Firm Management Issues Draw Proposed Suspension
A 90-day suspension of two Respondents has been recommended by the District of Columbia Board on Professional Responsibility in a case we had called “cutting edge” for its allegations that the misconduct had been rooted in contentions that the managing partners of a law firm had engaged in ethics violations in provisions of firm employment agreements and office management.
This matter arises principally out of Respondents’ management of the D.C. office of Tully Rinckey PLLC. An Ad Hoc Hearing Committee concluded that Disciplinary Counsel proved by clear and convincing evidence that (i) Mr. Tully violated District of Columbia Rules of Professional Conduct (“Rules”) 5.6(a), 8.4(a), 5.3(b), 5.1(b), 5.1(c)(1) and (2), and 8.4(d), and (ii) Mr. Rinckey violated Rules 5.6(a), 8.4(a), 5.3(b), 5.1(b), 5.1(c)(1) and (2), and 8.4(d). The Hearing Committee further recommended that each Respondent be suspended for ninety days.
Respondents have taken exception to the Hearing Committee Report and Recommendation, arguing that the Hearing Committee applied the wrong jurisdiction’s law to Respondents conduct; that Rule 5.6(a) should be deemed void as impermissibly vague or should otherwise only be applied prospectively to certain conduct; that the Hearing Committee did not adequately analyze certain provisions of the employment contracts at issue; and, that imposing a period of suspension in this matter is unwarranted and would be punitive. Respondents do not directly contest the bulk of the Hearing Committee’s findings of fact and conclusions of law. Disciplinary Counsel supports the Hearing Committee’s Report and Recommendation.
We agree with the Hearing Committee’s conclusions of law, except where discussed below, and recommend that each Respondent be suspended for 90 days.
The board held that D.C. rules applied as a matter of choice of law.
The misconduct involved a number of firm policies and operations
Respondents also directly managed and controlled the employees of the D.C. office. They used video surveillance to monitor the office and would even directly speak to lawyers through that camera to direct the behavior in the D.C. office to include on one occasion where Mr. Tully instructed a lawyer to tuck in his shirt. Tr. 414-15 (DíAgostino); 459 (Montalvo). Respondents would read the emails of D.C. lawyers as well. See FF 19. Indeed, Mr. Tully advised a lawyer that he had read his personal emails about an upcoming overseas trip. Tr. 415-16 (DíAgostino). Another lawyer reported having perused the J. Crew website during lunch, only to find the website blocked after she returned to the page. Id. Both Respondents regularly led virtual Firm meetings with employees of the D.C. office during which Respondents admonished or encouraged employees. Tr. 422-24 (DíAgostino); see also Tr. 491-92 (Montalvo); 729 (Weiss); 1065-66 (Rinckey).
Restrictive agreements
Respondents participated in offering or making; attempted to offer; or offered both employment agreements and separation agreements to Firm employees that required departing lawyers
(i) pay liquidated damages for early departure and/or for other reasons;
(ii) pay a percentage of fees earned after the lawyer departed on fees earned from Firm clients who followed the departing lawyers;
(iii) divide or attempt to divide clients with departing lawyers;
(iv) not work with other former Tully Rinckey lawyers for some period after their departure;
(v) be liable to the Firm for attorneyís fees and costs in any post-employment arbitration or litigation, regardless of the outcome; and
(vi) not contact Firm clients who had worked with the departing lawyer after the lawyer left the Firm.
Liquidated damages
We next consider whether the liquidated damages clauses here were financial penalties for lawyers who wanted to leave the Firm, irrespective of how they are described. We find that they were and Respondents have failed to rebut Disciplinary Counsel’s evidence on this issue. Although Respondents testified that the liquidated damages were calculated on an individual basis for each attorney and were tied to their marketing expenses and training, Respondents did not explain nor did they offer any financial assessment, with specificity, how they were calculated to compensate the Firm for foreseeable damages resulting from the lawyer’s early departure.
Future employment restrictions
Here, as the Hearing Committee found based on clear and convincing evidence, Respondents crafted a number of employment and separation agreement terms and conditions that either expressly or impliedly restricted their lawyer- employees’ or their former lawyer-employees’ practice. Given that, we find that Respondents violated Rule 5.6(a) by attempting to restrict the legal practice of lawyers.
Agreements to not cooperate with investigations
The expansive language contained in the Firm’s separation agreements evidenced Respondents’ intent that Firm employees not voluntarily cooperate with investigations, including investigations by disciplinary authorities. And, as the Hearing Committee found, three attorneys (Benjamin, Weiss and Gregerson) expressed concerns about their ability to cooperate with Disciplinary Counsel because of this language. See FF 62-63, 75, 92. Additionally, the fact that Respondents’ agreements included a number of other provisions that violated the Rules of Professional Conduct even after LEO 368 was penned demonstrates that Respondents, although now arguing they had no intent to discourage cooperation with Disciplinary Counsel, undertook no such detailed and specific consideration of the terms and conditions of their employment and separation agreements, particularly as it relates to assuring that those agreements comply with the Rules of Professional Conduct…
Irrespective whether they were successful in interfering with Disciplinary Counsel’s investigation, they intended to do so and, by including these provisions in their agreements, they committed acts to consummate that interference. See Taylor v. United States, 267 A.3d at 1059.
Accordingly, we conclude, as did the Hearing Committee, that Respondents’ agreements violated Rules 8.4(a) and (d) by attempting to deter witnesses from cooperating with Disciplinary Counsel’s investigation. While we agree that there is no evidence that Respondents directed any witness to refrain from cooperating with inquiries from Disciplinary Counsel, given the provisions in the separation agreements permitted cooperation only when required, and thus “impliedly prohibit[ed] voluntary reporting of lawyer misconduct to Disciplinary Counsel,” in violation of the Rules, we need not find that they directed witnesses to refrain from cooperation in order to find by clear and convincing evidence they violated the Rules.
Sanction
Distinct from the referenced cases, Respondents’ misconduct spanned a period of roughly eight years, and involved nearly a dozen lawyers and a host of agreement provisions that violated our Rules. Respondents were alerted by a D.C. Legal Ethics Opinion that provisions contained within the agreements did not comply with the Rules but they remained undeterred in their actions. Further, the agreements Respondents had crafted included provisions intended to prevent complete and thorough investigation into the Firm’s misconduct…
Here the facts support that Respondents’ actions were inconsistent with the “best concepts” of the legal profession. Over a period of years they engaged in behavior that violated the Rules of Professional Conduct and directed their employees to do the same, even with a Legal Ethics Opinion that advised their behavior was inconsistent with the Rules of Professional Conduct. Given this, we agree with the Hearing Committee’s recommended sanction of a ninety-day suspension.
Unlike the vast majority of bar discipline matters, this one will likely get the close attention of law firm managers. (Mike Frisch)