Title: Shuttleworth Ruloff and Giordano v. Nutter
Citation: N/A
Docket Number: 962538
State: Virginia
Issuer: Virginia Supreme Court
Date: October 31, 1997

Present:  Carrico, C.J., Compton, Lacy, Hassell, Keenan, and 
Kinser, JJ., and Poff, Senior Justice 
 
SHUTTLEWORTH, RULOFF  
AND GIORDANO, P.C.  
 
v.  Record No. 962538 
OPINION BY JUSTICE CYNTHIA D. KINSER 
                                 October 31, l997 
R.J. NUTTER, II 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH 
 
Jane Marum Roush, Judge Designate 
 
 
At issue before this Court is the enforceability of a 
provision in an addendum to an employment contract entered into 
between Shuttleworth, Ruloff and Giordano, P.C. (Shuttleworth), 
a law firm, and R.J. Nutter, II (Nutter), who was both a 
stockholder and an employee of Shuttleworth.  Because we find 
that the disputed addendum provision does not violate the 
Virginia Code of Professional Responsibility, we will reverse 
and remand for proceedings consistent with this opinion. 
 
I. 
 
On May 26, 1987, at the outset of his employment with 
Shuttleworth, Nutter signed an "Employment Agreement." 
Subsequently, on February 12, 1990, Shuttleworth and Nutter 
entered into an "Addendum To Employment Agreement."  At that 
time, Shuttleworth was preparing to execute an eleven-year 
lease for new office space.  The Addendum's stated purpose was 
to address Nutter's obligation pursuant to his personal 
guarantee of the lease.  The Addendum provided that, in 
exchange for Nutter's personal guarantee, Nutter would receive 
a portion of the cash incentive being offered to Shuttleworth 
by the landlord of the leased property.  However, should Nutter 
 
 
 
 
2 
leave his employment with Shuttleworth during the first five 
years of the lease, Nutter would have to refund a pro rata 
portion of his share of the cash incentive.
1
    Nutter had an additional obligation under the Addendum.  
Upon the voluntary or involuntary termination of his employment 
with Shuttleworth, he would remain liable on a monthly basis 
for his "proportionate share" of the lease payments.
2  The 
commitment to make lease payments was a "continuing 
obligation," commencing on the date of the lease and continuing 
through the end of the eleven-year lease term.  
 
However, the obligation to make lease payments after 
termination of employment with Shuttleworth was not absolute.  
Nutter would not have been required to make payments if his 
termination was the result of death or disability, if he was 
appointed to the judiciary, or if he was terminated 
involuntarily by a non-unanimous vote of Shuttleworth's board 
                     
     
1  Nutter's share was approximately $21,000.  Since Nutter 
left Shuttleworth more than five years after the commencement 
of the lease, Nutter did not have to return any of the cash 
incentive.  The validity of that particular provision in the 
Addendum is not at issue in this case. 
     
2  An employee's "proportionate share" was to be expressed 
in the form of a fraction.  The numerator was to be the average 
of the employee's two years' gross receipts for the two fiscal 
years of Shuttleworth next preceding the date of termination.  
The denominator was to be Shuttleworth's average gross receipts 
for the two fiscal years of Shuttleworth next preceding the 
date of termination.  This fraction was to then be multiplied 
by Shuttleworth's monthly lease payment.  The evidence did not 
show the precise dollar amount of Nutter's "proportionate 
share" of the lease payments. 
 
 
 
 
3 
                    
of directors.
3  Most important to our determination here is the 
provision that the lease payments would continue after the 
first five years of the lease "only in the event that [Nutter] 
has entered into the active practice of law."  
 
In September 1995, more than five years after commencement 
of the lease, Nutter terminated his employment with 
Shuttleworth.
4  Following Nutter's termination, Shuttleworth 
filed a petition for declaratory judgment in the court below.  
In its petition, Shuttleworth requested the court to declare 
that the Addendum's lease payment provision requires Nutter to 
make monthly payments.  Shuttleworth also sought a judgment for 
the sum of all lease amounts "accruing and unpaid" by Nutter up 
until the time of final adjudication. 
 
