MRPC Rule 1.17

(a) A lawyer or a law firm may sell or purchase a private law practice, including good will,

pursuant to this rule.

(b) The fees charged clients shall not be increased by reason of the sale, and a purchaser shall

not pass on the cost of good will to a client. The purchaser may, however, refuse to

undertake the representation unless the client consents to pay fees regularly charged by the

purchaser for rendering substantially similar services to other clients prior to the initiation of

the purchase negotiations.

(c) Actual written notice of a pending sale shall be given at least 91 days prior to the date of the

sale to each of the seller’s clients, and the notice shall include:

(1) notice of the fact of the proposed sale;

(2) the identity of the purchaser;

(3) the terms of any proposed change in the fee agreement permitted under paragraph (b);

(4) notice of the client’s right to retain other counsel or to take possession of the file; and

(5) notice that the client’s consent to the transfer of the client’ s file to the purchaser will be

presumed if the client does not retain other counsel or otherwise object within 90 days

of receipt of the notice.

If the purchaser has identified a conflict of interest that the client cannot waive and that

prohibits the purchaser from undertaking the client’s matter, the notice shall advise that the

client should retain substitute counsel to assume the representation and arrange to have the

substitute counsel contact the seller.

(d) If a client cannot be given actual notice as required in paragraph (c), the representation of

that client may be transferred to the purchaser only upon entry of an order so authorizing by

a judge of the judicial circuit in which the seller maintains the practice. The seller or the

purchaser may disclose to the judge in camera information relating to the representation

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

(e) The sale of the good will of a law practice may be conditioned upon the seller ceasing to

engage in the private practice of law for a reasonable period of time within the geographical

area in which the practice had been conducted.

This rule permits a selling lawyer or law firm to obtain compensation for the reasonable value of

a private law practice in the same manner as withdrawing partners of law firms. See MRPC 5.4

and 5.6. This rule does not apply to the transfer of responsibility for legal representation from

one lawyer or firm to another when such transfers are unrelated to the sale of a practice; for

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transfer of individual files in other circumstances, see MRPC 1.5(e) and 1.16. 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.

A lawyer participating in the sale of a law practice is subject to the ethical standards that apply

when involving another lawyer in the representation of a client. These include, for example, the

seller’s obligation to act competently in identifying a purchaser qualified to assume the

representation of the client and the purchaser’s obligation to undertake the representation

competently, MRPC 1.1, the obligation to avoid disqualifying conflicts and to secure client

consent after consultation for those conflicts that can be waived, MRPC 1.7, and the obligation to

protect information relating to the representation, MRPC 1.6 and 1.9.

If approval of the substitution of the purchasing attorney for the selling attorney 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, MRPC 1.16. See also MCR 2.117(C).

All the 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.

Selling Entire Practice.

When a lawyer is closing a private practice, the lawyer may negotiate with a purchaser for the

reasonable value of the practice that has been developed by the seller. A seller may agree to

transfer matters in one legal field to one purchaser, while transferring matters in another legal

field to a separate purchaser. However, a lawyer may not sell individual files piecemeal. A

seller closing a practice to accept employment with another firm may take certain matters to the

new employer while selling the remainder of the practice.

Although the rule contemplates the sale of substantially all of the law practice, a seller retiring

from private practice generally may continue to represent a small number of clients while

transferring the balance of the practice.

The seller remains responsible for handling all client matters until the files are transferred under

this rule.

Termination of Practice by the Seller.

The rule allows the parties to agree that the seller cease practice in the geographical area for a

reasonable time as a condition of the sale. In certain situations, a blanket prohibition on the

seller’s practice would not be appropriate or warranted, such as a judicial appointee who might

subsequently be defeated for reelection, or a seller elected full-time prosecutor. The parties

should be allowed to negotiate, for instance, whether any geographical or duration restrictions

apply to the seller’s employment as a lawyer on the staff of a public agency or of a legal services

entity that provides legal services to the poor, or as inside counsel to a business.

Conflicts.

The practice may be sold to one or more lawyers or firms, provided that the seller assures that all

clients are afforded competent representation. Since the number of client matters and their

nature directly bear on the valuation of good will and therefore directly relate to selling the law

practice, conflicts that cannot be waived by the client and that prevent the prospective purchaser

from undertaking the client’s matter should be determined promptly. If the purchaser identifies a

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conflict that the client cannot waive, information should be provided to the client to assist in

locating substitute counsel. If the conflict can be waived by the client, the purchaser should

explain the implications and determine whether the client consents to the purchaser undertaking

the representation. Initial screening with regard to conflicts, for the purpose of determining the

good will of the practice, need be no more intrusive than conflict screening of a walk- in

prospective client at the purchaser’s firm.

Client Confidences, Consent, and Notice.

Negotiations between the seller and prospective purchaser prior to disclosure of information

relating to a specific representation of an identifiable client can be conducted in a manner that

does not violate the confidentiality provisions of MRPC 1.6, just as preliminary discussions are

permissible 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 fact 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 transfer of the client’s file to the identified purchaser is presumed.

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 are not

available to consent to the purchase or direct any other disposition of their files, the rule requires

an order from a judge of the judicial circuit in which the seller maintains the practice, 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 legitimate

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.

The client should be told the identity of the purchaser before being asked to consent to disclosure

of confidences and secrets or to consent to transfer of the file.

Subchapter 9.300 of the Michigan Court Rules provides a mechanism for handling client matters

when a lawyer is temporarily or permanently unable to practice law.

Fee Arrangements between Client and Purchaser.

Paragraph (b) is intended to prohibit a purchaser from charging the former clients of the seller a

higher fee than the purchaser is charging the purchaser’s existing clients. The sale may not be

financed by increases in fees charged the clients of the practice that is purchased. Existing

agreements between the seller and the client as to fees and the scope of the work must be

honored by the purchaser, unless the client consents after consultation.

Adjustments for differences in the fee schedules of the seller and the purchaser should be made

between the seller and purchaser in valuing good will, and not between the client and the

purchaser. The purchaser may, however, advise the client that the purchaser will not undertake

the representation unless the client consents to pay the higher fees the purchaser usually charges.

To prevent client financing of the sale, the higher fee the purchaser may charge must not exceed

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the fees charged by the purchaser for substantially similar service rendered prior to the initiation

of the purchase negotiations.

Deceased Lawyer.

Even though a nonlawyer seller representing the estate of a deceased lawyer is not subject to the

Michigan Rules of Professional Conduct, a lawyer who participates in a sale of a law practice

must conform to this rule. Therefore, the purchasing lawyer can be expected to see that its

requirements are met.