SUPREME COURT OF ARIZONA

En Banc

WILLIAM D. FEARNOW and ELIZABETH ) Arizona Supreme Court 

FEARNOW, ) No. CV-05-0217-PR 

 ) 

 Plaintiffs-Appellees, ) Court of Appeals 

 ) Division One 

 v. ) No. 1 CA-CV 03-0650 

 ) 

RIDENOUR, SWENSON, CLEERE & ) Maricopa County 

EVANS, P.C., ) Superior Court 

 ) No. CV98-019171 

 Defendants-Appellants. ) 

 ) 

 )

 ) O P I N I O N

__________________________________) 

Appeal from the Superior Court in Maricopa County 

The Honorable Anna M. Baca, Judge

The Honorable Colin F. Campbell, Judge

VACATED AND REMANDED

Opinion of the Court of Appeals, Division One

210 Ariz. 256, 110 P.3d 357 (2005) 

VACATED

________________________________________________________________

PAUL G. ULRICH P.C. Phoenix

 By Paul G. Ulrich

 Pamela B. Petersen

Attorneys for William D. and Elizabeth Fearnow

OSBORN MALEDON P.A. Phoenix

 By Mark I. Harrison

 Thomas L. Hudson

 Diane M. Meyers

Attorneys for Ridenour, Swenson, Cleere & Evans, P.C.

________________________________________________________________

H U R W I T Z, Justice 

¶1 Ethical Rule (“ER”) 5.6(a) of the Arizona Rules of 

Professional Conduct prohibits an “agreement that restricts the 
2

right of a lawyer to practice [law] after termination of [a law 

firm] relationship.” Ariz. R. Sup. Ct. 42 (2006). This case 

involves the application of ER 5.6(a) to a shareholder agreement 

requiring a departing lawyer to tender his stock to a 

professional corporation for no compensation if he thereafter 

competes with the corporation in the practice of law. We hold 

that such an agreement does not violate ER 5.6(a), but rather 

should be evaluated under the well-established law governing 

similar restrictive covenants in agreements between non-lawyers. 

I. 

¶2 In 1987, William Fearnow paid $33,674.42 for a law 

firm partnership interest. Four years later, the partners 

decided to wind down the firm. Several partners, including 

Fearnow, formed a new firm, Ridenour, Swenson, Cleere & Evans, 

P.C. (“RSCE”). See Ariz. Rev. Stat. (“A.R.S.”) §§ 10-2201 to -

2249 (2004) (governing professional corporations) (hereinafter 

“the Professional Corporations Act” or “the Act”). The former 

partners made no new capital contributions to RSCE; rather, 

their original partnership contributions were converted to 

stock. Fearnow was thus deemed to have paid $33,674.42 for one 

share of RSCE stock. 

¶3 Fearnow and the other RSCE shareholders signed a 

Shareholder Agreement (“Agreement”). The Agreement generally 

provided for the repurchase of a lawyer’s stock for the original 
3

subscription price upon disability, retirement, withdrawal, or 

expulsion from the firm. Separate provisions in the Agreement 

(collectively, the “voluntary withdrawal provisions”) required a 

shareholder voluntarily withdrawing and thereafter competing in 

the firm’s “geographic area for more than ten hours per week” to 

“tender his or her Share back to the Corporation for no 

compensation.”1

 

¶4 In 1998, Fearnow voluntarily left RSCE to join another 

Phoenix firm. Fearnow demanded $33,674.42 for his RSCE stock. 

RSCE refused, citing the voluntary withdrawal provisions. 

Fearnow sued, alleging that the provisions violated ER 5.6(a). 

¶5 The parties filed cross-motions for summary judgment. 

The superior court held that the voluntary withdrawal provisions 

violated ER 5.6(a) and were therefore unenforceable. Because 

the Agreement had no severability clause, the court held the 

entire contract invalid. The trial court then found Fearnow to 

be a “disqualified person” as defined by the Professional 

Corporations Act, see A.R.S. § 10-2201(1), and ordered a 

 

1

 The Agreement provides that “[o]ther than retirement, a 

Stockholder who withdraws from the Corporation shall tender his 

or her Share to the Corporation for no compensation.” In turn, 

the Agreement defines retirement from the “private practice of 

law” as not “engaging in any lawyering activity in competition 

with the Corporation and within the Corporation’s geographic 

area for more than ten hours per week.” Collectively, these 

provisions bar repurchase if the shareholder voluntarily 

withdraws from the firm and then engages in the defined 

competition. 
4

valuation of his stock pursuant to A.R.S. § 10-2223. The 

superior court ordered RSCE to repurchase the stock for $86,500. 

¶6 The court of appeals affirmed in part and reversed in 

part. Fearnow v. Ridenour, Swenson, Cleere & Evans, P.C., 210 

Ariz. 256, 110 P.3d 357 (App. 2005). The court found the 

voluntary withdrawal provisions unenforceable, but held that 

Fearnow was not a “disqualified person” entitled to redemption 

of his stock under the Act. Id. at 262 ¶ 32, 110 P.3d at 363. 

¶7 Fearnow petitioned for review and RSCE filed a 

conditional cross-petition. We granted review of both petitions 

because the issues presented are of first impression and 

statewide importance. We have jurisdiction pursuant to Article 

6, Section 5(3), of the Arizona Constitution and A.R.S. § 12-

120.24 (2003). 

II. 

A. 

¶8 As a general rule, a contract restricting the right of 

an employee to compete with an employer after termination of 

employment “which is not unreasonable in its limitations should 

be upheld in the absence of a showing of bad faith or of 

contravening public policy.” Lassen v. Benton, 86 Ariz. 323, 

328, 346 P.2d 137, 140 (1959), modified on other grounds, 87 

Ariz. 72, 347 P.2d 1012 (1959); see also 15 Corbin on Contracts

§ 80.15 (2003) (noting that in determining the enforceability of 
5

such a provision, “reasonableness is the North Star”). Such a 

restrictive covenant is unreasonable if “(a) the restraint is 

greater than is needed to protect the promisee’s legitimate 

interest, or (b) the promisee’s need is outweighed by the 

hardship to the promisor and the likely injury to the public.” 