In response to Shuttleworth's petition, Nutter filed a 
motion for summary judgment pursuant to Rule 3:18.  In his 
motion, Nutter contended that the Addendum's lease payment 
provision was void as a matter of law because it violated the 
public policy stated in Disciplinary Rule (DR) 2-106(A) of the 
Virginia Code of Professional Responsibility.
5  Specifically, 
 
     
3  Nutter's obligation under the Addendum's lease payment 
provision also ceased if Shuttleworth's landlord declared the 
office lease in default and called upon the personal 
guaranties. 
     
4 Currently, Nutter is engaged in the private practice of 
law in the Tidewater area. 
     
5 DR 2-106 (A) provides as follows: 
 
 
 
A lawyer shall not be a party to a partnership or 
employment agreement that restricts the right of a 
 
 
 
 
4 
Nutter argued that the provision was a financial disincentive 
to his continued practice of law.  Nutter further contended 
that the challenged provision infringed on the public's right 
to obtain counsel of its choosing. 
 
After considering briefs submitted by both parties as well 
as hearing oral argument, the trial court granted Nutter's 
motion for summary judgment.  In explaining its rationale, the 
trial court stated: 
 
I do think that the provision of the agreement that 
says that partners who have withdrawn from the firm 
or shareholders who have withdrawn from the firm, 
have to pay their proportionate share of the lease 
obligation after the fifth year, only if they're 
engaged in the active practice of law, does run afoul 
of Rule 2-106(A) of the Virginia Code of Professional 
Responsibility and is therefore unenforceable as 
contrary to the public policy of Virginia. 
 
Shuttleworth appeals. 
 
II. 
 
We have often stated that "`[t]he parties' contract 
becomes the law of the case unless it is repugnant to some rule 
of law or public policy.'"  Rash v. Hilb, Rogal & Hamilton Co., 
25l Va. 28l, 285, 467 S.E.2d 791, 794 (1996) (quoting Winn v. 
Aleda Const. Co., 227 Va. 304, 307, 315 S.E.2d 193, 194 
(1984)).  If a contract violates public policy, it is void and 
of no legal effect.  Cohen v. Mayflower Corp., 196 Va. 1153, 
1160, 86 S.E.2d 860, 864 (1955); Wallihan v. Hughes, 196 Va. 
                                                                
lawyer to practice law after the termination of a 
relationship created by the agreement, except as a 
condition to payment of retirement benefits. 
 
 
 
 
5 
117, 124, 82 S.E.2d 553, 558 (1954).  However, "the law looks 
with favor upon the making of contracts between competent 
parties upon valid consideration and for lawful purposes, and 
`courts are averse to holding contracts unenforceable on the 
ground of public policy unless their illegality is clear and 
certain.'"  Jessee v. Smith, 222 Va. 15, 17-18, 278 S.E.2d 793, 
795 (1981) (quoting Ryan v. Griffin, 199 Va. 891, 895, 103 
S.E.2d 240, 244 (1958)). 
 
In ruling on Nutter's motion for summary judgment, the 
circuit court found that the contested provision of the 
Addendum is contrary to public policy because it violates DR 2-
106(A).  Accordingly, the court declared the provision 
unenforceable.  In effect, the court used the disciplinary rule 
to measure whether the contested provision violates public 
policy, thereby elevating DR 2-106(A) to the status of 
decisional or statutory law.  We question the propriety of 
equating the force of a disciplinary rule with that of 
decisional or statutory law in light of our decisions in Carter 
v. Williams, 246 Va. 53, 60, 431 S.E.2d 297, 30l (1993), and 
Ayyildiz v. Kidd, 220 Va. 1080, 1085, 266 S.E.2d 108, 112 
(1980).  In those cases, we held that the Code of Professional 
Responsibility does not provide the basis for a private cause 
of action.  However, for the purpose of this decision, we 
assume, without deciding, that a disciplinary rule may properly 
be considered in determining the public policy of this 
 
