                  IN THE SUPREME COURT OF THE STATE OF MONTANA .y-4
                                                                c-4
                                    No. 84-303

                                                                                      PM - 7 2000
 IN RE PROPOSED RULES OF
 PROFESSIONAL CONDUCT ON                                          ORDER
 THE SALE OF A LAW PRACTICE                                1


        The State Bar of Montana has tiled in this Court a petition to amend the Montana
 Rules of Professional Conduct to allow for the sale of a lawyer’s client files and goodwill in
 addition to the physical assets of a law practice and of accounts receivable of a retiring or
 deceased lawyer. The proposed revisions are modeled on the American Bar Association
 (ABA) model rule 1.17 and corresponding changes to rules 5.4, 5.6, and 7.2 of the ABA’s
 model rules.
        In May 1998, the Court ordered the proposed revisions published and allowed a
 comment period on them. Only one comment has been received, and the Court has
 considered it.
        The Court now having fully considered the proposed changes,
        IT IS HEREBY ORDERED:
        1 . By and under the authority vested in the Supreme Court of the State of Montana
in Article VII, Section 2(3), of the Montana Constitution, we hereby promulgate and adopt
Rule 1.19, and amend Rules 5.4, 5.6, and 7.2 of the Montana Rules of Professional Conduct
as set forth in the attachment to this Order. The attachment sets forth the new Rule 1.19 in
 its entirety. In Rules 5.4, 5.6, and 7.2, new language added is underlined; language to be
deleted is interlineated.
        2. The Rules as herein adopted and amended shall be in full force and effect as of
May 1, 2000, as part of the Rules of Professional Conduct adopted by this Court.
        3 . A copy of this Order, including the attachment setting forth the new and revised


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rules, shall be published in the Montana Reports as soon as practically possible. The Clerk
of this Court shall forward copies of this Order and Rules to West Company; to the State Bar
of Montana, with the request that it be published in the earliest possible issue of the Montana
Lawyer; to the Montana Legislative Services Division; to each district judge in the State of
Montana; to each clerk of district court in the State of Montana; to each federal district judge
sitting in the District of Montana; and to the Clerk of the United States District Court for the
District of Montana.
       Dated this       -


                       c Of Marchp 2ooo.
        AMENDMENTS TO THE RULES OF PROFESSIONAL CONDUCT

RULE 1.19 - Sale of Law Practice

        A lawyer or a law firm may sell or purchase a law practice, including goodwill, ifany,
if the following conditions are satisfied:

       (a)    The seller ceases to engage in the private practice of law in the geographic area
in which the practice has been conducted;

       (b)    The practice is sold as an entirety to another lawyer or law firm;

       (c)    Actual written notice is given to each of the seller’s clients regarding:

              (1)     the proposed sale;

              (2)   the terms of any proposed change in the fee arrangement
       authorized by paragraph (d);

               (3)     the client’s right to retain other counsel or to take possession of
       the client’s file; and

               (4)    the fact that the client’s consent to the sale will be presumed if
       the client does not take any action or does not otherwise object within ninety
       (90) days of receipt of the notice of the proposed sale.

        (d)    If a client cannot be given notice, the representation of that client may be
transferred to the purchaser only upon entry of an order so authorizing by a court having
jurisdiction. The seller may disclose to the court in camera information relating to the
representation only to the extent necessary to obtain an order authorizing the transfer of a
file.

       (e)   The fees charged clients shall not be increased by reason of the sale. The
purchaser may, however, refuse to undertake the representation unless the client consents to
pay the purchaser’s fees at a rate not exceeding the fees charged by the purchaser for
rendering substantially similar services prior to the initiation of the purchase negotiations.




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RULE 5.4 - Professional Independence of a Lawyer

       (a)    A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

              (1)     an agreement by a lawyer with the lawyer’s firm, partner, or
       associate may provide for the payment of money, over a reasonable period of
       time after the lawyer’s death, to the lawyer’s estate or to one or more specified
       persons;




              Izl     a lawver or law firm who ourchases the practice of a deceased,
       disabled or disauoeared lawver mav. pursuant to the arovisions of Rule 1.19,
       pav to the estate or other reuresentative of that lawver the ameed-uoon
       purchase mice: and

              (3)    a lawyer or law firm may include nonlawyer employees in a
       compensation or retirement plan, even though the plan is based in whole or in
       part on a profit-sharing arrangement.

       (b)     A lawyer shall not form a partnership with a nonlawyer if any of the activities
of the partnership consist of the practice of law.

      (c)     A lawyer shall not permit a person who recommends, employs, or pays the
lawyer to render legal services for another to direct or regulate the lawyer’s professional
judgment in rendering such legal services.

       (d)      A lawyer shall not practice with or in the form of a professional corporation,
limited liability company, or association authorized to practice law for a profit, if:

              (1)    a nonlawyer owns any interest therein, except that a fiduciary
       representative of the estate of a lawyer may hold the stock or interest of the
       lawyer for a reasonable time during administration;

              (2)     ins the case of a professional corporation, a nonlawyer is a
       corporate director or officer thereof;

             (3)    in the case of a limited liability company, a nonlawyer is a
       manager of the limited liability company;

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               (4)    a nonlawyer had the right to direct or control the professional
       judgment of a lawyer.


RULE 5.6 - Restrictions on Right to Practice

       A lawyer shall not participate in offering or making:

        (a) an                             agreement that restricts the rights of a lawyer to
practice law after termination of the a practice relationship, except an agreements concerning
benefits upon retirement; and exceot in situations involving sale of a law nractice. or oat-t
thereof. as described in Rule 1.19, or

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


RULE 7.2 - Advertising

        (a)     Subject to the requirements of Rule 7.1, a lawyer may advertise services
through public media, such as a telephone directory, legal directory, newspaper or other
periodical, outdoor, radio or television, or through written communication not involving
solicitation as defined in Rule 7.3

       @I     A copy or recording of an advertisement or written communication shall be
kept for two years after its last dissemination along with a record of when and where it was
used.

       (c)    A lawyer shall not give anything of value to a person for recommending the
lawyer’s services, except that a lawyer may

            a p a y t h e r e a s o n a b l e c o s t o f advertisingements o r w&en
       communications permitted by this rule; and-may

              f2J     pay the usual charges of a not-for-profit lawyer referral service
       or other legal service organization; and

              L11    pav for a law nractice in accordance with Rule 1.19.

       (4     Any communication made pursuant to this rule shall include the name of at
least one lawyer responsible for its content.


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