ETHICS AND THE SOLE PRACTITIONER: A GUIDE FOR SUCCESSION PLANNING
By: Sandra L. Clapp
It’s Monday morning and your telephone rings. You receive the unexpected news that your friend and close colleague was injured in an automobile accident during a short weekend trip. Your injured friend, a sole practitioner with a small office staff, is unconscious and cannot provide directions to the employees. The call comes from a frantic staff member in your colleague’s law office who is lost, scared, and is seeking your advice. You learn during this call that your friend had informed his staff to contact you if something went wrong. Unfortunately, this is news to you.
Attorneys advise their clients to plan, help their clients to organize their affairs, and assist their clients through many legal and practical hurdles in business and personal matters. Attorneys are paid to plan and strategize and organize and develop alternate courses for their clients. Why is it then that planning for an emergency for this same independent and organized attorney isn’t a priority? For many sole practitioners, the attorney wears many hats that may include bookkeeper, file clerk, business manager, and marketing director. In a world where information moves faster, clients demand more with less notice, and technology makes us available 24 hours a day almost anyplace in the world, the demands of those who make the most noise get handled first and many attorneys, particularly sole practitioners, leave their individual needs at the bottom of the list.
Before you launch into this process or ignore your situation any longer, it might surprise you to learn that you may be violating your ethical responsibilities to your clients through your delinquency or inadequacy in planning. There are many ethical rules that relate directly and indirectly to the obligations of a sole practitioner regarding succession or emergency planning. This article is intended to summarize ethical rules and considerations relating to succession planning. Practical steps and guidance are provided in a separate article in this issue prepared by Stephen F. Smith. In addition, the Idaho State Bar Professionalism and Ethics Section is working on developing a full handbook with forms and guidelines that will be presented in an upcoming course.
OVERVIEW OF ETHICAL CONSIDERATIONS
The Idaho Rules of Professional Conduct, both past and current, touch on several ethical considerations related to succession planning. Some of these ethical considerations may seem rather basic and obvious, but nonetheless make it clear the responsibilities an attorney has to a client to proactively address the likely problems that will arise in the event of an attorney’s death or disability. With the adoption of the revised Idaho Rules of Professional Conduct effective July 1, 2005, the addition of a new comment to Rule 1.3 has made clear that the planning discussed in this article became mandatory for sole practitioners to comply with their ethical obligations. In addition, other ethical provisions are involved in the succession planning analysis.
To begin, Rule 1.1 Competence states, “[ a] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” Upon death or disability of the attorney, the duty of competent representation suggests, at a minimum, that the attorney ensures that someone will step in to avoid client prejudice that could occur if telephones go unanswered, mail goes unopened, or deadlines pass without attention.
Rule 1.3 Diligence, Commentary 4 explains that “[u]nless the relationship is terminated as provided in Rule 1.16, a lawyer should carry through to conclusion all matters for a client.” Taken literally and in order to “carry through to conclusion all matters for a client,” the attorney should anticipate and address the needs of his/her client upon death or disability. Commentary 5 of Rule 1.3 now makes it very clear that “[t]o 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 lawyer to review client files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action.” Emphasis added. It is worth paraphrasing here that an attorney can meet his or her ethical obligations for succession planning under the ethical dictate of diligence by achieving the following:
- Prepare a plan
- Designate another competent attorney to review client files
- Notify clients upon death or disability
- Determine need for protective action
Rule 1.4 (a) (2) Communication states that “[a] lawyer shall reasonably consult with the client . . . about the means by which the client’s objectives are to be accomplished.” The “means” could include using an engagement letter to convey generally what will happen to a client’s documents or file in the event the attorney should die or become disabled. Subparagraph (b) of Rule 1.4 further confirms that “[a] lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” This subparagraph may require that the client understand that if some calamity should occur to their attorney, prior arrangements have been made to have an attorney contact the client who, among other things, will either help the client identify another attorney or possible offer their services to the client.
Rule 1.6 Confidentiality of Information, Commentary 17 provides that “[a] lawyer must act competently to safeguard information relating to the representation of a client against inadvertent or unauthorized disclosure by the lawyer or other persons who are participating in the representation of the client or who are subject to the lawyer’s supervision.” Arrangementsshould be made prior to an attorney’s death or disability to form a succession plan to keep client information confidential. For example, the agreement used between the attorney and the backup attorney who will administer the succession plan should address confidentiality of client matters. In addition, the firm policy manual or employee training should address confidentiality during emergency situations. If not addressed, in the perhaps chaotic period that would follow the death or disability of the attorney, client confidentiality might be breached by office staff believing the circumstances are extraordinary and that it might be permissible to disclose client information outside the normally established procedures.
