Can a law firm's buy/sell agreement condition the firm's purchase of a departing shareholder's interest on a covenant not to compete?

Plain-English summary

The committee addressed a buy/sell agreement among the shareholders of a law firm. The agreement conditioned the firm's obligation to purchase a departing shareholder's interest on the shareholder's agreement to a covenant not to compete.

The committee concluded that such a condition violates RPC 5.6, the rule on restrictions on a lawyer's right to practice. (The archived record notes that the underlying informal opinion text is missing; the holding above is the portion preserved in the official record.)

Currency note

This opinion was issued in 1991, before the 2006 revisions to the Washington 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 Treat this page as historical context, not current guidance.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 make a departing shareholder's buyout depend on a noncompete?

A: No. The committee concluded that a buy/sell agreement conditioning the firm's obligation to purchase the shareholder's interest on a covenant not to compete violates RPC 5.6.

Q: Which rule does that kind of condition implicate?

A: RPC 5.6, the rule on restrictions on a lawyer's right to practice.

Background and rules framework

The opinion applied RPC 5.6, Washington's rule restricting agreements that limit a lawyer's right to practice, which corresponds to ABA Model Rule 5.6. The committee treated a covenant not to compete embedded as a condition of a shareholder buyout as a prohibited restriction on the right to practice.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 5.6 (restrictions on a lawyer's right to practice)
• Washington RPC 5.6

See also

• ABA Formal Op. 94-381: Restrictions on Right to Practice
• ABA Formal Op. 06-444: Retirement Restrictive Covenants

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=526

Original opinion text

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

Advisory Opinion: 1446
Year Issued: 1991
RPC(s): RPC 5.6
Subject: Restrictions on right to practice.

Buy/sell agreement conditioning law firm's obligation to purchase shareholder's interest on covenant not to compete violates RPC 5.6. (Informal opinion missing).