Restatement (Second) of Contracts § 188 (1981). 

¶9 The determination of “[r]easonableness is a factintensive inquiry that depends on the totality of the 

circumstances.” Valley Med. Specialists v. Farber, 194 Ariz. 

363, 369 ¶ 20, 982 P.2d 1277, 1283 (1999). “Each case hinges on 

its own particular facts.” Bryceland v. Northey, 160 Ariz. 213, 

217, 772 P.2d 36, 40 (App. 1989). As the court of appeals has 

noted, 

[w]hat is reasonable depends on the whole subject 

matter of the contract, the kind and character of the 

business, its location, the purpose to be accomplished 

by the restriction, and all the circumstances which 

show the intention of the parties. 

Gann v. Morris, 122 Ariz. 517, 518, 596 P.2d 43, 44 (App. 1979). 

¶10 Most of our cases concerning the enforcement of 

restrictive covenants deal with “non-compete” agreements, under 

which an employee is prohibited from competing with the former 

employer in a geographic area for a period of time. See, e.g., 

Farber, 194 Ariz. at 365 ¶ 3, 982 P.2d at 1279 (finding 

unreasonable a covenant between physicians forbidding 

competition within a five-mile radius of any medical office 
6

owned by the former employer for three years); Lassen, 86 Ariz. 

at 328, 346 P.2d at 140 (finding reasonable a provision 

prohibiting competition for five years within a twelve-mile 

radius of a veterinarian’s former employer). We have, however, 

employed the same fact-based reasonableness analysis to 

determine the enforceability of agreements under which a 

departing employee is not entirely forbidden to compete. See 

Olliver/Pilcher Ins., Inc. v. Daniels, 148 Ariz. 530, 715 P.2d 

1218 (1986). Olliver/Pilcher involved an “anti-piracy” 

agreement forbidding solicitation of the former employer’s 

customers. Id. at 531, 715 P.2d at 1219. While recognizing 

that such a provision is “less restrictive than a covenant not 

to compete,” id. at 531, 715 P.2d at 1218, we reiterated that 

“‘the test of validity of restrictive covenants is one of 

reasonableness,’” id. at 532, 715 P.2d at 1219 (quoting Lessner 

Dental Labs. v. Kidney, 16 Ariz. App. 159, 160, 492 P.2d 39, 40 

(1971)).2

 

2

 Other courts have adopted a similar approach to agreements 

imposing restrictions less onerous than covenants not to 

compete. See, e.g., Tatom v. Ameritech Corp., 305 F.3d 737, 745 

(7th Cir. 2002) (holding that a forfeiture provision will be 

enforced as long as it is reasonable); Pollard v. Autotote, 

Ltd., 852 F.2d 67, 72 (3d Cir. 1989) (applying a reasonableness 

test to determine if a forfeiture-for-competition provision in a 

management incentive compensation plan is enforceable); Harris 

v. Bolin, 247 N.W.2d 600, 603 (Minn. 1976) (holding a forfeiture 

clause unenforceable as unreasonable); Brockley v. Lozier Corp., 

488 N.W.2d 556, 563 (Neb. 1992) (holding that penalties in 

profit sharing plans can be enforced only when reasonable).
7

B.

¶11 Were Fearnow not an attorney, the voluntary withdrawal 

provisions would be subject to a fact-based reasonableness 

analysis. This Court, however, has adopted a rule governing the 

ability of lawyers to enter into certain types of agreements. 

That rule, ER 5.6, provides: 

A lawyer shall not participate in offering or 

making: 

(a) a partnership or employment agreement that 

restricts the rights of a lawyer to practice after 

termination of the relationship, except an agreement 

concerning benefits upon retirement; or 

(b) an agreement in which a restriction on the 

lawyer’s right to practice is part of the settlement 

of a controversy between private parties. 

Such restrictions are prohibited because they limit a lawyer’s 

“professional autonomy” and interfere with “the freedom of 

clients to choose a lawyer.” ER 5.6 cmt. 

¶12 The Arizona Rules of Professional Conduct, of which ER 

5.6 is part, are based on the 1983 Model Rules of Professional 

Conduct promulgated by the American Bar Association (“ABA”). 

See Ariz. R. Sup. Ct. 42 (providing that the professional 

conduct of State Bar members shall be governed by the ABA Model 

Rules, as amended by this Court). But even before the ABA 

adopted Model Rule 5.6(a), its Committee on Professional Ethics 

had issued several opinions condemning non-compete agreements 

among lawyers under previous Canons of Professional Ethics. 
8

Those opinions stressed the same themes as the current 

commentary to ER 5.6 – lawyer autonomy and client choice. See, 

e.g., ABA Comm. on Prof’l Ethics, Formal Op. 300 (1961) (finding 

a non-compete agreement improper under Canon 7 (forbidding 

encroachment on the business of another lawyer), Canon 27 

(prohibiting solicitation), and Canon 35 (protecting client 

confidences)); ABA Comm. on Prof’l Ethics, Informal Op. 1072 

(1968) (stating that covenants not to compete “interfere with 

and obstruct the freedom of the client in choosing and dealing 

with his lawyer” and that an “attorney must remain free to 

practice when and where he will and to be available to 

prospective clients who might desire to engage his services”). 

These opinions led to the adoption in 1969 of Disciplinary Rule 

(“DR”) 2-108 of the Model Code of Professional Responsibility,3

which in turn was incorporated into Rule 5.6 of the 1983 Model 

Rules without substantive change. 

¶13 ER 5.6 categorically forbids lawyers from making an 

“agreement that restricts the right of a lawyer to practice 

after the termination of [a law firm] relationship,” ER 5.6(a), 

or a settlement agreement containing “a restriction on a 

lawyer’s right to practice,” ER 5.6(b). Neither ER 5.6 nor 

 

3

 Informal Opinion 1171 (1971) held that an agreement 

prohibiting a departing attorney from working with law firm 

clients violated DR 2-108. Informal Opinion 1417 (1978) held 

that an agreement prohibiting a departing partner from hiring 

away firm associates violated DR 2-108. 
9

prior ABA opinions, however, expressly deals with agreements 

that do not restrict a lawyer’s right to practice or compete, 

but rather impose only some financial disincentive for doing so. 

