*fn1 REPORTER'S NOTE: Pursuant to the authority vested in the
Supreme Court by article 3, § 6(f) of the Kansas Constitution,
Hon. Fred S. Jackson, Shawnee District Judge, and Hon. David S.
Knudson, Saline District Judge, served on the Supreme Court to
participate in the hearing and decision of this case vice
Justices Holmes and Herd.
The opinion of the court was delivered by
This is a civil action brought by the plaintiff, Malcolm
Miller, against the law firm of Foulston, Siefkin, Powers &
Eberhardt (Foulston-Siefkin) and his former partners. The
plaintiff involuntarily left the firm under pressure, and,
although he alleges ten separate claims in his petition, the
basis of his action is that he should receive retirement benefits
and a share of the attorney fees the firm received for its
20-year litigation in two sets of class action cases that have
become known as the consolidated and the private helium cases.
The district court denied plaintiff's motion for partial summary
judgment and granted summary judgment to defendants on the
grounds the claims were barred by the statute of limitations.
Miller appeals from that judgment.
Miller began practicing with Foulston-Siefkin in 1952. In a
memo dated May 13, 1982, the executive committee of
Foulston-Siefkin advised plaintiff that it was concerned about
his participation in the firm and was suggesting a substantial
reduction in compensation. In December 1982, plaintiff was
advised by memorandum from "his partners" of their desire for him
to resign rather than face expulsion. Fifteen partners signed the
memo. It was based upon a unanimous recommendation from the
executive committee that plaintiff be expelled from
Foulston-Siefkin. Plaintiff left the firm January 1, 1983. He was
of counsel with the firm until February 28, 1983, when he was
required to remove
all his belongings from the firm's offices. Plaintiff never
intended to retire from the practice of law when he left
Foulston-Siefkin first became involved in complex helium
litigation in 1963. One set of cases in this class action became
known as the consolidated helium cases. One of these cases
settled in 1985, the others in 1988. The court awarded attorney
fees of approximately $17 million. The second set of cases, known
as the private helium cases, which were filed in 1971 and 1986,
resulted in attorney fees of approximately $4.5 million.
According to plaintiff, he suggested to his partner, Gerald
Sawatzky, that Foulston-Siefkin seek a consensual achievement fee
in the helium litigation but was told that such a request was not
possible because the attorney time had been billed at a high rate
throughout the litigation. This claim was denied by Sawatzky. His
affidavit states that the continuous agreement with
Foulston-Siefkin's clients in the helium cases was that the firm
would bill at a minimum level with the understanding that, if
recovery occurred, the court would be asked to award attorney
fees from the amount recovered at full compensation.
Plaintiff and Foulston-Siefkin disputed whether plaintiff
should receive retirement benefits. At one point, the firm agreed
to pay plaintiff retirement benefits in the amount of $190,416.89
in 120 equal installments of $1,586.81, beginning June 1, 1983,
conditioned upon plaintiff's retirement. In May 1983, at the
Foulston-Siefkin partnership meeting, it was reported that the
firm would begin paying these retirement benefits. In the fall of
1983, plaintiff and Foulston-Siefkin attempted to negotiate a
settlement which would allow plaintiff to continue some activity
in the practice of law while remaining retired and receiving
retirement benefits under the 1965 Foulston-Siefkin partnership
agreement. Pursuant to the proposal, Foulston-Siefkin agreed to
pay plaintiff $190,000 over ten years while liberalizing the
phrase "practice law" contained in the partnership agreement to
allow some minimal activity. Foulston-Siefkin offered to pay
plaintiff $2,000 a month for 96 months if he restricted his
practice to "permitted activities."
In December 1985, plaintiff learned that Foulston-Siefkin had
sought extraordinary attorney fees in the helium cases.
Foulston-Siefkin first received payment on those fees in December
1985. Plaintiff sought to have a portion of the helium fees, but
request was denied. He filed the original petition on November
30, 1987. He filed his amended petition, which alleges the ten
claims against the defendants, on January 20, 1989.
Plaintiff filed a motion for partial summary judgment on
October 26, 1988, asking the trial court to find: (1) that the
1965 Foulston-Siefkin partnership agreement was void under the
Kansas Code of Professional Responsibility, DR 2-108(A) (1989
Kan. Ct. R. Annot. 159); or, in the alternative, (2) that the
withdrawal, retirement, and expulsion portions of the 1965
agreement are void under the Code of Professional Responsibility.
The trial court denied the motion, finding that the 1965
agreement did not violate any ethical code and that plaintiff did
not retire, which meant that he was not entitled to retirement
funds available under the 1965 agreement.
Defendants (except Christopher P. Christian) filed a motion for
summary judgment, arguing plaintiff's claims were time barred.
