2024 COA 99
Colo. Ct. App.2024Background
- Ivy Ngo, head of the class action department at Franklin D. Azar & Associates (the Azar firm), signed agreements containing nondisclosure, client nonsolicitation, and employee nonsolicitation provisions upon hiring.
- Ngo prepared to leave the Azar firm, attempting to move her department to another firm by contacting potential new employers and sharing a presentation; she was terminated upon discovery.
- The Azar firm sued Ngo for breach of contract and breach of fiduciary duty; Ngo counterclaimed for defamation and sought declaratory judgment that some restrictive covenants were unenforceable under Colorado legal ethics rules.
- The trial court held the client nonsolicitation provision unenforceable under Colo. RPC 5.6(a), but allowed the employee nonsolicitation provision (as applied during employment) and the nondisclosure provision.
- A jury found Ngo had breached both agreements and awarded the Azar firm $4,000 in damages; defamation claims failed.
- The trial court awarded the Azar firm over $1 million in attorney fees and more than $100,000 in costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Employee nonsolicitation provision's enforceability under Rule 5.6(a) | Azar: Provision prevents disruption, does not restrict post-termination practice | Ngo: Provision unlawfully restricts lawyer’s right to practice after leaving firm | Provision valid as applied to pre-departure conduct; does not violate Rule 5.6(a) |
| Need for jury instruction on employee preparation privilege | Azar: Jet Courier privilege inapplicable in contract claims | Ngo: Privilege permits arranging future competition while still employed | Privilege applies only to tort, not to contractual claims; No instruction required |
| Application of litigation privilege to letters sent to law firms | Azar: Letters relate to litigation and are privileged | Ngo: Recipients not sufficiently connected to litigation; assertion of defamation | Privilege applies; letters related to litigation objectives |
| Attorney fee and cost awards violating Rule 5.6(a) | Azar: Fees based on breach of contract, not penalties for client movement | Ngo: Fee provisions are impermissible financial disincentives for leaving firm | Issue not preserved for appeal; not reviewed |
Key Cases Cited
- Johnson Fam. L., P.C. v. Bursek, 2024 CO 1 (interpreting Colorado Rule of Professional Conduct 5.6(a); focus on client choice and attorney autonomy)
- Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486 (Colo. 1989) (employee’s duty of loyalty and limits of pre-departure solicitation)
- Dowd & Dowd, Ltd. v. Gleason, 816 N.E.2d 754 (Ill. App. Ct. 2004) (breach of fiduciary duty and duty of loyalty in law firm context)
- Killmer, Lane & Newman, LLP v. BKP, Inc., 2023 CO 47 (litigation privilege scope under Colorado law)