Boundaries of Rule 5.6(b)

Boundaries of Rule 5.6(b)

Rule 5.6(b) bars a lawyer from participating in offering or making “an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy.”¹ The rule has edges, and a term can look like the forbidden bargain without falling inside it. Three neighbors cause most of the confusion: a promise not to solicit, a restriction written into a firm agreement that takes effect when the lawyer leaves, and a restriction included in the sale of a law practice.

Each neighbor lacks an ingredient of the trade the rule targets, which is a lawyer's future practice exchanged for a present settlement. A non-solicitation promise leaves the lawyer in the pool of counsel available to later claimants. A restriction in a firm agreement has no client settlement behind it, so a different paragraph of Rule 5.6 governs. A covenant in the sale of a practice comes with the seller's exit from the field, and the commentary exempts it. Two questions sort any suspect term: does it remove the lawyer from the counsel that future claimants can hire, and is it part of resolving a client's claim?

The policies behind the rule explain where the lines fall. The rule protects the choice of absent claimants and removes the opponent's incentive to buy a lawyer's exit, and a term that threatens neither interest gives the rule nothing to do.

Non-Solicitation Terms

A promise not to solicit sits at the edge of Rule 5.6(b) because soliciting and representing are different acts. A lawyer who solicits approaches people and invites them to bring a claim or to hire the lawyer; a lawyer who represents acts for a client who has already decided to proceed. The lawyer can give up the first and remain fully available for the second. Whether a settlement term crosses the rule's line therefore depends on whether it restricts “the lawyer's right to practice,” and a promise confined to soliciting may not.²

The settlement agreement signed by the Beigel firm shows where the line falls. It contained two promises, and the court treated them differently:

• The first promise bound the firm not to “assist or cooperate” with other parties or attorneys in other actions against the settling defendants. The language did not expressly bar the firm from representing clients in those actions, but the court read it to bar representation as well, since representation is barred a fortiori when assistance and cooperation are.³
• The second promise bound the firm not to “encourage any other parties or attorneys to commence such action or proceeding.” The court called that “a significantly different commitment than assisting or cooperating with other parties or attorneys, or representing other parties.”⁴

The court then separated the two on public policy. It assumed, for the sake of argument only, that a settlement agreement forbidding a lawyer to represent other clients against the settling defendants in similar litigation is against public policy as expressed in the Code of Professional Responsibility. It held that an agreement not to solicit clients is not likewise against public policy.⁵ That is a contract-law question: whether a term, though validly bargained for, runs so directly contrary to public policy that a court will not enforce it.⁶ The court added that, until recently, disciplinary rules barred solicitation of clients even without any agreement.⁷

The opinion states its conclusion without explaining the mechanism, but the mechanism follows from the interest a representation bar offends. A representation bar removes the lawyer from the pool of counsel that later claimants can hire, so those claimants lose a lawyer they would otherwise have chosen. A promise not to solicit leaves the lawyer in that pool, because every claimant who seeks the lawyer out remains free to hire the lawyer. The lawyer gives up the initiative in finding clients and keeps the availability the rule exists to protect.

The firm's own conduct tested the promise. After entering the agreement, the Beigel firm sent a letter to the limited partners of Madeira. The court called that letter “clearly a solicitation of plaintiffs barred by the settlement agreement,” and it agreed that the firm's representation of the plaintiffs violated the language and intent of the agreement.⁸

Three features keep the holding in proportion. The court looked to the Code of Professional Responsibility, not to Model Rule 5.6(b). It assumed, and did not decide, that a representation bar is against public policy. And its treatment of solicitation rested partly on the disciplinary rules then in force. None of this supports a shortcut that treats every term touching solicitation as valid. A clause labeled non-solicitation that keeps the lawyer from taking clients who come forward unprompted has the same effect on the pool of counsel as a representation bar, and it restricts the right to practice in the sense Rule 5.6(b) uses.⁹

An exam stem will usually dress a clause in one label or the other, and the label settles nothing.

The question that sorts the two clauses is whether a claimant who finds the lawyer without any prompting can still retain the lawyer. If so, the term reaches only the lawyer's methods of finding clients, and the reasoning above supports treating it as a different kind of term from a representation bar. If not, the term restricts practice whatever name it carries.

Rule 5.6(a) Compared

Rule 5.6 contains two prohibitions, and the settlement prohibition is the second. Paragraph (a) bars participating in offering or making “a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.”¹¹ Paragraph (b) reaches a restriction that is “part of the settlement of a client controversy.”¹² The first restriction lives in the agreement that organizes a lawyer's working relationship and takes effect when that relationship ends; the second lives in the settlement of a client's claim. A departing lawyer therefore cannot be held to a non-competition clause that would bar practice in the geographic area or bar the acceptance of former clients of the firm.¹³

The two paragraphs can reach clauses that read almost identically, so the location of the clause decides the analysis. Paragraph (a) asks whether the restriction sits in a partnership, employment, or similar agreement and takes hold after the relationship ends, and it needs no dispute and no settlement. Paragraph (b) asks whether the restriction is part of resolving a client's claim, and it needs no firm or employment relationship at all. A stem describing a clause that bars a lawyer from representing certain people therefore calls for one question before any other: what is the clause attached to?

