N E W Y O R K S T A T E B A R A S S O C I A T I O N NYSBA Planning Ahead Guide How to Establish an Advance Exit Plan to Protect Your Clients’ Interests in the Event of Your Disability, Retirement or Death Law Practice Management Committee Subcommittee on Law Practice Continuity Second Edition NYSBA Planning Ahead Guide How to Establish an Advance Exit Plan to Protect Your Clients’ Interests in the Event of Your Disability, Retirement or Death Law Practice Management Committee Subcommittee on Law Practice Continuity Second Edition Copyright © 2015-2016 New York State Bar Association ISBN: 1-57969-475-6 Product Number: 41700E THE PLANNING AHEAD GUIDE, 2d ED. TABLE OF CONTENTS Table of Contents Page Introduction....................................................................................................................................................1 The Planning Ahead Guide: How to Establish an Advance Exit Plan to Protect Your Clients’ Interests in the Event of Your Disability, Retirement or Death.........................................................3 Appendices | Sample Checklists and Forms 1. What If? Answers to Frequently Asked Questions............................................................................11 2A. Checklist for Lawyers Planning to Protect Clients’ Interests in the Event of the Lawyer’s Disability, Impairment, Incapacity or Death...........................................................16 2B. Checklist for Closing Your Own Office............................................................................................18 2C. Checklist for Closing Another Attorney’s Office..............................................................................20 2D. Checklist of Concerns When Assuming Temporary Responsibility for Another Attorney’s Practice (Disability or Suspension).................................................................................24 2E. Checklist of Concerns When Assuming the Responsibility for Another Attorney’s Practice (Purchase or Acquisition)..................................................................................27 2F. Checklist for the Fiduciary of a Solo Practitioner.............................................................................30 2G. Checklist for Lawyers’ Business Disaster Planning and Recovery...................................................32 3. Agreement to Close Law Practice in the Future................................................................................38 4. Authorization and Consent to Close Law Office...............................................................................45 5. Limited Power of Attorney to Manage Law Practice at a Future Date.............................................47 6. PCS and PLLCS: Appointing the Appropriate Agent to Manage a Solo Law Practice in the Event of Death, Disability, Incapacity or Other Inability to Practice Law......................................................................................................................................51 7A. Letter from Planning Attorney Advising That Lawyer Is Closing Law Office.........................................................................................................................................55 7B. Letter from Closing or Assisting Attorney Advising That Lawyer Is Unable to Continue Law Practice...................................................................................................................56 7C. Letter from Firm Offering to Continue Representation.....................................................................57 7D. Authorization for Transfer of Client File...........................................................................................58 7E. Request for File..................................................................................................................................58 TABLE OF CONTENTS THE PLANNING AHEAD GUIDE, 2d ED. 7F. Acknowledgment of Receipt of File..................................................................................................58 8. Law Firm Master List of Contacts and Important Information.........................................................59 9. Special Provisions for Attorney’s Will: Instructions Regarding My Law Practice ......................................................................................................................................66 10. Transfer of a Law Practice.................................................................................................................69 11. Valuing a Law Practice......................................................................................................................75 12. Sample Asset Purchase Agreement...................................................................................................79 13. Confidentiality and Non-Disclosure Agreement...............................................................................94 14. Interruption of a Practice Due to a Lawyer’s Substance Abuse or Mental Health