General Practice, Solo & Small Firm DivisionMagazine
Volume 17, Number 1
THE TRANSITIONING LAWYER How to Meet Your Ethical Obligations
BY MARCIA L. PROCTOR
During the course of a legal career, a lawyer may leave practice, either temporarily or permanently. A lawyer may become a judge or seek other public office that prohibits a separate law practice, take a position as inside counsel, or choose to work in the business sector as an alternative to law practice.
A lawyer may relocate for family reasons or professional advancement, or professional discipline or malpractice may put an end to a practice. Ultimately, a lawyer may retire, become disabled, or die. When a lawyer considers a reduced caseload, sale of a practice, retirement, or law practice succession after death, the selection of counsel to continue services to clients is crucial.
In a multilawyer firm, such sunset decisions are usually handled by law firm management, and the remaining firm members can be relied upon to carry on the practice obligations. Members of a law firm are presumed to share client confidences and secrets-they certainly share the benefits of the fees paid.
They are responsible under ethics rules and, in litigation, under court rules to handle client matters when the primary lawyer is unavailable. They may be responsible for payment of sanctions or malpractice judgments. ABA Model Rules of Professional Conduct 5.1 and 5.3 require that law firm partners make reasonable efforts to establish procedures for firm compliance with ethical obligations, including reasonably contemplated workload transitions.
In a solo practice, however, or in a practice having no lawyers in the same practice field as the transitioning lawyer, the burden of handling transition is frequently addressed alone. Solo practitioners often have no existing relationships with backup counsel.
A prudent lawyer will anticipate the variety of law practice transitions and preplan those aspects that can be controlled. The transitioning lawyer will owe duties to former and current clients, courts, opposing parties, family, and other firm personnel (for example, fiduciary duties to the firm, and employer duties to staff). Planning will vary depending upon the present circumstances of the lawyer and the type of transition, but there are common elements in all such plans. Agreements between sunsetting lawyers and backup counsel, therefore, need to account for special factors and should carefully outline the parameters of expectations.
ABA Model Rule of Professional Conduct 1.4(b) requires that clients be given sufficient information to enable them to make decisions about their legal representation. Their lawyer's continued availability is one such factor. Lawyers who change firms are required to give prompt notice to clients about counsel transition (ABA Formal Opinion 99-414). The disciplinary rules of most jurisdictions have some version of ABA Model Rule of Disciplinary Enforcement 26, which requires notice to clients in situations of discipline.
A. Recipients of Notice; Contents. Within ten days after the date of the court order imposing discipline or transfer to disability inactive status, a respondent disbarred, transferred to disability inactive status, placed on interim suspension, or suspended for more than six months shall notify or cause to be notified by registered or certified mail, return receipt requested, (1) all clients being represented in pending matters; (2) any co-counsel in pending matters; and (3) any opposing counsel in pending matters, or in the absence of opposing counsel, the adverse parties, of the order of the court and that the lawyer is therefore disqualified to act as lawyer after the effective date of the order. The notice to be given to the lawyers for an adverse party, or, in the absence of opposing counsel, the adverse parties, shall state the place of residence of the client of the respondent.
ABA Model Rule of Professional Conduct 1.17 requires notices to clients before the sale of a law practice. Ethics rules may require judicial candidates to advise current clients of the possibility that they will be unavailable to complete a particular representation, because a full-time judge cannot maintain a practice and furnish legal services to former clients after taking judicial office. ( See, e.g., In the Matter of Ryman, 394 Mich. 637 (1975); ABA Model Code of Judicial Conduct Canon 3.)
Court rules in most jurisdictions similarly require notice to the state licensing authority and to the tribunal where matters are pending. The transitioning lawyer has fiduciary duties to advise firm partners, if any, of the anticipated transition, and sole practitioners should advise lawyer and nonlawyer employees.
