By Jim Calloway

A lawyer’s final duty to the clients is often appropriately shutting down their law practice in a way that ensures clients’ interests are protected, which may include providing clients with appropriate departing advice and perhaps a referral to successor counsel. With proper advance planning, this can be handled more efficiently.

The closing of a private law practice can be, as Dickens famously wrote, the best of times or the worst of times. It may be the culmination of a multi-year planned winding down of a practice to enter retirement or an emergency situation brought on by failing health or death. Accepting a new employment offer or a judicial appointment often means the law office needs to be completely shut down within a relatively short time.

Sadly, a lawyer’s unexpected death may cause others to have to close the law practice, and without appropriate succession planning, those others may not be well prepared. The family of many a solo practitioner has had to rely on the local community of lawyers to assist them when a lawyer passes away unexpectedly.

This article is designed to assist lawyers with shutting down a law practice, whether it involves an individual lawyer making a personal decision or a lawyer who has been hired to assist the family of a deceased lawyer.

There are two available resources: one is for planning ahead, and the other relates to the implementation of the closing process.

OBA’S PLANNING AHEAD GUIDE

Advanced Planning and Properly Closing Client Matter Files Make the Law Office Closing Process Go Easier

All Oklahoma lawyers in private practice at every stage of their careers are advised to read and follow the guidance of the OBA’s Planning Ahead Guide: Attorney Transition Planning in the Event of Death or Incapacity. You may download your free copy by logging into MyOKBar and clicking the link to Attorney Transition Planning Guide. This detailed handbook includes useful forms for setting up an assisting attorney relationship to assist your client in the event of temporary or permanent inability to do so.

As noted on page 11 of the guide, “If your office is in good order, the Assisting Attorney will not have to charge more than a minimum of fees for closing the practice. Your law office will then be an asset that can be sold and the proceeds remitted to you or your estate. An organized law practice is a valuable asset. In contrast, a disorganized practice requires a large investment of time and money and is less marketable.”

OBA CLOSING A LAW PRACTICE RESOURCES

Your attention is directed to the OBA Management Assistance Program’s new Closing a Law Practice Resources at www.okbar.org/map/cylp. This is a newly designed collection for Oklahoma lawyers. OBA MAP has previously provided much of this information to Oklahoma lawyers and their representatives upon request. Now, this information is available for download on demand. There are more resources and checklists included there than included in this article.

Planning Your Exit

There are many details associated with retirement planning. The primary concerns for a lawyer who wants to permanently close their law practice include:

1. Protecting clients from negative consequences related to the lawyer’s retirement. Normally this is done through a combination of concluding as many open matters as possible and closing those files during the winding up of the lawyer’s practice. Sometimes it means working with the client to transfer a matter to successor counsel. Sometimes it may mean withdrawing from a matter and documenting clearly that you have provided the client all information they need and are willing to cooperate with successor counsel when the client obtains successor counsel.

2. Protecting the lawyer (or the lawyer’s estate) from future professional liability claims and protecting clients from a loss. Since professional liability insurance is typically sold on a “claims made” basis, once you no longer have professional liability insurance, you will be personally responsible for any claim made, even if it is based on conduct that occurred when you had coverage. Normally one protects against that risk by purchasing a tail policy (also known as extended reporting period) from one’s professional liability insurance carrier for a one-time fee. Then such claims will be covered by insurance.

3. Protecting your “heirs” from unnecessary anxiety and frustration. While we wish you a long and happy retirement, when you close a law practice, it is important to make certain any future potential responsibilities can be handled even if you are not around to personally do so. Your legal heirs will have the rights and responsibility to handle your estate. But other “heirs” may be local lawyers who agree to pitch in and assist your family. You do not want their last memories of you to be “Why is everything such a mess?” or “Why aren’t there any written instructions?”

