Saturday, May 25, 2019
Wednesday, May 22, 2019
Service of Petition for Charging Order Upon LLC
In a recent decision from a federal district court in Georgia, it was held that, under the Georgia LLC Act, a petition for a charging order need not be served on the LLC itself. First Southwestern Financial Services, LLC v. Dennis Waters Construction, LLC, Civil Action No.: 4:13-CV-260, 2019 WL 1782123 (S.D. Ga. April 23, 2019).
In this instance, First Southwestern sought a charging order against the interest of Dennis Waters in numerous LLCs. Although it is not entirely clear as to why the question arose (the defendant never responded to the request for a charging order), the court considered whether it was necessary to serve the application for the charging order upon the subject LLC. Comparing the Georgia LLC Act’s charging order statute (O.C.G.A. § 14-11-504) to those of other states including with the equivalent provision of the Kentucky Uniform Partnership Act (Ky. Rev. Stat. Ann. § 362.481), in the absence of a provision in the Georgia statute requiring that service of the charging order be made as well upon the LLC, as well as a limited rights afforded one to whom a charging order is granted, it was held the service on the LLC is not required.
Tuesday, May 21, 2019
More on LLCs Must Be Represented By Attorneys; Alaska Speaks
Across the states, it is accepted that an LLC may appear in court only through an attorney. On the recent decision from Alaska’s adopted that same rule. Parlier v. Can-Ada Crushing & Gravel Co., S. Ct. No. S-17358, 2019 WL 2064048 (Alaska May 10, 2019).
In this decision, the Alaska Supreme Court extended a statute which requires that a corporation be represented in court only by an attorney to include LLCs, citing in support not only prior Alaska law but also the decisions from other jurisdictions.
Sunday, May 19, 2019
The Fall and Execution of Anne Boleyn
Today, May 19, marks the anniversary of the execution in 1536 of Anne Boleyn on spurious charges of adultery and therefore (by one argument) treason. While she would be included in Foxe’s Book of Martyrs, a 16th century effort at Protestant hagiography, all indications are that Anne died a Catholic; it is difficult to otherwise understand her request that the Eucharist be placed in her chambers at the Tower of London in the days before her execution.
It was a convoluted process that brought Anne to execution.
Previously, Henry VIII had been married to Catherine of Aragon. That marriage would ultimately sour on the fact that only one of the children of Henry and Catherine survived infancy, that being Mary. England was not, it was feared, ready to be ruled by a queen. The only example of it doing so, that being the reign of the Empress Matilda (daughter of King Henry I) was referred to as the “Anarchy.” Seeking to perpetuate the dynasty and avoid the possibility of civil war after his death, Henry pursued the Divorce (it was actually what we would refer to today as an annulment) so that he could marry Anne Boleyn.
The Divorce could not easily be had consequent to at least a pair of factors. Initially, on theological grounds, the basis for the Divorce was weak. Second, Eleanor’s nephew, Charles V, was King of both Spain and the Netherlands and as well Holy Roman Emperor. He was able to delay any Papal decision on the Divorce, thereby depriving Henry of the one thing he did not have, namely time. Ultimately, Henry would schism the English church from Roman communion (an act which earned for Henry his very own bull of excommunication). The marriage to Catherine of Aragon was then annulled by Thomas Cramer, Archbishop of Canterbury notwithstanding that he did not have he authority to do so. Now “single,” Henry proceeded to marry Anne Boleyn. She, already pregnant at the time of the marriage, would be the mother of Elizabeth. Elizabeth would be their only child. Henry was now in no better position than he was before; two potential female heirs to the throne did not address the perceived need for a male heir. Anne’s fortunes would ultimately be destroyed consequent to a series of events whose genesis is still greatly debated, but it is clear that the charges of adultery and incest for which she was convicted and executed were entirely fabricated. Regardless, by some means Thomas Cromwell was told to make it happen, and he did.
On April 30, 1536 Mark Smeaton, a court musician and hanger-on, was arrested, this being the first overt step in Cromwell’s plan to bring down Anne Boleyn. According to one source, Cromwell had Smeaton brought to his own house and there tortured him. Eventually, Smeaton would be racked and confess to have committed adultery with Anne Boleyn. Some five additional men would be arrested on similar grounds. One of them, Wyatt, was not ultimately charged.