The trial court found that the longest applicable statute of
limitations was three years; that the action should have
commenced about the end of 1985 or the early part of 1986; and
that, because the action was not commenced until late in 1987,
the claims were barred. The court further found that plaintiff's
status in the law firm gave him knowledge that would include an
awareness of the potential attorney fees that could be produced
under the helium litigation even though the exact amount of
anticipated fees was not known in late 1982. Finally, the court
concluded that, even though plaintiff's claims are time barred,
they might provide offsets to defendants' counterclaims. The
defendants dismissed their counterclaims on March 13, 1989.
Defendant Christian's motion for summary judgment was granted on
March 27, 1989, based upon the same grounds as the others.
Plaintiff argues that the trial court erred in denying his
motion for partial summary judgment because the 1965
Foulston-Siefkin partnership agreement is unethical and
unenforceable in two ways. First, plaintiff argues that the
agreement on its face restrains the practice of law and does not
comply with the requirements of DR 2-108 (1989 Kan. Ct. R. Annot.
159) of the Kansas Code of Professional Responsibility, which
allows for conditional payment of retirement benefits. Second,
plaintiff argues that Foulston-Siefkin attempted to use the
agreement to compel plaintiff
to quit practicing law, which would also violate DR 2-108.
Finally, plaintiff argues that, because the agreement's restraint
on the practice of law was unethical and unenforceable, the
entire 1965 partnership agreement is invalid and should be found
to be void.
We first consider if the conditional payment of retirement
benefits make the 1965 agreement unethical and unenforceable on
its face. DR 2-108(A) is intended to give clients the widest
possible choice of attorneys by providing as follows:
"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 the termination of a relationship
created by the agreement, except as a condition to
payment of retirement benefits." 1989 Kan.
The purpose behind DR 2-108(A) is to protect the public's right
"to select and repose confidence in lawyers of their choice
without restriction by providing full availability of legal
counsel." Cohen v. Lord, Day & Lord, 144 A.D.2d 277, 280,
534 N.Y.S.2d 161 (1988), rev'd 75 N.Y.2d 95, 551 N.Y.S.2d 157
The partnership agreement challenged by plaintiff was adopted
by Foulston-Siefkin on April 1, 1965. Twelve partners signed the
"Amended Partnership Agreement," including plaintiff. Article I
contains definitions of terms used in the agreement.
"Retirement and Retiring partner" are defined in Article I(h)
as "withdrawal from the partnership, other than upon death, in a
manner and at the times set forth in Section 3 of ARTICLE VII."
"Withdrawal and withdrawing partner" are defined in Article
I(i) as "withdrawal from the partnership other than upon death,
retirement or expulsion." Article I(j) states:
"Expulsion shall mean expulsion from the
partnership under the provisions of Section 5 of
ARTICLE VII; provided, however, that any partner who
is expelled and who, under the provisions of Section
5 of ARTICLE VII, is entitled to the rights and
payments provided upon retirement shall not be
regarded as an expelled partner but shall be
considered for all purposes as having withdrawn in
retirement and as being a retired partner."
Article VII sets out how the partnership will respond to death,
retirement, withdrawal, and expulsion of one of the partners.
Article VII, § 1 establishes that the occurrence of one of these
four events will not terminate the partnership, but will end
of that partner against the partnership except as set forth in
the agreement. Article VII, § 2(a) defines the payments that will
be received upon the death or retirement of a partner:
"(i) Such partner's full drawing account for the
month in which his death or retirement occurs.
"(ii) Such partner's capital account as of the end of
the month immediately preceding the month in which
his death or retirement occurs.
"(iii) An amount equal to such partner's share of
partnership profits, as defined in Section 3 of
ARTICLE VI, for either the fiscal year of the
partnership first preceding the date of such death or
retirement, or for the fiscal year second preceding
the date of such death or retirement, whichever is
greater, provided, however, that for purposes of this
computation, there shall be excluded from partnership
net profits that portion of any single fee paid
within any such year which is in excess of
Article VII, § 3 outlines the provisions by which a partner
retires from the firm, as follows:
"Retirement. A partner who withdraws from the
partnership for the purpose of retiring from the
practice of law shall be considered as a retired
partner and shall be entitled to payments provided
for in Section 2 of this ARTICLE VII upon retirement,
if, at the time of such withdrawal, such partner
(a) is sixty (60) years of age, or
(b) has been associated with the partnership,
whether as a partner or as an associate, or both,
for at least thirty (30) years, or
(c) is, in the unanimous opinion of all remaining
partners, unable to continue in the practice of law
by reason of a permanent physical or mental
provided, however, that notwithstanding any provision
in this agreement to the contrary, if such retired
partner, without the express consent of all
continuing partners, re-enters the practice of law or
becomes otherwise gainfully engaged or employed at an
occupation associated with or related to the practice
of law, then, and upon such event, the obligation of
the partnership to make the payments set forth in
clause (iii) of Section 2(a) of this ARTICLE VII
shall immediately cease and terminate and be forever
forfeited by such retiring partner, and any amounts
which have theretofore been paid by the partnership
to such retired partner under clause (iii) of Section
2(a) shall be, upon demand of the partnership,
immediately repaid by such retired partner to the
In Article VII, § 4, the agreement states that if a partner
withdraws other than in retirement, the withdrawing partner is
entitled to a portion of the drawing account and that partner's
capital account. No provision is made for the receipt of
retirement funds by a withdrawing partner.
