Introduction

This article discusses the issues that an attorney needs to consider as she contemplates retirement and closing her practice. If the reader believes she has fully retired and has already closed her practice, the article perhaps notes a thing or two that were overlooked and need to be cinched up.


Until the bar association has developed a more formal checklist, we note these important considerations. They are not provided to establish any requirements or standards of care, only to discuss our personal views. They are not intended as legal advice, and they should not be relied upon as opinions that suggest any sort of safe haven or guarantee of any sort of result if they are followed. Each attorney’s circumstances are different and require the exercise of reason, diligence, and judgment appropriate to the particular situation.


Our overall point is that closing a law practice is not merely a matter of turning out the light on a selected date; rather retirement is more like carefully landing a plane with the appropriate runway. So, in preparation for landing, please make sure your professional seatbelt is securely fastened and check off these things. And remain seated until the seatbelt light has been turned off.


The Checklist, or The Approach to the Runway

The following checklist includes basic considerations for a retiring lawyer and the closure of a law practice. It does not address issues related to the sale of a law practice or a particular firm’s procedures applicable to an attorney going of counsel. Neither does it address the situation of a lawyer with diminished capacity or a disabling illness. A lawyer should consult both the Arkansas Rules of Professional Conduct and other focused resources in those situations.1 However, a number of the considerations are helpful to any attorney who is discontinuing the practice of law.


Addressing Active and Dormant Matters Handled for Clients

Long before the actual date of retirement or practice closure, the attorney should create a list of all engagements that have been undertaken, whether active or dormant. Some lawyers have a practice of sending a disengagement letter to the client when a particular matter is completed or discontinued. If that is not the lawyer’s practice, then the task of identifying all open matters may require a little more work if there is any question about whether the matter is concluded and the engagement has ended.


For cases pending in court or before some other body such as a regulatory entity, it is usually a simple matter to determine if the matter has ended. However, even court proceedings can be dormant but still pending. For example, a lawyer may have handled guardianships on a pro bono basis. Minor guardianships remain pending until the child turns 18. Adult guardianships can remain open for decades, particularly if the adult was a disabled 18-year-old when the guardianship was established. If the guardianship remains open and the lawyer is the attorney of record, she will likely continue to receive notices about annual reports and other matters.


For any pending case, whether active or dormant, it is important to withdraw before closing the law practice and retiring. This will usually require a motion to withdraw, client consent, and an order permitting the withdrawal and relieving the lawyer of further responsibility, all in accordance with Rule 1.16 of the Arkansas Rules of Professional Conduct. For most cases, this will be in conjunction with another attorney being substituted for the lawyer as the attorney of record.


However, in situations involving an active but dormant matter such as a guardianship, it may be important to have an explanatory letter and in-person conference with the client to help the person serving as a guardian understand and acknowledge ongoing responsibilities.


For court proceedings, it may be useful to transition from open-ended representation to a limited scope engagement as the lawyer moves toward retirement. Arkansas Rule of Civil Procedure 87 provides the procedure for such engagements. Once complete, the engagement is ended by a simple filing with the court.


For lawyers engaged in transactional matters that do not involve a legal proceeding, determining whether a matter is completed is usually accomplished simply by whether an agreement has been signed and performed. However, if there is any question about whether the lawyer has any continuing obligation to the client, that should be addressed proactively with the client in order to ensure that the representation has been terminated in accordance with Rule 1.16.


Similarly, if the lawyer has any continuing engagements in which she provides general advice to a client, she should confer with the client and determine an end to the engagement.

In every termination of any engagement, Rule 1.16(d) requires the following:


Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers relating to the client to the extent permitted by other law.


As this rule indicates, client files are a highly important part of retiring and closing a law practice. For those retiring in 2024, client files are often a mix of paper and electronic records. And some files may be stored remotely (e.g., in the “cloud”) with a third party. A clear agreement should be reached with the client regarding access to client papers and files, preferably transferring everything at the time the engagement is terminated. If that has not been done for an engagement previously terminated and the files are being maintained for at least five years pursuant to Rule 1.19(b), arrangements should be made to maintain the files for that period before they are destroyed. Some files may need to be preserved for longer periods, and this should be addressed with the client. If the attorney either does not want to or cannot maintain a file on a long-term basis, the file may be returned to the client or handled in another acceptable manner. However, if stored by the attorney, the client’s confidential information must be protected even after the attorney’s retirement and the closing of the practice. This may require ongoing financial arrangements with third parties, including those who already maintain confidential client information and presumably have some access to that information in their contracted capacity.(2)


Finally, at some point in the process of retiring and closing a law practice, the lawyer should stop taking new matters or at least have a co-counsel that the client understands will assume sole responsibility for the matter when the lawyer retires. Again, clear agreements, preferably in writing, are essential to a smooth transition to retirement.