The first trial (albeit indirect) of Anne Boleyn took place on May 12, 1536. Anne, however, was not a participant in the trial. Rather, at this trial each of Mark Smeaton, Henry Norris, William Brereton and Francis Weston were charged with multiple acts of adultery with the Queen. Sadly, no transcript of the proceedings, if made (and that is doubtful), survives. All were found guilty, thereby sealing Anne’s fate. She did not attend the trial; rather, at that time she was confined in the Tower of London. Her father, Thomas Boleyn, did sit on the jury – his vote in favor of their conviction sealed the fate of his children.
On May 15, 1536, Anne Boleyn as well as her brother George were tried on allegations of adultery and incest. As to Anne, the conclusion of this “trial” was a foregone conclusion. Four of the men with whom Anne was accused of having engaged in adultery, Mark Smeaton, Henry Norris, William Brereton and Francis Weston, had already been convicted on May 12, and, so goes the adage, it does take two to tango. George was convicted on the charges against him.
Although some incomplete notes of this trial do survive, sadly no transcript is available; it would no doubt make interesting reading. It is clear that both Anne and then George (George’s trial was separate and held after that of Anne) denied all charges against them. Those denials (as well as the expected denials of the other men charged with having committed adultery with Anne) must be accepted at face value. As has been demonstrated by several scholars, most conclusively Eric Ives, the author of the definitive biography of Anne, Anne and her various co-conspirators could not have been guilty of the charges made – even with the incomplete records available to us today, it can be demonstrated that in numerous instances Anne and a particular gentleman were charged with having committed adultery at a particular time and place when, in fact, either or both of them were at a different place or even two difference places. The truth, however, was not the issue; the outcome of the trial was a foregone conclusion before it ever started. Henry was tired of Anne, and Cromwell had been charged to bring about her fall. End of story.
On May 14, Cramner, Archbishop of Canterbury, had declared the marriage of Henry and Anne to have been invalid ab initio, possibly (the papers as to his determination have been lost) on the basis of her prior contract of marriage to Henry Percy the son of the then Fifth Earl of Northumberland (this Henry would be the Sixth Earl). An alternative basis was that Mary Boleyn, Anne's sister, had been Henry's mistress, and on that basis the marriage could have been invalid based upon consangruity. Regardless as to why, Anne would not die as the Queen of England, having never been validly married to Henry, and their daughter Elizabeth (the future Queen Elizabeth I) was rendered illegitimate.
All of Mark Smeaton, Henry Norris, William Brereton and Francis Weston, along with George Boleyn, would be executed on May 17. Anne’s death would not take place until May 19.
Famously, Anne was executed not with the traditional English ax, but rather by a French swordsman. I have never found a satisfactory explanation as to why the swordsman was requested over the axeman; Friedmann (another biographer of Anne) suggested, and Ives admits it as a possibility, that it was at Anne’s request, she desiring the French manner of execution in light of her having been raised in the French court. There is, however, a problem of chronology. Anne was consigned to the Tower on May 2, her alleged partners in adultery (other than her brother George) were tried on May 12, and she was tried on May 15. The swordsman, normally resident in Calais, may have been ordered to come to England before Anne’s trial. If so, there is further evidence that the trials were for show and the verdicts were pre-determined; even though her trial had not yet taken place, the manner of her dispatch may have already been selected. Still she came out ahead (no pun intended); her sentence was commuted to beheading – the regular sentence for a woman convicted of treason was burning at the stake.
Anne was buried in St. Peter ad Vincula, the church on the grounds of the Tower of London. There she joined Sir (now Saint) Thomas More, another of Henry’s victims.
Henry would marry Jane Seymour, his third wife, on May 30. She shortly thereafter became pregnant, ultimately delivering a son who would survive infancy. That child was Edward VI. Jane would die of complications from childbirth. While Henry would go on to marry three more times, namely to Anne of Cleves, Catherine Howard and Catherine Parr, none of them would have children by him. Edward VI would die, probably of tuberculosis, in his mid-teens. Mary and then Elizabeth, the girls Henry feared could not rule, would in turn rule England. As observed by Peter W. Hogg, Succession to the Throne, 33 Nat'l J. Const. L. 83 (2014):
[W]hile Henry VIII was engaged in his obsessive quest for a male heir he could not know that his daughter Elizabeth by Anne Boleyn (the second of his six wives) was destined to become the greatest monarch England had ever known. She became Elizabeth I (Good Queen Bess, as she was known), and ruled for 45 years (1558-1603, England's “golden age”). Henry should have stopped worrying and settled down with Anne Boleyn instead of beheading her.
