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Rule 1.17. Sale of Law Practice.

A lawyer or a law firm may sell or purchase a law practice or anarea of practice, including good will, if the following conditions aresatisfied:

(a) The seller ceases to engage in the private practice of law, orin the area of practice that has been sold in the geographic area in which thepractice has been conducted;

(b) The entire practice, or the entire area of practice, is soldto one or more lawyers or law firms;

(c) The seller gives written notice to each of the seller'sclients regarding:

(c)(1) the proposedsale and the identity of the purchaser;

(c)(2) the client'sright to retain other counsel or to take possessionof the file; and

(c)(3) the fact that the client'sconsent to the transfer of the client?s files will be presumed if the clientdoes not take any action or does not otherwise object within ninety (90) daysof sending written notice; and

(d) The fees charged clients are not increased by reason of thesale.

Comment

[1] The practice of law is a profession, not merely a business.Clients are not commodities who can bepurchased and sold at will. Pursuant to this Rule, when a lawyer or an entirefirm ceases to practice, or ceases to practice in an area of law, and otherlawyers or firms take over the representation, the selling lawyer or firm mayobtain compensation for the reasonable value of the practice as may withdrawing partners of law firms. See Rules 5.4and 5.6.

Notification

In complying with this Rule, a seller must undertake reasonablesteps in locating the clients who would be subject to the sale of the practiceor area of practice. Typically, this would require attempts to contact theclient at the last known address.

Termination of Practice by the Seller

[2] The requirement that all of the private practice, or all of anarea of practice, be sold is satisfied if the seller in good faith makes theentire practice or the area of practice available for sale to the purchasers.The fact that a number of the seller?s clients decide not to be represented bythe purchasers but take their matters elsewhere, therefore, does not result ina violation. Return to private practice as a result of an unanticipated changein circumstances does not necessarily result in a violation. For example, alawyer who has sold the practice to accept an appointment to judicial officedoes not violate the requirement that the sale be attendant to cessation ofpractice if the lawyer later resumes private practice upon being defeated in acontested or a retention election for the office or resigns from a judicial position.

[3] The requirement that the seller cease to engage in the privatepractice of law in the geographic area does not prohibit employment as a lawyeron the staff of a public agency or a legal services entity that provides legalservices to the poor, or as in-house counsel to a business.

[4] The Rule permits a sale of an entire practice attendant uponretirement from the private practice of law within the geographic area. Theremaining language of the Model Rule Comment [4] has been intentionally omittedas unnecessary.

[5] This Rule also permits a lawyer or law firm to sell an area ofpractice. If an area of practice is sold, the law firm or the lawyer remainingin the active practice of law must cease accepting any matters in the area ofpractice that has been sold, either as counsel or co-counsel or by assumingjoint responsibility for a matter in connection with the division of a fee withanother lawyer as would otherwise be permitted by Rule 1.5(e). Selling a lawpractice or an area of practice is distinct from selling an ownership interestin a law firm, and nothing in this Rule prohibits the latter even when thedivesting lawyer remains active in the practice of law as a non-owningassociate or in an of counsel capacity. For example, a lawyer or law firm witha substantial number of estate planning matters and a substantial number ofprobate administration cases may sell the estate planning portion of thepractice but remain in the practice of law by concentrating on probateadministration; however, that practitioner or law firm may not thereafteraccept any estate planning matters. Although a lawyer who leaves a geographicalarea typically would sell the entire practice, this Rule permits the lawyer tolimit the sale to one or more areas of the practice, thereby preserving thelawyer?s right to continue practice in the areas of the practice that were notsold.

Sale of Entire Practice or Entire Area of Practice

[6] The Rule requires that the seller?s entire practice or anentire area of practice be sold. The prohibition against sale of less than anentire practice area protects those clients whose matters are less lucrativeand who might find it difficult to secure other counsel if a sale could belimited to substantial fee-generating matters. The purchasers are required toundertake all client matters in the practice or practice area, subject toclient consent. This requirement is satisfied, however, even if a purchaser isunable to undertake a particular client matter because of a conflict ofinterest.

Client Confidences, Consent and Notice

[7] Negotiations between seller and prospective purchaser prior todisclosure of information relating to a specific representation of anidentifiable client no more violate the confidentiality provisions of Rule 1.6than do preliminary discussions concerning the possible association of anotherlawyer or mergers between firms, with respect to which client consent is notrequired. Providing the purchaser access to client-specific informationrelating to the representation and to the file, however, requires clientconsent. The Rule provides that before such information can be disclosed by theseller to the purchaser, the client must be given actual written notice of thecontemplated sale.

