Planning for an Orderly Transition by taoyni


									         Michigan Bar Journal      September 2009

 52 Law Practice Solutions

Planning for an Orderly Transition
By Dawn M. Evans

               ost lawyers identify the impor-       While an increasing number of states          formal statewide program. While this pro-
               tance of having a will and de-    require lawyers to identify a lawyer who          cedure exists, relying solely on its opera-
               veloping a personal financial     will act as an “inventory attorney” in wind-      tion guarantees delay for clients and courts.
               contingency plan when plan-       ing down the practice of a disappeared, dis-      This delay could be avoided if the lawyer
ning for retirement. Unfortunately, many are     abled, or deceased attorney, the only pro-        selects a successor in advance and provides
less diligent in developing and maintaining      vision currently in effect in Michigan that       sufficient documentation and information in
a contingency plan for winding down a law        deals with the death or disability of an attor-   the form of a succession plan to empower
practice in the event of disability or death.    ney is Michigan Court Rule 9.119(G), which        that successor to step in immediately if the
In a multi-member law firm, other attor-         states in pertinent part:                         operative circumstances occur.
neys may immediately step in to ensure                                                                 One critical element of a succession plan
                                                    If an attorney...disappears or dies, and
that client matters are handled in the event                                                       is an up-to-date policy and procedure man-
                                                    there is no partner, executor or other re-
of the death or disability of an attorney. Be-                                                     ual for the law firm containing the follow-
                                                    sponsible person capable of conducting
cause solo practitioners do not have that                                                          ing information:
                                                    the attorney’s affairs, the [grievance] ad-
built-in backup system, it is vitally impor-
                                                    ministrator may ask the chief judge in         •	 How to perform conflict checks;
tant for all solo practitioners to have a plan
                                                    the judicial circuit in which the attorney     •	 How to use the calendaring system;
in place to deal with the possibility of death
                                                    maintained his or her practice to appoint      •	 How to locate a list of active client files
or disability.
                                                    a person to inventory the attorney’s files        and how open/active files are organized;
    In the absence of a plan, a lawyer who
                                                    and to take any action necessary to protect
is suddenly disabled or dies without hav-                                                          •	 Where client ledgers are kept;
                                                    the interests of the attorney and the attor-
ing previously identified someone to step                                                          •	 Policies regarding billing;
                                                    ney’s clients. The person appointed may
in and wind down the practice may leave                                                            •	 Where closed files are kept, how they
                                                    not disclose any information contained in
clients unaware of the need to retain new                                                             are organized, and how to access them;
                                                    any inventoried file without the client’s
counsel or retrieve records, courts unaware
                                                    written consent. The person appointed is       •	 Policy on keeping clients’ original docu-
that the lawyer is unable to appear in court,
                                                    analogous to a receiver operating under           ments and where they are kept;
clients and third parties unable to access
                                                    the direction of the circuit court.            •	 Record retention policy, records identi-
escrowed funds,1 and surviving family mem-
bers vulnerable to lawsuits from unhappy            Pursuant to MCR 9.119(G), if an attorney          fying destruction dates for specific files,
now-former clients.                              dies or becomes otherwise incapacitated,             and notifications to clients regarding de-
                                                 the grievance administrator must ask the             struction policy;
                                                 chief judge in the judicial circuit where the     •	 Location of the safe deposit box (if any)
                                                 attorney maintains an office to appoint a            and how to access it;
   Law Practice Solutions is a regular fea-      receiver to step in. Some local bar associa-      •	 Information regarding all bank accounts
ture brought to you by the Practice Manage-      tions have programs to manage the death              and trust accounts, including bank name,
ment Resource Center (PMRC) of the State         or disability of an attorney, but there is no        address, signatories, and account numbers;
Bar of Michigan, featuring articles on prac-
tice and risk management for lawyers and
their staff. For more resources offered by
the PMRC, visit our website at http://www.          Unfortunately, many lawyers are not diligent in or call our
Helpline at (800) 341-9715 to speak with a
                                                    developing and maintaining a contingency
practice management advisor.                        plan for winding down a law practice in the
                                                    event of disability or death.
   —JoAnn Hathaway and Diane Ebersole,
          Practice Management Advisors
                                                                                                September 2009               Michigan Bar Journal

