July 2, 2014 – If you are a solo or small firm practitioner who is retiring or closing shop, there are a number of things to consider in closing the practice and winding down the business. For instance, what do you do about current clients? What do you do with electronic or physical client files?
From an ethics perspective, this article focuses on five major areas to consider when closing a law practice including current clients, trust accounts, closed files, electronic equipment, and malpractice insurance.
Notify Current Clients
Current clients must be notified that a lawyer is closing a practice. The lawyer should write to clients with open files, notifying them that the lawyer is unable to continue representing them and that they need to retain new counsel.
The letter should inform current clients about time limitations and dates that are important to their cases, and it should provide an accounting of fees, costs, and property held in trust. The letter should also explain how they can pick up copies of their files or have the files transferred to successor counsel, and should give a time deadline for doing this. The letter should be sent certified mail, return receipt requested, as well as by standard mail or email, so that a record is created of who was contacted and who received the notice.
In addition, the lawyer should notify opposing counsel and comply with the tribunal’s rules for withdrawing. It is a good idea to keep a file-tracking chart that includes:
the file name and file number;
the date the file was last reviewed;
a list of the important dates, tasks, and limitation periods;
the date when the letter was sent to the client;
the date when termination was discussed with the client; any instructions that were received from the client;
whether the file was copied;
whether the file was given to the client and a receipt obtained;
whether the file was delivered to successor counsel and a receipt obtained; whether opposing counsel was notified;
whether the tribunals’ rules for withdrawing were complied with; and
whether any further action is required.
Practice Law. Manage Business. Enjoy Life: Attend the 2014 Wisconsin Solo and Small Firm Conference
For solo and small firm practitioners, there is one conference dedicated to helping you build your business while also improving your life – the 2014 Wisconsin Solo and Small Firm Conference at the Kalahari Resort, Wisconsin Dells, Oct. 23-25.
Online registration is now available.
What's Different About This Program?
This year’s Wisconsin Solo & Small Firm Conference will have a special focus on business skills for lawyers with pre-conference sessions devoted to growing your practice, a plenary session on financial personalities, and breakout sessions geared toward practical tips and skills for running an efficient office.
The conference will also feature sessions in practice management, technology, ethics/quality of life and substantive law.
Reconcile Trust Accounts
Reconcile trust accounts, and complete and update all records. The lawyer is required by SCR 20:1.15(e)(6) to retain the trust account records for at least six years after the date of termination.
Closed Files: Retain and Communicate Policy
The Rules of Professional Conduct do not require that you maintain closed files forever, yet they do not provide a specific time period to retain closed files. SCR 20:1.16(d) states that “[u]pon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred.”
Under this rule, the lawyer must provide the client with anything in the file to which the client is entitled. In the ideal situation, the lawyer would have discussed this right and the retention/destruction of the file in the engagement agreement and again in the letter at the conclusion of the matter.
If the lawyer has a file retention/destruction policy that has been communicated to the clients, then closed files should be kept as required by that policy. If the lawyer does not have a file retention/destruction policy and the client has not requested the file, the lawyer should retain the file for a minimum of six years.1
org akaiser wisbar Aviva Kaiser (SUNY-Buffalo 1979) is the assistant ethics counsel for the State Bar of Wisconsin. Reach her by org akaiser wisbar email or by phone at (608) 250-6158.
A lawyer who has retained a closed file for at least six years has given the former client sufficient time to claim the file and, in most situations, has retained the file past the point where the file is needed to protect the former client’s interests.
Some files must be retained longer than six years, and the length of time that a file must be retained depends on the nature of matter. For example, lawyers should maintain files involving minors until the minor reaches the age of majority and relevant statutes of limitations have run. Maintain iles involving tax matters as long as client liability is possible.2
Although the Rules of Professional Conduct do not require notice to the former clients before the closed files are destroyed, as a matter of good practice, clients should be informed of their right to the materials in the file, that the lawyer will maintain the file only for the stated time, and that the lawyer will destroy the file at the end of that time. Having been so informed, no client can claim a reasonable belief that the lawyer would retain the file longer than the lawyer stated as the retention/destruction policy.
When the lawyer has not informed clients about his or her file retention/destruction policy, it is a good idea to place an announcement in a newspaper of general circulation in two consecutive issues and then wait a few months before destroying the files. Do not destroy original documents and documents that could not be reconstructed from other sources.
Taking Down Your Shingle
Learn the practical aspects of shutting down a solo firm or leaving a small firm for retirement. Attend this session at the Wisconsin Solo & Small Firm Conference for advice on selling your practice, transitioning clients, and closing your door.
Check out the schedule at WSSFC.org.
The destruction of the files must be done in a manner consistent with the duty of confidentiality that every lawyer owes to every client and former client under SCR 20:1.9(c)(2) and SCR 20:1.6. There must be a complete destruction of the materials in the file as would be the case with incineration or shredding. The lawyer should keep a record or index of files that have been destroyed for a reasonable period of time.3
Any electronic equipment with a hard drive, such as a fax machine, copier, computer, tablet, or smart phone, has information relating to the representation of the clients stored on it, and that information must be protected from disclosure. If the equipment is to be sold, given away, or used for personal purposes, the lawyer must make sure the drives are clean, that all client information is removed. Many experts state that the only way to be certain that a drive is clean is to destroy it.
The lawyer should discuss a tail endorsement with his or her malpractice insurance carrier. The insurance industry defines the word “tail” as an extended reporting period. The purchase of tail coverage adds an extended reporting endorsement (ERE) to an existing policy that extends the time in which a claim may be reported to the insurance carrier. The purchased tail endorsement provides an attorney the right to report claims to the insurer after a policy has expired or been cancelled.
Under most ERE provisions, the tail endorsement is not one of additional coverage or of a separate and distinct policy. This means no coverage will be available for a negligent act that takes place during the time the tail endorsement is in effect. For example, if a claim arises out of work done in retirement as a favor for a friend, there would be no coverage for that claim under the tail endorsement.
1 A commonly suggested minimum period is six years because that is the statute of limitation for certain malpractice actions and because lawyers are required by SCR 20:1.15(e)(6) to keep trust account records for six years. Another suggestion is ten years because the statute of limitations for a client or other person to complain about a lawyer’s conduct to the Office of Lawyer Regulation pursuant to SCR 21.18 is ten years.
2 Kentucky Bar Association Ethics Opinion KBA E-436 (2013).
3 ABA Informal Op. 1384.