A Basic Checklist for Closing a Practice

• Determine a target closing date and a date to stop taking new engagements.
• Inventory open client files to determine status and actions to be taken.
• Discuss extended reporting or tail coverage with your professional liability carrier well in advance of your target date so you can understand your options and the cost.
• Inform your staff in person and in writing. Give a simple, truthful reason for the closure.
• Inform your clients in person if able, but certainly in writing.
• Complete all matters where that can be accomplished.
• For litigation matters that cannot be completed, discuss with the client their options to obtain new counsel and follow up that discussion in writing. You may need to assist your clients by requesting extensions of time and resetting of hearings when possible.
• If a client is obtaining new counsel, be certain an order allowing your withdrawal or a substitution of counsel is accomplished.
• Make certain the client has been advised in writing of impending statutes of limitations and all other deadlines.
• Notify former clients from recent years that you are closing your practice, reminding them of your file destruction policy and letting them know where their files will be stored between the closing and the ultimate destruction date.
• Hopefully, you have already returned all original documents, such as original wills and contracts to former clients, along with any copies of documents they might need as a part of your normal file closing process. But if not, now is the time to do so.
• You likely want to obtain a post office box and notify the post office to forward mail to that address after your office is closed. Check the box weekly at first and then monthly. Send change of address notices in response as warranted. Calendar when the mail forwarding expires as you may wish to renew it.
• Notify the OBA of new contact information soon after closure.
• Close your IOLTA trust account properly. A checklist for doing so is available from the Oklahoma Bar Foundation and the MAP resource page noted above.
• Inform other professionals of the closure, including court officials and those who have provided services to your firm. If time is an issue, this may be done via postcards or email.
• Notify landlords, utilities and other vendors who provide services to you. It is a good idea to review incoming mail for several months in advance for those who should be added to this list.
• Appropriately cancel memberships, internet service and other subscriptions.
• Prepare last-time records and send out final bills. These should also include the post office box address for those who may not remit timely.
• Prepare disposition of office furniture and other office property. Computers and hard drives should not be transferred to third parties unless you are confident in your ability to permanently erase all data.
• Your phone number is a valuable asset and may be transferred or sold to another law firm. This allows them to communicate that this office has been closed to those who were not informed and call the number.
• Law books are bulky and have little resale value, especially if not updated. Ask other lawyers in your community if there is a new lawyer who might appreciate them as a gift.
• An announcement on your website about the office closure is appropriate at some point. (Note: if you allow the website domain name to expire simply by not paying the renewal fee, it can be bought by someone else. Due to recent examples of fraud, it may be advisable to continue renewing old domain names even after you have discontinued the website.)
• Your email can be configured to automatically respond with a message about the office closure and that should be left operational for some time. Some small firm lawyers may decide to keep the “office” email account as a personal email account. Retirement may also be a good time to “start over” with a new email address. A Microsoft 365 subscription may be a good, secure option then.
• Hopefully, you have already utilized a password manager that you will keep for personal use. If not, a list of passwords should be prepared and securely stored physically (e., not on a computer).
• If you practice in a smaller community that has a local newspaper, consider placing a notice of the closing in it. This could be beneficial to some former clients. This can be considered when a lawyer unexpectedly dies.
• Cancel the law firm merchant account used for credit card processing, along with law firm credit cards as appropriate.

Obviously, this is not a comprehensive list, and the individual circumstances for each lawyer and law practice will vary.

What About Your Law License?

Broadly speaking, there are three ways for a lawyer to handle the lawyer’s license when retiring.

1. The lawyer can resign. Then the individual no longer has the legal right to practice law in Oklahoma and has no professional obligation to comply with mandatory CLE requirements or pay bar association dues. They are also no longer a lawyer. Acceptance of a resignation is contingent on no pending disciplinary proceedings or grievances pending. However, if the lawyer changes their mind, a reinstatement hearing will be required to attempt to return to the practice of law in Oklahoma.

2. The lawyer can maintain a law license and cease practicing law. Payment of dues to the OBA will continue. The benefit of this approach is you can easily change your mind if circumstances change. Filing an affidavit with the MCLE Commission that one did not practice law for the entire year relieves the lawyer of MCLE obligations, as does being a nonresident of the state for the entire year while not practicing law in Oklahoma. But be aware of the “December surprise.” We have talked with lawyers who did not practice law for almost a year and then made a small claims appearance or did some minor work for someone in December, which meant they had to satisfy MCLE requirements on short notice.

3. The lawyer can take Retired Lawyer status. Lawyers 70 years of age and older can take retired lawyer status that means they no longer have to pay dues and satisfy other bar obligations. But they also cannot practice law. Retired lawyer is a convenient explanation when people request advice in the future. It acknowledges the lawyer’s career and also explains why they cannot offer legal advice. See www.okbar.org/governance for more details and the form to request the status. The member must have attained age 70 prior to Jan. 2. As stated at 5 O.S. Ch. 1, App. 1, Art. II, Sec. 2 (d), “An Active Member requesting Retired Member classification must have reached age seventy (70) prior to January 2nd of the year he or she is requesting to be reclassified to Retired Status and relieved from paying dues.”

Selling Your Law Practice

A lawyer who is retiring and intending to either not practice law in the future or practice in a different area is allowed to sell their law practice to another Oklahoma lawyer. The method of doing so is outlined in Oklahoma Rules of Professional Conduct Rule 1.17. Sale Of Law Practice. Comment 1 to the rule reminds us that, “The practice of law is a profession, not merely a business. Clients are not commodities that can be purchased and sold at will. However, under the conditions and requirements set forth in this Rule, a practice or an area of practice may be sold.” 1.17 states, in part, that “[t]he signed written consent of each client whose representation is proposed to be transferred to a purchaser must be obtained.” Notice to clients about the proposed transfer is outlined in the rule, and consent by clients is presumed if the client does not object or take other action within 90 days of the notice date.

Often the situation of a lawyer retiring and attempting to transfer the practice to a successor involves a certain period of working together to acquaint clients with the purchasing lawyer. If space is available, then depending on the lawyer’s specific plans for retirement, a lawyer who has gone to the office daily for decades might appreciate some free office space for some months, and the new lawyer could benefit from advice. If a lawyer is taking the bench, they can accept monthly payments from the purchaser based on a fixed sales price but cannot receive payments that are based on future fees.

