Can a law firm's partnership agreement delay paying out a departing partner's capital account if the partner keeps practicing law in the same area?
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This page answers the general question as of 1993. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
Opinion 241 (adopted September 21, 1993) addressed a partnership agreement that paid a withdrawn partner's capital-account funds over five years, but delayed those payments (until age 65, until the partner stopped practicing, or for an extra five years) if the partner engaged in the private practice of law in the metropolitan D.C. area. The inquirer asked whether that delay violated Rule 5.6(a).
The committee concluded it did. Rule 5.6 bars a lawyer from offering or making a partnership or employment agreement that restricts the right to practice after the relationship ends, except an agreement concerning retirement benefits. Drawing on its prior Opinions 181, 65, and 194 and on Gray v. Martin, the committee explained that agreements imposing direct financial penalties for practicing at a competing or potentially competing firm are forbidden restrictions on the right to practice, while financial arrangements that merely divide fees fairly for work performed are permissible. The committee noted it had upheld only narrow, reasonable limits on a departing lawyer's solicitation of the firm's clients.
The committee held that the delay provision served no purpose other than restricting practice and insulating the firm from competition. That the agreement delayed rather than eliminated the payments did not save it: the broad application still deterred opening a competing practice, and the fact that the restriction ended automatically once the partner stopped practicing confirmed its purpose. A clause delaying capital-account payments for five years because a departing partner practices in the Washington area is therefore prohibited by Rule 5.6.
Currency note
This opinion was issued in 1993, before the District of Columbia's adoption of the 2007 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.
Common questions
Q: Can a firm delay a departing partner's capital payout because he keeps practicing nearby?
A: No. The committee concluded that delaying capital-account payments for up to five years because the partner practices law in the Washington area is a financial penalty that violates Rule 5.6(a).
Q: Does it matter that the payment is delayed rather than forfeited?
A: No. The committee concluded that even a delay deters opening a competing practice and so operates as a prohibited restriction on the right to practice.
Q: What kinds of departure arrangements are permitted?
A: Fair divisions of fees for work performed. The committee concluded that arrangements simply allocating fees based on work done are permissible, and that only narrow, reasonable limits on soliciting the firm's clients have been upheld.
Background and rules framework
The opinion interpreted D.C. Rule 5.6(a), which forbids a lawyer from offering or making a partnership or employment agreement restricting the right to practice after the relationship ends, other than an agreement about retirement benefits. The committee noted that the operative phrase, "restricts the right of a lawyer to practice," is identical to the former Code's DR 2-108(A), and that the District's growing bar reinforces the policy of protecting clients' choice of counsel and lawyers' mobility.
Citations and references
Rules of Professional Conduct:
- D.C. RPC 5.6(a) / Model Rule 5.6 (restrictions on the right to practice)
Cases:
- Gray v. Martin, 663 P.2d 1285 (Or. 1983), refusing to enforce a partnership clause eliminating payments if the lawyer practiced in designated counties
Other opinions cited:
- D.C. Bar Opinion 181: a thorough review showing general hostility toward restrictive employment agreements
- D.C. Bar Opinion 65: an agreement requiring a departed lawyer to pay 40% of net billings from former clients was a forbidden restriction
- D.C. Bar Opinion 194: halving payment of unrealized receivables for opening a competitive practice was impermissible
See also
- DC Ethics Op. 291: Temp Lawyer Non-Compete Limits
- DC Ethics Op. 391: Government Deals and Practice Limits
Source
- Landing page: https://www.dcbar.org/for-lawyers/legal-ethics/ethics-opinions-210-present/ethics-opinion-241
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