NJACPE July 16, 1964

Can a lawyer take over a retiring attorney's cases and pay him a share of future fees, or a lump sum, for the goodwill of the practice?

Short answer: The Committee concluded both arrangements were improper. Paying a retiring attorney a percentage of future profits or a lump sum for his practice and goodwill violated the canon against dividing fees with one who did no work on the matters.

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This page answers the general question as of 1964. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.

Disclaimer: Advisory only. Not binding precedent.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page) is the authoritative source for any reliance.

Plain-English summary

An attorney asked whether he could take over the prosecution of certain cases of a retiring attorney and pay the retiring attorney one-third of all net profits from that work, and from any other work for the retiring attorney's former clients, over a three-year period. In the alternative, he asked whether he could pay a lump sum approximating the retiring attorney's net income for one year. The inquirer observed that the goodwill of the retiring attorney's practice had intrinsic value that the retiring attorney was reluctant to give away.

The Committee concluded that either type of transaction would violate Canon 34 of the Canons of Professional Ethics, and also pointed to Canons 12, 27, and 37. It quoted Drinker's statement of the principle that a lawyer's practice and goodwill may not be offered for sale, and noted the same rule in ABA Committee on Professional Ethics and Grievances Opinion 266 (1945).

Currency note

This opinion was issued in July 1964, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied Canon 34 of the former Canons of Professional Ethics, which barred dividing fees with a lawyer who did no work on the matter and treated the sale of a practice and its goodwill as improper. New Jersey law on this subject changed substantially: RPC 1.17 now permits the sale of a law practice under stated conditions, and fee-division limits appear in RPC 5.4 and RPC 1.5(e). Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Could the lawyer pay the retiring attorney a share of future fees from his cases?

A: No. The Committee held that paying one-third of net profits over three years violated Canon 34, which barred dividing fees with someone who did no work on the matters.

Q: Did paying a single lump sum instead of a percentage change the result?

A: No. The Committee held that the lump-sum alternative would also violate Canon 34, because both were ways of buying the practice and its goodwill.

Q: Could the lawyer pay for the goodwill of the practice?

A: No. Quoting Drinker, the Committee stated that a lawyer's practice and goodwill may not be offered for sale.

Background and rules framework

The opinion applied Canon 34 of the former Canons of Professional Ethics (division of fees), with reference to Canons 12, 27, and 37, treating a sale of a law practice and goodwill as impermissible. The modern New Jersey rules reach a different result: RPC 1.17 now authorizes the sale of a law practice under conditions, and fee-division is governed by RPC 5.4 and RPC 1.5(e).

Citations and references

Rules of Professional Conduct (as in effect at the time):

Canon of Professional Ethics 34 (division of fees)
Canons of Professional Ethics 12, 27, 37 (also cited)

Other opinions cited:

ABA Committee on Professional Ethics and Grievances, Opinion 266 (1945): a lawyer's practice and goodwill may not be sold
Drinker, Legal Ethics 161 (1953): a lawyer's practice and goodwill may not be offered for sale

Source

Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp48-1.html

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

87 N.J.L.J. 459
July 16, 1964

OPINION 48

Sale of Practice

An attorney inquires whether he may properly take over the prosecution of certain cases of a retiring attorney and agree to pay the latter one-third of all net profits from such work and from any other work he performs for the former clients of the retiring attorney over a three-year period. In the alternative, he inquires whether he could properly pay a lump sum to the retiring attorney approximating the latter's net income for one year. He observes that "the good will represented by his (the retiring attorney's) practice has intrinsic value which he is understandably reluctant to give away."

Either type of transaction would violate the Canons of Professional Ethics, Canon 34. See also Canons 12, 27 and 37.

While there is a wealth of supporting authority on the matter, it will suffice here to refer briefly to the following.

The applicable principle is stated succinctly in Drinker, Legal Ethics 161 (1953):

A lawyer's practice and good will may not be offered for sale.

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