MCLE Self-Study

IMPORTANT NOTICE: This article is provided solely for research and archival purposes. MCLE self-study credit is no longer available. Even if you follow the instructions and submit payment you will not be granted MCLE self-study credit. Please note that low-cost MCLE is provided by the California Lawyers Association, pursuant to Business and Professions Code section 6056.

Read this article and take the accompanying test to earn one hour of Minimum Continuing Legal Education credit. Follow instructions on test form. This month's article and test provided by the State Bar's Law Practice Management Section

by Walton M. Phillips

When the time comes to retire or close down a law practice, sole practitioners face problems that those in partnerships or other forms of group practice do not have. While much of this self-study package applies to all attorneys, a special emphasis is made regarding the sole practitioner. This is only a partial checklist that should be supplemented by referring to the source materials cited.

Notification requirements

The decision to close your practice implies that you are quitting the practice of law and that you will perhaps resign from the State Bar, or adopt inactive status with the State Bar. The notice requirements are the same for voluntary or involuntary resignation, inactive status, or disciplinary suspension or disbarment.

Business & Professions Code §6180.1 provides the basic requirements for notification and states in part:

Notice of your cessation of practice "shall be mailed to all persons who are then clients, to opposing counsel, to courts and agencies in which . . . [you had] pending matters with an identification of the matter, to any errors and omissions insurer, to the Office of the Chief Trial Counsel of the State Bar and to any other person or entity having reason to be informed . . ." of your cessation of practice.

This requirement also applies where death, change of status, or discontinuance or interruption of law practice occurs for other reasons -- with, obviously, others performing the duties in the event of the death or incapacity of the attorney.

Where the cessation of practice is due to any order of disbarment, suspension, or acceptance of resignation, the notice must also contain any information required by the order. (B&P Code §6180.1)

If the retiring attorney does not properly comply with the notice requirements prior to death or incompetency, the notice shall be given by the attorney's "personal representative or guardian or conservator of the attorney or, if none, by the person having custody or control of the files and records of the attorney. In other cases, the notice shall be given by the attorney or a person authorized by the attorney or by the person having custody and control of the files and records." (B&P Code §6180.1)

In the event of an attorney's death or incapacity, and whether or not notice of withdrawal from practice has been given, "the Superior Court, on its own motion, or a client of the attorney, or the State Bar, or an interested person or entity may make application to the superior court for the county where the attorney maintains or more recently has maintained his or her principal office for the practice of law, or where he or she resides, for assumption by the court of jurisdiction over the law practice to the extent provided in this article. In any proceeding under this article, the State Bar shall be permitted to intervene and to assume primary responsibility for conducting an action." (B&P Code §6180.2)

Where the State Bar has assumed responsibility, documents and files of the attorney are recorded and maintained for at least five years prior to being warehoused.

Reimbursement of costs and compensation approved by the State Bar may be sought from the affected attorney. (B&P Code §6180.14) In this case, the word "attorney" includes former attorney.

Wills and testaments

Many attorneys hold their clients' wills and probate-related matters in their office safes for security purposes. If an attorney has these documents, they must be returned to the clients or otherwise handled as briefly set forth here.

Probate Code §§730 et seq provide for termination of deposits of probate-related documents such as wills, trusts and other documents related to probate-related matters. Briefly stated, personal delivery of the document to the client or mailing by registered mail or certified mail with return receipt requested, and keeping the return receipt, is acceptable pursuant to Probate Code §731.

Section 732 sets forth three other means of terminating the deposit (transfer to another attorney, mailing notice to your client to reclaim the document within 90 days after mailing, delivering the will to the clerk of the superior court of the county of your client's or depositor's last known domicile.) Section 733 describes the notice you must send to the State Bar of California. These sections must be read and followed for the detailed means of compliance required.

Client file retention

Since the 1980s when the requirement was established that nearly all representation and fee agreements be in writing, it has been generally agreed that all representation and fee agreements should also include a paragraph or disposition of the client's file at the termination of the representation. This language does not help many older practitioners who seldom maintained comprehensive written representation agreements with their clients.

As a result, files have accumulated with little, if any, guidance concerning their retention and the duties of an attorney concerning those files. The State Bar has not expressed an opinion on the required time that an attorney must maintain a client's file. One thing that has been established is that the file belongs to the client (Rule of Professional Conduct 3-700(D)) and not to the attorney, and that is without regard to whether or not a fee has been paid.

The Los Angeles County Bar Association has undertaken to offer guidance on this subject in its Formal Opinion No. 475. This opinion takes the position that a file concerning a civil matter must be maintained for at least five years past the closing date (or if a minor is involved, until the minor reaches majority, if longer), at which time a letter should be sent to the client's last known address informing him or her that the file will be destroyed unless picked up within a reasonable time -- at least 90 days.

This Los Angeles County Bar document opines that files involving criminal matters should be kept for the life of the client unless instructed or authorized otherwise by the client. This is due to the subsequent applicability of enhancing statutes, such as "three strikes," subsequent change of plea and sealing of records, and so forth.

The Bar Association of San Francisco, in its Formal Opinion 1996-1, provides that the client's file belongs to the client and cannot be destroyed at any time without the client's consent. It may be that your only approximation of compliance is to write (certified mail, return receipt requested) to the client's last known address giving him or her 90 days or more to pick up the file or it will be destroyed.

These opinions should be analyzed as to the type of file involved, what the "file" consists of, the importance of the matter, and the ability, or lack thereof, to contact the client and to obtain consent or effect delivery of the file to the client.

