Let It Go (but Not All of It): Revisiting Rule 1.17

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The flipping of the calendar from December to January marks a natural time for many of us to get a fresh start and "let it go," as a certain frosty queen espoused — and for lawyers, that may mean leaving longstanding practices to focus on alternative endeavors.

Of course, every longtime worker from attorney to zookeeper usually follows that bold plan with at least a partial second guess: "Wait. Well ... maybe not the whole shebang. On second thought ..."

Twelve years after adopting Model Rule of Professional Conduct 1.17, "Sale of Law Practice," which affirmed that an entire law practice can be bought or sold, the American Bar Association in 2002 modified the rule to permit the sale of a practice in part, as opposed to the whole kit and caboodle.

That key modification gave solo and small-firm practitioners another way to reap the financial value of what they have built up over the years through their hard work and creativity. Importantly, the decision to modify Rule 1.17 to allow lawyers to sell a practice area and still remain in practice — though not in the area sold — also enables those lawyers to continue to make valuable contributions to their clients and their communities while still earning revenue and enjoying work at a presumably more reasonable and slower pace.

For example, a lawyer who has a probate and estate planning practice may decide to sell just the estate planning portion but retain the probate segment. That allows the lawyer to work less but still serve clients until she is ready to retire completely; the alternative being either to close the entire practice or continue to serve clients with less vigor, as age and loss of interest creep in.

With a partial practice sale, clients are better served — both those whose estate plans are handled by other lawyers interested in the segment they purchased, and those who are probating estates of decedents.

The rules of professional conduct set forth very precise ethical requirements for transferring one's interest in a law firm, including, for example, the following:

  • Fees charged to clients cannot be increased solely because a practice is sold, even if the purchaser may charge higher rates to his clients than the selling lawyer.

  • The selling attorney must close out all client trust accounts, with some jurisdictions requiring trust account records to be maintained for years.

  • The selling attorney must give written notice to clients — usually no fewer than 90 days before the transfer — and advise them that they have the right to retrieve their files.

  • The selling attorney must inform clients, in writing, of their right to retain other counsel.

In addition, Rule 1.17 states: "If a client cannot be given notice, the representation of that client may be transferred to the purchaser only upon entry of an order so authorizing by a court having jurisdiction. The seller may disclose to the court in camera information relating to the representation only to the extent necessary to obtain an order authorizing the transfer of a file.

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