Ind. Prof. Cond. Rule 1.17

Effective January 1, 2005

A lawyer or a law firm may sell or purchase a law practice, or an area of law practice, including goodwill, if the following conditions are satisfied:

(a) The seller ceases to engage in the private practice of law, or in the area of practice that has

been sold, in the geographic area in which the practice has been conducted.

(b) The entire practice, or the entire area of practice, is sold to one or more lawyers or law

firms.

(c) The seller gives written notice to each of the seller's clients regarding:

(1) the proposed sale;

(2) the client's right to retain other counsel or to take possession of the file; and

(3) the fact that the client's consent to the transfer of the client's files will be presumed if

the client does not take any action or does not otherwise object within ninety (90) days of

receipt of the notice.

If a client cannot be given notice, the representation of that client may be transferred to the

purchaser only upon entry of an order so authorizing by a court having jurisdiction. The seller

may disclose to the court in camera information relating to the representation only to the

extent necessary to obtain an order authorizing the transfer of a file.

(d) The fees charged clients shall not be increased by reason of the sale.

Comment

[1] The practice of law is a profession, not merely a business. Clients are not commodities

that can be purchased and sold at will. Pursuant to this Rule, when a lawyer or an entire

firm ceases to practice, or ceases to practice in an area of law, and other lawyers or firms

take over the representation, the selling lawyer or firm may obtain compensation for the

reasonable value of the practice as may withdrawing partners of law firms. See Rules 5.4

and 5.6.

Termination of Practice by the Seller

[2] The requirement that all of the private practice, or all of an area of practice, be sold is

satisfied if the seller in good faith makes the entire practice, or the area of practice, available for sale to the purchasers. The fact that a number of the seller's clients decide not to

be represented by the purchasers but take their matters elsewhere, therefore, does not

result in a violation. Return to private practice as a result of an unanticipated change in circumstances does not necessarily result in a violation. For example, a lawyer who has

sold the practice to accept an appointment to judicial office does not violate the requirement that the sale be attendant to cessation of practice if the lawyer later resumes private

practice upon being defeated in a contested or a retention election for the office or resigns

from a judiciary position.

[3] The requirement that the seller cease to engage in the private practice of law does not

prohibit employment as a lawyer on the staff of a public agency or a legal services entity

that provides legal services to the poor, or as in-house counsel to a business.

[4] This Rule also permits a lawyer or law firm to sell an area of practice. If an area of practice is sold and the lawyer remains in the active practice of law, the lawyer must cease

accepting any matters in the area of practice that has been sold, either as counsel or co-counsel or by assuming joint responsibility for a matter in connection with the division of a

fee with another lawyer as would otherwise be permitted by Rule 1.5(e). For example, a

lawyer with a substantial number of estate planning matters and a substantial number of

probate administration cases may sell the estate planning portion of the practice but

remain in the practice of law by concentrating on probate administration; however, that

practitioner may not thereafter accept any estate planning matters. Although a lawyer

who leaves a jurisdiction or geographical area typically would sell the entire practice, this

Rule permits the lawyer to limit the sale to one or more areas of the practice, thereby pre-

serving the lawyer's right to continue practice in the areas of the practice that were not

sold.

Sale of Entire Practice or Entire Area of Practice

[5] The Rule requires that the seller's entire practice, or an entire area of practice, be sold.

The prohibition against sale of less than an entire practice area protects those clients

whose matters are less lucrative and who might find it difficult to secure other counsel if a

sale could be limited to substantial fee-generating matters. The purchasers are required

to undertake all client matters in the practice or practice area, subject to client consent.

This requirement is satisfied, however, even if a purchaser is unable to undertake a particular client matter because of a conflict of interest.

Client Confidences, Consent and Notice

[6] Negotiations between seller and prospective purchaser prior to disclosure of information relating to a specific representation of an identifiable client no more violate the con-

fidentiality provisions of Rule 1. 6 than do preliminary discussions concerning the possible

association of another lawyer or mergers between firms, with respect to which client consent is not required. Providing the purchaser access to client-specific information relating

to the representation and to the file, however, requires client consent. The Rule provides

that before such information can be disclosed by the seller to the purchaser the client

must be given actual written notice of the contemplated sale, including the identity of the

purchaser, and must be told that the decision to consent or make other arrangements

must be made within 90 days. If nothing is heard from the client within that time, consent

to the sale is presumed.

[7] A lawyer or law firm ceasing to practice cannot be required to remain in practice

because some clients cannot be given actual notice of the proposed purchase. Since

these clients cannot themselves consent to the purchase or direct any other disposition of

their files, the Rule requires an order from a court having jurisdiction authorizing their

transfer or other disposition. The Court can be expected to determine whether reasonable

efforts to locate the client have been exhausted, and whether the absent client's legit-

imate interests will be served by authorizing the transfer of the file so that the purchaser

may continue the representation. Preservation of client confidences requires that the petition for a court order be considered in camera.

[8] All elements of client autonomy, including the client's absolute right to discharge a lawyer and transfer the representation to another, survive the sale of the practice or area of

practice.

Fee Arrangements Between Client and Purchaser

[9] The sale may not be financed by increases in fees charged the clients of the practice.

Existing arrangements between the seller and the client as to fees and the scope of the

work must be honored by the purchaser.

Other Applicable Ethical Standards

[10] Lawyers participating in the sale of a law practice or a practice area are subject to the

ethical standards applicable to involving another lawyer in the representation of a client.

These include, for example, the seller's obligation to exercise competence in identifying a

purchaser qualified to assume the practice and the purchaser's obligation to undertake

the representation competently (see Rule 1.1); the obligation to avoid disqualifying conflicts, and to secure the client's informed consent for those conflicts that can be agreed to

(see Rule 1.7 regarding conflicts and Rule 1.0(e) for the definition of informed consent);

and the obligation to protect information relating to the representation (see Rules 1.6 and

1.9).

[11] If approval of the substitution of the purchasing lawyer for the selling lawyer is

required by the rules of any tribunal in which a matter is pending, such approval must be

obtained before the matter can be included in the sale (see Rule 1.16).

Applicability of the Rule

[12] This Rule applies to the sale of a law practice of a deceased, disabled or disappeared

lawyer. Thus, the seller may be represented by a non-lawyer representative not subject to

these Rules. Since, however, no lawyer may participate in a sale of a law practice which

does not conform to the requirements of this Rule, the representatives of the seller as well

as the purchasing lawyer can be expected to see to it that they are met.

[13] Admission to or retirement from a law partnership or professional association, retirement plans and similar arrangements, and a sale of tangible assets of a law practice, do

not constitute a sale or purchase governed by this Rule.

[14] This Rule does not apply to the transfers of legal representation between lawyers

when such transfers are unrelated to the sale of a practice or an area of practice.