A lawyer contemplating a transition arrangement should incorporate notice to current clients. One way to handle client notice is to include in the engagement letter or fee agreement a statement such as the following:
In the event that I become incapacitated or otherwise unavailable to handle your representation matter to completion, please be advised that I have made arrangements with [backup lawyer] of [name of firm] law offices to complete the matter. If you have objections to [backup lawyer's] participation, or if [backup lawyer] is unable to handle the matter at this time, [backup lawyer] will arrange for other counsel to handle the matter. [Backup lawyer] will not receive any information about your representation until and unless (1) I become unable to proceed, (2) you consent to [backup lawyer's] representation, and (3) [backup lawyer] is able to handle the matter at such a time.
Withdrawals and Substitutions A lawyer contemplating a transition arrangement should consider ethics and court rules involving withdrawal from representation.
ABA Model Rule of Professional Conduct 1.16 governs withdrawal from representation. Withdrawal is mandatory in three circumstances: (1) where the representation will result in violation of the Rules of Professional Conduct or other law, (2) where the lawyer's physical or mental condition impairs the lawyer's ability to represent the client, or (3) where the lawyer is discharged. Transitions due to judicial office, bodily injury, medical condition, death, or change of licensing circumstances are within the mandatory withdrawal provisions.
ABA Model Rule of Professional Conduct 1.16(b) governs situations of permissive withdrawal:
Except as stated in paragraph (c), a lawyer may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interests of the client, or if: (1) the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent; (2) the client has used the lawyer's services to perpetrate a crime or fraud; (3) a client insists upon pursuing an objective that the lawyer considers repugnant or imprudent; (4) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled; (5) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or (6) other good cause for withdrawal exists.
Most voluntary transitions fall within the first category, where the withdrawal would not prejudice the client's interests. Read literally, the rule would not permit a lawyer to put personal reasons for transition before the interests of the client, if the withdrawal would have "material adverse effect" on the client's interests.
When a matter is before a tribunal, the lawyer must seek permission of the adjudicator to withdraw (ABA Model Rule of Professional Conduct 1.16(c)). In some jurisdictions a simple substitution of counsel may be acceptable, while in others a motion for withdrawal may be required.
A prudent transitioning lawyer will not make assumptions about how the transition will be accomplished; instead, the transition agreement should provide that successor counsel will take whatever steps necessary to fulfill the client's wishes concerning choice of counsel and to cooperate with the directions of any appropriate tribunal.
Confidences and Secrets
Ethics rules require lawyers to protect client confidences and secrets. A lawyer may not disclose confidences and secrets or use confidences and secrets to the benefit of a third party or for the lawyer's own interests, without the client's consent (ABA Model Rules of Professional Conduct 1.6, 1.8(b)). Agreements with backup counsel, therefore, may not unilaterally allow access to client information.
Within a law firm, partners and employees are bound by the lawyer's duty to protect confidences and secrets. But office sharers, surviving spouses, and even counsel for the personal representative of a deceased lawyer's estate would not normally be authorized to inventory or handle client files. Without this access, however, the receivables of the firm cannot be determined or collected, the client trust accounts cannot be closed, and the administration of justice is prejudiced because client matters are in limbo.
A simple way to obtain client consent to covering the representation in the event of the lawyer's unavailability would be to add a paragraph to the retainer letter, fee agreement, or firm advertising brochure that is regularly given to all clients. This notice need not be any more complicated than that required for record retention plans. An example might be: "In the event of my disability or death before the conclusion of this matter, [backup lawyer] will have access to your name, address, and representation file in order to notify you so you may obtain substitute counsel. By retaining me you agree to this disclosure, should it become necessary."
Closed client files must also be addressed. (Michigan Ethics Opinion RI-100: A lawyer retiring from the practice of law must ensure the proper disposition of representation files and other files of the law practice.) "Proper disposition" includes assisting the client to obtain competent legal representation for matters the lawyer cannot conclude before retirement, protecting confidences and secrets of clients, fulfilling the lawyer's fiduciary duties regarding safekeeping of client property, and satisfying the lawyer's record-keeping obligations.
