An Unreasonable Ban on Reasonable Competition: The Legal Profession’s Protectionist Stance Against Noncompete Agreements Binding In-House Counsel

In the vast majority of jurisdictions in the United States, a business may protect its confidential information and customer goodwill by conditioning employment on an employee’s acceptance of a covenant not to compete. These covenants are beneficial to the marketplace because they allow employers to provide employees with necessary skills, knowledge, and proprietary information without any fear of misappropriation. Accordingly, noncompete agreements are upheld by courts so long as they pass a fact-specific “reasonableness” test. Notwithstanding the widespread acceptance of reasonable noncompete agreements for all other professionals—including doctors and corporate executives—forty-eight states, following the American Bar Association’s lead, prohibit all noncompete agreements among lawyers. This prohibition is purportedly designed to protect both an attorney’s professional autonomy and a client’s right to choose his counsel. Despite legal commentators’ criticism of the prohibition, several state bar associations have recently extended it beyond the traditional law-firm context to agreements between companies and their in-house counsel. This expansion has transformed a questionable policy of professional self-regulation into an unjustifiable infringement on the legitimate interests of corporate employers. In addition to providing an analysis of the history and ethical norms that justify rejection of the ban’s application to in-house counsel, this Note argues that bar committees that issue opinions supporting the ban’s extension may be susceptible to antitrust liability under the Supreme Court’s new Dental Board standard pertaining to state-action immunity

Attorneys Must Not Enter Partnership Agreements Prohibiting Themselves from Representing Former Clients Upon Termination of Partnership. Dwyer v. Jung, 133 N.J. Super. 343, 336 A.2d 498 (Ch. 1975), appeal docketed, No. 3378-74, App. Div., June 18, 1975.

Three attorneys entered into a partnership agreement for the practice of law. Their agreement included a provision that assigned the partnership\u27s insurance carrier clients to individual partners upon the termination of the partnership and restricted the partners from doing business with a client designated as that of another partner for a period of five years. Of these insurance carrier clients, 154 were assigned to the defendant while five were allotted to the plaintiffs. After the partnership was dissolved, the plaintiffs sought a judicial accounting. The defendant counterclaimed, contending that the plaintiffs violated the restrictive covenant of the original partnership agreement by attempting to do business with clients designated as his. Plaintiffs denied the charge and argued that the covenant apportioning clients to individual partners had the effect of prohibiting the other partners from dealing with those clients and was therefore void as against public policy. The plaintiffs also contended that they had entered into the agreement at the insistence of the defendant, even though all parties regarded the provision as unenforceable. The Superior Court of New Jersey, Chancery Division, held that the covenant in the partnership agreement restricted the partnership\u27s clients in their choice of counsel and was thus void for public policy reasons. The court refused to apply the standards usually used in evaluating restrictive covenants