Thursday, May 16, 2019
More on LLCs May Appear in Court Only Through an Attorney
Most states now have a ruling to the effect that an LLC may appear in court only through an attorney. In Illinois that ruling is Stone Street Partners, LLC v. City of Chicago Department of Administrative Hearings, 12 N.E.3d 691 (May 20, 2014), aff’d 88 N.E.3d 699 (Feb. 20, 2017). A recent decision applied that rule in a question over jurisdiction. Cross v. Wal-Mart Stores, Inc., 2019 IL App. (5th) 180350-U, 2019 WL 1984604 (Ill. App 5th May 2, 2019).
This dispute involved a medical LLC’s claims for payment on services rendered to Cross after a slip and fall injury in a Wal-Mart store. The LLC was never served, and the question was whether a non-attorney’s participation in a hearing served to waive the requirement of service and a consent to the court’s jurisdiction. It was held that an LLC had not made a general appearance in an action when the company representative was not an attorney. Rather:
Finally, it cannot be said that the Non-Parties submitted to the court’s jurisdiction when James appeared at the hearing on Plaintiff’s amended petition to adjudicate liens and inchoate claims under the Act. The Plaintiff’s contention that James’ appearance at the hearing to adjudicate the liens was a “general appearance” by the Non-Parties sufficient to waive service of process is misplaced. The Non-Parties are limited liability companies, which can only appear in legal proceedings via an attorney. See Stone Street Partners, LLC, 2014 IL App (1st) 123654, ¶¶ 17, 21. It is undisputed that James, while an employee of the Non-Parties, was not an attorney and was unable to present evidence and argument on behalf of the Non-Parties at the hearing. As a non-attorney, James’ attempted “representation” of the Non-Parties at the hearing does not legally constitute an “appearance” on behalf of the Non-Parties, waiving the right of the Non-Parties to service of process to acquire personal jurisdiction.
2019 WL 1984604, ¶ 35.
Wednesday, May 15, 2019
Dissenter Rights Procedure
In Peter Mahler’s blog New York Business Divorce, Franklin C. McRoberts has posted a summary of the requirements applicable, under New York corporation law, for the prosecution of a dissenter rights action. Why your state may not follow the exact same procedure, this posting provides a useful outline of what you need to look for under the laws of other jurisdictions.
That posting, entitled How to Initiate a Fair Value Appraisal Proceeding as a Dissenter’s Checklist, is available at the following link: HERE IS A LINK.
Monday, May 13, 2019
Business Law Update: Cases (and a Few Statutes) of Which You Need To Be Aware
On Thursday, June 13, at the KBA Annual Convention, the KBA Section of Business Law will be presenting Business Law Update: Cases (and a Few Statutes) of Which You Need to be Aware.
This Business Law Update is designed to bring attendees up to speed on the most important cases handed down by Kentucky and other courts over the last two years. The developments being reviewed are important for both the business law practitioner and the business law litigator. While there will not be time to review every case in the voluminous outline, presenters Elizabeth M. Reeder and Thomas E. Rutledge will highlight particular decisions. In addition, their presentation will address a number of cases that have come down after the due date for the outline.
Thursday, May 9, 2019
In a recent decision from Kentucky Court of Appeals, it struck down as unconstitutional a statute allowing business organizations (corporations, partnerships, LLCs, etc.) to appear at hearings on unemployment compensation through persons who are not attorneys. Rather, it was held that the employer must be represented by an attorney. Nichols v. Kentucky Unemployment Insurance Commission, No. 2017-CA-001156-MR, 2019 WL 1868589 (Ky. Ap. April 26, 2019).
In this dispute, Norton Healthcare, the employer of Nichols, appeared before an Unemployment Insurance Commission hearing through Skinner, the Director of Clinical Engineering at Norton (and not an attorney). Nichols’ application for unemployment benefits was denied. Before the Court of Appeals the question was whether that determination was valid because of the employer’s representation by a non-attorney. Ultimately, the denial of benefit would be struck down because of Norton’s improper representation by a non-attorney.
There was a statute, KRS § 341.470(3), that permitted a partnership or corporate employer to appear through non-lawyers at unemployment hearings. In this ruling, the Court of Appeals would strike down that statute is unconstitutional, finding that:
The statutory provision allowing corporate or partnership employers to appear pro se through non-lawyer representatives in unemployment proceedings, violates the separation-of-powers provisions of the Kentucky Constitution. Since Norton was represented by a non-attorney in the administrative proceedings before the Commission, we must vacate the circuit court’s order with directions to remand this matter to the Commission for a new administrative hearing.