Working Part Time After Retirement?

Many lawyers consider working part time after retirement. This may be because some additional earned income in retirement is desired or just to combat boredom in retirement. Working for another firm or company part time means the employer deals with professional liability insurance, paying for overhead and the like. Resigning that employment is usually like leaving any other job, although a rare situation where a client would be negatively impacted could implicate our ethical rules.

A solo practitioner who wants to slow down but “still practice some law” is a plan that sounds simple in theory but is more difficult to execute well in practice.

Slowing down often means ending the biggest overhead expense – support staff.  The lawyer who has worked with support staff assisting them over their career may misjudge the challenges of keeping a calendar, preparing billing statements and meeting appropriate deadlines without assistance. As the lawyer ages, this can become more challenging. It can be very difficult to practice law “part time.” Taking retainers on several new matters may make for a great week. But soon, the semi-retired lawyer may find their schedule is nearly as busy as before they retired but with much less net income.

The part-timer will likely have to pay nearly the same premium for professional liability insurance as if they were fully employed. They will also have to maintain their trust account. The lawyer will need a business-class computer, together with all the software, maintenance, internet access, need for tech support and other things that operating a business-class computer entails. Likely a printer and a business phone line will be required. MCLE requirements remain. Someone must be available to sign for certified mail in your absence. Will you have someone answering the phone for you or an answering service (or machine)? Will you still maintain your law firm website? Closing a physical business location can also dramatically impact the flow of potential new clients.

Lawyers who have not had support staff, particularly those who have made use of cloud-based practice management tools, are often better positioned to realistically judge what slowing down means for them.

If staying occupied is the goal, one might be better served by volunteering for Legal Aid Services of Oklahoma or another nonprofit where support staff help would be provided, and that entity would pay for professional liability insurance and overhead.

If additional income in retirement is the main goal, then cultivating an “of counsel” relationship with a law firm can be a better option. The lawyer might continue to work for certain clients with the understanding that they are transitioning to becoming a client of the firm, or a law firm might need help with their own “overflow” work with compensation on an agreed basis. Then your primary business record-keeping obligation is not losing the 1099 or W-2 the firm provides you.

Providing limited scope legal services under District Court Rule 33 is another viable option today. OBA MAP has a limited scope legal services page at www.okbar.org/map/lss. The lawyer with extensive family law experience might enjoy referring the family law feuds elsewhere and limiting the practice to preparing agreed dissolutions and custody agreements and perhaps even occasionally going down to the “waiver docket” to have an agreed order entered. For this type of practice to generate significant income, online marketing will be required.

Closed Files

Closing a law practice means closing files. How simple or challenging this process is will be greatly impacted by how well the lawyer or firm has closed client files during their practice.

Some law firms have exemplary file closing procedures, which involve much more than putting paper-based client files in boxes and labeling them by year. The law firm’s goal should be that once a file is closed, it need never be opened again – unless it is needed by the client in the future, hopefully for a related new engagement. Those firms’ clients received back any original documents, copies of all relevant documents they might need and were reminded of the law firm’s file destruction date as a part of the file closing process. File destruction policies had also been covered in the engagement agreement.

Closed files can be scanned and stored digitally to save on closed file storage costs as long as proper data security and backup procedures are followed.

Note that it is best to keep retainer agreements (where the client signed off on the file destruction policy), receipts from clients who picked up a copy of their file and a list of all destroyed files for an extended period (perhaps permanently) after the files are destroyed.

The law firm should have already established a client file destruction policy. The attorney’s client file has two general purposes after a matter is concluded: 1) Retain for the client the records of a recently closed matter should the client need them and 2) to preserve documentation of attorneys properly handling the matter should there be a grievance or other claim filed against the lawyer. The first goal may be accomplished by giving the client a complete copy of the file and obtaining a receipt that the client has received it. The Oklahoma Rules of Professional Conduct do not require a file be retained for a stated period of time. However, the rules do require that records related to trust accounting be retained for at least five years. As a practical matter, a lot of information in the client file involves trust account expenditures. So, many lawyers determine they will retain their closed files for a five-year period after closing or longer. But pay attention to some types of matters, such as a friendly suit involving a minor plaintiff, where a longer file destruction period should be set.

CONCLUSION

There is much to do to properly close a busy law practice. Hopefully, these resources will serve as a starting point for those undertaking this journey. Should you have additional questions concerning this subject, feel free to contact me or Practice Management Advisor Julie Bays, who can be reached at julieb@okbar.org.

Author’s Note: The author appreciates the contributions of OBA General Counsel Gina Hendryx and Ethics Counsel Richard Stevens in reviewing this article prior to publication.

Mr. Calloway is OBA Management Assistance Program director. Need a quick answer to a tech problem or help solving a management dilemma? Contact him at 405-416-7008, 800-522-8060, jimc@okbar.org or find more tips at www.okbar.org/map. It’s a free member benefit.

Originally published in the Oklahoma Bar Journal — May, 2021 — Vol. 92, No. 5