Can a Texas law firm enforce non-compete or no-solicitation covenants against associates and partners who leave the firm?

Plain-English summary

The inquiry presented four questions about restrictive covenants in lawyer employment and partnership agreements: a covenant barring a departing associate from practicing in competition with the firm for a reasonable time in its geographic area; a covenant barring a former associate from soliciting the firm's current clients for a set period; a covenant barring a former associate from accepting employment from the firm's current clients; and a partnership provision barring an exiting partner from continuing to represent clients originally brought to the firm by a remaining partner.

The Committee analyzed all four under DR 2-108, which bars a lawyer from being a party to a partnership or employment agreement that restricts the right to practice law after the relationship ends, except as a condition to payment of retirement benefits. It noted that DR 2-108 draws no distinction between employment and partnership agreements and that none of the four inquiries involved retirement benefits. Surveying authority from other jurisdictions, including ABA Formal Opinion 300 and several ABA informal opinions, New York County Lawyers Association Opinion 109, and Dwyer v. Jung, the Committee emphasized the principle that the right to practice law cannot be limited by private agreement and that clients are entitled to an informed choice of counsel.

The Committee concluded, by an 8-1 vote, that each of the four covenants is improper. None of the first three (non-competition, no-solicitation, no-acceptance of current clients) is permissible against an associate, and a partnership agreement may not bar an exiting partner from continuing to represent clients brought in by remaining partners. Any lawyer who is a party to or participates in such an agreement restricting the right to practice law, except as a condition to payment of retirement benefits, would violate DR 2-108.

Currency note

This opinion was issued in 1984, under the former Texas Code of Professional Responsibility, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. The Disciplinary Rules have since been amended, and Texas never adopted the ABA's Ethics 2000 framework. The current Texas rule on restrictions on a lawyer's right to practice is Rule 5.06, with closest ABA analog Model Rule 5.6; the retirement-benefits exception carries forward. Subsequent rule changes 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 Texas firm make an associate sign a non-compete that bars practicing in the firm's area after leaving?

A: Per the opinion, no. The Committee concluded such a covenant restricts the right to practice law and is controlled by the prohibition of DR 2-108, regardless of any time or geographic limit.

Q: Can a firm bar a departing associate from soliciting or accepting its current clients?

A: No. The Committee concluded both the no-solicitation and the no-acceptance covenants are improper under DR 2-108, noting that advertising and solicitation are separately regulated by DR 2-101, DR 2-103, and DR 2-104 and that a restrictive covenant is not needed to assure compliance.

Q: Is there any permissible restriction?

A: The Committee recognized the single exception in DR 2-108: a restriction on the right to practice law that is a condition to payment of retirement benefits.

Q: Can a partnership agreement keep an exiting partner from representing clients a remaining partner brought in?

A: No. The Committee concluded such a provision is improper because it would contravene the client's right to an informed choice of counsel and is controlled by DR 2-108.

Background and rules framework

The opinion interprets DR 2-108 of the former Texas Code of Professional Responsibility (barring partnership or employment agreements that restrict the right to practice law after termination, except as a condition to payment of retirement benefits), and references DR 2-101, DR 2-103, and DR 2-104 on advertising and solicitation, and DR 2-110 and DR 7-101(A) on withdrawal and zealous representation. The closest current concepts are Texas Rule 5.06 and Model Rule 5.6. The analysis turns on the principle that the right to practice law may not be limited by private agreement and that clients retain an informed choice of counsel.

Citations and references

Rules of Professional Conduct:

• MR 5.6 (restrictions on a lawyer's right to practice)
• DR 2-108, DR 2-108(A), DR 2-110, DR 7-101(A)(2) and (3), Canon 2, EC 1-1, EC 2-32, Texas Code of Professional Responsibility

Cases:

• Dwyer v. Jung, 133 N.J. Super. 343, 336 A.2d 498 (1975), partnership agreement dividing clients held against public policy
• Bates v. State Bar of Arizona, 433 U.S. 350, lawyer advertising
• Ohralik v. Ohio State Bar Association, 436 U.S. 447, in-person solicitation
• In re Primus, 436 U.S. 412, solicitation

Other opinions cited:

• ABA Formal Opinion 300 (1961); ABA Informal Opinions 1072 (1968), 521 (1962), 1171 (1971), 1417 (1978): restrictive covenants on practice are improper
• New York County Lawyers Association Opinion 109 (1943): "Clients are not merchandise"

See also

• TX Ethics Op. 459: Fee-Clawback Restrictive Covenant on a Departing Associate
• TX Ethics Op. 466: Restricting a Departing Lawyer's Practice and Continued Use of Firm Name
• ABA Formal Op. 06-444: Restrictive Covenants Conditioned on Retirement Benefits

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-422/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_422.pdf

Original opinion text

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

QUESTION PRESENTED

The questions presented deal with the propriety of restrictive covenants in employment contracts between lawyers employed as associates of a law firm, as employees, and a law firm, as employer, and the propriety of restrictive covenants in partnership contracts.

