This article reviews two important proposed changes to the New York Rules of Professional Conduct (RPCs) and Comments, both relating to the rules governing lateral movement by lawyers, which have been proposed by the New York State Bar Association Committee on Standards of Attorney Conduct (COSAC) and are being circulated for public comment. Once adopted by COSAC, proposals are placed before the New York State Bar Association House of Delegates and, if adopted there, the proposals for changes to the rules themselves (but not the Comments, which are within the control of the New York State Bar Association) are passed on to the Advisory Board, comprised of the chief judges of the four Appellate Divisions and the Chief Judge of the New York Court of Appeals. If adopted by the Advisory Board, the proposals for changes to the rules themselves become part of the then revised RPCs.
The first set of changes relate to RPC 5.6, which, subject to an exception relating to retirement benefits, prohibits lawyers from making agreements that “restricts the right of a lawyer to practice after termination of the relationship.” The proposals with respect to RPC 5.6 do not change the black letter wording of that rule, but very significantly expand the scope of the Comments. Even though the Comments, unlike the RPC’s themselves, are not binding, they provide important advisory guidance to the bar. Since the proposed comments are extremely far-reaching, they deserve to be set out here in full (proposed changes in italics):
 An agreement restricting the right of a lawyer who has left a law firm to practice after leaving a firm (a “departed lawyer”) not only limits the departed lawyer’s professional autonomy but also limits the freedom of clients to choose a lawyer. Paragraph (a) prohibits such agreements, except agreements imposing restrictions incident to provisions concerning retirement benefits for service with the firm or restrictions justified by special circumstances described in this Comment.
Scope of Rule
[1A] Paragraph (a)(1) applies to any written or oral agreement governing or intended to govern:
(i) the operation of a law firm (including an in-house legal department);
(ii) the terms of partnership, shareholding, or of counsel status at a law firm;
(iii) the terms of an individual lawyer’s full-time or part-time employment at a law firm or other entity; and
(iv) the terms of a lawyer’s or law firm’s retention or employment by a client.
[1B] Paragraph (a)(1) applies whether the agreement is embodied in a formal contract, a provision in a contract, an amendment or rider to a contract, a firm or employee handbook, a memorandum, outside counsel guidelines, or any other kind of document. Paragraph (a)(1) prohibits any agreement (other than a provision relating to retirement) that prohibits or limits a departed lawyer from contacting or serving the firm’s present, former, or prospective clients who used or considered using the lawyer’s services while the lawyer worked at the firm, or who might wish to use the lawyer’s services after the lawyer and the firm have terminated the relationship, except that an agreement may include provisions to protect proprietary law firm information or confidential or proprietary client information, and may include provisions requiring the departed lawyer to take reasonable and proportionate measures to protect such information.
[1C] Paragraph (a)(1) applies not only to agreements regarding lawyers in private practice but also to agreements between employed (“in-house”) attorneys and the clients or entities that employ them, whether in a legal or nonlegal capacity. However, paragraph (a)(1) does not prevent an entity and its employed lawyers from agreeing to restrictions on post-departure non-legal functions. In every type of law firm (see Rule 1.0(h), which defines “law firm”), the departed lawyer and the law firm must balance their rights and obligations to each other in a manner consistent with the Rules of Professional Conduct and the law governing contracts, partnerships, and fiduciary obligations, all while recognizing the primacy of client interests and client autonomy. Comment [1D] addresses restrictions that ordinarily violate the Rule and Comment [1E] addresses restrictions that ordinarily do not violate the Rule.
[1D] Agreements that will ordinarily violate paragraph (a)(1) include, but are not limited to, agreements that purport to do any of the following:
(i) prohibit or limit the departed lawyer from contacting or representing some or all current, former, or prospective clients of the firm, except as set forth in Comment [1E](i) below;
(ii) prohibit or limit a departed lawyer from practicing law for any period of time following his or her withdrawal (e.g., imposing a mandatory “garden leave”);
(iii) prohibit or limit a departed lawyer from contacting or soliciting firm employees after the lawyer and the firm have formally terminated their relationship; or
(iv) impose more severe financial penalties on departed lawyers who intend to compete, actually compete, or are suspected of or presumed to be competing with the firm than are imposed on departed lawyers who do not compete.
[1E] Agreements that are ordinarily permitted under paragraph (a)(1) include, but are not limited to, agreements permitting a firm to impose reasonable restrictions or proportionate financial penalties on a departed lawyer who:
(i) knowingly contacts or seeks to contact firm clients for work in areas that are the same as or substantially related to the work the firm has done for those clients, if the departed lawyer did not actively and substantially work on matters for, and did not have significant contact with, those clients while at the firm;
(ii) has undertaken a specific, significant financial undertaking with respect to the firm that remains outstanding (g., guaranteeing a loan to renovate the firm’s premises, or entering a new lease or other contract with significant financial consequences for the firm);
(iii) has agreed with other firm lawyers, prior to departure, that those other lawyers will join the departed lawyer at his or her new affiliation upon or shortly after departure;
(iv) has breached material employment or partnership responsibilities to the firm in a manner that has caused or is likely to cause material financial or reputational harm to the firm; or
(v) has breached, or has taken actions which threaten to breach, non-disclosure obligations or agreements intended to protect proprietary information, trade secrets, or confidential information belonging to the firm or the firm’s clients.
Reasonable Management Discretion
[1D] Paragraph (a)(1) is not intended to prohibit a law firm in the ordinary course of its operations from exercising reasonable management discretion regarding case assignments, case staffing, promotions, demotions, compensation, or other aspects of a law firm’s operations, finances, and management. The Rule is intended only to prevent overly restrictive practices with respect to lawyers who have provided notice of an intention to leave a firm, or who have taken affirmative steps toward planning to leave the firm (with or without notice to the firm).
[1E] Paragraph (a)(1) addresses agreements governing the relationship between departed lawyers and their prior law firm after the departed lawyers have left the firm. Rule 5.9, in contrast, addresses the relationship between a law firm and lawyers intending or planning to depart the firm before those lawyers have left the firm.