Guidance on Closing Your Office
You’re closing your practice to take early retirement, move out of state or accept a new job.
How to break the news to your clients? What to do with their files? How about all those closed files stored in the back room?
Here are some tips on winding down wisely:
- Plan ahead. Give yourself as much lead time as possible.
- Take down your shingle. Shut down your website, cancel your advertisements and discontinue all ongoing services. Be sure to remove signage, stationery and other indications that you are still in practice.
- Notify the State Bar. Report your new mailing address and telephone number. Will you remain an active Bar member or change to inactive status? Check the Rules and Regulations for details on membership classification.
- Contact your malpractice insurance carrier. Tell the company when you will be leaving your practice. Ask what is required to formally cancel your current policy. Request a refund of unearned premium. Consider buying an extended reporting endorsement, also called a tail policy. This provides protection for claims reported after the expiration of the underlying policy. Typically, tail coverage must be purchased within a short period after the expiration of the underlying policy. Some companies offer tail policies free or at discounted rates for longtime insureds.
- Notify your clients. Let them know that you are closing your practice and the effective date. Tell them how to pick up your files. Make sure you read and follow Rule 1.16 of the Rules of Professional Conduct: “Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect the client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled, and refunding any advance payment of fee that has not been earned.” Help clients locate a new lawyer if needed. If the case is in litigation, obtain permission from the court to withdraw and/or substitute counsel.
- Notify successor counsel. Most applications of malpractice insurance require solo attorneys to designate a successor to take over active cases when they retire or leave practice. If you have a successor, notify them well in advance of your departure date. Confirm in writing all files that are being transferred. Remember that clients have the absolute right to the lawyer of their choosing regardless of your successor plans. Discuss fees with successor plans and put that agreement in writing. Make sure the client is fully advised. Follow Rule 1.5 and ethics rulings RPC 205 (referral fees) and RPC 148 (division of fees between lawyers).
- Create a case inventory. Make a master index of active files. For each file on the list, prepare a written summary of what needs to be done to conclude the case. This should include the client name, file number, nature of legal matter and current status. Keep a copy of each summary in a three-ring binder or similar reference book.
- Retain closed files at least six years. See the risk management article on File Retention.
- Create an inventory of outstanding fees and receivables. Develop a plan and timeline for collecting outstanding fees. Review the Fair Debt Collection Practices Act. Think twice before suing for an unpaid fee. Notify clients of the State Bar’s nonbinding Fee Arbitrations Program at least 30 days before filing suit.
- Wind down your trust account. Review the State Bar’s Trust Account Guidelines (1.15-1 through 1.15-4). Make sure the account if properly reconciled and that all required records are safely stored. Maintain records at least six years. Note that the rules require a written accounting to each client of trust fund activity upon the complete disbursement of all funds.
- Thinking of selling your practice? Follow the requirements of Rule 1.17.
