In the Matter of: Karl N. Truman
2014 Ind. LEXIS 342, 2014 WL 1713403, 7 N.E.3d 260 (2014)
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Rule of Law:
An attorney employment agreement violates professional conduct rules if it restricts a departing lawyer's right to practice law or limits clients' freedom to choose their own counsel, including through indirect means such as controlling client communications or imposing strong financial disincentives.
Facts:
- In October 2006, Respondent Karl N. Truman hired an associate attorney ('Associate').
- As a condition of employment, the Associate was required to sign a Separation Agreement.
- The agreement prohibited the Associate, upon leaving the firm, from soliciting clients or notifying them of his departure, giving Truman the sole right to notify clients.
- The agreement also contained provisions for dividing fees that were structured to create a strong financial disincentive for the Associate to continue representing clients he had represented at the firm.
- In October 2012, the Associate informed Truman that he was resigning from the firm.
- At the time of his resignation, the Associate had substantial responsibility for representing more than a dozen clients.
- Truman enforced the agreement by sending notices to these clients which, in some cases, did not explain that the clients could choose to continue representation with the Associate and did not provide the Associate's contact information unless a client specifically requested it.
- Despite the agreement, the Associate sent his own notices to the clients, informing them of their right to choose their counsel and providing his contact information.
Procedural Posture:
- Respondent Truman filed a complaint against the Associate in a trial court to enforce the Separation Agreement.
- The civil dispute between Truman and the Associate was resolved through a mediated settlement.
- The Indiana Supreme Court Disciplinary Commission subsequently began an investigation into Truman’s conduct related to the Separation Agreement.
- The Disciplinary Commission and Truman submitted a 'Statement of Circumstances and Conditional Agreement for Discipline' to the Indiana Supreme Court, stipulating to the facts and proposing a public reprimand for approval.
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Issue:
Does an employment agreement violate Indiana Professional Conduct Rule 5.6(a) if it prohibits a departing associate from notifying clients of his departure, gives the firm sole control over client communication, and includes fee-splitting provisions structured to create a strong financial disincentive for the associate to continue representing firm clients?
Opinions:
Majority - Per Curiam
Yes. An employment agreement that restricts a departing lawyer's ability to practice and a client's freedom of choice violates Indiana Professional Conduct Rule 5.6(a). The court reasoned that Rule 5.6(a) exists to protect both the professional autonomy of lawyers and the freedom of clients to choose their counsel. The Separation Agreement at issue hampered both of these principles by restricting the Associate’s ability to communicate with his clients and by creating an 'unwarranted financial disincentive' for him to continue representing them. The court cited with approval an Ohio Supreme Court case, Cincinnati Bar Assn. v. Hackett, which held that a client's 'absolute right to discharge an attorney' would be 'hollow' if a firm could prevent other attorneys from representing that client, including through punitive fee-splitting arrangements.
Analysis:
This decision reinforces the strong public policy that a client's right to choose their legal counsel is paramount. It clarifies that a violation of Rule 5.6(a) is not limited to explicit non-compete clauses but extends to any contractual provision that indirectly restrains a lawyer's practice or a client's choice. Law firms are thus put on notice that agreements creating severe financial penalties or controlling client communications upon a lawyer's departure are impermissible restrictions. This holding protects lawyer mobility and ensures that the attorney-client relationship is not treated as a firm asset to be controlled contractually.