Issue........................................................................................................................................97 15. “Impaired Attorneys: The Firm as Employer,” an article by Paula A. Barran..................................99 16. New York Human Rights Law........................................................................................................112 17. FAQs re Document Destruction and Preservation...........................................................................113 18. Selected Excerpts from the CPLR and Judiciary Law.....................................................................116 19. Selected Appellate Division Rules ..................................................................................................121 20. Rules of Professional Conduct.........................................................................................................122 21. Selected Ethics Opinions.................................................................................................................124 22. “Ten Things Not to Do When You Retire,” an article by David Kee.............................................130 23. HIPAA Form....................................................................................................................................132 24. ABA FAQs on Extended Reporting Period Coverage.....................................................................132 THE PLANNING AHEAD GUIDE, 2d ED. INTRODUCTION Introduction by Sarah Diane McShea The original Planning Ahead Guide was published a decade ago and quickly became one of the NYSBA’s most popular publications. Recently a subcommittee of the Law Practice Management Committee updated the Guide, replacing citations to the old ethics rules with current references to the Rules of Professional Conduct and revising the model forms to reflect, among other things, changes in the law and some of the newer technologies used by many practicing lawyers. The result, we hope, is as “user friendly” as the original Planning Ahead Guide. The Guide includes free downloadable forms in Word and Wordperfect and links to many of the cited references. The Guide will remain a work in process, as we welcome suggestions and feedback from law- yers in New York and other jurisdictions as they work with this publication. The original Planning Ahead Guide was written by the NYSBA’s Committee on Law Practice Continu- ity, chaired by David R. Pfalzgraf, Esq., a leader in the profession and the inspiring helmsman of the Law Prac- tice Continuity Committee’s work in assuring that lawyers prepare for the future and ensuring that there are safety nets for their clients and families when they have not done so. The Planning Ahead Guide was the Law Practice Continuity Committee’s first significant achievement. Its second significant achievement was its proposal of the Uniform Caretaker Rule to provide the necessary authorization and guidance for the appointment of caretaker lawyers to serve in emergency situations when disaster befalls a fellow member of the Bar. Although the proposed Uniform Caretaker Rule has not yet been adopted by the Appellate Division, it has nonetheless served to alert the courts and the legal profession to the need for guidance and court involvement in many situations when lawyers have not taken sufficient steps to plan for the future. Copies of the proposed model rule and the Committee’s supporting memoranda are available at www.nysba.org/ProfessionalConduct. Special thanks go to the members of the Law Practice Management Committee’s Subcommittee on Law Practice Continuity for their commitment and insights in updating the Planning Ahead Guide: Marion Hancock Fish, Patricia Spataro, Henry E. Kruman, Robert L. Ostertag, Anthony R. Palermo, Marian C. Rice, John R. McCarron, Anthony Q. Fletcher and Joseph F. Saeli, as well as William H. Roth, who assisted the Subcommit- tee in revising the updated Guide. Particular thanks go to the hardworking dedicated staff at the NYSBA, espe- cially Katherine Suchocki, Jessica Patterson and Simone Smith, without whom we could not have completed this task. We would remiss if we did not thank the leadership of the NYSBA for encouraging and consistently sup- porting the work of the Committee on Law Practice Continuity and the Law Practice Management Committee over the past twelve years. The original members of the Committee on Law Practice Continuity, which was responsible for the original Planning Ahead Guide and many continuing legal education programs around the State, included David R. Pfalzgraf (Committee Chair); James M. Altman (the original thinker behind the proj- ect), Francis X. Carroll (who has helped many lawyers in New York cope with personal and professional disas- ters), Anthony E. Davis, James F. Dwyer, Jeffrey M. Fetter, Susan F. Gibralter, S. Jeanne Hall (one of the chief authors of the original Guide and a leading light in the profession), Paul M. Hassett, Douglas C. Johnston, Kim 1 INTRODUCTION THE PLANNING AHEAD GUIDE, 2d ED. Steven Juhase, Anne B. Keenan (to whom the original Guide was dedicated), Steven C. Krane, Anne Maltz, Sarah Diane McShea, Mark