Summary of California State Bar Guidelines for Closing or Selling a Law Practice
The California State Bar’s Guidelines for Closing or Selling a Law Practice provides a comprehensive framework for attorneys navigating the ethical and practical considerations of winding down or transferring a legal practice. Below is a summary of key points for attorneys and law firms to ensure compliance with professional responsibilities:
1. Planning for Closure or Sale
Advance Preparation: Attorneys should plan for unexpected events (e.g., death, disability) or planned closures (e.g., retirement). A succession plan or agreement with another attorney to manage the practice is recommended.
Ethical Obligations: Rule 1.17 of the California Rules of Professional Conduct governs the sale of a law practice, emphasizing client protection and confidentiality.
2. Client Notification and Consent
Timely Communication: Attorneys must notify clients promptly about the closure or sale, providing clear instructions on how to retrieve files or continue representation.
Client Consent: For a sale, clients must consent to the transfer of their matters to the purchasing attorney, with assurances of continued competent representation.
Confidentiality: Attorneys must safeguard client confidences during the transition, adhering to Rule 1.6.
3. Handling Client Files and Property
File Retention and Destruction: Attorneys must follow Rule 1.16(e) for returning client files and property. Files should be retained for a reasonable period (often five years) unless otherwise agreed, and destruction must comply with confidentiality rules.
Original Documents: Original documents (e.g., wills, trusts) require special care, often necessitating delivery to clients or secure storage.
4. Financial and Administrative Responsibilities
Trust Accounts: Attorneys must reconcile and close client trust accounts, ensuring all funds are properly distributed or refunded (Rule 1.15).
Billing and Fees: Outstanding invoices should be finalized, and clients informed of any fee arrangements with the new attorney in a sale.
Malpractice Insurance: Attorneys should consider “tail” coverage to protect against future claims after closure.
5. Sale of a Law Practice
Eligibility: The entire practice or a specific area of practice can be sold to a qualified attorney licensed in California.
Valuation and Terms: The sale agreement should address valuation, client notification, and the transfer of goodwill, ensuring compliance with ethical standards.
Due Diligence: The purchasing attorney must verify the seller’s compliance with ethical and legal obligations.
6. Notifying Other Parties
Courts and Agencies: Attorneys must inform courts, opposing counsel, and relevant agencies (e.g., State Bar, IRS) of the closure or sale.
Professional Contacts: Notify insurers, landlords, and vendors to terminate or transfer obligations.
7. Post-Closure Responsibilities
Recordkeeping: Maintain records of client notifications, trust account reconciliations, and file dispositions for future reference.
State Bar Notification: Update the State Bar with changes in practice status or contact information.
Daniel Horowitz has recently completed the winding down of a major law practice. It involved checking the websites of hundreds of courts and complex accounting and tracing issues. If you need assistance in closing down a practice, especially due to death or disability, Daniel can help. (925) 283-1863