March 01, 2018

Building a Practice: Avoiding Common Ethical Mistakes When Starting Out

Lynda C. Shely

Every year thousands of lawyers open their own firms. Whether they are coming straight out of law school or from another firm or public office, these entrepreneurial lawyers face several challenges to maintaining not only a profitable practice but an ethically compliant practice. The following suggestions for avoiding common ethical mistakes when starting out are based on 25 years of advising lawyers on how to comply with the rules of professional conduct—while also, hopefully, enjoying the practice of law. Note that these suggestions discuss the ABA Model Rules of Professional Conduct (“Model Rules”), but obviously lawyers should review the rules adopted in their own jurisdictions, as rules of professional conduct vary from state to state.

1. Have a Business Plan

While the Model Rules may not require that lawyers have a plan on how to open a law firm, it is encouraged. You will be running a business—one that happens to involve legal services. Unless you have managed a business previously, running a law firm while simultaneously trying to represent clients can overwhelm many first-time firm managers. There are many business plan templates available on the Internet, and some bar associations even offer suggestions.

Managing a firm takes far more time than lawyers usually anticipate. Schedule time each week to manage—including entering time, running invoices, being available to supervise staff, paying bills, and handling the multitude of other administrative tasks required for business operation.

 

2. Take a Continuing Education Course on Maintaining a Trust Account

This is serious: Record-keeping for law firm trust accounts (also known as “Interest on Lawyers Trust Accounts,” or IOLTA accounts) is not basic accounting. Each jurisdiction has very specific requirements not just for safeguarding funds but also for the documents that must be maintained for trust accounts. Remember—this is not your money. Lawyers have a fiduciary obligation under Model Rule 1.15 to safeguard funds entrusted to them for client matters.

 

3. Hire Wisely—Both Staff and Clients

Staff: After you determine how many employees you really need to competently and efficiently operate a law firm, hire wisely. Do background checks before hiring anyone, and confirm all employees understand their ethical obligations. (Provide training—do not assume they know the rules!) Make time to provide appropriate supervision. This is required by Model Rules 5.1 and 5.3, as well as Model Rule 5.5, which prohibits lawyers from assisting the unauthorized practice of law. Tip: In most jurisdictions nonlawyers cannot enter into fee agreements with new clients.

Clients: Only retain “good” clients. Oh, if only it were easy to identify “good” clients. Here are some warning signs for potentially problematic clients you should avoid:

  • anyone who says, “money is no object” (you will never be able to satisfy their expectations);
  • anyone who has had more than two prior lawyers working on the matter (yes, you should always ask about prior representation);
  • anyone who cannot be contacted except by text message;
  • anyone who has filed bar charges against all their other lawyers (in many jurisdictions this is public record information);
  • anyone who is rude to your staff or is a no-show for a consultation;
  • anyone who insists on unrealistic timelines for handling the matter;
  • anyone who cannot afford your retainer/fee deposit—unless you voluntarily want to handle the matter pro bono; and
  • friends and family (working with them is just not a good idea).

 

4. Do Not Dabble

Model Rule 1.1 requires that a lawyer be competent in representing a client. This is one of the most common reasons for a bar charge and a malpractice claim. Well-intentioned lawyers fall prey to this mistake when they try to be helpful to an existing client who has a “little issue” that is outside the scope of the representation and the lawyer’s experience. If you must handle a matter for which you have little to no experience, discuss this with the client and obtain client consent either to bring on competent co-counsel or attend courses to get up to speed.

 

5. Establish Policies and Procedures for Docketing, Conflict Checking, Fee Agreements, Client Communications, and File/Data Retention

Every firm must have policies and procedures for assuring that: (1) conflict checks are run for all new clients and new client matters; (2) all open client matters are listed in a general firm database; and (3) there are at least two lawyers (hopefully) at the firm who are responsible for each open client matter. Remind lawyers that even pro bono matters must be in the database. Train staff to rerun conflict checks every time a new party, witness, or opposing counsel is added to the matter.

Model Rules 1.3 and 3.2 address diligence—even for non-litigation matters. Establish procedures for assuring that all client matters are handled diligently, which means adding new matters to the firm calendaring system and training everyone how to use and check the calendar. Similarly, file maintenance requires that all firm client files be stored within the firm—not in people’s homes or cars—as part of the lawyer’s duty to safeguard client confidentiality (Model Rule 1.6) and property (Model Rule 1.15). Have a written policy.

Every office should have written procedures that outline: (1) who opens the mail (paper and electronic); (2) who date stamps the mail; (3) who then receives the mail; (4) who dockets any deadlines (initial the back of the document to confirm it has been docketed); and (5) who confirms that the correct date is docketed. And all this should occur before the mail gets to the lawyer’s desk. Include in the firm’s written policies not just the calendaring requirements (assign duties) but also that a lawyer will review the open matters for clients each week. Even if there are no pending deadlines, the firm’s database should include an automatic “tickler” so that every file listed as “open” for an attorney is pulled at least once a month for the lawyer to review.

Set policies for all firm personnel on communication requirements, too. This should include basic information, such as responding to calls and e-mails within a certain amount of time, using out-of-office auto-messages on e-mail and voice mail when someone will be unavailable for a day or more, and documenting communications in client files.

 

6. Have a Succession Plan

Accidents happen. Whether you are going solo or opening a firm with several colleagues, every lawyer should have a succession plan (it’s required in some jurisdictions) that provides information about how to contact clients and firm vendors/employees in case the lawyer is incapacitated for a period of time or otherwise unable to continuing practicing law. Do not assume that your staff know your passwords, how to get into the off-site file storage, who the landlord is, where your malpractice policy can be found, and who to contact in case of an emergency—write it down and confirm that a trusted colleague knows where to locate this information.

 

7. Do Not Become Isolated, but Still Have Boundaries

With all the burdens of running a business and practicing law, lawyers can burn out quickly. Resist the tendency to eat lunch at your desk every day—join local bar associations or sections of the bar in your practice area to maintain contacts with colleagues who may be able to assist if you need backup counsel or even serve as a mentor/sounding board for quick questions. To practice law and enjoy it, maintain reasonable boundaries to avoid practicing 24/7. Schedule time off—time for family/friends/hobbies/exercise/free time. It will make you a healthier, happier, and better lawyer. 

 

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Lynda C. Shely opened the Shely Firm, PC (shelylaw.com), in 2003 after serving as the State Bar of Arizona’s Director of Lawyer Ethics for ten years. She represents legal professionals, including law firms, in-house corporate legal departments, individual lawyers, and government entities in ethics, risk management, and professional responsibility matters. She may be reached at lynda@shelylaw.com.