[8] Intentionally omitted as unnecessary.

[9] All elements of client autonomy, including the client'sabsolute right to discharge a lawyer and transfer the representation to another,survive the sale of the practice or area of practice.

Fee Arrangements Between Clientand Purchaser

[10] The sale may not be financed by increases in fees charged theclients of the practice. Existing arrangements between the seller and theclient as to fees and the scope of the work must be honored by the purchaser.

Other Applicable Ethical Standards

[11] Lawyers participating in the sale of a law practice or apractice area are subject to the ethical standards applicable to involvinganother lawyer in the representation of a client. These include, for example,the seller?s obligation to exercise competence in identifying a purchaserqualified to assume the practice and the purchaser?s obligation to undertakethe representation competently (see Rule 1.1); to charge reasonable fees (seeRule 1.5); to protect client confidences (see Rule 1.6); to avoid disqualifyingconflicts and secure the client's informed consent for those conflicts forwhich there is agreement (see Rules 1.7; 1.9 and Rule 1.0(f) for the definitionof informed consent); to releases of liability (see Rule 1.8(h); and towithdrawal of representation (see Rule 1.16)).

[12] If approval of the substitution of the purchasing lawyer forthe selling lawyer is required by the rules of any tribunal in which a matteris pending, such approval must be obtained before the matter can be included inthe sale (see Rule 1.16).

Applicability of the Rule

[13] This Rule applies to the sale of a law practice byrepresentatives of a deceased, disabled or disappeared lawyer. Thus, the sellermay be represented by a nonlawyer representativenot subject to these Rules. Since, however, no lawyer may participate in a saleof a law practice which does not conform to the requirements of this Rule, the representatives of the seller as well as thepurchasing lawyer can be expected to see to it that they are met.

[14] Admission to or retirement from a law partnership orprofessional association, retirement plans and similar arrangements, and a saleof tangible assets of a law practice, do not constitute a sale or purchasegoverned by this Rule.

[15] This Rule does not apply to the transfers of legalrepresentation between lawyers when such transfers are unrelated to the sale ofa practice or an area of practice.

[15a] This Rule does not prohibit a lawyer from selling aninterest in a law firm and thereafter continuing association with the firm orin an of-counsel capacity.

[15b] The body of the ABA ModelRule 1.17 does not provide for inclusion of the identity of the purchaser inthe written notice; however, Comment [7] to the ABA Model Rule does indicatethat the identity of the purchaser should be given in writing to clients.Utah?s Rule 1.17 departs from the ABA Model Rule by requiring only one writtennotice and enumerating in the body of the rule all required content of thenotice.

[15c] Section (c)(3) of Utah?s Rule 1.17 deviates from the ABAModel Rule by providing that the 90-day client objection period begins to runfrom the mailing of the notice rather than from receipt of the notice. The onlypractical way to prove receipt would be by commercial courier orcertified/registered mail. Proving receipt of notice could therefore becost-prohibitive, especially to the small sole practitioner. Often when alawyer does not have a viable address for a client, it is because thesubject-matter of the representation has become stale or the client has failedto keep in touch with the lawyer presumably due to a loss of interest in thematter. Both the Utah Rules of Civil Procedure and the Utah Rules of CriminalProcedure allow for notices to be given by regular U.S. mail at the last-knownaddress for the client and provide a presumption of service upon deposit of thenotice in the mail, postage pre-paid. There does not appear to be good reasonto place a more onerous burden upon a lawyer selling a law practice or area ofpractice. Whether the client received actual notice of the proposed sale of apractice or area of practice, the client is not abandoned; there is new counselto protect the client?s existing rights. The last paragraph of Model Rule1.17(c)(3) has been intentionally omitted asunnecessary.

[15d] The Utah version of Rule 1.17 deletes the provision of theABA Model Rule (c)(3) relating to obtaining courtorder for transfer of representation in those instances where the lawyer cannotgive and prove actual notice of the proposed sale of a law practice or area ofpractice to a client. As discussed above, Utah?s version of Rule 1.17 does notrequire proof of actual notice of the sale of a law practice or area ofpractice before the 90-day client objection period begins to run; therefore, itis impossible to know which clients received actual notice and which did not.

[15e] The Utah version of Rule 1.17 changes the context of the ABAModel Rule 1.17(d) regarding fees from "shall not" to "are" because the ABA wording seemed to be in the natureof a mandate and out of place with the conditional language of the Rule.

 

Effective November 1, 2017