 
 
 
6 
Commonwealth and conclude that the contested provision of the 
Addendum does not violate DR 2-106(A). 
 
An examination of the purpose behind DR 2-106(A), as well 
as other jurisdictions' application of similar provisions, 
supports our conclusion that the Addendum's lease payment 
provision does not violate DR 2-106(A).  The objective of DR 2-
106(A) is to make attorneys fully available to the public.  In 
Jacob v. Norris, McLaughlin & Marcus, 607 A.2d 142 (N.J. 1992), 
the court explained the purpose of a disciplinary rule similar 
to DR 2-106(A):  
 
 
The history behind the [rule] and its precursors 
reveals that the [rule's] underlying purpose is to 
ensure the freedom of clients to select counsel of 
their choice, despite its wording in terms of the 
lawyer's right to practice.  The [rule] is thus 
designed to serve the public interest in maximum 
access to lawyers and to preclude commercial 
arrangements that interfere with that goal.   
 
Id. at 146. 
 
 
Given this purpose, courts in other jurisdictions have 
applied rules of professional conduct, similar if not identical 
to DR 2-106(A), to prohibit agreements that impose financial 
disincentives, as opposed to explicit restrictions, on a 
withdrawing partner's competition with the former firm.  See 
Stevens v. Rooks Pitts & Poust, 682 N.E.2d 1125, 1132 (Ill. 
1997) (holding that provision requiring departing lawyer to 
forego compensation if he competed with firm in certain 
geographic area was unenforceable and in contravention of 
public policy underlying disciplinary rule); accord Pierce v. 
 
 
 
 
7 
Hand, Arendall, Bedsole, Greaves & Johnston, 678 So. 2d 765, 
769 (Ala. 1996); Jacob v. Norris, McLaughlin & Marcus, 607 A.2d 
at 148-49; Denburg v. Parker Chapin Flattau & Klimpl, 624 
N.E.2d 995, 999 (N.Y. 1993); Gray v. Martin, 663 P.2d 1285, 
1290-91 (Or. Ct. App. 1983);  Spiegel v. Thomas, Mann & Smith, 
P.C., 811 S.W.2d 528, 531 (Tenn. 1991); Whiteside v. Griffis & 
Griffis, 902 S.W.2d 739, 743-44 (Tex. App. 1995).  But see 
Howard v. Babcock, 863 P.2d 150, 160 (Cal. 1993).  Unlike the 
Addendum's lease payment provision, the purpose of the 
agreements in these cases was to restrict competition.  In 
order to accomplish that purpose, they imposed monetary 
penalties if the withdrawing attorney practiced law within a 
particular geographic area, practiced a particular kind of law, 
or represented former clients of the firm. 
 
In contrast, the intent of the Addendum's contested 
provision was not to restrict Nutter's competition with 
Shuttleworth if he left the firm and continued to practice law; 
rather, it was to insure that Shuttleworth had the financial 
means with which to make the lease payments.  The terms of the 
lease payment provision evidence such an intent.  First, the 
provision does not contain any restrictions common to 
noncompetition agreements.  Nutter's obligation to pay his 
proportionate share of the monthly lease payments was not 
triggered by his practice of law as to geographic area, subject 
matter, or clientele.  Second, during the first five years of 
 
 
 
 
8 
the lease, Nutter was obligated to pay his share if he left 
Shuttleworth for any reason, except death, disability, 
acceptance of a judicial position, or termination by a non-
unanimous vote.  Thus, Nutter's obligation during the first 
five years of the lease was not contingent on his continued 
practice of law if he left Shuttleworth.  Accordingly, we find 
that the Addendum's lease payment provision does not contravene 
the purpose behind DR 2-106(A). 
 
We, therefore, conclude that the Addendum's lease payment 
provision does not violate the literal terms of DR 2-106(A) or 
its underlying purpose.  Accordingly, we will reverse the 
judgment of the circuit court and remand this case for a trial 
on the merits consistent with this opinion. 
 
Reversed and remanded.