This decision is consistent with other rulings of the Kentucky Supreme Court with respect to representation by a non-attorney of a business organization. Applying that prior law, this panel of the Kentucky Court of Appeals wrote:
However, in Turner v. Kentucky Bar Association, 980 S.W.2d 560 (Ky. 1998), our Supreme Court held that a similar statute authorizing non-attorneys to represent and advise workers’ compensation claimants encroached on the exclusive power of the judiciary to establish rules relating to the practice of law. Id. at 562-63. See also KY. CONST. § 116. “Legal representation by a lay person before an adjudicatory tribunal, however informal, ... as such representation involves advocacy that would constitute the practice of law.” Turner, 980 S.W.2d at 564. Furthermore, the Court expressly declined to extend comity to the statute at issue in Turner. Id. at 563.
We emphasize that individual employers, such as a sole proprietorship, have the right to represent themselves in any administrative or legal proceeding. We also recognize that KRS 341.470(3) has a laudable goal of trying to simplify proceedings before the Commission. However, it is well-established that representation of a corporate or non-natural entity by a non-attorney implicates the unauthorized practice of law. See SCR 3.020. See also Statewide Environmental Services, Inc. v. Fifth Third Bank, 352 S.W.3d 927, 929 n.4 (Ky. App. 2011). Based on Turner, we are compelled to conclude that this restriction also applies to proceedings before administrative agencies. Therefore, to the extent that KRS 341.470(3) provides otherwise, the statute violates the separation-of-powers provisions of the Kentucky Constitution.
Wednesday, May 8, 2019
Ninth Circuit Court of Appeals Addresses Distinction Between Traditional and Business Trusts for Purposes of Diversity Jurisdiction
Ninth Circuit Court of Appeals Addresses Distinction Between Traditional and Business Trusts for Purposes of Diversity Jurisdiction
In a decision rendered earlier this month by the Ninth Circuit Court of Appeals, it addressed whether a particular trust would be treated as a traditional trust or a business trust for purposes of diversity jurisdiction. In this instance, having examined the documents that brought the trust into existence, it was determined that it would be treated as a traditional trust. Demarest v. HSBC Bank USA, N.A., ___ F.3d___, No. 17-56432, 2019 WL 1510430 (9th Cir. April 8, 2019).
Demarest brought this action in state court challenging the foreclosure of her property. HSBC, as the trustee of the deed of trust holding as assignee the mortgage, along with other defendants, removed the action to federal court, where they were granted summary judgment. In this appeal, Demarest sought a determination that the removal of the action to federal court was deficient. She would lose that argument.
While the law in this area has noteworthy exceptions, the generally accepted rule is that, with respect to a traditional trust, its citizenship, for purposes of determining whether or not there exists federal diversity jurisdiction (28 U.S.C. § 1332) will be that of the trustees (i.e., the citizenship of the beneficiaries as beneficiaries will not be attributed to the trust). In contrast, a “business trust,” a category that includes a variety of business organizations that, while utilizing “trust” in their respective names, do not share the elements of a traditional trust, will be assessed like any other unincorporated organization and the citizenship of all of the members (i.e., the trust’s beneficiaries) will be attributed to the trust. In this instance the plaintiff was alleging that, as HSBC had not demonstrated that none of the beneficiaries of the trust were California citizens, the removal of the action failed.
The plaintiff’s position was based upon the US Supreme Court's decision in Americold, wherein it clarified the law with respect to traditional trust versus unincorporated business organizations; HERE IS A LINK to my review of the Americold decision. Also HERE IS A LINK to my review of two subsequent decisions applying the holding in Americold. The plaintiffs reliance on Americold was rejected on the basis that the trust here at issue for which HSBC served as the trustee was a traditional common law trust and not a business trust as contemplated by the Americold ruling. As observed by the court:
Among other things, the Agreement established the Trust, enumerated its assets, and appointed HSBC as trustee, and it described the Trust as a common-law trust governed by New York law. Id.
In addition, the trust afforded the trustee, in that capacity, the power to institute a “suit or proceeding in its own name as Trustee.” Id. *6. Based upon these characteristics, it was determined that the trust at issue is a common-law trust subject to the rule of Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980), under which only the citizenship of the trustees, and not the citizenship of the beneficiaries, would apply in determining citizenship for purposes of diversity jurisdiction.
Tuesday, May 7, 2019
Swearing In the Newest Members of the Papal Swiss Guard
Yesterday, on the anniversary of the Sack of Rome in 1527 by troops of Charles V, Holy Roman Emperor, twenty-three new members of the Papal Swiss Guard were sworn into service.