Such provisions are before us today. 

C. 

¶14 In analyzing the voluntary withdrawal provisions, we 

write on a clean slate. No prior opinion of this Court has 

applied ER 5.6(a). We did, however, discuss ER 5.6 in Farber, 

which involved a covenant not to compete among physicians. In 

that case, we analogized the importance of a patient’s right to 

choose a doctor to the need for a client to be free to choose an 

attorney. 194 Ariz. at 368 ¶¶ 16-17, 982 P.2d at 1282. Citing 

ER 5.6, we stated that “restrictive covenants are prohibited 

between attorneys,” id. at 369 ¶ 18, 982 P.2d at 1283, and that 

“public policy considerations preclude their applicability,” id.

(quoting Dwyer v. Jung, 336 A.2d 498, 500 (N.J. Super. Ct. Ch. 

Div. 1975) (quotation marks omitted)). We concluded that the 

doctor/patient relationship, like the attorney/client 

relationship, “is special and entitled to unique protection.” 

Id. ¶ 19. We did not, however, find the covenant in Farber

invalid as a matter of law. Expressly declining the invitation 

to hold such agreements between physicians “void per se as 

against public policy,” id. ¶ 19 n.1, we instead examined the 

covenant for reasonableness, id. ¶ 19. 
10

¶15 The above-quoted dicta from Farber support the 

conclusion that agreements violative of ER 5.6(a) will not be 

enforced. Cases from other jurisdictions so hold, finding void 

agreements that expressly forbid attorneys from representing 

particular clients or competing in a specific geographic area 

for a specified period of time. See, e.g., White v. Med. Review 

Consultants, Inc., 831 S.W.2d 662, 664-65 (Mo. Ct. App. 1992) 

(upholding a rule prohibiting the restriction of a lawyer’s 

right to practice); Dwyer, 336 A.2d at 501 (finding void as 

against public policy a covenant prohibiting departing attorneys 

from working with partnership clients). 

¶16 The case law is less clear, however, when the covenant 

does not categorically forbid competition or representation of 

former clients, but rather provides only a financial 

disincentive that may discourage the departing lawyer from doing 

so. Many courts hold such provisions void. For example, in an 

oft-quoted opinion, the New York Court of Appeals refused to 

enforce a law firm partnership agreement that conditioned the 

payment of earned but uncollected partnership revenues upon a 

withdrawing partner’s refraining from competing with the firm. 

Cohen v. Lord, Day & Lord, 550 N.E.2d 410, 410 (N.Y. 1989). The 

court reasoned: 

[W]hile the provision in question does not expressly 

or completely prohibit a withdrawing partner from 

engaging in the practice of law, the significant 
11

monetary penalty it exacts, if the withdrawing partner 

practices competitively with the former firm, 

constitutes an impermissible restriction on the 

practice of law. The forfeiture-for-compensation 

provision would functionally and realistically 

discourage and foreclose a withdrawing partner from 

serving clients who might wish to continue to be 

represented by the withdrawing lawyer and would thus 

interfere with the client’s choice of counsel. 

Id. at 411. Other jurisdictions have reached similar results on 

similar reasoning.4

¶17 There is, however, a strong opposing view, articulated 

principally by the California courts. The seminal case is 

Haight, Brown & Bonesteel v. Superior Court, 285 Cal. Rptr. 845 

(Ct. App. 1991), which involved a provision requiring 

withdrawing attorneys competing with the law firm to forfeit 

capital investments and accounts receivable. Construing an 

ethical rule quite similar to ER 5.6,5

 the court found that the 

 

4 See, e.g., Jacob v. Norris, McLaughlin & Marcus, 607 A.2d 

142, 148 (N.J. 1992) (refusing to enforce a provision 

withholding termination benefits for departing attorney who 

competes with firm); Katchen v. Wolff & Samson, 610 A.2d 415, 

419 (N.J. Super. Ct. App. Div. 1992) (finding that the 

challenged provision “has the effect of discouraging competition 

and forces an attorney to decide whether he should stay with a 

firm that admittedly fairly compensates him or leave the firm at 

a financial risk to himself in order to better serve his 

clients”); Gray v. Martin, 663 P.2d 1285, 1290 (Or. Ct. App. 

1983) (refusing to enforce a contract preventing a withdrawing 

attorney from receiving termination benefits if the attorney 

continues to practice in certain counties). 

5

 The rule at issue, Rule 1-500 of the Rules of Professional 

Conduct of the State Bar of California, provided as follows: 
12

provision was not prohibited because it did “not expressly or 

completely prohibit the [attorneys] from engaging in the 

practice of law, or from representing clients.” Id. at 848. 

The court noted that the rule “simply provides that an attorney 

may not enter into an agreement to refrain from the practice of 

law.” Id. The rule does not 

prohibit a withdrawing partner from agreeing to 

compensate his former partners in the event he chooses 

to represent clients previously represented by the 

firm from which he has withdrawn. Such a construction 

represents a balance between competing interests. On 

the one hand, it enables departing attorneys to 

withdraw from a partnership and continue to practice 

anywhere within the state, and to be able to accept 

employment should he choose to so do from any client 

who desires to retain him. On the other hand, the 

remaining partners remain able to preserve the 

_________________________ 

(A) A member shall not be a party to or participate in 

offering or making an agreement, whether in connection 

with the settlement of a lawsuit or otherwise, if the 

agreement restricts the right of a member to practice 

law, except that this rule shall not prohibit such an 

agreement which: 

(1) Is a part of an employment, shareholders’, or 

partnership agreement among members provided the 

restrictive agreement does not survive the 

termination of the employment, shareholder, or 

partnership relationship; or 

(2) Requires payments to a member upon the 

member’s retirement from the practice of law; or 

(3) Is authorized by Business and Professions 

Code sections 6092.5, subdivision (i) or 6093. 

