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RULE 19-301.17. SALE OF LAW PRACTICE (1.17)

West's Annotated Code of MarylandMaryland Rules

West's Annotated Code of Maryland
Maryland Rules
Title 19. Attorneys
Chapter 300. Maryland Attorneys' Rules of Professional Conduct
Client-Attorney Relationship [Rules 19-301.1 to 19-301.18]
MD Rules Attorneys, Rule 19-301.17
RULE 19-301.17. SALE OF LAW PRACTICE (1.17)
(a) Subject to section (b) of this Rule, a law practice, including goodwill, may be sold if the following conditions are satisfied:
(1) Except in the case of death, disability, or appointment of the seller to judicial office, the entire practice that is the subject of the sale has been in existence at least five years prior to the date of sale;
(2) The practice is sold as an entirety to another attorney or law firm; and
(3) Written notice has been mailed to the last known address of the seller's current clients regarding:
(A) the proposed sale;
(B) the terms of any proposed change in the fee arrangement;
(C) the client's right to retain another attorney, to take possession of the file, and to obtain any funds or other property to which the client is entitled; and
(D) the fact that the client's consent to the new representation will be presumed if the client does not take any action or does not otherwise object within sixty (60) days of mailing of the notice.
(b) If a notice required by subsection (a)(3) of this Rule is returned and the client cannot be located, the representation of that client may be transferred to the purchaser only by an order of a court of competent jurisdiction authorizing the transfer. The seller may disclose to the court in camera information relating to the representation only to the extent necessary to obtain an order authorizing the transfer.
COMMENT
[1] The practice of law is a profession, not merely a business. Clients are not commodities that can be purchased and sold at will. Pursuant to this Rule, when an attorney or an entire firm ceases to practice and another attorney or firm takes over the representation, the selling attorney or firm may obtain compensation for the reasonable value of the practice as may withdrawing partners of law firms. See Rules 19-305.4 (5.4) and 19-305.6 (5.6).
Termination of Practice by the Seller--[2] The requirement that all of the private practice be sold is satisfied if the seller in good faith makes the entire practice available for sale to the purchaser. The fact that a number of the seller's clients decide not to be represented by the purchaser but take their matters elsewhere does not therefore result in a violation. The purchase agreement for the sale of a law practice may allow for restrictions on the scope and time of the seller's reentry into practice.
Single Purchaser--[3] The Rule requires a single purchaser. The prohibition against piecemeal sale of a practice protects those clients whose matters are less lucrative and who might find it difficult to secure another attorney if a sale could be limited to substantial fee-generating matters. The purchaser is required to undertake all client matters in the practice, subject to client consent. If, however, the purchaser is unable to undertake all client matters because of a conflict of interest in a specific matter respecting which the purchaser is not permitted by Rule 19-301.7 (1.7) or another rule to represent the client, the requirement that there be a single purchaser is nevertheless satisfied.
Client Confidences, Consent and Notice--[4] Negotiations between seller and prospective purchaser prior to disclosure of information relating to a specific representation of an identifiable client no more violate the confidentiality provisions of Rule 19-301.6 (1.6) than do preliminary discussions concerning the possible association of another attorney 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, written notice of the contemplated sale must be mailed to the client. The notice must include the identity of the purchaser and any proposed change in the terms of future representation, and must tell the client that the decision to consent or make other arrangements must be made within 60 days. If nothing is heard from the client within that time, consent to the new representation is presumed.
[5] An attorney 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 cannot themselves consent to the new representation or direct any other disposition of their files, the Rule requires an order from a court having jurisdiction 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.
[6] All the elements of client autonomy, including the client's absolute right to discharge an attorney and transfer the representation to another, survive the sale of the practice. Additionally, the transfer of the practice does not operate to change the attorney-client privilege.
Other Applicable Ethical Standards--[7] Attorneys participating in the sale of a law practice are subject to the ethical standards applicable to the involvement of another attorney in the representation of a client. These include, for example, the seller's obligation to exercise competence in identifying a purchaser qualified to assume the practice and the purchaser's obligation to undertake the representation competently (see Rule 19-301.1 (1.1)); the obligation to avoid disqualifying conflicts, and to secure the client's informed consent for those conflicts which can be agreed to (see Rule 19-301.7 (1.7) regarding conflicts and Rule 19-301.0 (f) (1.0) for the definition of informed consent); and the obligation to protect information relating to the representation (see Rules 19-301.6 (1.6) and 19-301.9 (1.9)).
[8] 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, that approval must be obtained before the matter can be included in the sale (see Rule 19-301.16 (1.16)).
Applicability of the Rule--[9] This Rule applies to the sale of a law practice by representatives of a deceased or disabled attorney, or one who has disappeared. Thus, the seller may be represented by a non-attorney representative not subject to these Rules. Since, however, no attorney may participate in a sale of a law practice that does not conform to the requirements of this Rule, the representatives of the seller as well as the purchasing attorney can be expected to see to it that the requirements are met.
[10] Admission to or retirement from 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.
[11] This Rule does not apply to the transfers of legal representation between attorneys when such transfers are unrelated to the sale of a practice. This Rule does not prohibit an attorney from selling his or her interest in a law practice.
Committee note: The sale of a practice does not mean that the appearance of an attorney who is in a case will be stricken.
Model Rules Comparison: This Rule substantially retains Maryland language as it existed prior to the Ethics 2000 Amendments to the ABA Model Rules of Professional Conduct except for incorporating ABA changes to Comments [2] and [3].

Credits

[Adopted June 6, 2016, eff. July 1, 2016.]
MD R Attorneys, Rule 19-301.17, MD R ATTORNEYS Rule 19-301.17
Current with amendments received through December 15, 2019.
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