New Hampshire Bar Association
About the Bar
For Members
For the Public
Legal Links
Publications
Newsroom
Online Store
Vendor Directory
NH Bar Foundation
Judicial Branch
NHMCLE

Providing innovative litigation support services in business valuation, financial analyses and forensic accounting to attorneys and clients alike throughout the New England.

Visit the NH Bar Association's Lawyer Referral Service (LRS) website for information about how our trained staff can help you find an attorney who is right for you.
New Hampshire Bar Association
Lawyer Referral Service Law Related Education NHBA CLE NHBA Insurance Agency

Member Login
username and password

Bar Journal - June 1, 1999

Law Practice Management: Succession Planning
Is There a Plan in Place for Your Law Practice?


By:
 

What happens when a lawyer no longer goes to the office? There could be many reasons for this, either voluntary or involuntary. Disability, suspension, retirement and even death - there are many instances by which the unexpected absence may occur - and for the solo practitioner or small firm, such an interruption is a scenario to consider. The Law Practice Management Committee has researched and studied succession planning issues for the last several years. The intent of the information detailed in this article is to empower the solo practitioner or small law office with the ability to plan for an unanticipated interruption in the daily practice of law and to also plan for the eventual winding up of the solo or small law practice.

The apparent absence of resource materials on succession planning for the small law practice suggests that this topic has not been the subject of much formal discussion. The authors invite and encourage further inquiry into this topic and welcome suggestions.

ON A DAILY BASIS - WHAT IF...

The solo practitioner or small law firm has many substantive and administrative challenges that are of lesser concern to larger firms. For the solo practitioner and small law firm, certain administrative aspects of the practice of law are often postponed. Have we really planned for an interruption in the daily practice? What if you as a solo or as the second partner in a firm, were to become disabled? Die? Is your office prepared for a long term interruption?1

Any of the following can leave clients without legal counsel when they need it:

  • Death
  • Disability
  • Relocation
  • Retirement
  • Suspension or disbarment
  • Short-term illness and vacations

Choosing successor counsel in advance is highly recommended by the Law Practice Management Committee (and most malpractice insurance carriers). The successor is referred to as the "backup." The arrangement with the backup can be formal or informal. Among the factors for consideration in any backup arrangement are the following:

  • Area of expertise
  • Case load
  • Billing rates and arrangements
  • Malpractice coverage
  • Compatibility with clients and office staff
  • Profit sharing and responsibility for office overhead
  • Malpractice "tail" coverage

The typical application for malpractice insurance (whether first time or a renewal) asks the applicant to identify a "backup". In naming a "backup" the attorney should consider whether the person named is really a practical backup. Probably no one backup attorney would be appropriate for any seasoned practice. Many solo practitioners practice in three or four areas of law. One might name at least one fellow solo as backup each year on the malpractice application, certainly with notice. However, in real life, the practice areas of the attorney named might not "match". In addition, one must question whether an already established solo or small firm can manage the absorption of an entire practice while still managing its own.

Each attorney, in the small firm or solo setting, should address and evaluate what would happen in the event of an emergency. Clients and cases need to be assigned according to practice areas like family law, employee benefit law, and life planning law. Backups cannot not take assignments outside their practice areas or skills.2 One should consider informing their malpractice carrier of a practical number of backups while making a more thorough attempt at discussing this role with the prospective backups. If the attorney has done a good job establishing practical backups and the execution of a backup plan is necessary, transition issues should be manageable and immediate relief available.3

One should also consider the potential scenarios in which a well thought out backup plan might be needed -- the attorney is in a coma at the local hospital and his or her office desperately needs some attention. Is there a protocol for how to proceed? If an attorney is declared incompetent or incapacitated, the Supreme Court may appoint another to inventory and "assign" his or her files pursuant to Supreme Court Rule 37(14):

(14) Appointment Of Counsel To Protect Clients' Interests:

  1. Whenever an attorney is suspended, disbarred, dies or whose whereabouts are unknown, and no partner, executor or other responsible party capable of conducting the attorney's affairs is known to exist, the court, upon proper proof of the fact, may appoint an attorney or attorneys to make an inventory of the files of said attorney and to take such action as seems indicated to protect the interests of clients of said attorney as well as the interest of said attorney.
  2. Any attorney so appointed shall not be permitted to disclose any information contained in any files so inventoried without the consent of the client to whom such file relates except as necessary to carry out the order appointing the attorney to make such inventory.
  3. Any attorney so appointed shall be entitled to reasonable compensation and reimbursement for expenses incurred.4

