Lampert, Hausler & Rodman PC v. John F. Gallant, et al

Brief Fact Summary.

The parties in this case are former partners/shareholders in a law firm in a dispute over the distribution of contingency fees due on cases that were pending at the time the John F. Gallant, (Defendant) and other lawyers, left the law firm. Lampert, Hausler & Rodman, P.C., (Plaintiff), moves for partial summary judgment.

Synopsis of Rule of Law.

A lawyer shall not participate in offering or making an agreement in which a restriction on the lawyers’ right to practice is part of the settlement of a controversy.

Facts.

Plaintiff is a closely held professional corporation with three shareholders including Defendant who continues to hold his position. The parties never entered into a written agreement dealing with the division of unfinished business or the dissolution of the firm. Defendant and other lawyers left the law firm taking several clients with them and establishing a competing law firm within the same town. The parties now dispute how to distribute the contingency fees owed on the pending cases. Both parties also demand the enforcement of the fiduciary duties between the shareholders. Plaintiff further alleges that Defendant’s mere competition is a breach of that duty.

Issue.

Whether enforcement of the fiduciary duty between shareholders demands restricting Defendant from the improper solicitation of clients.

Held.

No. The court will enforce the fiduciary duties between shareholders of Plaintiff generally but deny enforcement of those duties as would prohibit any shareholder from practicing law.

Discussion.

The courts have generally declined to enforce forfeiture provisions. Such provisions discourage client free choice by encouraging a lawyer who leaves a firm not to compete. Therefore the court will enforce the fiduciary duties between the shareholders except insofar as they may otherwise prohibit any of the shareholders from practicing law.