This rule permits a selling lawyer or law firm to obtain compensation for the reasonable value of
a private law practice in the same manner as withdrawing partners of law firms. See MRPC 5.4
and 5.6. This rule does not apply to the transfer of responsibility for legal representation from
one lawyer or firm to another when such transfers are unrelated to the sale of a practice; for
transfer of individual files in other circumstances, see MRPC 1.5(e) and 1.16. Admission to or
retirement from a law partnership or professional association, retirement plans and similar
arrangements, and a sale of tangible assets of a law practice, do not constitute a sale or purchase
governed by this rule.
A lawyer participating in the sale of a law practice is subject to the ethical standards that apply
when involving another lawyer in the representation of a client. These include, for example, the
seller’s obligation to act competently in identifying a purchaser qualified to assume the
representation of the client and the purchaser’s obligation to undertake the representation
competently, MRPC 1.1, the obligation to avoid disqualifying conflicts and to secure client
consent after consultation for those conflicts that can be waived, MRPC 1.7, and the obligation to
protect information relating to the representation, MRPC 1.6 and 1.9.
If approval of the substitution of the purchasing attorney for the selling attorney is required by
the rules of any tribunal in which a matter is pending, such approval must be obtained before the
matter can be included in the sale, MRPC 1.16. See also MCR 2.117(C).
All the elements of client autonomy, including the client’s absolute right to discharge a lawyer
and transfer the representation to another, survive the sale of the practice.
Selling Entire Practice.
When a lawyer is closing a private practice, the lawyer may negotiate with a purchaser for the
reasonable value of the practice that has been developed by the seller. A seller may agree to
transfer matters in one legal field to one purchaser, while transferring matters in another legal
field to a separate purchaser. However, a lawyer may not sell individual files piecemeal. A
seller closing a practice to accept employment with another firm may take certain matters to the
new employer while selling the remainder of the practice.
Although the rule contemplates the sale of substantially all of the law practice, a seller retiring
from private practice generally may continue to represent a small number of clients while
transferring the balance of the practice.
The seller remains responsible for handling all client matters until the files are transferred under
this rule.
Termination of Practice by the Seller.
The rule allows the parties to agree that the seller cease practice in the geographical area for a
reasonable time as a condition of the sale. In certain situations, a blanket prohibition on the
seller’s practice would not be appropriate or warranted, such as a judicial appointee who might
subsequently be defeated for reelection, or a seller elected full-time prosecutor. The parties
should be allowed to negotiate, for instance, whether any geographical or duration restrictions
apply to the seller’s employment as a lawyer on the staff of a public agency or of a legal services
entity that provides legal services to the poor, or as inside counsel to a business.
Conflicts.
The practice may be sold to one or more lawyers or firms, provided that the seller assures that all
clients are afforded competent representation. Since the number of client matters and their
nature directly bear on the valuation of good will and therefore directly relate to selling the law
practice, conflicts that cannot be waived by the client and that prevent the prospective purchaser
from undertaking the client’s matter should be determined promptly. If the purchaser identifies a
conflict that the client cannot waive, information should be provided to the client to assist in
locating substitute counsel. If the conflict can be waived by the client, the purchaser should
explain the implications and determine whether the client consents to the purchaser undertaking
the representation. Initial screening with regard to conflicts, for the purpose of determining the
good will of the practice, need be no more intrusive than conflict screening of a walk-in
prospective client at the purchaser’s firm.
Client Confidences, Consent, and Notice.
Negotiations between the seller and prospective purchaser prior to disclosure of information
relating to a specific representation of an identifiable client can be conducted in a manner that
does not violate the confidentiality provisions of MRPC 1.6, just as preliminary discussions are
permissible concerning the possible association of another lawyer or mergers between firms,
with respect to which client consent is not required. Providing the purchaser access to client-specific information relating to the representation and to the file, however, requires client
consent. The rule provides that before such information can be disclosed by the seller to the
purchaser the client must be given actual written notice of the fact of the contemplated sale,
including the identity of the purchaser, and must be told that the decision to consent or make
other arrangements must be made within 90 days. If nothing is heard from the client within that
time, consent to the transfer of the client’s file to the identified purchaser is presumed.
A lawyer or law firm ceasing to practice cannot be required to remain in practice because some
clients cannot be given actual notice of the proposed purchase. Since these clients are not
available to consent to the purchase or direct any other disposition of their files, the rule requires
an order from a judge of the judicial circuit in which the seller maintains the practice, authorizing
their transfer or other disposition. The court can be expected to determine whether reasonable
efforts to locate the client have been exhausted, and whether the absent client’s legitimate
interests will be served by authorizing the transfer of the file so that the purchaser may continue
the representation. Preservation of client confidences requires that the petition for a court order
be considered in camera.
The client should be told the identity of the purchaser before being asked to consent to disclosure
of confidences and secrets or to consent to transfer of the file.
Subchapter 9.300 of the Michigan Court Rules provides a mechanism for handling client matters
when a lawyer is temporarily or permanently unable to practice law.
Fee Arrangements between Client and Purchaser.
Paragraph (b) is intended to prohibit a purchaser from charging the former clients of the seller a
higher fee than the purchaser is charging the purchaser’s existing clients. The sale may not be
financed by increases in fees charged the clients of the practice that is purchased. Existing
agreements between the seller and the client as to fees and the scope of the work must be
honored by the purchaser, unless the client consents after consultation.
Adjustments for differences in the fee schedules of the seller and the purchaser should be made
between the seller and purchaser in valuing good will, and not between the client and the
purchaser. The purchaser may, however, advise the client that the purchaser will not undertake
the representation unless the client consents to pay the higher fees the purchaser usually charges.
To prevent client financing of the sale, the higher fee the purchaser may charge must not exceed
the fees charged by the purchaser for substantially similar service rendered prior to the initiation
of the purchase negotiations.
Deceased Lawyer.
Even though a nonlawyer seller representing the estate of a deceased lawyer is not subject to the
Michigan Rules of Professional Conduct, a lawyer who participates in a sale of a law practice
must conform to this rule. Therefore, the purchasing lawyer can be expected to see that its
requirements are met.
