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Borteck v. Riker

April 05, 2004

ROBERT D. BORTECK, ESQ., PLAINTIFF-RESPONDENT,
v.
RIKER, DANZIG, SCHERER, HYLAND & PERRETTI LLP, DEFENDANT-APPELLANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 362 N.J. Super. 284 (2003)

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

The issue before the Court is whether the retirement provisions of a law firm's partnership agreement violate Rule of Professional Conduct (RPC) 5.6.

Robert Borteck is an attorney-at-law of New Jersey. From April 1989 to September 2000, he was a capital partner at Riker, Danzig, Scherer, Hyland & Perretti, LLP (Riker). At the age of fifty-three, Borteck withdrew from Riker to join another law firm with offices in New Jersey. At the time of his departure, Borteck was subject to a partnership agreement with Riker that set forth a withdrawing or retiring partner's entitlement to certain monies as well as a notice provision governing the departure.

Paragraph 17(A) of the agreement provides that a capital partner is entitled to a share of the firm's "net worth" and is to be paid the value of that share over the first twelve months following his or her withdrawal. There is no dispute that Riker properly paid Borteck the full share of the firm's net worth pursuant to this provision.

Paragraph 17 (B) contains the eligibility criteria for retirement benefits. In pertinent part, it provides that retirement shall mean permanent retirement from the practice of law, whether or not due to disability, subject to certain qualifications: 1) that the capital partner is at least fifty-five years of age; 2) continuation with the firm in an of counsel status after retirement is not inconsistent with eligibility for retirement benefits; and 3) in recognizing the importance of public service, a partner is deemed to have retired from the practice of law even if he or she is appointed to the bench, enters government service, or assumes a position in academia. Entitlement to continuation of retirement benefits is conditioned on the former partner remaining in retirement status.

Paragraph 17 (C) of the agreement concerns early retirement benefits and provides that capital partner that has been with the firm for a period of at least ten consecutive years, and who, throughout the subsequent five year early-retirement-benefit-payment period following retirement from the firm, and continuously remains in retirement status, shall receive early-retirement-benefit payments equal to a percentage of the partner's average annual earnings for the last five full calendar years immediately preceding retirement as a capital partner of the firm. This paragraph also contains a schedule for determining the applicable early retirement percentage, which ranges from zero to onehundred-and-fifty percent, depending on the retiree's years as a partner with the firm or predecessor firms. Pursuant to that schedule, a withdrawing partner with Borteck's years of service would be entitled to seventy-five percent of his average annual earnings in the five years preceding retirement. Those payments would be paid in 96 equal semimonthly installments, the first installment being due thirteen months after retirement from the firm. Pursuant to the above provisions, Borteck claims to be entitled to a total of $275,090 in addition to the amount already received as payment for his share of Riker's net worth.

The agreement's other disputed provision is Paragraph 14, which provides that a partner is to give no less than three months' written notice to the firm's management committee of his or her intention to withdraw or retire. Borteck withdrew with little or no formal notice to the firm and began soliciting many of his former clients. After Riker refused to pay the requested retirement benefits on the ground that Borteck had not "retired" as defined in the agreement, Borteck filed a complaint against Riker, claiming that Riker failed to pay him $275,090 allegedly due under Paragraph 17 (C) of the agreement. Riker answered, asserting certain counterclaims and damages that Borteck has denied and which are not the subject of this appeal.

The trial court granted Borteck's motion for summary judgment, ordering specific performance on the early retirement provisions and awarding Borteck the amount requested. On appeal, the Appellate Division affirmed, concluding that if retirement benefits are not paid to Borteck in the amount asserted, then the firm's agreement would have anti-competition effects prohibited by Rule of Professional Conduct (RPC) 5.6.

The Supreme Court granted certification.

HELD: The Riker partnership agreement sufficiently operates as a retirement plan within the contemplation of RPC 5.6 and, as such, it does not offend the public policies underlying the rule. Therefore, the agreement's eligibility requirements, including the age threshold and conditions concerning the private practice of law, are enforceable against Borteck.

