Law practices close for any number of reasons. Death, disability, retirement, disbarment, a move out-of-state, or a career change are all common reasons why attorneys leave the practice. While the specific steps that need to be taken can vary significantly depending upon the reasons driving the closure, this article seeks to provide some general guidance on the main issues that will arise. Be aware, however, that jurisdictional rules differ and a review of your local rules, ethics opinions, or perhaps a call to your local bar counsel would be well advised early on.
At the outset understand that in many instances the process of properly closing a law practice can easily take six to twelve months. The obligations to protect client confidences as well as the interests of the client make closing a law practice more difficult than closing other types of businesses.
The first step is to determine what files can be finalized prior to closing and then doing so. The second step is to write a letter to all clients with active matters (some jurisdictions require a letter to past clients as well) advising them of the upcoming change. Typically these letters also inform the client of any time limitations or important time frames, provide instructions as to how and where they may obtain a copy of their file, and advise them to find a new attorney as quickly as possible. An offer to assist the clients in finding a new attorney by providing a few names or the phone number to a local lawyer referral service would be appropriate as well. Finally, don’t overlook the importance of setting forth your file retention policy and providing post closure contact information in the event a client needs a copy of their file at some later point in time. Where appropriate these letters are usually followed up with a full accounting of client funds in the trust account and a statement of fees owed by the client.
As clients respond to the letters, remember to retain your original file and return to the client any original documents and/or client property such as original wills, deeds, stock certificates, signed contracts, promissory notes, etc. Clients get copies of your file; you get copies of their original documents. Don’t forget to document the disposition of the files in case questions come up post closure. Have clients sign an authorization to release their file to their new attorney or sign an acknowledgement that they picked up a copy of their file.
On matters that have pending court dates, depositions, or hearings, have a conversation with the client to discuss how to proceed. A request to reset a hearing or a request for an extension or continuance may be called for and, once received, confirmation of granted requests should be sent to opposing counsel and your client. For cases before a court or administrative body, obtain client permission to submit a motion and order to withdraw as the attorney of record and at an appropriate time verify that all motions to withdraw have been granted. If the client has obtained a new attorney, make certain that a Substitution of Counsel is filed.
If, over the course of your career, you failed to review and destroy old files that no longer needed to be retained, now is the time to begin. The costs to continue to maintain closed files can be significant and you have an ethical obligation to take care of this. Don’t burden a spouse by leaving this for them to deal with should your spouse outlive you.
When you originally closed the file, you should have separated all the original documents that belong to the client, and returned them to the client. If you did not, do it now. In fact, a review of every file prior to destruction is a good idea as sometimes original documents were overlooked when the file was closed.
Remember that in most jurisdictions the file belongs to the client. This means that you must follow the client’s instructions on the disposition of the file. If you did not obtain the client’s instructions when you closed the file, seek those instructions before you destroy the file. You can simply send a letter to the client’s last known address. Once you learn your client’s wishes, carry them out. If you are going to destroy a file, make sure you follow through with the notion of destruction. “Destruction” does not mean leaving a file in a dumpster behind the office. You should incinerate or shred the file. You cannot compromise your client’s confidences, even in file destruction. Again, document your actions. Track the client name, file matter, method of disposition (destroyed, returned) and date of disposition.
Turning to one specific business concern, contact your malpractice insurance carrier in advance of your closing. The purpose is to begin the process of obtaining an extended reporting period endorsement (ERE, more commonly referred to as a “tail policy”). An ERE is not a new policy, however. This endorsement simply extends the time in which a claim may be reported to the insurance carrier. In short, the purchased endorsement (tail) provides an attorney the right to report claims to the insurer after a policy has expired or been cancelled. Again, it is important to note that under most ERE provisions the purchase of the endorsement is not one of additional coverage or of a separate and distinct policy. This means no coverage will be available for a wrongful act that takes place during the time the ERE is in effect. So, if a claim arises several years post retirement out of work done in retirement as a favor for a friend, there would be no coverage for that claim under the ERE. That’s worth remembering.