Lawyers Journal

Exit strategy makes for an orderly transition

People change jobs and careers more frequently than ever before. Gone are the days of holding one job for all or most of someone’s work life, if that ever existed. Lawyers are just as likely as anyone else these days to change career directions. The reasons may involve retirement or pursuing a new career within the profession or outside it.

A lawyer making such a change needs to think first about how to notify clients and conduct an orderly transition. Mass. R. Prof. C. 1.16(b) provides that a lawyer must take all steps reasonably practicable to protect a client’s interests when withdrawing from representations. This is more easily accomplished by attorneys who practice with a group of colleagues in a law firm, public agency or corporate law department. It is a more difficult challenge for a sole practitioner or space-sharer. This article will identify matters that a sole practitioner or space-sharer needs to address to exit practice and what to do about them.

The exiting lawyer must identify all client matters pending and identify those cases where withdrawal might have a material adverse effect on any client interest. The lawyer should give written notice to each client of the lawyer’s intentions to withdraw from representing the client. The notice should clearly communicate that the client is entitled to select new counsel and that the client’s file will be delivered to successor counsel as the client directs or be made available to the client. Files that are not delivered to clients or new counsel must be retained or discarded where and as permitted. (See D.C. Crane, “Talking Trash-Recycled,” Lawyers Journal, Sept. 2001. Also available at the B.B.O. website: http://www.mass.gov/obcbbo.) The usual notice will communicate a period of time during which the files will be available at the lawyer’s office or another location where they will be readily available for delivery to clients until they go to offsite storage.

Before withdrawing, the lawyer must allow an adequate amount of time for the client to secure new counsel after the client has received notice of the lawyer’s plan to terminate the representation. In the interim, the lawyer is required to provide proper representation to the client, including addressing transactions or court matters that have critical deadlines before the client has engaged new counsel. Where the client matter is in suit or pending before another tribunal, the lawyer also must obtain leave to withdraw in accordance with the rules of the tribunal. Rule 1.16(c) Until that leave is granted, the lawyer may not discontinue providing representation.

The exiting lawyer also is required to account for and return any unearned retainers or advances that the client may have paid. A lawyer leaving practice also must deliver any other funds that the lawyer holds for clients or third persons. Funds to which clients are entitled must be paid to them or as they direct. If clients cannot be located, it may be necessary to pay the money into court on their behalf or to the Commonwealth under the laws of escheat. Money held for missing clients does not belong to the lawyer. Also, alternative arrangements may need to be made for funds held in escrow on behalf of clients or third persons. Records of all of these transactions are required to be maintained for six years after the final distribution and termination of the representation under Rule 1.15(a), but the lawyer may wish to keep such records for a longer period of time. (See “Talking Trash”.)

A lawyer must be careful to keep client information confidential throughout this process. Files may not be delivered to anyone but the client without the client’s consent. Unless the client has given consent to the lawyer to disclose information to prospective new counsel, the exiting lawyer cannot provide another lawyer or law firm selected by the exiting lawyer with information about the matter or permit access to the file. If files are to be left with anyone other than the lawyer’s staff to be held for delivery to clients, care must be taken that the files are held in a secure manner so that persons other than the lawyer’s staff do not have access to confidential client information.

Lawyers also may sell their practices to another lawyer or law firm. Sale of a practice, whether by a lawyer or by his or her representative, requires strict compliance with the provisions of Rule 1.17. These include written notice to the client of the terms of any proposed change in the fee arrangement, the client’s right to retain other counsel or take possession of the file, and the fact that consent to the transfer will be presumed if the client does not take any action or otherwise object within ninety days of receipt of notice. Rule 1.17 (c) All of the requirements of confidentiality, transfer of funds, and protection of client interests from any materially adverse effect also apply to a sale.

For work in progress where the final fee for services due to the departing attorney cannot be determined at the termination of the representation, it is important for the client, departing attorney and new counsel to arrive at some agreement. This situation usually arises in contingent fee matters. The better course is for the client, departing attorney and new attorney to agree upon how any fees that may be due will be divided between new and departing counsel. A fee dispute between the lawyers is much less likely if there is a written agreement between the client and the lawyers before any award or settlement occurs. Of course, any agreement to charge or collect a contingent fee must be in writing and conform to Rule 1.5(c).

The departing lawyer also is faced with many other business decisions about how to deal with former employees, landlords and other commercial relationships. These are generally not disciplinary matters and are beyond the scope of this article. However, one business decision that relates to professional responsibility for the departing lawyer is what to do about professional liability insurance. Since all professional liability insurance policies are written on a “claims made” basis, the departing lawyer will have no coverage for claims made against the lawyer after the date of expiration of the policy unless the lawyer purchases “tail” coverage. No rule requires an attorney to purchase professional liability insurance in the first place, but if a lawyer wants to protect former clients and the lawyer as well, it is important for the departing lawyer to consult with a competent broker and even the lawyer’s own counsel to make the best decision possible before leaving a practice concerning liability coverage.

One of the final acts that the departing lawyer needs to do before putting out the lights for the last time is to notify the Board of Bar Overseers of the lawyer’s new address and to request inactive status if the lawyer is leaving the practice of law. S.J.C. Rule 4:02. Otherwise, the departing attorney runs the risk of administrative suspension for failure to file an annual registration statement if the Board mails the notice to the lawyer’s former address. (See, R. Geller and S.Straus Weissberg, “Dues and Don’ts,” Lawyers Journal, Jan. 2002. Also available at the B.B.O. website: http://www.mass.gov/obcbbo.) In appropriate circumstances, the Board also uses this information to assist clients to get in contact with their former counsel when there is a need to get information from the departing lawyer.

Lawyers who include these steps as part of an exit strategy will be able to enjoy the next adventure with less concern that something from the days of private practice will come back to haunt them.

©2014 Massachusetts Bar Association