Why Succession Planning Is Vital for All Solo and Small Firm Attorneys of All Ages
Just as a complete estate plan is essential to protect all individuals and their families in the event of an unexpected death or disability, a comprehensive succession plan is critical for all solo and small firm attorneys of all ages and career stages. The Maryland Rules of Professional Conduct 19-301.3 states “[a]n attorney shall act with reasonable diligence and promptness in representing a client.” Furthermore, according to Comment 5 of the Maryland Rules of Professional Conduct 19-301.3:
To prevent neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with applicable rules, that designates another competent attorney to review client files, notify each client of the attorney’s death or disability, and determine whether there is a need for immediate protective action. Cf. Md. Rule 19-734 (providing for appointment of a conservator to inventory the files of an attorney who is deceased or has abandoned the practice of law, and to take other appropriate action to protect the attorney’s clients in the absence of a plan to protect clients’ interests).
The absence of a succession plan can expose a firm to potential malpractice claims. Notably, succession planning is not limited to protecting clients in the event of a lawyer’s death, but also in the event of an attorney’s temporary or long-term disability.
Disability Inactive Status
Pursuant to Maryland Rule 19-739(a), “on information that an attorney has a physical or mental disability or impairment that adversely affects the attorney’s ability to practice law, Bar Counsel may conduct an investigation to determine whether the attorney should be transferred to disability inactive status.” The Rule clarifies that the transfer of a lawyer to disability inactive status is designed to protect the public and rehabilitate the lawyer. It is not a form of discipline.
Rule 19-739(b) establishes the grounds that an attorney may be transferred to disability inactive status. Those are:
- The attorney has been judicially determined to be mentally incompetent or to require a guardian of the person for any of the reasons stated in Code, Estates and Trusts Article, § 13-705 (b), or, in accordance with law, has been involuntarily admitted to a facility for inpatient care treatment of a mental disorder.
- A physician licensed to practice medicine in the United States with special knowledge or training relating to the nature and causes of the disability or impairment has examined the attorney and determined the attorney is incapacitated as defined by Rule 19-701 (m); or
- A circuit court has entered an order appointing a conservator pursuant to Rule 19-734.
The procedure for an attorney to be transferred to disability inactive status begins with a confidential petition. As noted in Rule 19-739(c), “[w]ith the approval of the Chair of the Commission, Bar Counsel may file a petition to transfer an attorney to disability inactive status.” The petition is filed in the Supreme Court of Maryland and, as established in Rule 19-739(c), shall be sealed and stamped “confidential”. The Order of Transfer to Disability Inactive Status is the only document that should be open to inspection by the public.
Following the filing of the petition, the Supreme Court of Maryland orders the attorney to show cause, within 15 days, why he or she should not be immediately transferred to disability inactive status. Subsequently, pursuant to Rule 19-739(d), the Court may enter an order:
- Immediately transferring the attorney to disability inactive status, pending further order of the Court
- Designating a judge pursuant to Rule 19-722 to hold a hearing in accordance with Rule 19-727; or
- Containing any other appropriate provisions.
Bar Counsel’s Request for a Conservator
Maryland Rule 19-734 provides:
If (1) an attorney dies, disappears, has been disbarred, suspended, or transferred to disability inactive status, or is incapacitated or has abandoned the practice of law, (2) there are open client matters, and (3) there is not known to exist any personal representative, partner, or other individual who is willing to conduct and capable of conducting the attorney’s client affairs, Bar Counsel may file a petition requesting the appointment of a conservator to inventory the attorney’s files and to take other appropriate action to protect the attorney’s clients.
According to the committee report to Rule 19-734, the task of dealing with the attorney’s trust accounts and client matters becomes the responsibility of the conservator. As noted in Rule 19-734 (above), Bar Counsel may file a petition to request the appointment of a conservator if there is no known “personal representative, partner or other individual who is willing to conduct and capable of conducting the attorney’s client affairs.” Therefore, it is prudent for all solo and small firm attorneys to designate a trusted colleague to serve as “backup” or “surrogate attorney” to step in and pick up the attorney’s files should the attorney unexpectedly die or become disabled. Appointing a backup attorney would not only protect your clients but also prevent Bar Counsel from having to intervene to request the appointment of a conservator.
Alternatives to a Conservatorship via Succession Planning
Regardless of whether a lawyer winds down his or her practice before retirement or whether a backup attorney or conservator is needed, the issue of how to deal with client files is a sensitive matter to navigate. As the client is the one that “owns” the attorney-client privilege, that privilege survives even the death of the client. All attorneys should have a closed matter client file retention policy. That policy should include how to handle client files in the event of the death or disability of the attorney. The Maryland State Bar Association and American Bar Association have put out guidance that attorneys should familiarize themselves with when making decisions regarding their personal file retention policy for both paper and digitally preserved files. Lastly, any “backup” attorney must perform a conflicts check before undertaking representation of new clients.
Selling a Law Practice
Another issue regarding succession planning is the potential sale of a law firm by a retiring attorney. Historically, the sale of a law practice in Maryland was prohibited. Now, pursuant to Rule 19-301.17, a Maryland law practice, including goodwill, may be sold if the following conditions are met:
- Except in the case of death, disability, or appointment of the seller to judicial office, the entire practice that is the subject of the sale has been in existence at least five years prior to the date of sale;
- The practice is sold as an entirety to another attorney or law firm; and
- Written notice has been mailed to the last known address of the seller’s current clients regarding:
A. the proposed sale:
B. the terms of any proposed change in the fee arrangement;
C. the client’s right to retain another attorney, to take possession of the file, and to obtain any funds or other property to which the client is entitled; and
D. the fact that the client’s consent to the new representation will be presumed if the client does not take any action or does not otherwise object within sixty (60) days of mailing of the notice.
As noted in the comment section to Rule 19-301.17, “[t]he practice of law is a profession, not merely a business. Clients are not commodities that can be purchased and sold at will.”
Zachary W. Worshtil is a Partner at the Law Office of Ralph W. Powers, Jr., P.C. He is also a member of the PGCBA Board of Directors and co-chair of the Probate, Estates, Trusts & Elder Law Section. He concentrates his practice primarily in estate planning, estate and trust administration, and probate litigation.