If the transitioning lawyer is unable to attend to closed files, chooses not to do so, or believes questions may arise about the files, the transitioning lawyer should designate a lawyer to take custody of the closed files and handle them, pursuant to the law firm's record retention plan. The designee for closed files need not be the same lawyer who will be successor counsel on open files. If the law firm has no record retention plan, the designee's authority should explicitly include disposition of files.
Selection of Counsel
A client has a right to choice of counsel, and a lawyer may not unilaterally determine successor counsel without client consent. A transitioning lawyer has an obligation to act competently in the selection of backup counsel qualified to assume client representation and undertake the representation competently (ABA Model Rule of Professional Conduct 1.1; Michigan Ethics Opinion JI-118).
Failure to provide for the handling of client matters upon transition subjects the clients at a minimum to inconvenience, but it could also irreparably prejudice client interests, expose a decedent's estate to claims, and cast a shadow on the transitioning lawyer's professional reputation. A transitioning lawyer must ensure that client matters will be covered, especially if the transitioning lawyer is a sole practitioner without an obvious designee to handle these matters.
In the same way that an estate plan designates personal representatives, trustees, and guardians, a transition plan should designate lawyers who will stand in for the transitioning lawyer if the need arises. The arrangement should not be left to chance but should be discussed and negotiated with the backup lawyer.
Some lawyers who transition into retirement or public office will associate with at least one prospective backup lawyer for a period of time before making a final selection. These arrangements may take any number of forms, such as association on a particular case, employment (partner and associate), of counsel, sharing an office, or independent contractor. The label used to denote such relationships is not as important as meticulous compliance with the appropriate ethics rules.
The closer and more continuous the relationship between the transitioning lawyer and the backup lawyer becomes, the more likely the lawyers will be considered to be bound by each other's ethics duties and malpractice obligations. An arrangement whereby the backup lawyer is obligated to perform only after the transitioning lawyer dies, for example, will not trigger any shared ethics duties during the life of the transitioning lawyer. However, a relationship whereby the transitioning lawyer and the backup lawyer become immediately associated, such as an employment or of-counsel relationship, immediately triggers reciprocal ethics duties.
Lawyers may engage in virtually any working relationship they can conceive, as long as it meets the ethics criteria in their practice location.
By definition, trust account funds do not belong to the transitioning lawyer, but to clients or third persons (ABA Model Rule of Professional Conduct 1.15(a)). The ethics rule requires the lawyer to keep records of the trust account for at least five years; therefore, it may be possible to determine to whom the trust account monies belong without access to relevant client files. The law practice cannot be closed without fulfillment of the fiduciary obligations attendant to the trust account. Appropriate authority to access the trust account must therefore be granted to the transitioning lawyer's designee. The person responsible for resolving trust accounts need not be the same person selected to handle client matters, but the parties may need to work together to resolve all questions.
A lawyer should verify that the financial institution in which the trust account is placed will accept the form of authority granted. Note that lawyers who are not in the same firm may not be joint signators on a trust account, although a nonlawyer staff member of the firm may be a signator.
If the backup lawyer is to be compensated for services, the compensation should be specified in the transition agreement.
Ethics rules permit divisions of fees among lawyers who are not in the same firm, especially when the division is in proportion to the work performed by each (ABA Model Rule of Professional Conduct 1.5(e)). Each state requires that the client be advised about and not object to the division of fees. Some require that the consent be in writing.
If the transition plan contemplates that client files will be handled by of counsel or a current associate of the transitioning lawyer, the fee contract between the transitioning lawyer and the client will likely set any fees the client may subsequently owe to successor counsel. Associates and of counsel are considered part of the law firm of the transitioning lawyer and cannot change the client's fee agreement.