Similarly,Rule 5.3 (b) Responsibilities Regarding Nonlawyer Assistants makes it clear that “a lawyer with supervisory authority over a non-lawyer must make efforts to ensure the non-lawyer’s conduct is compatible with the professional obligations of the lawyer,” which would include that all client information is confidential unless the client authorizes disclosure. To be more specific, in Commentary 2 under the same rule confirms that “lawyers with managerial authority within a law firm [are required] to make reasonable efforts to establish internal policies and procedures designed to provide reasonable assurance that nonlawyers in the firm will act in a way compatible with the Rules of Professional Conduct.”
The role and obligations of the attorney who administers the succession plan is another important consideration under the ethical provisions. Rule 1.7(a) Conflict of Interest states that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” A decision should be made during the succession planning stages whether or not the attorney will be representing the deceased or disabled attorney or will be attempting to represent the deceased or disabled attorney’s clients directly. In the event the backup attorney is attempting to undertake representation of the deceased or disabled attorney’s clients, the assisting attorney should conduct a conflicts check to determine if he or she already represents a client that might be adverse to the deceased or disabled attorney’s clients.
The planning of the succession of the sole practice should also taken into consideration that if the backup attorney is representing the deceased or disabled attorney’s clients, he or she may be required to disclose to the clients any malpractice discovered by the backup attorney.
The American Bar Association, through the Standing Committee on Ethics and Professional Responsibility, issued Formal Opinion 92-369 entitled “Disposition of Deceased Sole Practitioner’s Client Files and Property,” which provides in part as follows:
To fulfill the obligation to protect client files and property, a lawyer should prepare a future plan providing for the maintenance and protection of those client interests in the event of the lawyer’s death. Such a plan should, at a minimum, include the designation of another lawyer who would have the authority to review client files and make determinations as to which files need immediate attention, and who would notify the clients of their lawyer’s death.
A lawyer who assumes responsibility for the client files and property of a deceased lawyer must review the files carefully to determine which need immediate attention. Because the reviewing lawyer does not represent the client, only as much of the file as is needed to identify the client and to make a determination as to which files need immediate attention should be reviewed. Reasonable efforts must be made to contact all clients of the deceased lawyer to notify them of the death and to request instructions in accordance with Rule 1.15.
The ethical guidelines in this article make clear that each attorney, and particularly the sole practitioner, has an ethical obligation to plan for the transfer of client matters in the event of death or disability.
As a sole practitioner, it is an understandable concern that the time to complete this planning process will take away from your short-term client obligations. However, your clients are counting on you to keep their interests in mind and, most importantly, your ethical directives require this succession planning.
- Idaho Professional Rules of Conduct (effective 7-1-04)
Rule 1.1 Competence
Rule 1.3 Diligence, Commentary 4 & 5
Rule 1.4 A (2), Communication
Rule 1.4 B Communication
Rule 1.6 Confidentiality of Information, Commentary 17
Rule 5.3 (b) Responsibilities of Nonlawyer Assistants
Rule 5.3 Responsibilities of Nonlawyer Assistants, Commentary 2
- Planning Ahead: A Guide to Protecting Your Clients Interests, Oregon State Bar, April 1999, P. 30 & 79
- American Bar Association – Standing Committee on Ethics and Professional
Responsibility, Formal Opinion 92-369, Disposition of Deceased Sole Practitioner’s Client Files and Property
Sandra L. Clapp is a sole practitioner in Eagle, Idaho. She graduated from the University of Idaho in 1988 and received her J.D. from the University of Idaho Law School in 1991. Ms. Clapp served as a law clerk to the Honorable Stephen S. Trott of the Ninth Circuit Court of Appeals and has been in private practice in both large and small firms in Boise, Idaho, since 1992. Ms. Clapp entered the ranks as a sole practitioner in March 2004, opening her office in Eagle. She is the past chair of the Idaho Law Foundation Continuing Legal Education Committee, the past chair of the Idaho State Bar Section of Taxation, Probate and Trust Law, and is currently serving on the governing board of the newly formed Section of Law Practice Management.