1. RPC 5.6 states that a lawyer shall not participate in offering or making a partnership or employment agreement that restricts the rights of a lawyer to practice after ending the lawyer/law firm relationship, except an agreement concerning retirement benefits. RPC 5.6 does not contain a definition of "retirement." Despite that lack of specificity, the rule's plain language treats a retirement agreement as an exception to the prohibition against restricting an attorney's right to practice after that attorney terminates a relationship with his or her firm. The retirement exception acts as a safe harbor, permitting restrictions on the practice of law not otherwise tolerated under the rule. (pp. 7-9)

2. Although Jacob and Apfel are helpful in providing a conceptual framework, their facts so differ from those here that they do not control the Court's analysis. In Jacob, the Court did not confront retirement provisions like the one at issue, nor did it address the safe-harbor provision of RPC 5.6. Similarly, the retirement agreement in Apfel contained no minimum age requirement and defined retirement as occurring when the withdrawing partner ceased practicing only in three states in which the former firm had maintained offices. (pp. 8-13)

3. The court reaches its conclusion in part based on the uncontested certification of Riker's proffered actuarial expert and employee benefits consultant. That certification provides that Riker's agreement includes all the normal indicia of a legitimate retirement plan. The Court is further persuaded by the fact that Riker's agreement resembles in one or more respects agreements that have been upheld by courts in other jurisdictions with safe-harbor language similar to that found in RPC 5.6. Three criteria espoused by noted commentator, Robert Hillman, are useful for defining a retirement plan in this setting. The first and most important factor is the existence of minimum age and service requirements. The second is the existence of provisions dealing independently with withdrawal for purposes of retirement and withdrawal for other reasons. The final Hillman factor focuses on the time period over which the benefits are to be paid. In reviewing those factors, the Court concludes that Riker's agreement constitutes a retirement plan. (pp. 13- 20)

4. Riker's agreement facially is consistent with the safe-harbor provision of RPC 5.6. Absent greater specificity in the rule itself, it would be unfair to hold Riker to requirements or standards not found in the rule's current text. The Professional Responsibility Rules Committee (PRRC) is directed to review the safe-harbor language of RPC 5.6 to determine whether the rule should define "retirement" and, if so, to propose such a definition or related criteria. (pp. 20-21)

5. The agreement's notice-departure language did not operate as an encumbrance in this case nor did it prevent Borteck from receiving his full share of Riker's net worth. The notice question, therefore, is essentially moot. Nonetheless, the issue is worthy of review. Thus, the PRRC should also consider whether an expressed rule or more explicit guidance is needed concerning an agreement's notice-departure provisions. In the Court's view, such provisions are not unenforceable per se. (pp. 21-23)

Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the trial court for resolution of Riker's counterclaims and any related issue not addressed in this opinion. The Court does not retain jurisdiction.

CHIEF JUSTICE PORITZ and JUSTICES LONG, ZAZZALI, ALBIN and WALLACE join in JUSTICE VERNIERO'S opinion. JUSTICE LaVECCHIA did not participate.

The opinion of the court was delivered by: Justice Verniero

Argued February 18, 2004

We are called on to review the retirement provisions of a law firm's partnership agreement. The Appellate Division invalidated the provisions based on its view of Rule of Professional Conduct (RPC) 5.6 and existing case law. Given the rule's current language, we disagree and reverse. Further, we direct the Professional Responsibility Rules Committee to consider whether RPC 5.6 requires any revision to provide clearer guidance to the bar concerning the elements necessary to establish a bona fide retirement plan under the rule.

I.

Plaintiff Robert Borteck is an attorney-at-law of New Jersey. From April 1989 to September 2000, he was a capital partner at defendant Riker, Danzig, Scherer, Hyland, & Perretti, LLP. At fifty-three years of age, plaintiff withdrew from defendant and joined another law firm with offices in this State. At the time of his departure, plaintiff was a party to an agreement with defendant that is the center of this dispute. The agreement sets forth a withdrawing or retiring partner's entitlement to certain monies as well as a notice provision governing the departure itself.

Paragraph 17(A) of the agreement provides that a capital partner is entitled to a share of the firm's "net worth" and shall be paid the value of that share over the first twelve months following his or her withdrawal. The parties do not dispute that defendant properly has paid plaintiff ...


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