In the instance where an attorney dies, note that the rule implies an "executor or other responsible party capable of conducting the attorney's affairs" shall handle the task. While most attorneys have testamentary wills in place to address their personal situations, many have not made similar plans for their law practices. It is also important to consider keeping the backup plan in a prominent place and make one's wishes known to others so that the appointed attorney, or the executor of the estate, can give the plan due weight. Hopefully, a meaningful backup plan will provide guidance (efficiently and effectively) to the person who steps in to manage the succession process.

What happens when another attorney (or responsible person) steps in? In the short-term absence, "pinch hitting" is often times the only way to manage the practice. The pinch hitter must determine which cases may have immediate pending needs, e.g., court hearings, court deadlines, etc. But what of the long term situation, as in the untimely death of the solo practitioner? What is the client told and how is a client sent to another attorney?

When the Supreme Court appoints an attorney to inventory files and refer cases off to other counsel, clients are notified of their prior attorney's situation, and given the option of receiving their files or having them sent to another attorney. The most practical communication includes a "form" that clients can return to the appointed attorney with their decision clearly denoted. Some firms will also forward to clients a "choice letter" when an attorney leaves the firm - giving each client the choice to remain with the firm or to seek other legal counsel. Consistent with our Rules of Professional Conduct, the client makes the choice on the retention of an attorney - clients are not "chattel" to be sold, traded or retained.5

No specific reference to a requirement for succession planning appears the in the New Hampshire Rules of Professional Conduct, yet such a mandate can possibly be inferred. The basic premise of the Rules of Professional Conduct is "the best interest of the client." If the area of law in which a solo practitioner (or the smaller firm) works is reactive and relatively fast paced, a backup plan is certainly in the client's best interest. It is indeed an ethical obligation all solo practitioners and small firms should try to achieve and maintain. Consider an analogous issue for the larger firm when attorneys leave, or in the law firm that dissolves:

The central and overriding concern of the migrating attorney, and the attorneys in the new and old law firms, must be what is in the best interests of the client. All doubts as to ethical resolution of a problem should be resolved with the client's best interest in mind, and the client's consent should be actively sought.6

The Law Practice Management Committee continues to review and consider issues related to the backup plan for the solo practitioner and smaller law firm. It is recommended that every solo practitioner and smaller law firm spend some time planning for the "what if" as an integral part of the practice of law and an ethical obligation to our clients. This plan consists of (1) an effective attorney "backup" (which most often will require more than one); (2) a written succession or backup plan; and (3) maintenance of the plan in a prominent place.

SELLING THE LAW PRACTICE...

Any solo practitioner wishing to step away from an established practice might ask "may I sell my law practice?" During 1998, advertisements appeared in the New Hampshire Bar News indicating that attorneys were trying to "sell" their law practices.

Selling a law practice is complicated by the Rules of Professional Conduct. Primarily, Rule 1.6 requires that a lawyer preserve client confidences and secrets. This is not easily done when the lawyer is "shopping" a law practice to interested purchasers. Rule 1.1 requires that the lawyer be competent to handle the client's case.7 Perhaps the only way an attorney could properly "sell" the practice would be to hire an associate, introduce the new lawyer to all the clients, train the new lawyer to handle competently each case in the office, and arrange for continued payments to the selling or retiring attorney.8 Each client must be notified of the retiring attorney's departure and be given the opportunity to decide if he or she would like to continue with the new lawyer (via the "choice letter" described above).9 This "succession by association" option takes serious planning and considerable time.10

RETIREMENT - CLOSING THE PRACTICE

If the departing attorney does not have the luxury of time or an available associate, the only option may be to close the law practice. In the absence of other resources recommending practical steps, the authors have drawn upon the experience of a diligent New Hampshire solo practitioner and staff. They seem to have "done it right" when the practitioner recently retired.11

This office's process for winding up the practice was consistent with and provided valuable input to the Law Practice Management Committee's study of the subject. In winding up the law practice, there are important considerations and tasks to be accomplished:

