Law practices close all the time. Partnerships dissolve. Lawyers leave their jobs. Whether an attorney is simply moving on or shuttering their practice, they cannot abandon their responsibilities or clients. Doing so could lead to inadvertent violations or outright disregard for the ABA rules and standards, creating an entire series of new or unanticipated problems.
Dennis Szafran, an attorney out of Florida is under disciplinary revocation after he abruptly closed his firm and deserted his practice with nearly 800 clients. He told a judge earlier this year he was working to withdrawal from his cases and that he had “no funds or… any assets held in my name or my firm’s name or trust account.” Szafran was unable to refund his clients the fees they paid for services they did not receive. He now finds himself unable to practice law. Szafran can seek readmission to the bar in 5 years.
What’s at risk?
Closing a law firm does not omit an attorney from applicable ABA rules. And because closing a law firm does not always mean a disbarment, there is a lot to lose in terms of an attorney’s career. Attorneys going through a closure process still must consider ABA rules such as Rule 1.4(a) of the Model Rules of Professional Conduct in which a lawyer may not withhold information to serve their own interest or convenience. Consider also rule 1.15(a) that requires an attorney to preserve property and records for five years post-termination or representation. Violating these critical ABA requirements could result in lawsuits from clients, suspension and/or disbarment.
Taking the correct steps
Closing a law firm is not a quick process. It requires planning, otherwise attorneys risk making simple clerical mistakes with significant consequences. Take note of the following high-level steps to consider when closing a law firm.
- Take inventory: Attorneys should understand what records and files they have in their possession for both open and closed cases. Most law firms will have this information already organized, in which case they should get familiar with which cases they will need to be withdrawn from, associated deadlines and more. Other records to account for might include financial accounts, leases, credit cards and computer access and data. The more well-rounded view an attorney has of their firm, the better. Attorneys should also take note of the documents they will have to maintain and for how long per their local jurisdictions.
- Prepare a timeline: Attorneys should establish a timeline to close their firm that includes when they will notify clients, employees and all necessary parties, when accounts will close, when the firm will cease operations as well as other additional touchpoints that will help them stay on track. A final closure date should be based on work already being done in the firm. While some attorneys will have a shorter timeline than others, they should ensure their clients are adequately represented.
- Act: Attorneys should hold themselves accountable to the timelines they establish. Closing a law firm is not an easy decision, but ensuring every task is completed while communicating transparently and winding down cases can quickly become overwhelming. Attorneys should remain diligent and stick to their timelines to avoid any unnecessary obstacles.
- Maintain insurance policies: Insurance coverage is another important factor in closing a law firm. For example, attorneys must maintain their malpractice insurance throughout the closure process to ensure they are covered should a client sue. An insurance professional who specializes in the legal space can help attorneys ensure they have the correct levels of coverage, as well as ensuring any long-tail liability issues are appropriately addressed to protect the attorney from future harm for past actions.
An abrupt departure from the practice of law rarely works in an attorney’s favor. Szafran learned this the hard way. Abandoning your clients and practice for expediency can have career and personal finance altering impacts. Fortunately, when done right, winding up your legal practice could just be another bump in the road. For those attorneys who are nowhere near closing their firms, it is always advisable to take inventory of a business on an annual or semi-annual basis. And should they ever find themselves preparing for closure, doing so will be that much easier with this type of foundational information already established.