Today’s post is a short one based on the second issue of Charles Soule’s run of She-Hulk. Soule continues to do great work, though this issue doesn’t have quite as many legal issues to discuss. A big one is revealed at the end of the issue, but I don’t want to spoil it. Instead I’m going to talk about attorneys and non-compete agreements.
When Jennifer Walters left her job with the firm of Paine & Luckberg, she was told that all of her outstanding cases would be assigned to other associates, except for “the blue file.” As a partner explains, “we took that case as a courtesy to you. If you go, it goes too.” We learn a little more about the mysterious blue file in issue #2, but not enough to discuss yet. What we do see in issue #2 is Walters trying (and failing) to drum up business from clients for whom she did work while she was at Paine & Luckberg. But wait: is it legal for an attorney to attempt to poach clients from her former employer? Perhaps surprisingly, the answer is yes.
Non-competition and non-solicitation agreements are a common feature of many employment contracts, especially in industries that are dependent on sales relationships with specific customers or which involve employees learning a lot of not-quite-trade-secrets-but-still-important information. The specifics vary from industry to industry, employer to employer, employee to employee, and (most importantly) state to state, but basically they seek to prohibit the employee from competing with the employer for a certain amount of time after the employment relationship is terminated. This can include working for a competitor, working in the same industry, or trying to solicit the employer’s clients. A few states basically ban the practice outright, and those that allow it do so with significant restrictions. This usually takes the form of limitations on the geographic, temporal, and industry scope of such agreements.
For example, an employee might be forbidden from working in the same (relatively narrowly defined) industry, for a year or two, within the same city. This means the employee could find similar work in another part of the country, or work in a related but distinct field, or just wait it out.
New York, where She-Hulk works, is a state that allows such restrictive covenants, but only to the extent that they are reasonable and necessary to protect valid business interests. The general rule is that they are allowed if they are “reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388-89 (1999). But there is a special rule for attorneys.
In every state that I am aware of (including New York) there is an ethical rule similar to ABA Model Rule 5.6, which states:
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;
The justification for the rule is found in the comments, which state that
An agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer.
One might observe that this is equally true of every other profession and its clients, but there is not necessarily any hypocrisy here. Remember that this is an ethical rule created by the legal profession, not an exception to the law. Without this rule it is entirely possible that law firms could impose non-compete agreements on their employees and partners, although one could imagine a court carving out an exception for criminal defendants on the basis of the Sixth Amendment right to counsel.
The bottom line is that, although the firm intended to keep its clients, Walters was almost certainly free to try to poach them.