Published on 5/25/09
With law firm layoffs and terminations climbing, the troubling requirements that are part of the departure scenarios have become all too familiar - for example, making sure that the departing lawyer does not photocopy copyrighted or proprietary information of the firm or tamper with or sabotage any of the firm's technology.
Too often, however, one vital element is left out of the departure checklist: a review of the accounts receivable and billings attributable to the departing lawyer. That includes such items as the completion of time sheets and the departing lawyer's responsibility for billing and collection.
Accounts receivable may be the most fluid and important assets of a law firm. Before a lawyer is "de-equitized," or otherwise terminated, the firm should take care to understand what that lawyer's receivable are and to know how much the firm depends on the lawyer to collect those receivables.
Ensure that there are incentives for the lawyer to collect those receivables before, or as, he departs. Here is an elementary checklist:
- Ensure that time sheets are current.
- Send final billings to clients immediately even if the totals need adjustments later.
- Monitor payment performance of the client to ascertain that final invoices are not ignored.
- Review client files to confirm there is no basis for clients to refuse payment.
Preparing for takeoff
It is essential that the law firm communicate with the client whose lawyer is leaving. It may be appropriate to send a joint letter (firm and lawyer) to the client indicating the new relationships being created.
If the departing lawyer is "taking the client," it is important that the lawyer and the firm negotiate the responsibility and methodology for collecting the outstanding fees.
Clients choose their lawyer, either the individual or the firm. This selection process, however, is not a passive activity. Lawyers must seek the patronage of the client. Care must be taken in this process.
If the competition for the client gets "out of hand," the client may inevitably say, "a pox on both your houses!" and move on to select a third lawyer/law firm.
Also, if the client decides to stay with either the current lawyer or law firm, the client may engage another law firm for some of the client's legal work. Such a move ensure that the client is not left twisting in the wind, with the same uncertainty about the future, and has the ability to move quickly if there is a need for assurances about legal representation while the lawyer finds a new home.
Failure to plan how clients will be taken care of when a lawyer departs can, according to some authorities, be construed as reckless disregard for client welfare - a true ethical violation. For example, if the primary lawyer in a firm representing a client departs at a critical juncture, such as on the eve of trial, a client's interest could be prejudiced.
Thus, the law firm needs to have a plan in place. That the departing lawyer will "take" the client with him is not a certainty, but prejudice to the client would be.