2020 was a tough year for small businesses around the country, and law firms are no exception. In May, just a few months into the pandemic, Martindale-Avvo conducted a survey about the impact of Covid-19 on law firms. 81% of firms responding said their revenues had declined in 2020. About 27% of those reported a drop of 50% or more.
A law firm, like any other business, can fail. A firm may be forced to close its doors because revenues drop too low to cover expenses. Partners may decide to go their separate ways. A solo attorney may relocate to another city, or state. But, the impact of a law firm closing its doors can be a bit different than when a neighborhood restaurant or your favorite shoe store shuts down.
If you have a case in progress, it’s important to understand what you need to do next to protect your rights and keep your case moving forward.
Attorney Obligations on Shutdown
As a licensed professional, your attorney has certain obligations, even if the firm is closing. Ideally, the closure will be an orderly process. Your attorney should notify you that the firm will be closing, and explain your options for moving forward. If the firm is being sold, for instance, the seller (or in some circumstances, the new attorney) is required to send a notice to clients explaining that the business is being transferred and advising that the client may choose to retain other counsel if he or she prefers.
Ideally, the attorney will be in a position to and take responsibility for sending the property notifications and making client files and other materials available. Or, the attorney may have taken the precaution of appointing a successor to handle those steps if the lawyer is unable, such as in the case of death or incapacity. But, we don’t operate in an ideal world, and sometimes the transition is more complicated.
When an Attorney Provides Notice of Sale or a Successor Has Been Appointed
Clients are best protected when someone else steps in to cover the departing attorney’s obligations. A purchaser or successor attorney can ensure that there are no gaps in representation, which will help avoid any missed deadlines or miscommunication. However, it’s important to know that you aren’t required to work with the attorney who purchased your lawyer’s practice or who has agreed to wrap up ongoing matters for a firm that’s going out of business.
In this situation, speak with the new attorney and determine whether you are comfortable moving forward or whether you would prefer to hire your own substitute counsel. If you decide to hire another attorney, you generally won’t want to terminate your relationship with the purchaser or successor until you have retained another lawyer.
If you don’t respond within 90 days, the attorney who purchased the practice may begin to act on your behalf. But, to ensure that you have trusted representation at all times, you’ll want to act much more quickly than that. It’s best to weigh your options and either move forward with the attorney who has assumed responsibility for your case or seek out alternate counsel as soon as possible.
When the Closure is Messy
Unfortunately, not every law firm closure is as orderly as the type of transfer described above. Sometimes, an attorney ignores his obligations and simply moves out of state or otherwise abandons the practice. Sometimes, the lawyer dies or becomes incapacitated, and no arrangements have been made for winding up the firm.
In the latter situation, the court may take control of the firm and appoint someone to wind up the firm’s business. But, this can be a time-consuming process for appointed representatives who may have no knowledge of the firm’s clients or operations.
If your attorney simply advises you that the firm is closing and you’ll have to seek alternate representation (or, worse, simply disappears), you’ll want to seek alternate counsel immediately. You may have no way of knowing if paperwork has been filed, if there are hearings scheduled, or if important deadlines are approaching. Any gap in representation may compromise your case.
Do I Really Need Replacement Counsel?
That depends on the situation. But, in most cases, the answer is “yes.” If you have a case in progress, chances are that you don’t have the knowledge of either legal procedures or the specifics of what’s underway in your case to confidently manage the remainder of the case. Overlooking a deadline or requirement could be harmful, or even fatal, to your case.
This report from the US Bankruptcy Court for the Central District of California reveals that Chapter 7 bankruptcy filers represented by an attorney are much more likely to receive a discharge: just 55.6% of self-represented debtors successfully complete a Chapter 7 case, compared with 94.1% of those represented by an attorney. The difference for Chapter 13 debtors was even more dramatic. Just 3% of self-represented Chapter 13 filers were able to get a plan confirmed.
Finding Alternate Counsel
If your attorney hasn’t transferred the practice or recommended alternative counsel, your search for a new attorney will be much the same as if you were hiring an attorney for the first time. However, when you contact a law firm to schedule a consultation, you’ll want to let them know right away that you already have a case in progress. Explain that your attorney has gone out of business, retired, or passed away and you are looking for someone to step in.
The experienced bankruptcy attorneys at Borowitz & Clark know what needs to be done when you find yourself without counsel in the midst of a bankruptcy case. We have experience in stepping into a law firm’s case load, keeping the cases moving forward and protecting the interest their clients. Schedule a free consultation right now to learn more about how we can help you stay on track.
M. Erik Clark is the Managing Partner of Borowitz & Clark, LLP, a leading consumer bankruptcy law firm with offices located throughout Southern California. Mr. Clark is Board Certified in Consumer Bankruptcy by the American Board of Certification and a member of the State Bar in California, New York, and Connecticut. View his full profile here.