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any firms in today’s market
boast that they have a collegial
and family-like environment
that promotes a balance between work and
family.1 But, regardless of the great work
environment that many firms now pro-
vide, it is not uncommon for lawyers to
leave those firms to head toward “greener”
pastures.2 Why? Well, only the departing
lawyer can answer that question. However,
this is not the real question on which to
focus. The more important question that
needs to be addressed is, “How do I handle
the separation in the right way for my
clients, my former associates and myself?”
Therefore, the crux of this article is to
point out the major issues that need to
be addressed when a lawyer leaves a firm
to ensure the separation is handled in the
right way for all parties involved (the law
firm, the departing lawyer and the clients)
so that their interests are protected to the
fullest extent possible.
What Are the
Departing Lawyer’s
Financial Obligations
to the Firm?
It is no secret that law firms derive
substantial value from intangible assets
such as intellectual capital, human capital,
relationship capital, reputation capital,
and, finally, goodwill.3 The main intangible
asset of a law firm is the goodwill of the
lawyers.4 When lawyers leave the firm, they
take their professional goodwill with them.
Therefore, the departure of a lawyer from a
firm can leave the lawyer and the firm at
odds with each over future financial obliga-
tions, particularly when the departing
lawyer leaves to start a new firm as opposed
to leaving to join an established firm.
If you have a well-thought-out firm
agreement or employment contract, then
many potential problems could be com-
pletely alleviated.5 However, the potential
problems that come when a lawyer leaves a
firm will only be alleviated when the firm
agreement addresses the following topics:
1. Determine what the firm owes the
withdrawing lawyer for equity;
2. Establish a payment schedule
detailing how the lawyer’s equity
will be repaid;
3. Agree what the fir