In the case of death or sale of the practice, the backup lawyer becomes successor counsel; fee agreements then are subject to rules governing those transactions (ABA Model Rule 1.17, Sale of a Law Practice). For pending cases, compensation may constitute "dividing the fee with someone who is not in the same firm," and, if so, must comport with the state equivalent of ABA Model Rule 1.5(e):
A division of fee between lawyers who are not in the same firm may be made only if: (1) the division is in proportion to the services performed by each lawyer or, by written agreement with the client, each lawyer assumes joint responsibility for the representation; (2) the client is advised of and does not object to the participation of all the lawyers involved; and (3) the total fee is reasonable.
The transition agreement with backup counsel may provide compensation on an hourly rate, fixed fee, salary basis, or a division based upon the amount of work performed. If the compensation arrangement exceeds the fees paid by the client under the original engagement contract, the excess would be owed from the transitioning lawyer's firm profits. A sample client notice on fees follows:
Client understands that [transitioning lawyer] has arranged for [backup lawyer] to cover client's matter, should [transitioning lawyer] be unavailable. In that eventuality, client consents to [backup lawyer's] representation and access to client confidences and secrets.
Client also agrees that if [backup lawyer] is called upon to handle any portion of the matter, [backup lawyer] will be paid by [transitioning lawyer] for the work performed at rates agreed upon between [transitioning lawyer] and [backup lawyer]. Under no circumstances will the fee charged to clients be increased because of participation of [backup lawyer] in the matter.
If the sole practitioner has not properly provided for transition, obvious consequences would include client complaints, delays, staff confusion, and misdirection. In turn, these circumstances might lead to grievances, breaches of duty, and malpractice problems.
In instances of death or disability, ABA Model Rule of Lawyer Disciplinary Enforcement 28 states: A. Inventory of Lawyer Files. If a respondent has been transferred to disability inactive status, or has disappeared or died, or has been suspended or disbarred and there is evidence that he or she has not complied with Rule 27, and no partner, executor or other responsible party capable of conducting the respondent's affairs is known to exist, the presiding judge in the judicial district in which the respondent maintained a practice, upon proper proof of the fact, shall appoint a lawyer or lawyers to inventory the files of the respondent, and to take such action as seems indicated to protect the interests of the respondent and his or her clients.
B. Protection for Records Subject to Inventory. Any lawyer so appointed shall not be permitted to disclose any information contained in any files inventoried without the consent of the client to whom the file relates, except as necessary to carry out the order of the court which appointed the lawyer to make the inventory.
If the decedent has not taken steps to obtain client consent to disclosure of confidences and secrets, no one is authorized to review files, make notifications on behalf of the firm, etc. In order to prevent prejudice and confusion, and to protect the decedent's heirs and staff from accusations of breach of confidentiality, a receiver must be appointed. The receiver may be any lawyer willing to perform the required duties. A colleague who shares an office may be a receiver candidate if not representing clients with interests adverse to those of the decedent's clients. Local bar associations may find a qualified practitioner willing to undertake the responsibility. If no one steps forward for appointment, the disciplinary agency should be immediately contacted to handle the matter.
A receiver is appointed by the chief judge of the circuit or county in which the decedent's practice was located. The receivership is defined by the appointment order entered, so some care should be taken regarding the extent of the authority needed to complete the duties of receiver. A receiver is an officer of the court and is responsible to the court for any action taken under the scope of the court's appointment order. The receiver does not report to the decedent's heirs, creditors, etc., unless such coordination is required under the appointment order. Duties conclude when the receiver files a final report and is released by the court.
Sole practitioners should have a written plan addressing what will happen to client matters when the lawyer transitions from practice. The transitioning lawyer should obtain appropriate consents; give instructions to those who will be involved; and store a copy of the executed enabling document in a safe but available location. The transition plan should be shared with all firm members, including nonlawyers, of counsel, and associates.
Marcia L. Proctor is general counsel at Butzel Long, a multistate law firm based in Detroit, Michigan, and concentrates her practice in professional responsibility and risk management.