Specifically, the inquiries are:
Is it proper for a firm to have a contract of employment with an associate lawyer providing that, upon leaving the firm, the associate would be restricted for a "reasonable time" from practicing law in competition with the firm in its geographical area of practice? (Emphasis added.); and,
Is it proper for a firm to require each of its associate lawyers to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from soliciting employment by any of the firm's "current clients" for a period of two (2) years from such termination? (Emphasis added. The inquiry presented states that "the two (2) year limitation period is used as an example only and is subject to modification.); and,
Is it proper for a firm to require each of its associate lawyers to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from accepting employment by any of the firm's "current clients" for a period of two (2) years from such termination? (Emphasis added. Again, it is stated that the period of two (2) years is used as an example only and is subject to modification. Further, the inquiry suggests a definition of the "firm's current clients" in both inquiries 2 and 3 as meaning "any client brought in to the firm, whether by a partner or an associate, where legal services are currently being provided for such client or have been provided for such client within the twelve (12) month period immediately preceding the date of termination of the associate."); and,
Is it proper for a law partnership agreement to provide that an exiting partner, whether leaving by choice or by expelling, would be prohibited from continued representation in legal matters of clients who were originally brought to the firm by one of its remaining partners? (Emphasis added.)

DISCUSSION

The Code of Professional Responsibility deals with such problems in Disciplinary Rule 2-108, as follows:

"Agreements Restricting the Practice of a Lawyer.

(A) A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits.

(B) In connection with the settlement of a controversy or suit, a lawyer shall not enter into an agreement that restricts his right to practice law."

It is noted that DR 2-108 makes no distinction between employment agreements and partnership agreements and applies equally to both. The only exception provided for in DR 2-108 concerns the allowable restriction of the right to practice law as a condition to payment of retirement benefits. It is further noted that none of the 4 inquiries make any reference to payment of retirement benefits or any condition pertaining thereto, as a part of the restrictive covenants of the agreement.

While no annotations appear pertaining to DR 2-108, it would seem that the lack of litigation in Texas dealing with the subject of restrictive covenants is probably due in part to the clarity of the Disciplinary Rule.

Other jurisdictions have wrestled for years with the problem of restrictive covenants as they affect the practice of law. Olavi Maru, in the Digest of Bar Association Ethics Opinions, cites approximately 20 opinions of different jurisdictions in their efforts to deal with the problems of restrictive covenants. American Bar Association Informal Opinion 1072 (1968) succinctly states: "The license to practice law in a given jurisdiction may not be limited by private agreements." ABA Formal Opinion 300 (1961) and ABA Informal Opinion 1171 (1971) and ABA Informal Opinion 521 (1962) and ABA Informal Opinion 1417 (1978) all deal with restrictive covenants, and each concludes, in response to similar inquiries as now posed to this committee, that such restrictive covenants are improper. Opinion 109 of the New York County Lawyers Association (1943) stated: "Clients are not merchandise. Lawyers are not tradesmen. They have nothing to sell but personal service. An attempt, therefore, to barter in clients would appear to be inconsistent with the best concepts of our professional status." A New Jersey Court found a partnership agreement that divided the clients of a dissolved partnership among its former members to be against public policy because it restricted the clients' choice of counsel. Dwyer v. Jung, 133 N. J. Super. 343, 336 A.2d 498 (1975). See 4 Fordham Urb. LJ. 195 (1975).

Canon 2 of the Texas Code of Professional Responsibility, as amended September 1, 1982, provides: "A lawyer should assist the legal profession in fulfilling its duty to make legal counsel available." A basic tenet of the professional responsibility of lawyers is that every person in our society should have ready access to the independent professional services of a lawyer of integrity and competence. EC 1-1.

While the first inquiry is additionally couched in the language of the inquirer to provide for a one (1) year restriction and applicability to an area of one (1) county, we note that DR 2-108 prohibits a lawyer from being a party to, or participating in, any agreement that restricts the right of a lawyer to practice law, without reference to any time or area parameters. It appears that anyone practicing law at any time within any given area might be considered as being "in competition" with all other lawyers who are practicing law in that area. Also, an agreement contemplated by the first inquiry would explicitly, by its own language, restrict the right of a lawyer to practice law. We believe, therefore, that the first inquiry is controlled by the clear prohibitions of DR 2-108.

