Dwyer v. Jung

• Decision Date: 19 March 1975
• Citation: 133 N.J.Super. 343,336 A.2d 498
• Parties: Edmond J. DWYER and Albert C. Lisbona, Plaintiffs, v. Fred W. JUNG, Jr., Jung and Howard, a partnership, Defendants.
• Court: New Jersey Superior Court

Page 343

133 N.J.Super. 343

336 A.2d 498

Edmond J. DWYER and Albert C. Lisbona, Plaintiffs, v. Fred W. JUNG, Jr., Jung and Howard, a partnership, Defendants.

Superior Court of New Jersey Chancery Division.

March 19, 1975.

Joseph C. Glavin, Jr., Newark, for plaintiffs.

Franzblau, Cohen & Falkin, Newark, for defendants (S. M. Chris Franzblau, Newark, appearing).

KIMMELMAN, J.S.C.

In this action following the termination of a law partnership the court is called upon to determine the enforceability of a restrictive covenant contained in the partnership agreement which parcels out named clients to specific partners upon dissolution and prevents one partner from intruding upon aother's clients for a period of five years.

Effective January 1, 1973 the parties entered into a partnership agreement for the practice of law (primarily defense of negligence actions) under the name of 'Jung, Dwyer and Lisbona.' Their agreement provided that each partner would contribute a stated amount for capital, cooperate in the business of the partnership and share in the partnership net profits in a stated manner. Upon dissolution each partner would be entitled to a repayment of capital and a distributive share of remaining profits and net assets.

The agreement also contained the following provisions:

Should the partnership terminate, all clients listed in exhibit 'A' shall be designated to certain individual partners. Upon termination, and by virtue of this Agreement, all partners shall be restricted from doing business with a client designated as that of another partner for a period of 5 (five) years.

Exhibit A, annexed thereto, contained a list of insurance carriers; 154 were designated to defendant Jung as his clients, 5 were designated to plaintiff Dwyer as his clients, and none was ascribed to plaintiff Lisbona.

On June 7, 1974 defendant notified plaintiffs that the partnership was dissolved as of June 1, 1974. The business of the partnership continued in De facto fashion until September 1, 1974 when the former partners went their separate ways. Plaintiffs now practice under the name of 'Dwyer and Lisbona.' Defendant practices under the name of 'Jung and Howard.'

In this action brought for an accounting defendant, by way of counterclaim, contends that plaintiffs have violated the restrictive covenant contained in the partnership agreement which designates or assigns certain clients to partners in the event of dissolution. Specifically, plaintiffs are charged with attempting to pirate defendant's clients and undermining his relationship with certain named insurance carriers. These charges are denied.

Plaintiffs argue that the quoted provision is void as against public policy. They claim that they entered into the agreement at the insistence of defendant although all parties regarded the provision as unenforceable.

Initially, it must be recognized that lawyer restrictive covenants are to be distinguished from noncompetitive covenants incident to the sale of a business where the covenants are designed to protect the good will of the business for the benefit of the buyer. Solari Industries, Inc. v. Malady, 55 N.J. 571, 576, 264 A.2d 53 (1970); Whitmyer Bros. Inc. v. Doyle, 58 N.J. 25, 32, 274 A.2d 577 (1971). A lawyer's clients are neither chattels nor merchandise, and his practice and good will may not be offered for sale. Drinker, Legal Ethics, at 161, 189 (1965). In this regard Abraham Lincoln's sage observation (slightly paraphrased) is particularly appropriate: A lawyer's time and advice are his stock in trade.

Nor may lawyer restrictive covenants, whether contained in a partnership agreement or an agreement of employment, be classified within the general category of agreements restricting post-employment competition. The usual employee restrictive covenant is a legitimate business device to protect the business and good will of an employer against various forms of unfair competition. Although not freely as enforceable as a seller's noncompetitive agreement, such restrictive covenant will nevertheless be given effect if it is reasonable under all of the circumstances. 'It will generally be found to be reasonable where it simply protects the legitimate interests of the employer, imposes no undue hardship on the employee, and is not injurious to the public.' Solari, supra, 55 N.J. at 576, 264 A.2d at 56; Whitmyer, supra, 58 N.J. at 32, 274 A.2d 577.

Commercial standards may not be used to evaluate the reasonableness of lawyer restrictive covenants. Strong public policy considerations preclude their applicability. In that sense lawyer restrictions are injurious to the public interest. A client is always entitled to be represented by counsel of his own choosing. ¹ See Marshall v. Romano, 10 N.J. Misc. 113, 114, 158 A. 751, 752 (C.P. 1932). The attorney-client relationship is consensual, highly fiduciary on the part of counsel, and he may do nothing which restricts the right of the client to repose confidence in any counsel of his choice. Drinker, supra at 89 et seq. No concept of the practice of law is more deeply rooted. The lawyer's function is to serve, but serve he must with fidelity, devotion and erudition in the highest traditions of his noble profession.

These principles underlie DR 2--108(A) of the Disciplinary Rules of the Code of Professional Responsibility of the American Bar Association which provide:

A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after...