Disapproval of restrictive covenants predates the Model Rules. A committee applying a preliminary draft of the Code of Professional Responsibility, dated January 15, 1969, called the covenant before it “improper, unworthy of the legal profession, and unethical,” and cited the draft's DR 2-108(A).¹⁴ That opinion supports the policy and not the text, because it rests on a draft Code and not on either paragraph of Rule 5.6.

Both paragraphs protect the same interest. Comment 1 explains that agreements restricting the right of lawyers to practice after leaving a firm limit their professional autonomy and also limit the freedom of clients to choose a lawyer, and Professors Hazard and Hodes describe the rule as “designed to protect present and potential clients from a diminution of their ability to choose counsel.”¹⁵ The settlement paragraph rests on the same concern, since future claimants lose access to an experienced lawyer when a settlement removes that lawyer from their options. The concern is client choice, not protection of the judicial process: an agreement restricting a lawyer's right to practice may or may not interfere with the judicial process, and the fundamental reason for forbidding such covenants is that clients may engage the lawyers of their choice.¹⁶

The textual difference that matters most on an exam is the retirement exception. Paragraph (a) exempts an agreement concerning benefits upon retirement, and paragraph (b) contains no comparable language.¹⁷ The structure of each paragraph explains the gap. A retirement-benefits agreement concerns a lawyer who has stopped practicing, so a condition tied to those benefits takes little away from clients who might have wanted that lawyer. A settlement restriction is aimed at a lawyer who is still practicing and whose experience is exactly what the opponent wants removed, and nothing about settling a client's claim supplies a reason to trade that future practice.

One jurisdiction has gone its own way on departing-partner payments. In Howard v. Babcock, decided under California's rule 1-500, departing partners left the Parker firm, and the trial court ordered them to pay the firm 82.5 percent of the net profits from work for former Parker firm clients.¹⁸ The court reasoned that an agreement assessing a reasonable cost against a partner who competes with former partners does not restrict the practice of law; it attaches an economic consequence to the departing partner's unrestricted choice to pursue a particular kind of practice.¹⁹

Howard is one jurisdiction's treatment under its own rule, and the court expressly did not address noncompetition agreements affecting employees as opposed to partners.²⁰ It involved a toll among partners with no client settlement anywhere in the case, so it gives no support for treating a settlement term that bars representation as acceptable under Model Rule 5.6(b). How courts treat financial penalties on departing lawyers belongs to the separate treatment of paragraph (a). For sorting purposes the working question stays the same: where does the restriction sit?

Sale of a Practice

Rule 5.6 has one further limit, and it appears in the commentary and not in the rule's text. Comment 3 states that the rule does not apply to “restrictions that may be included in the terms of the sale of a law practice pursuant to Rule 1.17.”²² The carve-out is needed because a sale agreement commonly contains the very term the rule otherwise targets: the seller's promise to stay out of a field of practice. Rule 1.17 has its own treatment, so this section covers only why the exemption exists and how to tell a covered sale term from a forbidden settlement term.

Two reasons support the exemption, and they reinforce each other. A buyer pays for goodwill, meaning the reputation and client loyalty that make an established practice worth buying, so a seller who resumed practice in the same practice area and geographic area would take back the very thing just sold and deny the buyer the benefit of the bargain.²³ And a premise of a Rule 1.17 sale is that the seller is ceasing to engage in the private practice of law, at least in that practice area and in that geographic area or jurisdiction, so a covenant in the sale agreement only confirms what the rule already requires.²⁴

Those reasons also show why the concern behind the settlement prohibition is missing here. The settlement rule exists because an opponent can pay to remove a lawyer who is still practicing, which strips future claimants of a lawyer they might have hired and gives the lawyer a personal stake in the client's deal. A covenant in a Rule 1.17 sale removes no lawyer from the pool of counsel, because the seller's departure from that field is the premise of the transaction. The buyer's price purchases the goodwill of a practice the seller is giving up, and the covenant protects that purchase.

An exam question will usually put a clause barring practice in a field in front of you and ask whether it is forbidden, and the answer turns on whether the lawyer is leaving the field or staying in it.

Both scenes involve a promise to stay out of a field, and the reason for the promise separates them. The carve-out reaches restrictions included in the terms of a sale under Rule 1.17, and its reasons presuppose a seller who is actually leaving the practice area and geography.²⁵ A settlement term that binds a lawyer who remains in practice shares none of those features, so the label on the document cannot change which rule governs. The exemption stays narrow: it takes sale terms out of Rule 5.6 and leaves the settlement prohibition in place for every client controversy.