The expulsion of a partner is defined in Article VII, § 5 as
"Expulsion. Any partner may be expelled at any
time, with or without cause, by a majority of
partners, and upon such expulsion, such expelled
partner's status as a partner shall immediately
terminate and such partner shall forthwith terminate
his practice of law with the partnership. Such
expelled partner shall be entitled to the same
payments at the same times and subject to the same
terms and conditions as provided in Section 4 above
with respect to a withdrawing partner, the same as if
such partner had withdrawn and had not been expelled;
provided, however, that if such expelled partner, at
the time of expulsion, meets the conditions for
retirement set forth in Section 3 hereof, and in the
event the expulsion is not for cause by reason of
dishonesty, unethical conduct or other acts of moral
turpitude of such partner, then, and in such events,
he shall be entitled to the same rights and payments,
subject to the same terms and conditions, as if he
had retired and had not been expelled."
The 1965 agreement was amended in 1968. The terms of the
agreement that were modified do not change the application of the
1965 agreement to the issues raised in this appeal.
Article VII, § 3 of the agreement states specific conditions
that must be met by a partner to qualify for retirement benefits.
If a partner does not meet those qualifications, then that
partner is not entitled to the compensation designated in Article
VII, § 2(a)(iii). Plaintiff argues that the 1965 agreement
violates DR 2-108(A) because an expelled partner is entitled to
substantial benefits under Article VII, § 2(a)(iii) if he quits
practicing law, but forfeits these benefits if he resumes
practice. The benefits at issue here involved approximately
Plaintiff argues first that the terms of the 1965 agreement
violate DR 2-108(A) because payment of one year of partnership
profits is conditioned upon a former partner's quitting the
practice of law. In support of this argument, plaintiff directs
this court's attention to Gray v. Martin, 63 Or. App. 173,
663 P.2d 1285, rev. denied 295 Or. 541 (1983). In Gray, a law
firm sued a withdrawing partner to obtain an accounting of
attorney fees he collected on seven contingency fee cases he took
with him when he left the firm. Defendant, the withdrawing
partner, argued he was entitled to keep the contingency fees
because it was not practicable for him to bill his unbilled time
on those cases at the time he withdrew from the firm. The law
firm described the
partnership agreement as having a "nothing in - nothing out"
policy. The court concluded that this policy was not consistent
with a withdrawing partner's taking the files of pending
partnership cases and collecting fees on those files without
accounting to the continuing firm for the monies received. 63 Or.
App. at 178.
The withdrawing partner counterclaimed, alleging that he was
entitled to withdrawal benefits of the partnership agreement
because restrictions conditioning the payment of these benefits
upon his cessation of the practice of law in three counties in
which the law firm was active violated DR 2-108(A). The law firm
argued that the provision did not restrict the withdrawing
partner's right to practice law and, even if it did, was an
ethical condition to the payment of retirement benefits. 63 Or.
App. at 181. The Oregon Court of Appeals concluded that the
prohibition contained within the partnership agreement directly
affected the withdrawing partner's right to practice law in the
three counties listed because he lost benefits that otherwise
would be his. The court found this restricted his right to
practice law and was not a condition for the payment of
retirement benefits. For the disciplinary rule to have meaning,
the court reasoned that retirement must mean something different
than withdrawal from the firm. Otherwise, every termination of a
relationship between law partners would be a retirement and
agreements restricting the right to practice would always be
allowed. 63 Or. App. at 182. Plaintiff argues that this case
supports his claim because his entitlement to retirement benefits
is conditioned upon his ceasing the practice of law.
In further support of his argument, plaintiff relies upon two
opinions by state ethical committees and one opinion by a
district court in Dallas County, Texas. Plaintiff did not include
copies of these opinions in the record or in his brief. We note
that the issue addressed by the Kentucky Bar Association Ethics
Committee was whether a clause in a partnership agreement tying a
partner's right to certain payments upon his withdrawal from a
firm to a covenant not to compete within a geographical area for
a period of two years violates DR 2-108(A). Reasoning ...