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Dwyer v. Jung

Decided: March 19, 1975.

EDMOND J. DWYER AND ALBERT C. LISBONA, PLAINTIFFS,
v.
FRED W. JUNG, JR., JUNG AND HOWARD, A PARTNERSHIP, DEFENDANTS



Kimmelman, J.s.c.

Kimmelman

[133 NJSuper Page 344] 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 another'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, co-operate 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 provision:

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 (1970); Whitmyer Bros. Inc. v. Doyle, 58 N.J. 25, 32 (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 ...


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