                                                                                                  Law Practice Solutions 53

•	 Location of all bank account and trust              Additionally, once an agreement is in
                                                                                                                                 Dawn M. Evans is direc­
   account records; and                            place, clients should be informed at the
                                                                                                                                 tor of professional stan­
                                                   time they retain the lawyer’s services about
•	 How to access computers, e-mail, voice                                                                                        dards with the State Bar
                                                   the existence of the advance planning agree-                                  of Michigan. She spent
   mail, answering machines, etc., including
                                                   ment to resolve any potential issues regard-                                  eighteen years in attorney
   necessary passwords and access codes.
                                                   ing confidentiality and to shed light on any                                  discipline with the State
    This information should be presented in        potential conflicts of interest between the cli-                              Bar of Texas—the last
a manner that is understandable to some-           ent and the assisting attorney. With that no-                                 five of those as chief dis­
one completely unfamiliar with the firm’s          tification in place, clients can be assured                                   ciplinary counsel. Before
protocols, which may be the case for the           that they will be promptly notified of the         her public service, she was in private practice for
person identified as a successor.                  death or disability of their attorney to allow     six years in Huntsville, Texas. She is the immediate
    In determining whom to select as a suc-        them to make appropriate decisions to pro-         past president of the National Organization of Bar
                                                                                                      Counsel and was formerly a member of the Texas
cessor (also called an assisting attorney) to      tect their interests in the event the advance
                                                                                                      Young Lawyers Association Board of Directors.
wind down a practice, a lawyer should be           planning agreement becomes operational.
mindful of the important role this person              When an attorney’s practice is in the
will play in allaying clients’ fears that the      form of a professional service corporation         FOOTNOTES
handling of their matters will be jeopar-          (PC) or professional limited liability com-         1. All attorneys in Michigan receiving funds in connection
dized by the original lawyer’s departure.          pany (PLLC), the attorney must ensure that             with a representation in which a client or third person
                                                                                                          claims an interest are required to deposit such funds
The assisting lawyer should be competent,          proper corporate resolutions are in place to           into an IOLTA or non-IOLTA account separate from the
trustworthy, ethical, and capable of being         give the assisting attorney appropriate au-            lawyer’s own property. See Rule 1.15 of the Michigan
as committed to the clients as the original        thority to act. This can be accomplished by            Rules of Professional Conduct. State Bar of Michigan
                                                                                                          Informal Ethics Opinion RI-107 opines that “signatories
attorney. It is a choice that should be dis-       having a resolution in place that sets forth
                                                                                                          on a law firm’s IOLTA trust account must be lawyer
cussed with the prospective assisting at-          the manner and the circumstances in which              members or employees of the law firm.” Because solo
torney ahead of time so that he or she is          the assisting attorney can act.                        practitioners do not have other attorneys in their firms to
aware of the responsibilities being asked of           Also, the lawyer’s will should clarify             act as signatories on IOLTA accounts, the death or
                                                                                                          disability of a solo practitioner can create enormous
him or her.                                        the personal representative’s role in wind-            problems with regard to trust account access if the
    Once an agreement has been reached,            ing down the practice, if any, to prevent              solo practitioner is the only signatory on the account.
a written agreement should be drafted set-         a potential conflict between the role of                  The only remedy for this situation is for the chosen
                                                                                                          successor attorney, the personal representative of the
ting forth the terms of the relationship, de-      the personal representative of the lawyer’s            estate, or the court-appointed receiver to obtain a court
scribing the assisting attorney’s role, and        estate and the assisting attorney. Specifi-            order giving him or her access to the trust account. This
stating under what circumstances the assist-       cally, any funds in the lawyer’s trust ac-             may cause unavoidable delay in accessing the account
                                                                                                          upon the lawyer’s death or disability and may conflict
ing attorney will step in. It must be deter-       count when he or she ceases to practice
                                                                                                          with the requirements of MRPC 1.15(b)(3), which requires
mined and spelled out in both the ad-              due to unforeseen circumstances should                 the lawyer to “promptly pay or deliver any funds...
vance planning agreement and in retainer           be handled in a manner consistent with                 that the client or third person is entitled to receive....”
agreements whether the assisting attor-            the provisions of the agreement to close               Unfortunately, there is no alternative for solo practitioners
                                                                                                          at this time. Attorneys practicing in multi-member firms
ney represents the attorney or the attor-          the practice.                                          should ensure that at least two attorneys are named as
ney’s clients.                                         Finally, Rule 1.17 of the Michigan Rules           signatories on the firm trust account to facilitate seamless
    If the successor attorney represents the       of Professional Conduct allows for the sale            access to the account at all times.
                                                                                                       2. In accordance with MRPC 1.17(c), “actual written
disabled or deceased lawyer, he or she will        of a law practice. This option should be ex-           notice of a pending sale shall be given at least 91
have a fiduciary relationship with the law-        plored when planning for winding down                  days prior to the date of the sale to each of the
yer or the lawyer’s estate and, therefore,         a practice and may provide an alternative              seller’s clients....” The notice required by section (c)
                                                                                                          must include:
may be prohibited from representing the            to a process that essentially involves an or-
                                                                                                          (1) notice of the fact of the proposed sale;
clients on certain matters, such as legal          derly return of the files to the clients.2             (2) the identity of the purchaser;
malpractice issues related to the former at-           Planning for an orderly transition upon            (3) the terms of any proposed change in the fee
torney. On the other hand, if the assisting        disability or death—which is particularly                  agreement permitted under paragraph (b)
                                                                                                              [of MRPC 1.17];
attorney represents the clients, he or she         important for solo practitioners—is a way              (4) notice of the client’s right to retain other counsel or
may be required to disclose ethical viola-         of assuring family, staff, and clients that                to take possession of the file; and
tions under certain circumstances or report        their respective concerns and interests have           (5) notice that the client’s consent to the transfer of the
                                                                                                              client’s file to the purchaser will be presumed if
errors or negligence that resulted in mal-         been addressed at a time when decisions                    the client does not retain other counsel or otherwise
practice to the clients. Upon execution of         about who will handle their matters dur-                   object within 90 days of receipt of the notice.
an agreement, family members and employ-           ing the transition can be made dispassion-          3. For more extensive information on this topic, see
                                                                                                          O’Connell, Sudden Death or Disability: Is Your
ees should be informed to ensure a smooth          ately. Having such a plan in place also
                                                                                                          Practice—And Your Family—Ready for the Worst,
transition should the assisting attorney’s serv-   eliminates a significant source of stress for          available at <
ices be required.                                  the lawyer.3 n                                         pdfs/death-disability.pdf> (accessed August 6, 2009).

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