Personal Legal Roles

Attorneys sometimes agree to serve as registered agents, guardians, or trustees as accommodations to clients or perhaps for compensation. In addition, attorneys are also set to become executors, guardians, and trustees in the future as a part of a client’s estate planning. And finally, it is not uncommon for a lawyer to sit as a board member for a client’s corporate entity.



"In Spanish, the most often used word for retirement is jubilación, which captures the positive emotional aspect of retirement. The foregoing steps we have addressed are ones that are intended to land the plane of law practice securely, confidently, and, most of all, to a place of jubilation."




The lawyer may be willing to continue to serve in these roles after retirement, but if there is any question about the lawyer’s role as a legal advisor, that should be cleared up before the attorney’s retirement and the closing of the law practice. As a matter of fact, attorneys not considering retirement should also make sure that the role of the attorney outside an active client engagement is clear to avoid professional malpractice claims. If the client’s corporate entity is also a client and the lawyer serves as a board member, compliance with the safeguards noted in Rule 1.13 is prudent, particularly as the lawyer nears retirement.

In case the attorney may have forgotten, or did not know, that she is listed as the registered agent for a client or former client at the Arkansas Secretary of State, a registered agent search should be conducted and the client or former client should be notified that the attorney is resigning as registered agent, followed by submitting an online resignation through the Secretary of State’s portal.


Professional Malpractice Coverage

As retirement nears, the lawyer should also consult her insurance agent concerning the requirements for reporting claims before retirement and for making sure that claims after retirement are covered. Extended reporting endorsements (sometimes referred to as “tail coverage”) for set periods of time (i.e., the statute of limitations) or unlimited periods may be available, depending upon your insurance carrier and the terms of your policy. Not all malpractice policies are the same, and anecdotal advice from other lawyers who have retired can be irrelevant and unreliable. The insurance policy and the lawyer’s particular situation are the only things that matter, and ignoring the issue is not wise. An in-person conference with the lawyer’s insurance agent is recommended.


The current state of the law in Arkansas makes this conference and related measures to avoid future malpractice claims even more significant. In the recent case of Nichols v. Swindoll,3 the Arkansas Supreme Court noted that until an attorney discloses facts of potential malpractice, a client can argue, at the pleading stage, that there was fraudulent concealment that tolled the statute of limitations:


By doing so, neither we nor the circuit court can properly conclude that Nichols failed to allege facts to support a claim of fraudulent concealment when her attorneys had a duty to inform her of their malpractice when they learned of it. See Norfleet, 180 Ark. at 168, 20 S.W.2d at 870; see also Restatement (Third) of the Law Governing Lawyers

§ 20 cmt. c; see also Ark. R. Prof’l Conduct 1.4 cmt. 7. Because attorneys owe a fiduciary duty to their clients, “a client is not required to maintain a double layer of lawyers to ensure that the fiduciary responsibilities of the primary lawyer are being honored. (And is a third lawyer needed to ensure the second lawyer properly monitors the first one? And so on.”) Nichols v. Swindoll, 2022 Ark. App. 399, at 8 (Harrison, C.J., dissenting).4


Most of the attorneys we know who become aware of an error that could lead to a malpractice claim will address it promptly with the client. If a retiring attorney knows that such an error occurred and was addressed with the client, it may be prudent to document that in writing (at least in the lawyer’s file) and disclose it to the malpractice carrier. If it was not addressed, Nichols v. Swindoll implies that it should be addressed in order for the running of the statute of limitations to begin. No matter the situation, it is important for the retiring lawyer to purchase tail coverage for malpractice claims that may arise after retirement and the closing of the law practice.


Professional Obligations Regarding Your IOLTA Account

Jordan Bates-Rogers, the former executive director of the Arkansas Access to Justice Foundation, has recently given helpful advice on closing a lawyer’s IOLTA account and related professional obligations.5 He states, “One of the most common mistakes attorneys make when retiring or leaving private practice is leaving their IOLTA account open.” Bates-Rogers also notes that attorneys in a firm that manages an IOLTA account for the attorneys in the firm need to complete a change of status form available at www.arkansasjustice.org/IOLTA when retiring.


It may be prudent to have the attorney’s accountant prepare a final audit and reconciliation of the IOLTA account to document that all funds have been properly disbursed and that the lawyer has complied with applicable requirements related to closing the account.


Other Financial Considerations

Final fee billings, collecting accounts receivable, and payment of ongoing debts all require a closing plan and some lead time. Both in a firm and in a solo practice, billing of fees and the collection of invoices can take months to complete. Beginning active management of those processes well in advance of retirement and closing the law practice is helpful. If that cannot be done, then an operating account and arrangements for receiving and monitoring payments—through bank transfers or mail—and keeping limited staff to help with that task should be considered.


