Departing attorney's solicitation of law firm's clients breached fiduciary duty

Law Reporter, Apr 2003

Wenzel v. Hopper & Galliher, P.C., 779 N.E. 2d 30 (Ind. Ct. App. 2002).

An Indiana appellate court held that an attorney breached his fiduciary duty to his law firm by attempting to persuade clients to come with him when he left the firm.

Here, a law firm filed suit for determination of the fair value of shares owned by a departing attorney. The firm claimed that the attorney had breached his fiduciary duty by secretly contacting numerous clients for whom he had been doing work and soliciting them to leave and to employ his new firm after his departure. Plaintiff also contended that many of these clients discontinued using the firm's services on the date when the attorney disclosed his intent to leave. The trial court concluded that as a shareholder of the firm, the attorney owed a fiduciary duty to it that he breached by these solicitations.

Affirming, the appellate court said that, in light of his fiduciary duty, defendant was prohibited from acting out of avarice, expediency, or self interest in his dealings with the firm. The court noted the view of one commentator that the public policy favoring client freedom of choice in legal representation should override a law firm's proprietary interest in holding its clientele. But the court reasoned that a pre-resignation surreptitious solicitation of a firm's clients for a partner's personal gain is actionable. This conduct exceeds what is necessary to protect the important value of client freedom of choice in legal representation, and it thoroughly undermines another important value-the loyalty owed to one's partners, the court said.

Many codes of legal ethics permit departing partners to inform firm clients with whom they have a professional relationship about their impending withdrawal and new practice, and to remind the client of its freedom to retain counsel of its choice, the court said. Ideally, such approaches would take place only after notice to the firm of the partner's plans to leave, the court added. In this case, however, the trial court could fairly infer that the secret communications that were made by defendant before he informed his partners of his impending departure were inconsistent with his fiduciary duty as a partner and shareholder.

Accordingly, the court remanded for a determination of the appropriate amount of damages.

Plaintiff's Counsel

*Deborah J. Caruso, Indianapolis, Ind.

J. Lee McNeely, Shelbyville, Ind.