Vol. 32, No. 6, 6. ETHICALLY SPEAKING Closing a Law Firm: Part 1 Withdrawal from Representation and File Retention and Destruction.

• Author: By John M. Burman

Wyoming Bar Journal

2009.

Vol. 32, No. 6, 6.

ETHICALLY SPEAKING Closing a Law Firm: Part 1 Withdrawal from Representation and File Retention and Destruction

Wyoming LawyerIssue: December, 2009ETHICALLY SPEAKING Closing a Law Firm: Part 1 Withdrawal from Representation and File Retention and Destruction(fn1)By John M. BurmanAll law firms(fn2) end eventually. If the firm is a sole proprietorship, it ends when the lawyer retires or dies. If the firm has more than one lawyer, it may continue for a long time, but it will ultimately dissolve, become part of another firm, or come to some other end. If the "firm" is part of a business or an organization of some sort, it may last for a very long time. If the firm has multiple members or is some organization that will last a long time, the issues inherent in closing a practice may not be as crucial as they are to small firms, especially to solo practices. Nevertheless, every lawyer is, according to the Wyoming Rules of Professional Conduct ("the Rules") a "public citizen." Accordingly, he or she "should seek improvement of the law, access to the legal system, the administration of justice and the quality of service rendered by the legal profession."(fn3) All lawyers should, therefore, be concerned that the closure of a firm does not leave clients out in the cold, throwing the legal profession into even greater disrepute.

Whatever the reason for a firm's closing, it cannot close overnight. The process will take many months, if not more, and may involve significant expense. Both the amount of time and the expense can be minimized if lawyers will organize their practices properly, and if they will develop a plan to be implemented if the lawyer unexpectedly dies or otherwise becomes unable to practice law. While few of us want to admit that something very bad could happen very suddenly, it may. And there is nothing to be gained, and much to be lost, by not planning for that all-to-real possibility.

The Ethical Framework

The Rules do not address the closure of a firm (the term "firm" includes a solo practitioner). The closest they come is in Rule 1.16, which discusses a lawyer's duties when the lawyer-client relationship is terminated (which is one result, of course, of a firm's closing). When such a relationship ends, "a lawyer shall take steps to the extent reasonably practicable to protect a client's interests . . ."(fn4) The obligation applies regardless of how or why the relationship ends.(fn5)

As the duty to take reasonable steps to protect a client's interests applies even when a lawyer is "unfairly discharged,"(fn6) it seems logical that the duty applies when a firm closes. The firm must, that is, take "reasonable steps" to protect the interests of all its clients (former clients are covered by Rule 1.9, Duties to former clients)" Perhaps most importantly for a firm that is closing is the duty of confidentiality that is owed to all current(fn7) and former(fn8) clients, and which never ends.(fn9) What to do with client files is a major issue, which is discussed in detail below.(fn10)

In Wyoming, as in most jurisdictions, the practice of law was traditionally done by solo practitioners or partnerships with a few lawyers (both of which fall within the current definition of "firm" in the Rules.(fn11)) Now, law firms may be very large, with hundreds, or even thousands of lawyers (the largest private firms in Wyoming still do not exceed 20 lawyers, though much larger firms, such as Holland and Hart, LLC, which has its main offices outside the state, have branch offices in Wyoming.) The largest "firm" is the Wyoming Attorney General's office. Whether the firm is private or public, large or small, the same general ethical and legal(fn12) principles apply. (Not only do the Rules not distinguish among types of organizations, with the exception that government lawyers are sometimes held to somewhat different standards,(fn13) the same issues will arise regardless of the type or size of firm involved if the firm closes).

When a firm closes for whatever reason, it has two types of clients: current ones and former ones. Not surprisingly, lawyers owe more duties to current clients than to former ones, so the category into which a client fits is vital. (Classifying clients as former or current will be much easier if the firm has followed the practice of using engagement and closing letters.(fn14)) If the status of a client is unclear, he, she, or it, should be treated as a current client since the burden is on the lawyer to clarify the status and nature of the relationship.(fn15)

Current Clients

The two main duties a lawyer owes to current clients are the fiduciary obligations of confidentiality and loyalty, duties "predating the ABA Canons of Professional Ethics promulgated in 1908."(fn16) (The same general duties are owed to former clients, though the parameters of the duties are different.) In addition to the ethical duties, lawyers have a legal duty to exercise "that degree of care, skill, diligence and knowledge commonly possessed and exercised by a reasonable, careful and prudent lawyer . . . in this jurisdiction."(fn17)

As noted above, a lawyer's duties to a client do not end when the lawyer-client relationship ends. "Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests . . . ."(fn18) The word "reasonably" is in bold as it is defined; it means "the conduct of a reasonably prudent and competent lawyer."(fn19)

The Commentary to Rule 1.16 offers little guidance about what the rule really means, saying only that a lawyer "must take all reasonable steps to mitigate the consequences to the client [of the lawyer's withdrawal]."(fn20) The assertion that a lawyer must take "reasonable" steps begs the question, what is "reasonable?" The suggestions that follow in this column and the next one are an attempt to answer that question.

Cases in "Which the Firm Has Entered its Appearance in Court

The first question to ask when determining what is "reasonable" regarding a current client is whether the firm has entered an appearance before a tribunal on behalf of that client. In answering that question, it is useful to remember that a lawyer in Wyoming may enter an appearance in court: (1) "By attending any proceeding as counsel for any party;" (2) "By permitting the attorney's name to appear on any pleadings . . . ;" or (3) "By a written appearance.."(fn21) It does not matter how the entry is done. Once in a case, a lawyer "shall be considered as representing the party . . . for whom the attorney appears for all purposes,"(fn22) and more importantly for a lawyer who wishes to terminate a lawyer-client relationship, the lawyer may not withdraw from the case without the permission of the court.(fn23) The Uniform Rules for District Courts, which apply to Circuit Courts too,(fn24) provide that except in "extraordinary circumstances," withdrawal will be conditioned "upon the substitution of other counsel by written appearance [or] . . . upon a statement submitted by the client acknowledging the withdrawal of counsel for the client, and stating a desire to proceed pro se."(fn25) Some judges are more willing to allow withdrawal than others, and the best approach for any lawyer is simply to know how the judge in question views motions to withdraw (timing is critical; the closer to trial, the less likely a court is to grant a motion to withdraw).

One of the benefits of having partners, is that one of them will probably fill in when necessary. Although practicing alone, a solo practitioner should have an arrangement with one or more other lawyers to fill in for each other should that become necessary. (A solo practitioner who wishes to form some sort of arrangement should make sure that any other lawyer with whom he or she gets involved has appropriate malpractice insurance.) When a firm is planning to close, or when a lawyer who is part of a firm intends to leave the firm,(fn26) for whatever...