Getting into a Partnership can be exciting. Staying in one is often more of a mixed bag. But exiting a partnership? Now we have something to talk about!
Some of my best client work involved partnership break-ups. They can become very nasty, very quickly.
The most memorable involved a dentist who wanted to break up with a partner who I took to referring to as the “dentist from hell (“DFH”). The DFH’s idea of negotiating the departure of my client was to call the College of Dentistry to report my client for bad dentistry. Then the DFH called the finance company who my client was negotiating with for financing for his new practice to tell them that they should not provide credit to my client because he was under investigation by the College.
I also had a great deal of fun (i.e.- large billings) helping a personal injury partner exit his firm. None of the other partners practiced personal injury law. The partnership agreement did not contemplate the peculiar nature of a personal injury practice, which involves carrying large amounts of work in process for long periods of time. We got our guy out of there, but it was not a pleasant walk in the park.
The first law firm partnership exit that I observed first-hand involved the rather hasty departure of a partner who headed the litigation department of a mid-sized firm, taking all of the litigation associates, a law clerk, some assistants, and even the articling student with him. He also took with him the physical files, which, back at the time, were an important thing to have. It sort of brings to mind the country song about the eighteen-year-old girl who ran off with her boyfriend so abruptly that she left the suds in the bucket and the clothes hanging out on the line.
There are fewer than fifty ways to leave your law firm partnership. Over the course of my career I think that I have observed them all. They range from, “You can stab them in the back, Jack” and “Take all the files, Miles,” all the way to “Work until you’re sick, Dick.”
One might think that lawyers who are offered a partnership in their law firm would be very concerned to be sure that they have a good exit strategy. After all, when advising our clients about commercial arrangements, the ability to terminate the agreement and the legal consequences of termination are always hot topics. And of course, well-drafted partnership agreements will certainly address the topic. Not surprisingly, however, the terms may protect the ongoing partners, not the departing partner.
My advice to lawyers who are becoming partners? On your way in, think about the way out. Be sure that you will get your capital back, Jack, that you won’t have to pay a big bill, Phil, and that you can take your clients with you, Sue. If the way out is not clear, instead of becoming a partner, think about staying on as an associate, or getting another job, Bob.
A version of this article was originally published by Law360 Canada, part of LexisNexis Canada Inc.