Wednesday, December 10, 2008

Non-Compete Clause Upheld

In a case involving interpretation of Massachusetts Rule 5.6, the Supreme Judicial Court concluded:

In Pettingell v. Morrison, Mahoney & Miller, 426 Mass. 253, 256 (1997) (Pettingell ), we precluded the enforcement of a provision in the Morrison, Mahoney & Miller partnership agreement that "impose[d] adverse consequences on a withdrawing partner" who competed with the law firm. We precluded enforcement because the provision did not impose such adverse consequences on a withdrawing partner who did not compete with the firm. We concluded that the provision violated the public policy of protecting the rights of clients and potential clients to their choice of counsel, as embodied in S.J.C. Rule 3:07, Canon 2, DR 2-108(A), 382 Mass. 773 (1981), now Mass. R. Prof. C. 5.6, 426 Mass. 1411 (1998) (rule 5.6). [FN4] In this case, we must decide whether that firm's amended partnership agreement, which imposes identical financial consequences on all partners who voluntarily withdraw from the firm, regardless of whether they compete with the firm after withdrawing, also violates rule 5.6. We conclude that it does not. We also conclude that the plaintiffs' claim that Morrison Mahoney was collaterally estopped from contesting liability in this case was properly rejected.

The departing lawyers filed suit and had sought payment of their annual partnership interest credits, which had been withheld as a result of a "forfeiture-for-competition" provision applied to partners who had voluntarily withdrawn from the firm.

The case is Pierce & others v. Morrison Mahoney LLP, decided December 9, 2008. (Mike Frisch)

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