(B) A member shall not be a party to or participate in 

offering or making an agreement which precludes the 

reporting of a violation of these rules. 
13

stability of the law firm by making available the 

withdrawing partner’s share of capital and accounts 

receivable to replace the loss of the stream of income 

from the clients taken by the withdrawing partner to 

support the partnership’s debts. 

Id. at 848. 

¶18 Three years later, the California Supreme Court held 

that “an agreement among law partners imposing a reasonable toll 

on departing partners who compete with the firm is enforceable.” 

Howard v. Babcock, 863 P.2d 150, 151 (Cal. 1994). The provision 

at issue required departing attorneys who worked with other 

departing attorneys in competition with the law firm to forfeit 

all withdrawal benefits; departing attorneys who worked on their 

own but competed with the law firm were required to forfeit 

seventy-five percent of their benefits. Id. Howard was decided 

against a backdrop of California statutes favoring non-compete 

agreements. Id. at 154. But the decision did not turn on those 

statutes; the court expressly noted that it had the “power to 

impose a higher standard of conduct on lawyers” through ethical 

rules. Id. at 155. The California Supreme Court concluded, 

however, that its ethical rule was not “intended to . . . 

prohibit the type of agreement that is at issue here.” Id. at 

155-56. Howard found a critical distinction between an 

agreement imposing disincentives against competition and one 

forbidding competition: 
14

An agreement that assesses a reasonable cost against a 

partner who chooses to compete with his or her former 

partners does not restrict the practice of law. 

Rather, it attaches an economic consequence to a 

departing partner’s unrestricted choice to pursue a 

particular kind of practice. 

Id. at 156. 

¶19 Recognizing that law firms have an obligation to 

protect their own economic interests and their investments in 

training and promoting partners, Howard found “no legal 

justification for treating partners in law firms differently in 

this respect from partners in other business and professions.” 

Id. at 157. Such an approach, the court noted, would “have no 

deleterious effect on the current ability of clients to retain 

loyal, competent counsel of their choice.” Id. at 156-57. 

Thus, Howard concluded that a contract provision that did not 

prevent a departing lawyer from competing was not void on its 

face, but rather would be evaluated for reasonableness. Id. at 

160.6

 

6 See also Pettingell v. Morrison, Mahoney & Miller, 687 

N.E.2d 1237, 1240 (Mass. 1997) (stating that a financial penalty 

may be valid if it is a “reasonable recognition of a law firm’s 

financial loss due to the departure of a partner”); McCrosky, 

Feldman, Cochrane & Brock, P.C. v. Waters, 494 N.W.2d 826, 828-

29 (Mich. Ct. App. 1992) (finding financial disincentive 

provisions valid because they were “not so overreaching that 

they amount to an actual restriction on the defendant’s right to 

practice law”); Capozzi v. Latsha & Capozzi, P.C., 797 A.2d 314, 

320 (Pa. Super. Ct. 2002) (finding that a forfeiture clause must 

meet the reasonableness standard used to evaluate non-compete 

clauses involving other professionals). 
15

D. 

¶20 We find the reasoning of Howard compelling. ER 5.6 

prohibits only an agreement “that restricts the right of a 

lawyer to practice” law after termination of employment with a 

firm. (Emphasis added.) It is one thing for this Court, in its 

supervisory capacity over the legal profession, to adopt a 

limited exception to the general rule construing restrictive 

covenants for reasonableness when confronting a contract the 

terms of which forbid a lawyer from engaging in practice or 

representing certain clients. It is quite another, as Howard

notes, to completely “distinguish lawyers from other 

professionals such as doctors or accountants, who also owe a 

high degree of skill and loyalty to their patients and clients.” 

Howard, 863 P.2d at 160.7

 We are unable to conclude that the 

interests of a lawyer’s clients are so superior to those of a 

 

7

 See Anderson & Steele, Ethics and the Law of Contract 

Juxtaposed: A Jaundiced View of Professional Responsibility 

Considerations in the Attorney-Client Relationship, 4 Geo. J. 

Legal Ethics 791, 846 (1991): 

Whether the fulcrum for balancing interests of clients 

over those of their lawyers is a narcissistic concept 

of ourselves as paragons of professional propriety – 

as super-fiduciaries – or the absurdly conflicting 

notion that good lawyers are hard to find, we wonder 

how much longer these outmoded, unrealistic concepts 

can be used to deny attorneys fair access to the norms 

of the marketplace, restricted only by the same rules 

applicable to doctors, to ministers, to accountants, 

and to all other fiduciary-based professions. 
16

doctor’s patients (whose choice of a physician may literally be 

a life-or-death decision) as to require a unique rule applicable 

only to attorneys. The language of ER 5.6 does not support such 

a sweeping special treatment of lawyers, nor does protection of 

clients mandate such a result.8

¶21 We therefore decline to read ER 5.6(a) in the 

expansive fashion suggested by Fearnow. Although the rule 

prohibits – and we will hold unenforceable – agreements that 

forbid a lawyer to represent certain clients or engage in 

practice in certain areas or at certain times, its language 

should not be stretched to condemn categorically all agreements 

imposing any disincentive upon lawyers from leaving law firm 

employment. Such agreements, as is the case with restrictive 

covenants between other professionals, should be examined under 

the reasonableness standard.9

 

8

 It is difficult to see how client choice is significantly 

impacted by our reading of ER 5.6(a). The client is of course 

free to remain with the lawyer, whether or not the lawyer 

chooses to stay at his original firm or go elsewhere. 

9

 Neither the comments to the ABA Model Rules nor the 

Restatement compel a contrary conclusion. The comments to the 

ABA Model Rule 5.6 are simply silent on the topic today before 

us. Restatement (Third) of the Law Governing Lawyers § 13(1) 

(2000) simply states, in language virtually identical to the 

text of ER 5.6(a), that a lawyer may not “enter into a law-firm 

agreement that restricts the right of the lawyer to practice law 

after terminating the relationship.” The commentary to § 13 

recognizes that a majority of courts have construed this 

language as encompassing agreements imposing financial penalties 

on departing lawyers who decide to compete, id. cmt. a., but 
17

E. 

