By Gregory W. Sampson and Rebekah Steely Brooker

With the undeniable graying of our profession, more lawyers are facing retirement and, for some less fortunate, an unplanned early termination of their practice by disability, death, or other circumstances. This leads lawyers and their families to ask whether their hard work building a practice can reap the financial benefits they deserve. The short answer is yes, but the method chosen must be carefully executed to comply with applicable rules of professional conduct.

When a lawyer plans to retire or close a practice, a number of traditional methods have worked successfully for decades under our professional responsibility rules. One is to hire an associate, mentor them, and work out a plan for the associate’s ascension and takeover of the practice with an exit compensation plan for the retiring lawyer. Others merge their practice with other firms bringing their client matters with them with consent and negotiate a retirement or exit compensation plan with the new firm. Still others engage co-counsel on open matters with client consent and enable that co-counsel to continue representation upon withdrawal, often with no compensation for the matters transferred beyond the fees earned or responsibility shared.

But can a lawyer who honorably built a practice, or the lawyer’s family at the lawyer’s passing, receive value upon a sale of the practice?   While a 1963 Ethics Opinion 266 suggests otherwise, there is no express prohibition to sale of a lawyer’s practice in our current professional responsibility rules or any of the two preceding canons or rules of ethics. Additionally, it is clear that many lawyers are selling their practices. Thus, the better question is, how to sell one’s practice in compliance with all applicable ethical rules.

When considering a sale, first identify what is being sold, and then what ethical rules apply. The first rule to abide is that the client’s matter and file belong to the client, and it is the client’s choice whom to engage to represent them. So, it is not the client files that are being sold, rather, it is the business of the practice, its property, social media presence, leases, reputation, contacts, retained employees and prospect of retaining existing clients - in other words, a lawyer’s business property and goodwill.

There are many identifiable rules that apply to sale of a practice. In 2017. the Texas Disciplinary Rules of Professional Conduct Committee drafted practice tips for Sale of a Practice, which can be found in the State Bar’s Law Practice Management Committee’s Succession Planning Toolkit at TexasBarPractice.com/Succession.

Nine rules were identified to be implicated in the sale of a practice by that committee. They are:

1. Rule 1.01 Competent and Diligent Representation
2. Rule 1.02 Scope and Objectives of Representation
3. Rule 1.03 Communication
4. Rule 1.04 Fees
5. Rule 1.05 Confidentiality of Information
6. Rule 1.09 Conflict of Interest: Former Client
7. Rule 1.14 Safekeeping Property
8. Rule 1.15 Declining or Termination of Representation
9. Rule 5.06 Restrictions on Right to Practice

Among these rules, the prohibition of fee sharing poses one of the greatest risks. The structure of the sale and the purchase price cannot share future fees unless the selling attorney assumes the risk of representation or is compensated for work actually done. Sellers cannot commit sham sales under Rule 1.04 either, for example piecemeal selling of individual client files or portions of one’s practice.

In addition, Rule 7.03 prohibiting solicitation of clients may also be implicated. At a minimum, the seller and purchaser need to tell the client they may take their file and hire any other attorney they choose.   Of course, sellers must also avoid the temptation to “oversell the deal” to clients and purchasers lest they violate rule 8.04 on misrepresentation.

Suggested guidelines for proper sale of a business can be found in the State Bar’s Succession Planning Toolkit, which is a rich resource for planning and executing a proper sale under the rules. Among those resources worthy of study is ABA Model Rule 1.17 providing a safe harbor for sales of a practice that has been adopted in many states, but not in Texas.  Note, if a deceased lawyer’s estate is selling a practice, a licensed Texas attorney must manage the transfer of confidential client files and must obtain client consent.

Whether transitioning your practice by one of the traditional methods or selling your practice, the sooner solo and small firm lawyers embark on planning to make their files and other goodwill features attractive to a buyer, the better to maximize the benefit for the retiree or their family.

Gregory W. Sampson is a Senior Counsel at Gray Reed and Rebekah Steely Brooker is a Partner at Scheef & Stone. They serve as Chair and Vice Chair, respectively, of the State Bar’s Law Practice Management Committee. They may be reached at gsampson@grayreed.com and rebekah.brooker@solidcounsel.com , respectively. This article first appeared in the February 2025 edition of the Dallas Bar Association’s Headnotes Newsletter.