May 18, 2018

Sharing Confidential Information with a new Firm Can Create Risks

An increasingly common problem for partners considering departing a law firm and joining another is whether and to what extent the partner can share confidential business information about the lawyer’s practice with the new firm without violating legal and ethical obligations. It is difficult to imagine any law firm agreeing to bring in a lateral partner or group of lawyers without reviewing detailed information about the prospective practice, including financial information like revenue and profitability details, client details, staffing considerations, and related business information. But for a partner at a firm, disclosing any of these categories of information to a new firm in negotiations can implicate the partner’s duties to the old firm and to clients.

California’s Rules of Professional Conduct include some of the strictest client confidentiality requirements in the country, making this issue especially relevant for California partners.  What are the risks of disclosing information in negotiations with a potential new firm? In summary, there are several:

  • Potentially violating your fiduciary duties, duties of confidentiality, and similar obligations to your firm and violating other partnership agreement provisions;
  • Potentially violating your ethical obligations of client confidentiality and loyalty; and
  • Potentially revealing your departure planning just by accessing the confidential information at your firm.

You can mitigate these risks, but it requires detailed advance effort and practical planning. You need to know the rules governing these potential disclosures and develop a specific strategy to navigate them.

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