Since the late 15th Century Italy (or at least the region we today identify as Italy – the notion of the region as a nation was long in the future) had been repeatedly invaded by forces from Northern Europe, each seeking to claim dominion over one area or another. Rival claimants to the crown of Naples caused as much trouble as did anything, but economic rivalry between for example Genoa and Venice did nothing to calm the waters. Pope Alexander VI gave command of the papal army to his son/nephew (which is a matter of dispute) Cesare in order to bring some order, and Pope Julius II would actually don armor and lead his army into battle, again in an effort to bring some stability to the situation. While Erasmus would condemn Julius for doing so, he did ignore the fact that the targeted cities surrendered to him.
But back to the Sack of Rome. Charles’ forces were at this point battling the League of Cognac, it being comprised of France, Milan, Venice, Florence and the Papal States. Keeping track of the various Leagues through the Italian Wars is a troubling task; the League of Cambrai was initially formed against Venice by the Papacy, France, Spain and the Holy Roman Empire. Later the initial members would be allied against France with Venice as an ally. In the next permutation Venice and France would be against the Papacy, Spain and the Holy Roman Empire. After a significant victory over the French army Charles’ troops were restive in that they had not been paid – most were mercenary. Pillaging Rome would be a way of paying the troops. The city was not well defended, although its formidable walls did need to be and were breached. Their commander having fallen in the course of the attack, discipline immediately broke down among the troops, and a sack of over three days began.
The Pontifical Swiss Guard, created only in 1506 under Pope Julius II, rose to the occasion. Of its then number of 189, 147 would fall defending Pope Clement VII, affording him time to take refuge in the Castel Sant’Angelo (Hadrian’s Mausoleum). In recognition of this event, new members of the Pontifical Swiss Guard are sworn in on May 6.
There was in 2013 an event unique to the Guard, namely the recognition of a Pope’s retirement. Benedict XVI left the Vatican as Pope, flying to the Castle Gandolfo. The Swiss Guard accompanied him to the castle and there stood guard. When the moment his resignation became effective, and Benedict became not Pope but Pope Emeritus, the Guards left their station at the castle and returned to Rome. While the Vatican has its security forces, and they no doubt continued to provide protection for Benedict, the Swiss Guard serve the Pope.
Monday, May 6, 2019
You Cannot Sue Somebody For Not Doing What They Never Agreed To Do
In a recent decision from the Delaware Court of Chancery, the court considered and rejected a variety of claims brought by a member of an LLC. One of those claims was that the managers of the LLC never sent to the plaintiff certain company books and records. The problem with this aspect of the suit was that the manager never undertook that responsibility. Ross v. Institutional Longevity Assets LLC, Civ. Act. No. 2017-0186-TMR, 2019 WL 960212 (Del. Ch. Feb. 26, 2019).
The plaintiff, Ross, brought suit against a number of parties who were members in Institutional Pooled Benefits LLC (“IPB”). It is important that at this juncture in the litigation IPB was no longer a defendant. Rather, as matters were here proceeding, Ross asserted that members Institutional Longevity Assets, LLC (“ILA”) and MRB Pooled Benefits, LLC (“MRB”), as well as certain of their individual constituents, violated certain duties arising out of the operating agreement.
Ross brought a claim couched as breach of contract for failure to send to him certain financial statements. The problem with this complaint was that none of the defendants had undertaken the obligation to provide to Ross those financial statements. Rather, as the Chancery Court would note, “The terms of the Operating Agreement unambiguously refer to IPB as the responsible party, not the Defendants.” 2019 WL 960212, *4.
On that basis, the claim was dismissed as a matter of law.
Wednesday, May 1, 2019
More on Relationships that are Not Fiduciary
In a recent decision from a federal district court in Iowa, it held that certain relationships are not fiduciary in nature. Meardon v. Register, 3:18-cv-00042, 2018 WL 7858345 (S.D. Iowa Dec. 18, 2018).
Responding to the suggestion that a fiduciary relationship arose out of a long-term business relationship gave rise to a fiduciary duty, the court wrote “Business relationships alone are not fiduciary relationships; nor are friendships.” Id, *7.
Tuesday, April 30, 2019
IRS Further Clarifies That Tax “Partners” Are Self-Employed and Not Employees
In ECC 201916004 (April 19, 2019), clarifying certain proposed regulations dealing with Certified Professional Employer Organizations (proposed Treas. Reg. § 301.7705-1), the Service again made the point that a person who is a member in an LLC taxed under subchapter K and is therefore a “partner” under the tax code may not as well be an employee of the entity (barring extraordinary facts as identified in an example therein).