  1. Inventory of files/cases and the wind up tasks to be done with each. This will vary with the "closed" file versus the active case. The attorney's practice areas will mandate how to proceed with each client. Some firms have very sophisticated inventory systems - while many still rely solely on the alphabet!
  2. Identify which cases may require formal withdrawal from the Court system. If "wind up" or retirement is planned, then this may not be an issue. It is critical to consider "active" cases - litigation and non-litigation - when proceeding to withdraw from cases and ensure compliance with Rule 1.16 of the Rules of Professional Conduct regarding Declining or Terminating Representation.12
  3. Letter to clients regarding the closing of the practice or retirement. Again, practice areas will impact this communication and the client's options. Similar to the choice letter mentioned above, clients should be given the opportunity to retrieve their file(s) or request direct transfer to another attorney. Important Note: If the office has kept original wills or certain probate documents for clients, this communication tool is critical to effectively return the original testamentary will, probate documents and/or any real estate documents, e.g. mortgages or promissory notes.13
  4. Review of all contractual relations. The attorney should review any active contracts with vendors, insurers, lessees, etc. This review may assist in deciding exactly when to retire and/or wind up depending upon the contractual obligations and their duration.
  5. Trust Accounts and other Client Property entrusted to the attorney. The New Hampshire Rules of Professional Conduct 1.15(a)(2) requires that attorneys keep records of trust accounts and other client property for a period of six (6) years after final disbursement. (See also Supreme Court Rule 50 regarding client trust accounts).14
  6. Retention of client files. Client files must be stored safely and adequately, and there must be a system in place for their retrieval.15 After notifying clients of the retirement, the attorney may still be left with many client files to store and maintain. While technological advances permit data to be saved on CD-ROM, most continue to use the "banker box" method of storage. What is the rule for client file retention? Generally, the attorney must exercise reasonable discretion in determining the length of time for retention or disposition of a file. The nature of one client file may require a longer retention than another. Some files may in fact be indestructible by their very nature.16 Also keep in mind in disposing of a client file, an attorney should protect client confidentiality with respect to the contents.17

    File retention for seven or ten years seems to be an informal local rule. Some law offices "strip" the client files of nonessential information and save only the essential client data indefinitely.18 Important note: One should notify clients of impending destruction as the file is the client's property and the client should be given the option to retrieve his or her file or parts thereof (whether closing a practice or simply "purging" files of the ongoing practice).19
  7. Notification to all others who need to know, e.g., attorneys, other professionals, phone company. If the attorney has been in practice for a number of years, some contacts may be missed and mail may still come. A forwarding address would assist in monitoring any mail that may come "post practice."
  8. Status with the New Hampshire Bar Association. One may also want to take the time to consider whether to stay active in the Bar Association or maintain an inactive status ("inactive retired" is also available if the attorney meets certain requirements).20 If one remains an active member of the Bar Association, one must continue to pay active dues and comply with continuing education requirements.

The ideal plan to retire should begin at least three (3) years prior to the anticipated retirement date, giving one time to decline "long term" cases and begin to wind up those still pending. The actual process of winding up or closing the office, as detailed above, can take up to three (3) to six (6) months to complete. If the wind up is conducted in this manner, the risk of future problems is minimized and the benefits to the clients tremendous.

OTHER THOUGHTS REGARDING BACKUPS AND SUCCESSION PLANNING

For proper identification of appropriate backup candidates or referrals upon retirement, a better knowledge of attorney practice areas would be helpful. This is also consistent with law practice issues identified by the Law Practice Management Committee, including the following:

  • Risk management and loss reduction
  • Professionalism
  • New lawyer mentoring
  • Civility and collegiality among lawyers
  • Networking
  • Marketing
  • Succession planning
  • Professional responsibility

To provide better data for attorneys to identify appropriate successors, the Law Practice Management Committee is recommending that the Bar consider posting on its Website the Bar's pictorial Membership Directory with practice areas listed for each attorney. The database should be accessible by its listed variables, including geographic location.

ENDNOTES

1.

This article discusses "personal" disaster planning as distinguished from "property" disaster planning, e.g., a fire in the office. While both are critical aspects to managing a law practice, the property disaster planning is discussed in many law practice management books and resources. The Law Practice Management Committee has a library at the Bar Center in Concord with numerous books that address property catastrophe planning.