File destruction

If return of the file to the client cannot be accomplished, the attorney-client privilege makes the necessity of complete file destruction important. The written fee and representation agreement also is a privileged communication that must be protected as an attorney-client privileged communication. (B&P Code §6149)

There are firms that claim to pulverize or otherwise destroy files. They may issue a "Certificate of Destruction" that is at least some evidence of the disposition of the files and the care employed in disposing of the file and its contents.

Record retention

Attorney trust account record retention is governed by Rule of Professional Conduct 4-100(B), which directs that these records be retained for five years after the final distribution of the trust funds. This period of time may be for State Bar auditing purposes, because for practical purposes these records should be kept for a longer period of time.

Time limitations on discipline

There is no time limit on the State Bar's ability to commence disciplinary proceedings, at least regarding matters that occurred before July 1995. In 1995, the State Bar adopted Rule 504.1 of the Transitional Rules of Procedure of the State Bar of California. This rule establishes a period of limitations of five years on matters that can be the basis for disciplinary proceedings.

It is not a simple period of repose, however, after which disciplinary proceedings cannot be commenced. The five-year period after an act warranting discipline is extended by continued representation of the client, client's lack of discovery of the error of omission, and nine other situations. This period of limitations is applicable only where a disciplinary proceeding is "based solely on a complainant's allegation of a violation of the State Bar Act or Rules . . ."

This rule was not made retroactive. As a result, it is not relevant to any retirement for at least five years. There is no significant statute of repose barring ancient accusations.

Resignation from the State Bar is, with rare exceptions, assurance that no State Bar disciplinary proceedings will be commenced against you.

Tail insurance

It is possible to buy a policy of errors and omissions insurance that will protect, according to its terms, against future claims. The terms of the insurance policy in your last year of coverage usually determine the tail or extended coverage that you will be offered.

Judy Dawson of Capital Workshop in San Francisco quotes one policy that offers an extended claims reporting period for a premium of 100 percent of the expiring policy's last premium for one year's period; 150 percent of the last premium for two years' period; 185 percent of the last premium for three years' period. If the insured is no longer practicing law at the time of the expiration of the policy, a payment of 225 percent of the last year's coverage extends the policy for an unlimited period.

Other policies offer varying extended coverage options, and each has to be examined to determine the extended coverage available. As a result, it is advisable to select your policy for your last year of practice based, at least in large part, on the terms offered for extended coverage.

Substitution and withdrawal

True retirement cannot exist if you remain as attorney of record in some litigation or proceeding pending in court or before some agency. Substitution of attorney takes place with the client's consent. It either substitutes another attorney in your place and stead, or substitutes your client in propria persona, without an attorney of record. (Code of Civil Procedure §284)

Notice of the substitution must be given in writing to the adverse party. (CCP §285)

A substitution of attorney can be rejected by a court if the substitution is under circumstances that will delay a trial. (CCP §128) Flynn v. Fink (1923 60 CA2d 670, 673.

An attorney may not withdraw from representation until:

• Reasonable steps have been taken to avoid reasonably foreseeable prejudice to the client's rights;
• Sufficient time has been given to the client to employ other counsel; and
• The withdrawing attorney has complied with all applicable laws and rules. California Rules of Professional Conduct 3-700(A)(2).

Withdrawal of an attorney in a domestic relations matter often can be accomplished without the client's consent or a court order. This can be done after a final judgment (before any service of pleadings or motion) by filing and mailing a notice of withdrawal to the client and adverse parties. (CCP §285.1)

This section also dictates the information that must be in the notice of withdrawal:

• Date of entry of the final judgment or decree;
• Last known address of the client; and
• The statement that the attorney withdraws as attorney for the client.

Withdrawal in other cases is accomplished by making a noticed motion before the court in which a proceeding is pending. California Rules of Court 376 sets forth the requirements that must be met. A memorandum of points and authorities must be attached and accompanied by a declaration stating in general terms, and without compromising the confidentiality of the attorney-client relationship, why a motion under CCP §284(2) is made instead of filing a consent for substitution of attorneys under CCP §284(1). (California Rules of Court 376(b))

The motion to withdraw must be served on the client and all parties. If served by mail on the client, it must be accompanied by a declaration stating that the address is the current address or the last known address of the client and the attorney has been unable to locate a more current address. (California Rules of Court 376(C))

The order relieving counsel must be served on the client and the parties and inform the client that failure to take appropriate action may result in serious legal consequences and that the client might want to seek legal assistance. This is especially true when withdrawing from representation of a corporation, since a corporation cannot represent itself, except in small claims court. The client's last known address and telephone number must also be in the order.

All of the above is stated in abbreviated fashion. The matter is treated at length in various publications: Witkin's Procedure, Summary; Cal Jur Third; CEB California Procedure Before Trial, among others.

Other matters

Over the years, attorneys may have recorded abstracts of judgments and other documents for their clients. The attorney's address may have been used in a deed of trust that requires a reconveyance.

If the attorney's office is closed, mail sent to that address may never be received. Unless a current list of all such records has been maintained, it is difficult to know how these loose ends should be resolved. Sending change of address notices to those known to the attorney is necessary, but a lengthy practice will leave some unremembered.

Retirement options

When retired, your options are to resign, become an inactive member of the bar or remain an active member. Your choice affects the control the bar has over you. If you do not plan to practice any further, but dislike the notion of cutting all ties with the bar, becoming an inactive member is an option. This is an affirmative step you must take by notifying the State Bar of your desire and satisfying the bar's requirements.

Remaining an active member continues your obligations to pay dues, comply with mandatory continuing education requirements and remain subject to the bar's other requirements as may change from time to time.

Whatever your decision, it is inevitable that you will alternate between enjoying it and regretting it.

Walton M. Phillips, a lawyer since graduating from Hastings College of Law in 1953, has been in solo practice since 1995 in Orinda.