A high-profile duel over rights to legal databases is playing out in state court in Boston. The warring parties are six former partners and the asbestos defense firm they left, allegedly taking with them high-value file-management and other databases. The firm’s suit, filed in November, raises the question: When partners leave, does a database that includes client information belong to the clients they take with them? Or to the old firm, which says it has invested heavily in developing the proprietary database?
Digital age departures
Model Rule 5.6(a), adopted by Massachusetts and most other jurisdictions, makes client choice the paramount concern when lawyers move from firm to firm, prohibiting any agreement that restricts the right of the migrating lawyers to practice. Model Rule 1.16 also protects a client’s right to their file when the representation terminates, thus limiting the right of the old firm to “lock up” the file, and protecting the right of the departing lawyers to take files and service clients at their new firm. And Massachusetts’ version of Rule 1.16 enlarges on that concept, with an expansive and detailed list of file items that “belong” to the client.
But where does a custom-developed digital database fall under an ethics rule analysis? Firms can invest heavily in developing such specialty management tools. Does the principle of client choice mean that departing lawyers can walk away with such a valuable asset and use it to service those clients in their new practice?
As reported in the ABA Journal, the Boston Globe and the Boston Business Journal, the Governo Law Firm asserts in a complaint filed in Suffolk County Superior Court that the six former partners had been negotiating to buy the firm. Included in the discussions were the databases, which Governo alleges it developed as a proprietary system, and which it says contains information about billing, expert witnesses, client correspondence, court rulings and asbestos litigation literature.
The Boston Business Journal describes the Governo firm as “a small firm that has built a national profile defending companies accused of exposing workers and consumers to asbestos.”
According to the complaint, before abruptly ending the sale discussions and leaving, one of the former partners had copies of the databases downloaded to her own computer. The six partners allegedly took more than half of Governo’s business with them; the complaint asserts claims for misappropriation of trade secrets, interference with contractual relationships and civil conspiracy.
The former partners opened their new firm on December 1, and are asserting that the database information belongs to the clients who came with them, and who were billed for the work connected to the databases.
On January 11, the Suffolk County Superior Court in Boston denied the Governo firm’s motion for preliminary injunction, ruling that the record was too undeveloped to determine whether the databases belong to the Governo firm, or to the clients who moved their business to the new firm. A scheduling conference is set for Feb. 14.
The Boston Globe reported that the case is being carefully watched, for its potential to make law on “leaving a law firm in the digital age.”
Watch your P’s and Q’s
In denying injunctive relief, the judge reportedly assessed evidence from both sides on the ownership of the database material, but found it insufficient to decide. That would appear to be a sound call, since determinations in this area can be very fact-specific. Key factors might be whether the firm used its own funds to develop the data base, or if those development costs were passed on to clients. In the latter case, an argument could be made that the clients charged for creation of the database should have a continuing right to have the lawyers use it at their new firm.
Whether you are a firm manager or a lawyer thinking about leaving your firm for greener pastures, this is an area where it pays to check your jurisdiction’s rules and ethics opinions before acting. As we’ve noted before, some states regulate the departure process by rule, and others have guidance on notice, client files and more, in their ethics opinions. The law also continues to develop on law partnership agreements that try to bring some certainty to this potentially contentious aspect of legal practice. We’ll continue to keep you posted.