S. Ochs, Robert L. Ostertag, Timothy J. O’Sullivan, Anthony R. Palermo, Michael Philip, Jr., the Honorable Eugene F. Pigott (then a justice of the Appellate Division, Fourth Department, and a consistent source of wisdom and practical guidance), Barbara F. Smith (one of the best draftsmen and most thoughtful Committee members participating in the project) and Leroy Wilson, Jr. Special thanks and gratitude must go to former NYSBA staff member Terry Brooks, whose fortitude and dedication insured the publication and excellence of the original Planning Ahead Guide. And, finally, we dedicate this current edition to Gary Munneke, the former Chair of the Law Practice Management Committee, whose outstanding work and astonishing level of commitment was appreciated by all involved in this update project. I sincerely apologize to those who contributed but who inadvertently are not included here. The fault is mine and later editions will correct this unintentional oversight. Sarah D. McShea Chair, Subcommittee on Law Practice Continuity 2 THE PLANNING AHEAD GUIDE, 2d ED. HOW TO ESTABLISH AN ADVANCE EXIT PLAN The Planning Ahead Guide How to Establish an Advance Exit Plan to Protect Your Clients’ Interests in the Event of Your Disability, Retirement or Death Revised and updated by the New York State Bar Association Law Practice Management Committee Subcommittee on Law Practice Continuity It is not easy to think about circumstances that could render you unable to continue practicing law. Unfortunately, accidents, illness, disability, planned or unplanned retirement, and untimely death are events that do occur. Under any of these circumstances, your clients’ interests, as well as your own, must be protected. Although there are no specific requirements in the New York Rules of Professional Conduct specifying the steps a lawyer must take to protect his or her clients in the event of a sudden inability to continue in practice, several Rules and Comments, along with general principles of attorney professionalism and fiduciary duty, pro- vide guidance on this issue. It is clear that there is a duty on the part of the attorney to protect his or her clients from the adverse consequences of such an event. For example, a lawyer who “neglects a matter” may violate RPC 1.3(b). By arranging in advance for the temporary management or closing of your practice, your ongoing matters will be handled in a timely manner and there will be less likelihood that a court date will be missed or a closing delayed (for example, because of an inability to access your escrow account), or clients’ interests other- wise prejudiced. Funds and property belonging to your clients will be returned to them promptly, as required by RPC 1.15(c). You also will be assured that your clients’ files will be protected and that your office bookkeeping records will be maintained as required by RPC 1.15(d). Attorney professionalism is often equated with dedication to clients, service, competence and the display of good judgment. By formulating a plan today, you will be fulfilling your ethical responsibilities and your obli- gations of attorney professionalism. The information in this Planning Ahead Guide is designed to assist you in protecting your clients and your practice. Following this introduction and overview are materials and model forms to assist you in this process. The Guide will help you to properly protect your clients and your practice if you personally are unable to act. To assist you in designing your Advance Exit Plan, this introduction refers by name to the forms and documents that are included in the attached Appendices. Appendices 1 to 2G in this Guide, for example, provide you with some frequently asked questions (FAQs) and checklists which raise issues that should be considered in making plans to protect clients’ interests in the case of the sudden unavailability of a sole practitioner to manage his or her practice, or in closing one’s own office or that of another attorney, or in temporarily assuming responsibility for another attorney’s practice. 3 HOW TO ESTABLISH AN ADVANCE EXIT PLAN THE PLANNING AHEAD GUIDE, 2d ED. Note: The Planning Ahead Guide refers to three categories of lawyers: (1) the lawyer whose disability, incapacity, retirement or death is the occasion for actions, is referred to as the “Planning Attorney,” the “Termi- nating Attorney,” the “Affected Attorney,” the “Absent Attorney,” or “Principal”; (2) the lawyer called upon to respond to the disability, incapacity, retirement or death of another lawyer, is referred to variously as the “Care- taker Attorney,” the “Assisting Attorney,” the “Responsible Attorney,” the “Closing Attorney,” or “Agent” (as appropriate); and (3) the “Acquiring Attorney” refers to the lawyer who buys a law practice under the circum- stances described in this Guide. Establish an Advance Exit Plan STEP 1: Designate an Assisting Attorney to manage or close your practice in the event of your disability, inca- pacity, retirement or death. This may be accomplished by a limited power of attorney, a comprehensive agreement with detailed powers, or a