Limiting or eliminating ongoing expenses can be more definite. For example, timing retirement and the closing of a practice to the expiration of a lease for office space is ideal, but if that is not practical, then negotiating a month-to-month lease should be pursued. Related insurance issues also factor in the lease for office space.


Similarly, ending leases for copiers, internet services (including electronic research services), telephone, subscriptions, and any other continuing obligations should be considered well ahead of the closing of the law practice in order to avoid payment for unneeded services for an extended period after retirement.


Financial planning to have funds to pay ongoing obligations is a given, and if drafts are set up to pay those expenses, active management of the balances to avoid returned checks, overdraft fees and insufficient funds fees will be required and is likely to extend well beyond the date that the law practice is officially, if not effectively, closed.


Dissolving The Corporate Legal Entity In Which You Conduct Your Practice

Many attorneys conduct their law practice through a corporate entity for financial reasons and because the entity provides some limitations of liability. Because the financial considerations and reasons for limitations of liability will likely continue for a period of time after the attorney retires and otherwise closes her practice, the attorney should consult with both her financial advisor and her insurance agent as to when the corporate entity should be dissolved. It may be necessary to keep the corporate entity in place for tax reporting and filings as additional transactions, including receipts, are received and expenses incurred.


Notices to Clients and The Public

When a lawyer decides to set a retirement date, a good practice is to send a notice to all clients. A notice must be sent to all active clients in order to comply with Rule 1.16(d). Because former clients don’t always distinguish between a formal engagement and general legal advice from a lawyer friend, the notice should also be sent to former clients with whom the lawyer has either had a formal engagement of some kind within the last five years or has an ongoing current engagement or relationship. The letter should announce the lawyer’s retirement and the anticipated date that her practice will end. It should also address file retention issues and any other matters that the lawyer believes are important to the client. If the lawyer is vacating her office space or has a new postal or e-mail address and telephone number for client inquiries, those should also be contained in the letter.


In addition to notifying clients, a forwarding notice should be provided to the post office, and other business contact information such as bank accounts, insurance, and bar association or professional memberships should be updated with new contact information.


Finally, some recommend placing a closing announcement in a local newspaper or bar journal to serve as notice to the broader public and professional colleagues that the attorney is retiring from the active practice of law.


Law Licenses and Bar Admissions

Finally, Arkansas court rules provide the option of a voluntary inactive status, and that status also entitles the attorney to maintain a law license for a reduced fee.6 If an attorney is truly retiring—not simply going to the status of “of counsel” at a firm—officially asking to be placed on voluntary inactive status is an official notice to the public that the attorney is no longer engaged in the practice of law.

If the attorney is licensed in multiple jurisdictions, the requirements for retiring from the practice of law in those other jurisdictions should be met. Similarly, if an attorney has an active admission to practice—pro hac vice or otherwise—in any other jurisdiction, she should make sure those are addressed as appropriate.


Conclusion

In preparing this article, we have seen a number of helpful checklists and advice from bar associations and their contributing authors. We have also noted official guides promulgated by state bars as well as commentaries by insurance providers. We have listed a few of them in the sidebar and commend them for guidance until our Supreme Court or our bar association has published a resource. None of the suggestions we have given is novel, but we hope they make planning for retirement and closing a law practice easier and less stressful.


In Spanish, the most often used word for retirement is jubilación, which captures the positive emotional aspect of retirement. The foregoing steps we have addressed are ones that are intended to land the plane of law practice securely, confidently, and, most of all, to a place of jubilation.


Endnotes:

1. Comment 5 to Ark. R. Prof'l Conduct 1.3 should be consulted for the situation in which another attorney is needed to assist a lawyer with diminished capacity. That comment reads: “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 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.” Another helpful resource for these issues is at https://nmcdn.io/e186d21f8c7946a19faed23c3da2f0da/556712d9bf0f4cb2a916cc810687d52b/files/risk-management-resources/practice-guides/Closing_Practice.pdf.

2. A helpful resource for addressing file issues is Jimmy Oliver, A Guide to File Retention and Destruction, Okla. Bar J. (Apr. 2023).

3. 2023 Ark. 146.

4. Id. at 6.

5. See What Should I Do With My IOLTA Account After Leaving Private Practice, 58 Ark. Law. 28 (Fall 2023).

6. See Procedures of the Arkansas Supreme Court Regulating Professional Conduct of Attorneys at Law

§ 25(A)(7); Arkansas Rules Governing Admission to the Bar, Rule VII(A)(1).