¶22 The Shareholder Agreement requires a withdrawing 

attorney engaging in “lawyering activity in competition with the 

Corporation and within the Corporation’s geographic area” to 

forfeit his or her stock in the professional corporation. The 

provisions do not restrict the lawyer’s right to practice law 

after termination. Rather, they merely provide a lawyer who 

withdraws and decides to practice elsewhere with less money than 

others making different decisions. 

¶23 Because the superior court held that the voluntary 

withdrawal provisions were void as a matter of law, it did not 

construe the provisions for reasonableness. The court of 

appeals, even assuming that the case was governed by the more 

permissive standard of Howard, found the provisions unreasonable 

as a matter of law because they required Fearnow to forfeit his 

entire capital contribution even if he took no RSCE clients. 

Fearnow, 210 Ariz. at 259 ¶ 17, 110 P.3d at 360. 

¶24 As an initial matter, we note that RSCE claims that 

Fearnow did take clients with him upon his departure; the court 

of appeals’ observation that the voluntary withdrawal provisions 

might be unreasonable when applied to a lawyer who took none is 

_________________________ 

also acknowledges that other courts and commentators have 

reached a different interpretation of the rule. See id., 

Reporter’s Note. 
18

thus not dispositive.10 More importantly, because the case was 

decided on summary judgment under the superior court’s view of 

ER 5.6(a), RSCE never had the opportunity below to present facts 

concerning the reasonableness of the provisions. Nor has 

Fearnow had the opportunity to present evidence that these 

particular provisions are unreasonable. Because “[e]ach case 

turns on its own particular facts,” Bryceland, 160 Ariz. at 217, 

772 P.2d at 40, we cannot conclude as a matter of law whether 

the voluntary withdrawal provisions are reasonable. We remand 

to allow the superior court to address the reasonableness of the 

voluntary withdrawal provisions.11 

III. 

¶25 The second issue before us is the appropriate remedy 

if the voluntary withdrawal provisions are found unreasonable. 

 

10 Even if a departing lawyer takes no clients, some level of 

financial penalty for withdrawal could conceivably be reasonable 

if, for example, the firm undertook capital expenditures or 

hired associate attorneys based on the presence of the former 

partner, or if the departure imposed costs in changing the firm 

name and related marketing materials. 

11 In determining the reasonableness of the voluntary 

withdrawal provisions, the superior court may consider that no 

financial penalty is imposed on withdrawing members who do not 

compete in the stated geographic area. But even if such 

discrimination might tend to show the unreasonableness of the 

voluntary withdrawal provisions, we are unable today, on the 

record before us, to conclude that this fact alone renders the 

provision automatically unreasonable as a matter of law. 

Rather, the question is whether there is a reasonable basis for 

such discrimination, an issue that turns on the particular facts 

of each case. 
19

The superior court held that Fearnow was entitled to redemption 

of his stock under the Professional Corporations Act as a 

“disqualified person.” The court of appeals disagreed, holding 

that Fearnow has no such statutory remedy as long as he is 

licensed to practice law. Fearnow, 210 Ariz. at 260 ¶ 23, 110 

P.3d at 361. 

¶26 We agree with the court of appeals. Section 10-

2201(1) defines a “disqualified” person as “an individual or 

entity that is not or ceases to be a qualified person”; section 

10-2201(7) in turn defines a “qualified person” simply as “a 

person that is eligible under this chapter to be issued shares 

by a professional corporation.” As the court of appeals 

correctly noted, section 10-2220(A)(1) allows issuance of shares 

to “[i]ndividuals who are licensed by law in this or another 

state to render a professional service described in the 

corporation’s articles of incorporation.” At all times relevant 

to this case, Fearnow was licensed to practice law in Arizona. 

He therefore is not a “disqualified person.”12

¶27 Vinall v. Hoffman, 133 Ariz. 322, 651 P.2d 850 (1982), 

upon which Fearnow relies, is not to the contrary. That case 

 

12 Had Fearnow been a disqualified person, the proper 

procedure under the Professional Corporations Act would be to 

first allow the corporation an opportunity to present a fair 

value offer for repurchase of the share. A.R.S. § 10-2224. A 

valuation proceeding is required only if the corporation refuses 

to make an offer or after the disqualified person rejects the 

offer. A.R.S. § 10-2225(A). 
20

involved a prior version of the Professional Corporations Act, 

which required the repurchase of stock after the “resignation” 

of a shareholder. Id. at 323, 651 P.2d at 851 (citing former 

A.R.S. § 10-909(D) (repealed 1995)). Our holding in Vinall that 

the word “resignation” meant resignation from the corporation, 

not the profession, is therefore of no aid in interpreting the 

present version of the Professional Corporations Act, which 

triggers the right to repurchase upon “disqualification.” 

¶28 But it does not follow, as the court of appeals held, 

that Fearnow must retain his RSCE stock until his retirement or 

disqualification to practice law. The Professional Corporations 

Act provides that “[a] provision for the acquisition of shares 

contained in a professional corporation’s articles of 

incorporation or bylaws or in a private agreement is 

enforceable.” A.R.S. § 10-2223(A). Therefore, should the 

voluntary withdrawal provisions be eventually found 

unreasonable, the next question is whether the Agreement 

nonetheless requires the acquisition of Fearnow’s shares. 

¶29 The superior court held that because the Agreement had 

no severability clause, Fearnow had no contractual remedy. The 

court of appeals, while disagreeing with the superior court’s 

conclusion that Fearnow was entitled to repurchase of his stock 

under the Professional Corporations Act, did not address whether 

the Agreement itself provided a remedy. Fearnow, 210 Ariz. at 
21

262 ¶ 29 n.8, 110 P.3d at 363 n.8 (stating that “we merely hold 

that there is not a remedy under the Act that provides for the 

mandatory repurchase of such shares as long as the departing 

shareholder remains licensed”). 

