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NEUMAN v. AKMAN

August 6, 1998

ROBERT H. NEUMAN, APPELLANT,
V.
JEROME P. AKMAN, ET AL., APPELLEES.



APPEAL FROM THE SUPERIOR COURT, GEOFFREY M. ALPRIN, J.

Before Steadman and Farrell, Associate Judges, and Belson, Senior Judge.

The opinion of the court was delivered by: Steadman, Associate Judge:

Rule 5.6(a) of the District of Columbia Rules of Professional Conduct bars a "partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement." The issue before us on this appeal is the scope of the "benefits upon retirement" exception.

Appellant Robert Neuman, a former partner in the law firm of Arent Fox Kintner Plotkin & Kahn ("Arent Fox"), challenges the determination of the trial court that the firm did not violate Rule 5.6(a) when, pursuant to its partnership agreement, it denied him a lifetime monetary benefit generally payable beginning at age sixty-five to withdrawing partners who satisfy certain age and longevity requirements or leave the firm by reason of death or permanent disability. The agreement withholds the benefit from those partners who leave, as did Neuman, in order to "engage in the private practice of law anywhere in the United States." Neuman claims that this provision conditioning receipt of the benefit on his not continuing to practice law amounts to an impermissible restraint on his right to do so in violation of Rule 5.6(a). We conclude that the limitation falls comfortably within the Rule's exception for "benefits upon retirement" and therefore affirm the grant of summary judgment by the trial court in favor of Arent Fox.

I.

The parties have stipulated to the relevant facts before us. Appellant Neuman joined Arent Fox, a law firm based in the District, in 1970 as an associate attorney. On or about January 1, 1973, he became a partner, a status he retained until his voluntary withdrawal on February 5, 1993. *fn1 Three days after leaving Arent Fox, Neuman commenced the private practice of law with the law firm of Baker & Hostetler in its D.C. office.

At the time of Neuman's withdrawal, Arent Fox had in force a written partnership agreement providing that partners who leave the firm to engage in private law practice would receive their capital contribution and share of the net partnership profits as of their separation date, but would not be entitled to an "Additional Amount" linked to the productivity of the partner over a period of [715 A2d Page 129]

years preceding his or her withdrawal. More specifically, paragraph 8 of the agreement divides withdrawing partners into four categories:

Upon a partner ceasing to be a member of the partnership, the surviving partners shall ascertain whether such occurrence is the result of (a) the decision of the partner to retire and to engage in the private practice of law anywhere in the United States whether as a sole practitioner, a member of, associate with or counsel to any law firm or as employee of any organization in a capacity where such partner's major activities are the handling of legal matters (but excluding (i) the teaching of law, and/or (ii) employment by the federal government or any state or local government — such activities shall be comprehended under (d) below); or (b) death; or (c) permanent disability, i.e., where the partnership determines that, by reason of physical or mental illness or accident, it appears that, for the indefinite future, a partner will be unable to engage, to a substantial degree, in the practice of law, or (d) any other reason including involuntary retirement pursuant to the provisions of Paragraph 9-C. . . .

Only if the partner leaves the firm under categories (b), (c), or (d) does he or she become eligible to receive, above and beyond the return of his or her capital account and share of net profits, the Additional Amount, defined as the product resulting from the multiplication of two factors, the "Basic Accrued Amount" and the "Vested Status Fraction." It is not necessary to set forth in toto the definition of these terms. It suffices to note that the Additional Amount is a factor of both the profits attributable to the withdrawing partner for a period of years preceding withdrawal and that partner's length of service as a partner of the firm. The figure is reduced if the partner withdraws prior to reaching age sixty-five or serving as a partner for twenty years, and is even further reduced if neither of these thresholds is met.

To receive the Additional Amount, a partner leaving the firm under category (d) — that is, one ceasing to be a member of the firm for any reason other than to engage in the private practice of law, death, or permanent disability, but including "involuntary retirement" *fn2 — must satisfy an age and longevity requirement known as the "rule of 75," which provides that the "sum of the number of full years of his age plus the number of full years he has been a partner of Arent, Fox, Kintner, Plotkin & Kahn . . . must equal 75 or more." Apart from this "rule of 75," partners falling within category (d) must not engage in the private practice of law for the two years following their retirement from Arent Fox. *fn2

For a former partner falling into categories (c) or (d), who is in the payout provision designated as a "retired" or "retiring" partner, the Additional Amount is dispensed over his or her entire remaining lifetime as follows:

(A) The Additional Amount shall be reduced by five percent (5%) leaving a 95% reduced Additional Amount which shall be paid in 120 equal monthly installments beginning on the first day of the second month following the retirement of the partner or on the first day of the month following the attainment of age 65 by the retiring partner, whichever is later. *fn3 [715 A2d Page 130]

(B) If the retiring partner survives the 120th payment there shall be an additional payment made for each month the partner shall live equal to 2-1/2 times the 5% monthly reduction set forth . . . above. No such payments shall be made to the estate of the retiring partner following death, or to the spouse or to the estate of the spouse.

Because Neuman left Arent Fox to engage in the private practice of law elsewhere, the firm determined that he left the firm under category (a) of the partnership agreement and thus did not qualify to receive the Additional Amount. Neuman brought suit to recover the benefit, arguing that the provision in the Arent Fox partnership agreement making payment contingent on his decision not to conduct the private practice of law violates public policy as expressed in D.C. RULES OF PROFESSIONAL CONDUCT Rule 5.6(a) (1991), and is therefore unenforceable. The trial court granted summary judgment in favor of Arent Fox, holding that the Additional Amount constituted a "retirement benefit" and, as such, fit within the exception under Rule 5.6(a) to the general prohibition of agreements in restraint of an attorney's right to practice law. We agree with the trial court.

II.

Rule 5.6 of the D.C. Rules of Professional Conduct provides in full as follows: *fn4

A lawyer shall not participate in offering or making:

(a) A partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or

(b) An agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between parties.

It is the exception for "benefits upon retirement" in subsection (a) that we are called upon to construe in this case. To properly undertake this inquiry, it may be useful first to examine the nature of the general rule proscribing covenants in restraint of the practice of law.

A.

The text of Rule 5.6(a) provides little guidance as to its full purpose and scope. The comment accompanying the rule is succinct as ...


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