Monday, April 29, 2019
Kentucky Supreme Court Declares That Lawyer Ethical Rules Constitute Public Policy
In the decision rendered the week before last,, the Kentucky Supreme Court held that the ethical rules of binding attorneys, to the extent they benefit the public generally, constitute public policy for purposes of employment. To that end, any agreement that would violate that public policy would be unenforceable against attorneys, but more importantly it would be unethical to either on-site to enter into that agreement. Greissman v. Rawlings and Associates, PLLC, ___ S.W.3d ___, 2019 WL 1747057, 2017-SC-000518-DG (Ky. April 18, 2019).
This dispute arose out of Greissman’s employment with Rawlings and Associates PLLC, a law firm. In 2011, Greissman, an attorney, was presented with an agreement pursuant to which Greissman would agree, for a period of three years after the termination of her employment, “not to solicit, contract, interfere with, or attempt to divert any of Rawlings & Associates’ customers or potential customers after ceasing employment with Rawlings & Associates.” - this is the summary of the provision provided by the Supreme Court; the opinion as well recited the provision in full. The provision as well contained a “savings clause,” limiting its application “Except to the extent necessary to comply with the rules of professional responsibility applicable to attorneys.”
Rule 5.6 of the Kentucky Supreme Court, governing attorneys licensed in Kentucky, provides that attorneys may not enter into any agreement that restricts the right of an attorney to practice after termination of a partnership or similar relationship (there is a carve-out for retirement benefits) or an agreement restricting the lawyer’s right to practice. Greissman, being of the view that the contract that the tendered agreement violated Rule 5.6, refused to sign it. In turn, Rawlings terminated her employment. Greissman then brought suit, alleging that her termination was improper in that it was premised upon her refusal to violate Kentucky public policy as set forth in Supreme Court Rule 5.6.
Kentucky law is generally that all employment is at-will (absent a contract to the contrary), but even when it is at-will an employee may not be terminated for refusing to violate an express constitutional or statutory provision.
The trial court found in favor of Rawlings on the basis that the Savings Clause of the agreement precluded violation of Rule 5.6. On that basis, summary judgment was granted to Rawlings. At the Court of Appeals, the decision of the trial court was upheld, but it is well held that Rule 5.6 not provide public policy in it is not either a statute or part of the Kentucky Constitution. Previously I reviewed that decision of the Court of Appeals; HERE IS A LINK to that review. There then followed this appeal to the Kentucky Supreme Court.
The Supreme Court rejected the determination by the Court of Appeals below that the ethical rules binding attorneys, to the extent “designed to serve the interests of the public at large, rather than the sole interest of the profession”, do not constitute public policy. 2019 WL 1747057, *4. This determination is based upon the fact the legal profession is exclusively regulated by the Supreme Court. Therefore, “For purposes of wrongful termination actions, we believe that an obligatory Rule of Professional Conduct for attorneys carries equal public policy weight as any public policy set forth in our Constitution or in a statute enacted by the General Assembly.” Id.
On that basis, all else being equal, if a firm terminated an employee for refusing to sign an agreement that would violate Rule 5.6, there would arise the basis of a legitimate wrongful termination claim.
However, the Court would go on to determine that Greissman’s claim ultimately failed. That determination was based upon the Savings Clause language, the Court holding that it effectively limited the application of the nonsolicitation agreement to matters not contemplated by Rule 5.6, to wit:
On its face, the savings clause applies only to restrict Greissman’s ability to solicit non-legal business; it exempts the solicitation of legal work from coverage under the non-solicitation clause, expressly noting that the signor does not agree to those terms to the “ accent necessary to comply with the rules of professional responsibility applicable to attorneys.” Unambiguously, the signor agrees not to solicit Rawlings’ non-legal business; the savings clause does not apply to the solicitation of legal work since that would violate the Rules of Professional Conduct. Indeed, the savings clause expressly recognizes that the Rules of Professional Conduct govern if any conflict exists between them in the agreement. Since the plain wording of the savings clause excludes any interpretation of the agreement that conflicts with the Rules of Professional Conduct, the agreement did not violate SCR 3.130, Rule 5.6. Id. (citation omitted).
In closing, the Court noted that Greissman could have sought direction from the Ethics Hotline of the Kentucky Bar Association, which would have protected her from any potential disciplinary action had she signed the agreement.