EXIT PLAN FOR PERSONAL INJURY PRACTITIONERS
Are you a plaintiff’s personal injury lawyer approaching retirement without an exit plan?
Or are you not approaching retirement, and still don’t have an plan that meets the requirements of the Rules of Professional Responsibility, #1.3, which requires lawyers to make reasonable preparations to protect clients in the event of their unexpected inability to practice law? Let us help you solve that problem.
There are many reasons why an attorney may decide to wind down, close or sell his or her practice. The attorney may be moving, retiring or entering a new line of work. There is also the possibility that the need to wind down, close up or sell the practice may not be voluntary. An attorney’s unexpected death or disability may
require others to handle closing the practice. This article discusses the merits of a detailed action plan for exiting a personal injury practice and outlines practical steps that attorneys should take towards this end.
PLANNING FOR THE UNEXPECTED
Rule 1.3, Minnesota Rules of Professional Conduct (MRPC), requires attorneys to make reasonable preparations to protect clients in the event of their unexpected inability to practice law. There are several ways to comply with this requirement. Attorney partnership agreements or assisting attorney agreements for solo practitioners should be negotiated to designate who will wind down and close up the practice. The agreements should define the nature and scope of that attorney’s responsibilities and determine the amount and method for compensation. A well-organized practice with documented procedures is critical to a smooth and easy closing up of a practice by another. A written office manual should contain key details such as:
names, addresses, phone numbers and job descriptions of support and other key personnel (office sharers, of counsel attorneys, office manager, secretary, bookkeeper, accountant, landlord, malpractice carrier and other insurance brokers), the personal representative and other important contacts;
location, account numbers and signatory name(s) for business and trust accounts;
location and access information for safety deposit box and/or storage facilities;
computer and voice mail access codes; and
location of important business documents such as leases, maintenance contracts, business credit cards, client ledgers and other books and records relating to the business and trust accounts.
The office manual should also have an explanation and description of the conflicts system, the calendaring system and backup, time billing records, accounts receivable/payable, an active client file inventory, and a closed file storage location and inventory. The manual should be complete enough for the attorney closing up the practice to be able to promptly identify those client matters needing immediate attention and any matter on which the attorney might have a conflict of interest.
If an attorney does not plan for unexpected practice interruption the court may have to appoint a trustee to windup and close out the practice.
SELLING A PRACTICE
If an attorney or the representative of a deceased, disabled or disappeared lawyer is selling a practice, MPRC Rule 1.17 will be of particular importance. This rule mandates that an attorney may not sell off only the most lucrative clients and leave the remaining ones unrepresented. The buyer must accept all of the currently active files except:
those in practice areas that deal with matters that the purchaser would not be competent to handle;
those that the buying lawyer or firm of lawyers would be barred from handling because of a conflict of interest; or
those from which the selling lawyer is denied permission to withdraw by a tribunal in a matter subject to MPRC Rule 1.16(c).
The buying lawyer may not increase attorney fees charged to the selling attorney’s clients for a period of at least one year from the date of the sale.
When negotiating the sale of a practice, an attorney should note that the amount and type of information the selling lawyer may give to a potential buyer is limited by the client confidentiality requirements of MPRC Rule 1.6. A prospective buyer may not see the client file unless the selling lawyer has obtained a waiver of confidentiality from the affected client. After the sale, the selling attorney must send written notification to all clients to be taken over by the purchaser. That notification must include (1) a statement that the practice, including the client’s file, has been sold; (2) a summary of the purchaser’s professional background; and (3) a statement that the client has the right to either continue with the new firm under the same fee arrangement, to have the complete file returned to the client, or forwarded to another attorney of the client’s choosing.
If the notification is sent by certified mail or personally served, the notification may state that if the client does not contact the buying attorney within 90 days, the client’s silence may be considered a waiver of confidentiality and consent to representation. The buying attorney should obtain a new representation agreement and file an appropriate substitution of counsel in this scenario. The selling lawyer should consider extending malpractice insurance for some reasonable period of time following the sale to insure against losses arising from errors that might come to light after the sale.
An attorney winding down, closing up or selling their practice has an obligation to return or properly refer all unsold active files and to dispose of all remaining inactive files appropriately. An attorney may not simply turn a client matter over to another attorney (without client consent). The Director’s Office may issue an admonition to an attorney who fails to properly close down her practice.
DISPOSING OF CLOSED FILES.
It is good practice to explain the firm’s file retention/destruction policy in an engagement letter, retainer agreement or letter at the close of every representation. A lawyer should not destroy or dispose of a client file without screening it. Before archiving a file the attorney should make sure that all client assets (such as stock certificates, abstracts, executed but unfiled documents, original wills, unrecorded deeds, etc.) have been returned or permanently safeguarded.
Clients and former clients have a reasonable expectation that useful information in the lawyers’ files will not be prematurely and carelessly destroyed. To that end, an attorney should obtain the client’s consent before destroying items that clearly or probably belong to the client. This includes retaining any information in the file that may have future utility to the client. The remainder of the closed files should be retained for a reasonable time. What is ‘reasonable’ will depend in part on the nature of the representation. Generally, an attorney should keep client files at least until the applicable statute of limitations on malpractice has run. Settlement documents and trust account books and records must be kept for six years after completion of the representation. An attorney may dispose of the files at the end of the retention period by shredding (sensitive materials) or bagging (non-sensitive) files in heavy duty opaque bags.
“PERSONAL INJURY LEGAL SERVICES WITH A PERSONAL TOUCH!”
A Schmidt Salita Workers Comp Lawyer will come to your home, or the hospital, for your initial visit. The Schmidt Salita Law Team strives to provide personal injury legal services with a personal touch to help the victims of personal injury through a very difficult time in their lives.