¶30 Although the Agreement has no severability clause, we 

believe that the contract nonetheless requires repurchase of 

Fearnow’s share for his original subscription price if the 

voluntary withdrawal provisions are deemed unenforceable. Under 

the Agreement, any shareholder who becomes permanently disabled, 

retires from the practice of law, is expelled from the law firm, 

or voluntarily withdraws must tender his or her stock to the 

corporation. In all cases but one, that tender is made in 

return for the original subscription price. Only the partner 

who voluntarily withdraws and competes with the firm in a stated 

geographic area is forced to tender stock for no compensation. 

¶31 Although “we will not permit courts to add terms or 

rewrite provisions” to covenants, Farber, 194 Ariz. at 372 ¶ 31, 

982 P.2d at 1286, “Arizona courts will ‘blue pencil’ restrictive 

covenants, eliminating grammatically severable, unreasonable 

provisions,” id. ¶ 30. In this case, the voluntary withdrawal 

provisions are severable from the balance of the agreement. The 

contracting parties plainly contemplated that all departing 

shareholders would be required to return their stock to RSCE. 

The Agreement also provides that all but those choosing to 
22

compete would receive their original subscriptions in return for 

the stock. If the only exceptions to the rule – the voluntary 

withdrawal provisions – are unenforceable, the severability of 

those provisions is plainly “evident from the contract itself.” 

Olliver/Pilcher, 148 Ariz. at 533, 715 P.2d at 1221. 

¶32 Therefore, if the superior court concludes on remand 

that the voluntary withdrawal provisions are unreasonable, it 

should order RSCE to repurchase Fearnow’s share for $33,674.42, 

his original subscription price. 

IV. 

¶33 For the reasons above, we vacate the opinion of the 

court of appeals, vacate the judgment of the superior court, and 

remand to the superior court for further proceedings consistent 

with this opinion. Because we do not yet know which party will 

ultimately be successful in this matter, we decline to award 

either party attorneys’ fees either under the Agreement or under 

A.R.S. § 12-341.01.13

 _______________________________________ 

 Andrew D. Hurwitz, Justice 

 

13 Fearnow has also requested fees under A.R.S. § 10-2226. 

That provision, however, applies only to an 

evaluation/repurchase proceeding required by the Professional 

Corporations Act, and cannot be invoked here in light of our 

conclusion that Fearnow is not a “disqualified” person under the 

Act. 
23

CONCURRING: 

_______________________________________ 

Ruth V. McGregor, Chief Justice 

_______________________________________ 

Rebecca White Berch, Vice Chief Justice 

_______________________________________ 

Michael D. Ryan, Justice 

B A L E S, Justice, concurring in part and dissenting in part 

¶34 The law firm in this case seeks to impose a penalty of 

$33,674 on an ex-partner merely because he competed with the 

firm for clients. Exacting significant financial penalties from 

former lawyers who compete, I believe, “restricts the right of a 

lawyer to practice” in violation of ER 5.6(a). My position, 

unlike that of the majority, is consistent with the language and 

purpose of our ethical rule. It also comports with the views of 

most other courts that have addressed this issue, as well as the 

Restatement (Third) of the Law Governing Lawyers (2000) 

(“Restatement”). Thus, I respectfully dissent from the 

majority’s holdings concerning the scope of ER 5.6(a) and the 

need to remand this case to determine the reasonableness of the 

“voluntary withdrawal” provisions. 
24

I. 

¶35 By its terms, ER 5.6(a) prohibits more than just noncompete agreements among attorneys. The rule more generally 

bars lawyers from entering agreements that “restrict” their 

right to practice after departing a firm. We have long 

recognized that non-compete agreements are one form of the 

broader category of restrictive covenants. See, e.g.,

Olliver/Pilcher Ins., Inc. v. Daniels, 148 Ariz. 530, 531-32, 

715 P.2d 1218, 1219-20 (1986) (distinguishing non-compete 

agreement from restrictive covenant requiring insurance employee 

to pay former employer share of fees earned if customers 

followed employee). While stating that the language of ER 5.6 

should not be “stretched” beyond non-compete agreements, op. ¶ 

21, the majority in fact compresses the rule to less than what 

its terms expressly provide. 

¶36 Most courts and commentators recognize that law firm 

agreements that impose significant penalties on competing former 

lawyers do in fact “restrict” a lawyer’s right to practice 

within the meaning of rules like ER 5.6(a). See, e.g., 

Pettingell v. Morrison, Mahoney & Miller, 687 N.E.2d 1237, 1239 

(Mass. 1997) (noting the “strong majority rule” that courts will 

not give effect to agreements that impose substantial financial 

penalties on lawyers for competing with former firms); Cohen v. 

Lord, Day & Lord, 550 N.E.2d 410, 411-12 (N.Y. 1989) (noting 
25

that reading rule to apply only to provisions that expressly 

prohibit practice of law conflicts with language and purpose of 

rule); 2 Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of 

Lawyering 47-6 (3d ed. 2005) (“The Law of Lawyering”) (noting it 

has become “generally accepted that financial disincentives 

‘restrict’ the departing lawyer’s right to practice [and] thus 

implicat[e] Rule 5.6(a)”). 

¶37 Similarly, the Restatement, like our ER 5.6(a), bars 

lawyers from entering agreements “that restrict [] the right of 

the lawyer to practice law after terminating the relationship.” 

Restatement § 13(1). Reflecting the generally accepted view, 

the official comments to the Restatement note that: 

[S]uch rules preclude enforcement of a provision of a 

firm agreement under which a departing lawyer is 

denied otherwise-accrued financial benefits on 

entering into competitive law practice, unless the 

denial applies to all departing lawyers, whether 

entering into private practice or not . . . . 

Id. cmt. b. 

¶38 The Restatement approach desirably promotes the 

policies that underlie ER 5.6. These policies are two-fold: 

preserving both the freedom of clients to choose their lawyers 

and the professional autonomy of lawyers to choose where to 

practice and whom to represent. See ER 5.6(a), cmt. 1; Valley 

Med. Specialists v. Farber, 194 Ariz. 363, 369 ¶ 18, 982 P.2d 

1277, 1283 (1999). Discussing American Bar Association (“ABA”) 
26

Model Rule of Professional Conduct 5.6(a), from which our rule 

is drawn, Professors Hazard and Hodes observe: 

Rule 5.6(a) is designed in part to protect lawyers, 

particularly young lawyers, from bargaining away their 

right to open their own offices after they end an 

association with a firm or other legal employer. It 

also protects future clients against having a 

restricted pool of attorneys from which to choose. 