2.

New Hampshire Rules of Professional Conduct Rule 1.1 (1994). See also Endnote 15 of this Article.

3.

The more conservative practice is also to mention who the backup is when drafting fee and engagement letters - but keep in mind that in the event the backup is needed, it is the client's decision to retain that backup.

4.

New Hampshire Supreme Court Rule 37(14).

5.

New Hampshire Supreme Court Rule 37(11) discusses the rules regarding disbarred and suspended attorneys. The last sentence of subparagraph (b) reads: "The notice to be given to the client shall advise the prompt substitution of another attorney or attorneys." This implies that such a substitution must be consented to by the client. New Hampshire Supreme Court Rule 37(11)(b).

6.

"When a Law Firm Splits Up", New Hampshire Lawyer's Weekly, September 10, 1986, drafted by members of the New Hampshire Bar Association's Ethics Committee.

7.

Rule 1.1 Competence...

  1. A lawyer shall provide competent representation to a client.
  2. Legal competence requires at a minimum:
    1. specific knowledge about the fields of law in which the lawyer practices;
    2. performance of the techniques of practice with skill;
    3. identification of areas beyond the lawyer's competence and bringing those areas to the client's attention;
    4. proper preparation; and
    5. attention to details and schedules necessary to assure that the matter undertaken is completed with no avoidable harm to the client's interest.
  3. In the performance of client service, a lawyer shall at a minimum:
    1. gather sufficient facts regarding the client's problem from the client, and from other relevant sources;
    2. formulate the material issues raised, determine applicable law and identify alternative legal responses;
    3. develop a strategy, in collaboration with the client, for solving the legal problems of the client; and
    4. undertake actions on the client's behalf in a timely and effective manner including, where appropriate, associating with another lawyer who possesses the skill and knowledge required to assure competent representation.
      New Hampshire Rules of Professional Conduct Rule 1.1 (1994).

8.

Under the New Hampshire Rules of Professional Conduct, payments are allowed to a former partner or associate pursuant to a separation or retirement agreement. See New Hampshire Rules of Professional Conduct Rule 1.5(g), (1994).

9.

See Rule 1.4 of the New Hampshire Rules of Professional Conduct (1994) regarding Client Communications.

10.

There may be other approaches to selling the law practice permitted by the Rules of Professional Conduct. Another topic for an article of its own at a later date.

11.

Special thanks to Fred Griffin and Anitra Griffin for the input in recently winding up their 10 year law practice - and best of luck!

12.

New Hampshire Rules of Professional Conduct Rule 1.16 (1994).

13.

New Hampshire Rules of Professional Conduct Rule 1.15 (1994)

14.

See New Hampshire Rules of Professional Conduct Rule 1.15(a)(2) (1994) and New Hampshire Supreme Court Rule 50 (1998).

15.

Client file retention issues for both the ongoing firm and retiring firm continues to haunt many of us (large and small firms). A entire topic for another day. See also ABA Comm. On Ethics and Professional Responsibility, Opinion 1380.

16.

Each attorney should also contact his or her malpractice insurance representative to discuss file retention as it may relate to potential claims and/or certain practice areas.

17.

See New Hampshire Rules of Professional Conduct Rule 1.6(a).

18.

See Retention of Client Files: How Long is Long Enough?, New Hampshire Bar News, January 1, 1997 and Records Retention Policies: Handle with Care, New Hampshire Bar News, November 20, 1996. See also recently published Ethical Considerations and the Retention of Client Files, New Hampshire Bar News, April 21, 1999.

19.

See New Hampshire Rules of Professional Conduct Rules 1.4 and 1.15.

20.

New Hampshire Bar Association Constitution, Constitution Excerpt: Article II, and New Hampshire Bar Association Bylaws, Bylaws Excerpt: Article II.

The Authors

Attorney Katherine Bucklin Stearns is a solo practitioner in New London, NH.

Attorney Frank B. Mesmer is the founder of Mesmer Law Offices, Manchester, NH, a three-attorney firm.

 

 

NHLAP: A confidential Independent Resource

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
email: NHBAinfo@nhbar.org
© NH Bar Association Disclaimer