short form authorization and consent form to close or manage a law practice. Samples of such forms are set forth in Appendices 3, 4, and 5. If you are a professional corpora- tion, resolutions may be necessary authorizing you, as sole shareholder and director, to appoint another attorney to manage or close your practice (See Appendix 6). STEP 2: Prepare written instructions to your family, your designated Assisting Attorney, your nominated exec- utor, and your key office staff containing: (cid:129) General information and guidance to minimize uncertainty, confusion and possible oversights; (cid:129) Authorizations to release medical information (required by the Health Insurance Portability and Accountability Act) that may be needed to determine your incapacity (see HIPAA release form at Appendix 23); • Specific and detailed information and authorizations needed to close your law practice; (cid:129) Steps to be taken to assure that your written instructions are updated and reviewed periodically for completeness and accuracy. See “Checklist for Lawyers Planning to Protect Clients’ Interests in the Event of the Lawyer’s Death, Disability, Impairment or Incapacity” and “Checklist for Closing Your Own Office,” set forth as Appendices 2A-2G. See also Appendix 8, a form that lists your Law Office contacts, which should be kept up to date and given to your family, staff, and/or Assisting Attorney. STEP 3: Discuss your Advance Exit Plan with the appropriate persons (e.g., your family, designated Assisting Attorney, nominated executor, and key office staff) to avoid confusion or delay in the event of your dis- ability, incapacity, retirement or death. For example, your executor should be aware of your wishes with respect to your practice in the event of death, including any instructions you may have given to an Assisting Attorney. Not only will this protect your practice, it will also save considerable time and expense that may be incurred in the administration of your estate. Appendices 8 and 9 provide you with a checklist for your executor, and a sample provision that can be used in your will giving instructions to your executor regarding your law practice. STEP 4: Your Advance Exit Plan should describe arrangements you enter into with your designated Assisting Attorney (see Appendices 3, 4, and 5, which are sample forms that could be used to accomplish this objective). They should cover the following: 4 THE PLANNING AHEAD GUIDE, 2d ED. HOW TO ESTABLISH AN ADVANCE EXIT PLAN (cid:129) Authorization to obtain medical information to assist the Assisting Attorney (or other designated person, e.g., family member) in determining your incapacity to continue in practice (see HIPAA release form at Appendix 23); (cid:129) Authorization to provide all relevant people with notice of closure of your law practice; (cid:129) Authorization to your Assisting Attorney to contact your clients for instructions on transferring their files; (cid:129) Authorization to obtain extensions of time in litigation matters, where needed. Your Advance Exit Plan might also include sample letters notifying clients of your inability to continue in practice, and arranging for transfer or return of files. See “Letter Advising That Lawyer Is Unable to Continue in Practice” (Appendix 7B) and “Authorization for Transfer of Client File,” “Request for File,” and “Acknowl- edgment of Receipt for File” (Appendices 7D, 7E, and 7F). At Appendix 17, you will find a helpful list of questions and answers on the subject of file retention and preservation, providing you with guidance on file disposition. If you are retiring, you should prepare a letter to your clients advising them of your retirement, the need to obtain new counsel, and a procedure for transfer of their files. See “Letter from Planning Attorney Advising that Lawyer Is Closing Office” (Appendix 7A). If there are other attorneys in your firm who would be available to represent the clients in the event of your own inability to practice, your Advance Exit Plan should include a letter from your colleague(s) to your clients advising them of your disability and their availability to continue handling their matter (see Appendix 7B). Your Advance Exit Plan also should include instructions as to: (cid:129) Disposition of closed files; (cid:129) Disposition of your office furnishings and equipment; (cid:129) Authorization to draw checks on your office and trust accounts; (cid:129) Payment of current liabilities of the office; (cid:129) Billing fees on open files; (cid:129) Collecting accounts receivable; (cid:129) Access to important information (e.g., passwords to your computer); and (cid:129) Insurance matters. Your Advance Exit Plan also might include provisions that give your Assisting Attorney or executor, as the case may be, authority to: (cid:129) Wind down your business financial affairs; (cid:129) Provide your clients with a final accounting and statement of work done by you/your office; (cid:129) Collect fees on your behalf; (cid:129) Liquidate or sell your practice. (See Appendices 3, 4, and 5 for sample language authorizing the foregoing): 5