The Law of Lawyering at 47-5. 

¶39 Some law firms have tried to restrict competition 

under the guise of retirement provisions, because ER 5.6(a)’s 

prohibitions do not apply to agreements concerning retirement 

benefits. See id. Such efforts typically provide for the 

forfeiture of capital shares or fee income that would otherwise 

be due a departing lawyer. “Often, the anticompetitive nature 

of such clauses . . . is made all the more clear by the fact 

that they become inoperative if the lawyer relocates to a 

different geographic area.” Id. These observations apply to 

the voluntary withdrawal provisions at issue here, as they 

result in the forfeiture of the stock purchase price only for 

those former lawyers who compete with the firm. 

¶40 “Onerous financial terms of this kind effectively 

limit the mobility and availability of still active lawyers, and 

correspondingly reduce client choice.” Id.; accord Cohen, 550 

N.E.2d at 411 (“The forfeiture-for-competition provision would 

functionally and realistically discourage and foreclose a 
27

withdrawing partner from serving clients who might wish to 

continue to be represented by the withdrawing lawyer and would 

thus interfere with the client's choice of counsel.”). 

¶41 In declining to follow the generally accepted approach 

as reflected in the Restatement, the majority observes that it 

writes “on a clean slate.” Op. ¶ 14. This is true, however, 

only in the narrow sense that we have not previously decided a 

case that actually applied ER 5.6(a) to lawyers. We have, 

however, recognized that ER 5.6(a) prohibits restrictive 

covenants among attorneys. See Valley Med. Specialists, 194 

Ariz. at 368 ¶ 17, 982 P.2d at 1282 (citing, inter alia, Cohen, 

550 N.E.2d at 410-11). Moreover, in other contexts, we have 

often noted that, in the absence of contrary Arizona law, our 

courts generally follow the Restatement. See, e.g., Espinoza v. 

Schulenburg, 212 Ariz. 215, 217 ¶ 9, 129 P.3d 937, 939 (2006). 

The majority unconvincingly departs from our usual approach by 

observing, op. ¶ 21 n.8, that the Reporter’s Notes to 

Restatement § 13(1) acknowledge that some courts and 

commentators do not adopt the Restatement’s interpretation — 

something that could be said of nearly every provision in any 

Restatement. 

¶42 The slate is also not clean in that this court only 

recently approved extensive revisions to our rules of 

professional conduct, including amendments to ER 5.6(a). See
28

Order Amending Ariz. R. Sup. Ct. 42 and 43, E.R. 5.6 (2003). 

These rule changes were the end result of a process that began 

with the ABA’s Ethics 2000 Commission, which thoroughly reviewed 

and updated the Model Rules of Professional Conduct. The 

Arizona State Bar’s Board of Governors in turn established an 

Ethical Rules Review Group to review the new ABA Model Rules and 

to recommend appropriate changes to our rules. The only changes 

proposed for ER 5.6(a) were to broaden its scope to clarify that 

it applies to all forms of agreements — whether partnership, 

shareholder, operating, employment, or otherwise — restricting a 

lawyer’s right to practice after leaving a firm.14

¶43 No one suggested that ER 5.6(a) should be revised to 

limit the rule’s prohibitions to only those agreements expressly 

barring a lawyer from competing in certain areas or for certain 

clients. Instead, in requesting changes to ER 5.6(a), the State 

Bar specifically noted that, “[a]s amended, the Rule and 

Comments are consistent with the corresponding ABA Model Rule 

and Comments.” Petition R-02-0045 for Amendment of Arizona 

 

14 The changes to ER 5.6(a), which became effective on December 

1, 2003, are indicated with underlined additions and struckthrough deletions in the following text: 

A lawyer shall not participate in offering or making: 

(a) a partnership, shareholders, operating,or

employment, or other similar type of agreement that 

restricts the rightsright of a lawyer to practice 

after termination of the relationship, except an 

agreement concerning benefits upon retirement. 
29

Supreme Court Rules 42 and 43 at 21 (2002). One would think 

that, if Arizona had adopted or proposed to adopt a version of 

ER 5.6(a) that is narrower than the generally accepted 

interpretation of Model Rule 5.6 and Restatement § 13, there 

would be some attention to this fact. 

¶44 The majority instead defends its constricted reading 

of Arizona’s ER 5.6(a) by relying on the California Supreme 

Court’s decision in Howard v. Babcock, 863 P.2d 150, 151 (Cal. 

1993), which interpreted Rule 1-500 of the California State 

Bar’s Rules of Professional Conduct. Op. ¶¶ 18-20. For several 

reasons, I find Howard’s reasoning unpersuasive. Cf. 

Pettingell, 687 N.E.2d at 1239 (noting that “[c]ourts have not 

been attracted to the [minority] view expressed in Howard”). 

California’s Rule 1-500 is on its face narrower than ER 5.6(a) 

because it expressly allows restrictions on a lawyer’s right to 

practice that satisfy California’s Business and Professions 

Code, which itself allows certain restrictive covenants. 

Consistent with the California statutes, the premise of the 

Howard decision is that law firm partners should be treated, in 

terms of restrictive covenants, no “differently . . . [than] 

partners in other businesses and professions.” 863 P.2d at 157. 

¶45 Howard’s equation of law firm partners with other 

professionals does not work in Arizona. Our ER 5.6(a) is not 

limited to restrictions affecting law firm partners, but instead 
30

applies broadly to agreements restricting the right of any 

lawyer to practice. See ER 5.6(a) & cmt. 1. Reading ER 5.6 

narrowly, as does the majority, will impact all lawyers, and not 

merely law firm partners. Arizona, unlike California, also has 

no rule providing that lawyers may enter restrictive covenants 

otherwise authorized by our general professional statutes. 