The key word in the second inquiry is "soliciting." The word "solicitation" can mean virtually everything to some and nothing to others, and, therefore, may not be a term of art. Sutton, The American Bar Association Code of Professional Responsibility: An Introduction, 48 Tex. Law Review 255. The word has been used, however, in indexing a number of prior Texas Professional Ethics Committee Opinions. It may involve the use of some form of advertising, as contemplated in the case of Bates v. State Bar of Arizona, 433 U.S. 350, and as now regulated in Texas by DR 2-101 and addressed in Ethics Opinions Nos. 413, 414, 416 and 418. Also, it may involve the matter of in-person solicitation, the U.S. Supreme Court cases of Ohralik v. Ohio State Bar Association, 436 U.S. 447, and In Re Edna Smith Primus, 436 U.S. 412, did so. If the second inquiry relates to advertising, then DR 2-101 is pertinent and allows and controls, as a part of the practice of law, publicity and advertising, and a restrictive covenant in a contract is not needed to assure compliance of a lawyer therewith. If the second inquiry relates to other forms of solicitation, then DR 2-103 and DR 2-104 are pertinent and allow and control, as a part of the practice of law, suggestions of need of legal services, and a restrictive covenant in a contract is not needed to assure compliance of a lawyer therewith. We believe that the second inquiry is controlled by the prohibitions of DR 2-108.

The third inquiry involves the prohibition by contract of acceptance of employment by a lawyer of employment by the firm's current clients. We must assume that the client desires to employ such lawyer or otherwise the lawyer would not have opportunity to accept such employment. Such restriction could result in hardship to present and potential clients in that they would be deprived of obtaining counsel of their own choice. Basic among the ethical considerations of the Code of Professional Responsibility is the premise that clients should have the right of informed choice of an attorney of competence and integrity to represent them. We believe that the third inquiry is controlled by the prohibitions of DR 2-108.

The fourth inquiry pertains to the continued representation of a client by a lawyer after disassociation from the partnership. Since the inquiry speaks of "continued representation" of the client, we must assume that the withdrawing lawyer is representing the client at the time of withdrawal, although the client may have been brought to the firm by one of its remaining partners. We must also assume that the client is desirous of continuing the representation by the lawyer; otherwise, the client would be presumed to have the right to dismiss such lawyer and to select other counsel of his choice. Again, such a restriction would seem to contravene the right of informed choice by the client of an attorney of competence and integrity. Additionally, the lawyer may have a duty to the client of completion of work undertaken as well as the problem of adverse effect on or harm to the client in the event of his withdrawal from representation. EC 2-32, DR 2-110, DR 7-101(A)(2) and (3). We believe that the fourth inquiry is controlled by the prohibitions of DR 2-108.

EXCEPT AS A CONDITION OF PAYMENT OF RETIREMENT BENEFITS:
It is not proper for a firm to have a contract of employment with an associate lawyer providing that, upon leaving the firm, the associate would be restricted from practicing law;
It is not proper for a firm to require its associates to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from soliciting any of the firm's current clients, as otherwise may be permitted and controlled by DR 2-101, DR 2-103 and DR 2-104;
It is not proper for a firm to require its associates to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from accepting employment by any of the firm's current clients;
It is not proper for a law partnership agreement to provide that an exiting partner, then not otherwise prohibited from practicing law, whether leaving by choice or expelling, is prohibited from continued representation in legal matters of clients brought to the firm by any of its remaining partners; and
Each lawyer who is a party to, or participates in, such a partnership or employment agreement, as discussed in the above four conclusions, which restricts the right of a lawyer to practice law after termination of the agreement, except as a condition to payment of retirement benefits, would be in violation of DR 2-108. (8-1)

CONCLUSION

EXCEPT AS A CONDITION OF PAYMENT OF RETIREMENT BENEFITS:
It is not proper for a firm to have a contract of employment with an associate lawyer providing that, upon leaving the firm, the associate would be restricted from practicing law;
It is not proper for a firm to require its associates to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from soliciting any of the firm's current clients, as otherwise may be permitted and controlled by DR 2-101, DR 2-103 and DR 2-104;
It is not proper for a firm to require its associates to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from accepting employment by any of the firm's current clients;
It is not proper for a law partnership agreement to provide that an exiting partner, then not otherwise prohibited from practicing law, whether leaving by choice or expelling, is prohibited from continued representation in legal matters of clients brought to the firm by any of its remaining partners; and
Each lawyer who is a party to, or participates in, such a partnership or employment agreement, as discussed in the above four conclusions, which restricts the right of a lawyer to practice law after termination of the agreement, except as a condition to payment of retirement benefits, would be in violation of DR 2-108. (8-1)

Tex. Comm. On Professional Ethics, Op. 422 (1984)