DENVER — A Denver law firm successfully sued a former employee for breach of contract, highlighting the complexities of employment agreements within legal practices. These contracts often navigate the tricky balance between business interests and professional ethics, as illustrated in the recent legal tussle between Franklin D. Azar and Associates, PC, and attorney Ivy Ngo.
Ngo, who led the firm’s class-actions department, planned to leave the firm and take her entire team with her to a new employer. She reached out to at least two other firms with her proposal while still employed at Azar, actions that led to her termination for alleged breach of her employment contract. This contract included clauses preventing the disclosure of proprietary information and soliciting employees to leave the firm.
In response, Ngo filed a counterclaim, naming Franklin D. Azar himself as an additional defendant. Central to her defense was the argument that the employment contract was restrictive of her future legal practice, which she claimed violated Section 5.6(a) of the Rules of Professional Conduct. This rule asserts that law firms cannot prevent their lawyers from practicing law after leaving the firm, ensuring clients can continue to be represented by their chosen attorneys.
The case escalated to Denver District Court where Judge David Goldberg found that parts of the Azar firm’s breach of contract claims were valid and allowed the case to proceed to trial. The court ultimately sided with the Azar firm, awarding them $4,000 in damages, while Ngo’s counterclaim did not result in any financial award.
The dispute didn’t end there. The Azar firm pursued further compensation for legal fees, citing a fee-shifting provision in Ngo’s contract. The firm requested over $2 million in fees and costs, which the court partly granted, awarding $1,072,991 in fees and $106,660.70 in costs to Azar.
Ngo appealed the decision, challenging the enforceability of her employment contract under Section 5.6(a). The Colorado Court of Appeals delved into the issue and issued a 28-page opinion on Sept. 5, affirming the lower court’s decision. The appellate court noted that the employment contract did not infringe upon Ngo’s right to practice law post-employment, and upheld the substantial award of attorneys’ fees, recognizing the Azar firm as the prevailing party.
The appellate court has sent the case back to trial court to assess additional attorney fees and costs associated with the appeal, which will further determine financial responsibilities for Azar and Ngo.
This case serves as a potent reminder of the careful drafting required in legal employment contracts and the significant consequences of contractual disputes. Legal firms must balance enforcement of their business interests with compliance to professional conduct standards, ensuring that their contracts do not unfairly restrict the future career opportunities of their practitioners.
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