Opinion ID: 1796866
Heading Depth: 1
Heading Rank: 12

Heading: Enforceability of Attorney's Agreement

Text: Law Offices' claim to the entire fee in the Jurado case is based upon the provision of the 1993 Attorney's Agreement which states that if Howard is retained by a Law Offices' client after he leaves the firm's employment, all fees generated by such representation are payable to Law Offices and no portion of such fees are payable to Howard. In a pretrial ruling, the district court determined that the agreement was an enforceable contract which had been breached by Howard, but that there was a genuine issue of material fact as to damages. In instructing the jury, the district court stated that Law Offices alleged that Howard had breached the contract by claiming entitlement to legal fees in the Jurado[-Melendez] Estate case. Howard alleges on appeal that the Attorney's Agreement was not enforceable with respect to his representation of Jurado after leaving the employment of Law Offices because the agreement constituted a restrictive covenant which is overly broad and injurious to the public. Law Offices counters that the restriction in the Attorney's Agreement is reasonable and resulted from a conscious business decision by Howard to accept greater compensation during his employment in exchange for giving up any entitlement to a fee if he represented a client of the firm after leaving its employment. As its title indicates, the contractual agreement at issue here is between attorneys who are subject to the professional ethics rules promulgated by this court. By establishing a framework for the ethical practice of law, such rules establish a state's public policy with respect to the professional conduct of lawyers. [13] On the date of the agreement and during the parties' representation of Jurado, the Code of Professional Responsibility, Canon 2, provided in relevant part: DR 2-108 Agreements Restricting the Practice of a Lawyer. (A) A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits. (B) In connection with the settlement of a controversy or suit, a lawyer shall not enter into an agreement that restricts his or her right to practice law. Since September 2005, Nebraska lawyers have been subject to the Nebraska Rules of Professional Conduct, which similarly provide: Rule 5.6 RESTRICTIONS ON RIGHT TO PRACTICE A lawyer shall not participate in offering or making: (a) a partnership, shareholders, operating, employment or other similar type of agreement that restricts the right 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 client controversy. [14] Based upon similar ethics rules in effect throughout the country, [c]ourts do not enforce any agreement involving the employment of lawyers that appears to have restrictive and thus anticompetitive tendencies. [15] This is so whether the restriction on competition is direct or indirect. [16] The prohibition against restrictive covenants in agreements between lawyers is generally reasoned to be necessary to ensure the freedom of clients to select counsel of their choice. [17] Courts and commentators note a distinction between the business principles which govern commercial enterprises and the ethical principles that govern the practice of law and find that because `clients are not merchandise' and `[l]awyers are not tradesmen,' restrictive covenants may not `barter in clients.' [18] Because the client's freedom of choice is the paramount interest the ethics rules attempt to serve, courts reason that any disincentive to competition is as detrimental to the public interest as an outright prohibition on competition. [19] Thus, cases almost uniformly hold that financial disincentive provisions in attorney agreements are unenforceable as against public policy. [20] We agree with this reasoning and find it applicable to this case. While the restrictive language in paragraph 12 of the Attorney's Agreement does not directly restrict a departing lawyer from practicing in competition with the firm, it provides a strong financial disincentive for that lawyer to perform services for a former client, and accordingly, it restricts the client's right to retain the lawyer. We conclude that the restriction is contrary to public policy and unenforceable. Accordingly, we reverse and vacate the judgment in favor of Law Offices and against Howard,