As lateral hiring continues to grow exponentially, lawyers looking to leave their firms must understand their rights and options — and those of the firm — as they plan their exits.
Most importantly, they need to know whether there is a buy-in and/or buy-out provision for the firm’s partners.
Assuming that provision is appropriately documented, the next step for a departing attorney should be to announce his or her wishes to the remaining stakeholders and work with them to structure a time frame for departure and a mechanism to decide which lawyers in the firm will be primarily responsible for the lawyer’s clients.
Next, the firm must create a process for cross-selling the new responsible lawyer to the existing client. That transition is important for the firm’s health and a concern for the lawyer in terms of receiving future payments from the firm over time.
In the event there is no partnership agreement that controls the buy-out of interest, an attorney needs to broach the subject of how to value his or her interest, what that value actually is, and how to pay for the interest as it may be valued.
When comparing that process to a solo practitioner’s options, it sounds similar to selling a law practice. But there are major differences between the two processes:
Conversely, the remaining partners may have second thoughts about how high the price is and how they will manage to run the ongoing operation while incurring the resultant cash-flow drain to pay the departing partner.
Since the typical partnership agreement rarely is drafted with the deftness of the U.S. Constitution, there must be a mechanism for periodic review and possible modification for the process if it is to be seen as fair to all parties over time.