Succession Planning for Lawyers and Law Firms: Not Just a Good Idea, Now Required!
Effective January 1, 2016, Arizona lawyers must have a succession plan. Yes, that’s must.
The Arizona Supreme Court has added a new duty in Rule 41, Ariz. R. Sup. Ct.:
The duties and obligations of members shall be…[t]o protect current and former client interests by planning for the lawyer’s termination of or inability to continue a law practice, either temporarily or permanently.
It added a comment explaining this new duty:
[2] Lawyers must plan for the possibility that they will be unable or unwilling to discharge their duties to current and former clients or to protect, transfer and dispose of client files, property or other client-related materials. As part of their succession plan, solo practitioners should arrange for one or more responsible transition counsel agreeable to assuming these responsibilities. Lawyers in multi-lawyer firms and lawyers who are not in private practice, such as those employed by government or corporate entities, should have a similar plan reasonable for their practice setting.
This was among the rule changes the State Bar proffered in a rule-change petition it filed last January as the result of its Succession Planning Task Force. The Court, at its December 15, 2015, rules conference, adopted many of the State Bar’s proposed changes. Here's the Court’s order.
The Court adopted the State Bar’s proposed language for the new Rule 41(j), although it slightly changed the State Bar’s proposed comment language. The State Bar had proposed that the comment explain that new Rule 41(j) require, at a minimum, identifying an active lawyer to assume successor duties. In the new comment, the Court instead says lawyers “should” arrange for “responsible transition counsel.”
Why did the State Bar propose this addition? The rule-change petition explained:
The lack of succession planning by lawyers has directly impacted the State Bar because many lawyers who have died, disappeared, become disabled or been disbarred or suspended have left either an ongoing practice that needs to be closed down or have abandoned client files. A lawyer who dies suddenly may leave hundreds of active files and clients who need to be notified. A lawyer who has been disbarred may abandon boxes of files with a landlord or storage facility who is not being paid to keep those files safe…..
Nothing requires all lawyers – no matter their practice setting -- to adopt a succession plan. ABA Formal Op. 92-369 suggests that a sole practitioner have a backup lawyer named to notify the lawyer’s client in the event the lawyer is unable to practice. Ariz. Ethics Op. 04-05 advises that a prudent lawyer would make arrangements to administer the lawyer's trust account if the lawyer dies or becomes disabled.
It appears to be time to add a professional obligation that clearly obligates all members to plan for their termination of or inability to continue a law practice....
What this new provision means for you
So what does this new obligation mean for Arizona lawyers? In short, plan for what happens if you get hit by a bus and as a result either die or become incapacitated.
Let’s assume you’re a solo criminal-defense lawyer who has been in a serious car accident and is now hospitalized.
Who will contact your clients – whether they are in or out of custody – to tell them that you’re incapacitated and cannot attend their hearings today or this week?
Who will file appropriate notices to advise the court that you’re in the hospital
Who will send out your statements to private-pay clients?
Who will pay your office rent and other expenses that are due this week?
Who will field calls from clients and potential clients seeking your legal help?
Even if you have employed non-lawyer help, you need to leave instructions for the person to execute.
Take the scenario one more step: you have died as a result of the car accident. It’s easy and snarky to say that if that happens, you will no longer care what happens to your law practice. But your surviving spouse or life partner or some other family member will care. Someone you love – who also is grieving your death -- will be burdened with closing down your practice and fielding calls and dealing with your files. You need to have a plan in place.
What if you’re in a multi-lawyer law firm? Your firm still needs a plan. Toddlers drown in swimming pools even when lots of people are around because no one is the designated watcher; everyone may assume everyone else is watching. If something happens to one of your lawyers, attending to that person’s practice may get lost in shuffle because everyone thinks someone else will handle it. Maybe even consider instituting a buddy system of sorts.
As a result of the Succession Planning Task Force, the State Bar produced a succession-planning handbook to help you with this process. You can find the handbook, which has downloadable forms, here.
The Supreme Court also adopted….
The State Bar also proposed streamlining and clarifying Rules 66 through 69, Ariz. R. Sup. Ct., under which a conservatorship may be imposed on the practice of a lawyer or former lawyer.
If no family member, friend or other lawyer is available to do the work, the State Bar is effectively left with no choice but to take control over a deceased or incompetent lawyer’s practice or retrieve the boxes abandoned by a disbarred lawyer to ensure that the client files are safeguarded, possibly returned to the clients, and then destroyed properly at the appropriate time. Because the State Bar’s mission explicitly includes serving the public, the State Bar cannot take the risk that the files may end up simply dumped into a Dumpster, with client information at risk and available for all to see.
Most of the new rule changes are, to some extent, inside baseball and most lawyers won't have any reason to deal with these rules. The new rules streamline the process that the State Bar must use when it takes over abandoned files, removes burdensome notification procedures, and shortens holding periods. The changes, however, should reduce State Bar conservatorship expenses.
What the Supreme Court didn’t adopt
The State Bar also proposed adding:
New comments to ERs 1.15 and 1.16, Rule 42, Ariz. R. Sup. Ct., explaining lawyer obligations to safeguard client documents and return client-provided documents to clients; and
A requirement as new Rule 32(c)(13), Ariz. R. Sup. Ct., that lawyers in private practice disclose, on their annual dues statement, whether they have a successor counsel and the name of that person.
The Court did not adopt these proposals.