Donnelly v. Brown, Winick, Graves, Gross, Baskerville, Schoenebaum, & Walker, P.L.C.

599 N.W.2d 677, 1999 Iowa Sup. LEXIS 207, 1999 WL 700236
CourtSupreme Court of Iowa
DecidedSeptember 9, 1999
Docket97-1495
StatusPublished
Cited by8 cases

This text of 599 N.W.2d 677 (Donnelly v. Brown, Winick, Graves, Gross, Baskerville, Schoenebaum, & Walker, P.L.C.) is published on Counsel Stack Legal Research, covering Supreme Court of Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Donnelly v. Brown, Winick, Graves, Gross, Baskerville, Schoenebaum, & Walker, P.L.C., 599 N.W.2d 677, 1999 Iowa Sup. LEXIS 207, 1999 WL 700236 (iowa 1999).

Opinions

LARSON, Justice.

The plaintiff, John V. Donnelly, brought this declaratory judgment action against his former law firm to establish his right to retirement benefits under a membership agreement. The district court granted summary judgment in favor of the defendant firm, and the plaintiff appealed. We affirm.

I. Facts.

Donnelly has been an attorney in Des Moines since 1965, when he began to work for the predecessor to the defendant firm of Brown, Winick, Graves, Gross, Basker-ville, Schoenebaum and Walker, P.L.C. (Brown, Winick). He became a partner in 1968, and when the partnership became a professional limited liability company in 1993, he became a shareholder. In 1994 Donnelly left Brown, Winick and went to another Des Moines firm. The present dispute arises over a 1993 “operating agreement” — specifically a provision for benefits to be paid to a retiring member. Paragraph 8 provides:

Retirement of Member by Reason of Death or Legal or Physical Disability or Retirement from Practice of Law. In the event of the retirement of a general member by reason of death or legal or physical disability or retirement from practice of law either after age 60 with at least 10 years service to the firm, or after at least 25 years of service with the [679]*679firm and its predecessors, regardless of attained age, the following provisions shall apply:
a. Payment of Capital Account. [This paragraph provides for payment of a withdrawing member’s capital account as shown in the firm’s books. The firm has paid Donnelly’s share of the account and this issue is not involved on this appeal.]
b. Contimiation Payments. In addition to the foregoing, the withdrawing member or, in the event of his (her) death before payments are complete, his (her) surviving spouse, or, if there is no surviving spouse or if the surviving spouse later dies, his (her) children under the age of 21 years, shall receive from the firm the amount set forth for each member on Exhibit “A” attached hereto.... The amount set forth on Exhibit “A” shall be paid without interest in 120 equal monthly installments, commencing on the 15th day of the month following the member’s death or retirement, as the case may be, provided, however, that in the event of the death of both the withdrawing member and his (her) spouse and when there are no children under the age of 21 of the member before the payments are completed, the payments shall cease even though the full sum shall not have been paid.

Paragraph 8(e) is the focus of this appeal. It provides:

For purposes of this paragraph, “retirement from practice of law” shall mean that a member elects to terminate his (her) private practice of law within the State of Iowa. For purposes of this paragraph, “retirement from practice of law after at least 25 years of service with the firm and its predecessors” shall be applicable when a member has had 25 years or more service with Brown, Win-ick, Graves, Donnelly, Baskerville, and Schoenebaum, P.L.C., and/or any of the partnerships which preceded this professional limited liability company. The date of each member’s commencement of service is set forth on Exhibit “B”.

(Emphasis added.) The issue on this appeal is whether the “continuation payments” under the firm’s operating agreement qualify as “retirement benefits” under DR 2408(A).

II. Summary Judgment Review.

We review a summary judgment for correction of errors at law. Iowa R.App. P. 4; Iowa Tel. Ass’n v. City of Hawarden, 589 N.W.2d 245, 250 (Iowa 1999). Summary judgment is appropriate when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 237(c). The material facts are not disputed in this case, and the parties agree that our role is simply to decide whether the district court correctly applied the law.

III. The “Retirement” Beneñts.

Donnelly had been with Brown, Winick for over twenty-five years, and under the membership agreement, that would be sufficient length of service to qualify him for retirement benefits. Brown, Winick rejected his request for them, however, because he was not retired under paragraph 8(e); he had not “terminate^] his ... private practice of law within the State of 'Iowa.” Donnelly contends such a limitation is a covenant not to compete and thus unenforceable under DR 2408(A) of our code of professional conduct. Brown, Win-ick counters that the rule’s prohibition does not apply when the restriction on future practice is conditioned on receipt of retirement benefits. The rule, with its exception, states:

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.

[680]*680Iowa Code of Profl Responsibility DR 2-108(A) (emphasis added). Donnelly rejoins that the exception to the rule requires full retirement before a withdrawing lawyer may be restricted in his future practice. But Brown, Winick’s “retirement” provisions do not require full retirement, according to him, because a withdrawing lawyer may enter private practice in another state or enter a nonprivate legal position in Iowa and still draw retirement benefits. Thus, the Brown, Winick plan is not a true retirement plan, and it does not qualify for the exception to DR 2-108(A), Donnelly argues. See Anderson v. Aspelmeier, Fisch, Power, Warner & Engberg, 461 N.W.2d 598, 601-02 (Iowa 1990) (firm’s refusal to pay withdrawing partner’s equity because of his competition with former firm held improper under DR 2-108(A)).

We agree with Donnelly that the restriction on Donnelly’s future practice is a covenant not to compete within the meaning of DR 2-108(A). But we do not agree with him that the retirement exception to the rule applies only when a firm member fully retires. First, the wording of the exception does not lend itself to that interpretation; it allows a restriction on future practice as a condition of payment of retirement benefits — not on the lawyer’s full retirement. Second, if the exception applied only when a lawyer completely retires, it would be surplusage because, in the case of a fully retired lawyer, a covenant not to compete would obviously not be necessary. We believe the exception under DR 2-108(A) applies when the parties have agreed, as in this case, to provide retirement benefits under conditions less than full retirement.

The exception under DR 2-108(A) applies only if the restriction on future practice is imposed as a condition for receipt of retirement benefits; it does not apply if economic sanctions are imposed under other circumstances. See, e.g., Anderson, 461 N.W.2d at 601 (withholding of partner’s equity in firm because of competition held impermissible); Cohen v. Lord, Day & Lord, 75 N.Y.2d 95, 551 N.Y.S.2d 157, 550 N.E.2d 410 (1989). In Cohen

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Bluebook (online)
599 N.W.2d 677, 1999 Iowa Sup. LEXIS 207, 1999 WL 700236, Counsel Stack Legal Research, https://law.counselstack.com/opinion/donnelly-v-brown-winick-graves-gross-baskerville-schoenebaum-iowa-1999.