Although not nearly as satisfying, in many ways closing a file is just as important to a professional as opening one. How and when to close a file is a component of best practices. Most professionals follow some document retention protocol (and if you don’t, you should). But an interesting wrinkle arises when it’s not entirely clear when the engagement has come to an end. Some cases are withdrawn, some clients sign an engagement letter but do not pursue the claim, some clients decide to retain new counsel without documenting the decision. To take into account these uncertainties, professionals must implement safeguards to monitor each client relationship and, when necessary, to document that the professional relationship has ended. By keeping files up-to-date, both old and new, professionals can help to avoid many hazards and ethical dilemmas.
The closing process begins once a professional determines that a client or case is inactive. Effective closing of a file involves three critical steps: (a) drafting a closing letter to the client, (b) taking an account of any outstanding payments, and (c) initiating an administrative closing of the matter.
The closing letter serves to confirm that the case is completed and to reiterate core principles of the representation. For instance, a closing letter should restate the nature and scope of the representation, confirm how the matter was resolved, provide documentation as to why particular aspects of the case were handled in a certain way, and include a request to the client to provide notice if there is any aspect of the case that she believes remains unfinished. A properly drafted closing will help to establish that the representation is concluded and that the client consented to the resolution.
During the accounting process, the firm should analyze all expenses, bills, and funds paid to the firm. Identifying any outstanding payments from the client early will help to resolve any payment issues and facilitate a collection lawsuit if the client fails to pay.
Lastly, firms must complete an administrative closing of the file. When a case has ended, or a client relationship is no longer active, it should be marked closed within the professional firm’s administrative system.
Timely closing files has important ethical and practical consequences for professional firms. On the ethical side, the rules of professional conduct applied to current clients impose additional obligations than those applied to former clients. Thus, the failure to close old files can create unwanted conflict issues that prohibit representation of new clients. On the practical side, closing a client matter can help to establish a clear statute of limitations deadline and avoid equitable tolling claims that could expose the professional to prolonged liability.