Finally, we have already recognized that ER 5.6(a) is broader 

than the prohibitions on restrictive covenants for other 

professionals, such as doctors. See Valley Med. Specialists, 

194 Ariz. at 368-69 ¶¶ 16-17, 982 P.2d at 1282-83 (noting that 

although the American Medical Association only discourages 

restrictive covenants between physicians, such covenants are 

actually prohibited among attorneys). Thus, the fact that 

professionals other than lawyers may also owe duties to their 

clients cannot determine the scope of ER 5.6(a), a rule that 

reflects this court’s authority to regulate the practice of law 

and interests in client choice and lawyer autonomy that are in 

some respects unique to the legal profession. 

¶46 At bottom, the majority’s decision to limit ER 5.6(a) 

to only those agreements that expressly bar a lawyer from 

competing with a former firm rests on a policy concern — the view 

that law firms should be able to protect their own economic 

interests by imposing financial penalties on former lawyers who 

compete. See Op. ¶ 19; cf. The Law of Lawyering at 47-6 
31

(recognizing that Howard rests on policy concerns that give 

primacy to law firm continuity). This policy, however, is not 

recognized by either the text of ER 5.6(a) or its previously 

identified purposes. See Pettingell, 687 N.E.2d at 1239 & n.4 

(noting that Model Rule 5.6 focuses on lawyer autonomy and, 

chiefly, client choice, “not the interrelationship of the 

partners and former partners”). If a law firm’s “obligation to 

protect [its] own economic interests,” op. ¶ 19, merits 

recognition in ER 5.6(a), we should consider proposals to amend 

the rule, which would allow an opportunity for broad public 

comment and full consideration of the interests involved, rather 

than engrafting California’s minority approach onto our rule by 

judicial decision. 

¶47 The majority’s approach will unfortunately subvert the 

interests that are protected by ER 5.6(a). Law firms and other 

legal employers will be encouraged to avoid the prohibitions in 

ER 5.6(a) by seeking to impose — as this case illustrates — 

financial penalties rather than explicit restrictions on 

competing former attorneys. Because the legality of such 

penalties will be judged only post hoc under a vague 

reasonableness standard, lawyers will be discouraged from 

leaving their firms to compete or from challenging postdeparture restrictions. Cf. Valley Med. Specialists, 194 Ariz. 

at 372 ¶ 31, 982 P.2d at 1286 (recognizing that restrictive 
32

covenants that are not challenged in court may have in terrorem 

effect on departing employees). This result may help law firms 

tighten the golden handcuffs on their lawyers; it will not 

promote autonomy on the part of individual attorneys or the 

freedom of clients to be represented by the lawyer of their 

choice. 

¶48 I would instead apply ER 5.6(a) by its terms and hold 

that the voluntary withdrawal provisions at issue here — which 

require a former lawyer to forfeit the purchase price of his 

stock if he competes after departing — are a restriction on a 

lawyer’s right to practice and are therefore unenforceable. The 

majority’s holding that such provisions escape the prohibitions 

of ER 5.6(a) will undermine the interests protected by that rule 

and unnecessarily require courts to engage in fact-specific 

adjudication over penalty provisions that should be held void on 

their face. 

II. 

¶49 Even if I accepted the majority’s conclusion that the 

penalty provisions in this case should be evaluated for their 

“reasonableness,” a remand would not be necessary. Although a 

fact-specific inquiry, the reasonableness of restrictive 

covenants remains a question of law in Arizona. Valley Med. 

Specialists, 194 Ariz. at 366-67 ¶ 11, 982 P.2d at 1280-81. 

Further, “a covenant not to compete is invalid unless it 
33

protects some legitimate interest beyond the employer’s desire 

to protect itself from competition.” Id. at 367 ¶ 12, 982 P.2d 

at 1281 (citations omitted). 

¶50 The law firm did have an opportunity below to present 

facts concerning the reasonableness of the “voluntary 

withdrawal” provisions. In briefing on the cross-motions for 

summary judgment, RSCE specifically argued that the provisions 

are reasonable under the Howard approach. In support of this 

argument, RSCE contended that the provisions do not result in 

any forfeiture on the part of Fearnow (an implausible assertion 

which the majority itself rejects) and that the provisions are 

reasonable because the firm lost clients who chose to follow 

Fearnow after he departed. The second reason offered by RSCE to 

support the provisions fails as a matter of law — given ER 

5.6(a), the firm has no legitimate interest merely in avoiding 

competition for its clients by its former lawyers. 

¶51 To the extent that other rationales might be offered 

for requiring departing lawyers to forfeit the price of their 

capital stock upon withdrawal, e.g., a firm’s desire to recoup 

some transition costs or to reserve sufficient funds to cover 

firm debts, the provision here is patently under-inclusive, and 

thus unreasonable, because it singles out only those former 

lawyers who compete. Cf. Pettingell, 687 N.E.2d at 1240 

(acknowledging that a firm might reasonably apply a charge to 
34

all attorneys to prevent the firm from being left with “onerous” 

debts); Denburg v. Parker Chapin Flattau & Klimpl, 624 N.E.2d 

995, 999 (N.Y. 1993) (rejecting argument that capital forfeiture 

provision was justified by desire to recoup firm’s relocation 

costs where penalty applied only to those departing lawyers who 

were potential competitors). 

¶52 RSCE already had an opportunity to present facts in 

support of the reasonableness of its provisions or to identify 

disputed material facts that preclude summary judgment. Cf. 

Valley Med. Specialists, 194 Ariz. at 372 ¶ 33, 982 P.2d at 1286 

(noting party seeking to enforce restrictive covenant has burden 

of showing it “is no greater than necessary to protect the 

employer’s legitimate interest, and that such interest is not 

outweighed by” harm to employee or public). It failed to do so, 

and there is no good reason to prolong this litigation by 

remanding for further proceedings on this issue. 

III. 

¶53 I concur in the majority’s opinion insofar as it holds 

that, if the “voluntary withdrawal” provisions are 

unenforceable, the appropriate remedy is for Fearnow to recover 

the amount he originally was deemed to have paid for his stock. 

_____________________________ 

W. Scott Bales, Justice