Ethics of Law Firm Dissolutions

All good things must come to an end.  Professional firms are no exception. There are many reasons that a professional firm may close its doors; however, regardless of the cause, professionals must remain cognizant of their ethical duties to third-parties and clients throughout the dissolution process.

The DC Bar recently issued an ethics opinion addressing law firm dissolutions to help attorneys navigate the various rules of professional conduct that are implicated when a law firm terminates its existence as a legal entity.   The Bar began its analysis by emphasizing that attorneys’ ethical duties to clients are paramount, and that each individual attorney in a dissolving firm has an ethical duty to ensure that the matters for which they are responsible are handled diligently, which includes completing the matter when possible.

With this principle in mind, the Bar explained that the dissolution process begins when there is a reasonable expectation that the firm will cease to exist at a foreseeable time in the near future, or when the firm’s partners agree to dissolve the firm.  The Bar continued that once dissolution is foreseeable, attorneys are required to notify firm clients of the dissolution, with attorneys notifying clients with whom they have had the most contact, or all members of the firm giving joint notice to each client.  The Bar also suggests that attorneys inform the clients of their right to seek outside representation.

Likewise, attorneys must make firm files available to the client, although the Bar states that counsel may withhold attorney work product if they client has not yet paid for the attorney’s work, unless doing so would irreparably harm the clients’ interest.  The Bar also cautions attorneys to ensure that all marketing materials, including websites, are reviewed to ensure that there are no misleading statements or omissions of fact, and that the website is either shut down or updated to disclose the pending dissolution.

Professional firm dissolutions implicate many ethical obligations to business partners, third-parties, and clients. Attorneys who are considering dissolving a firm must appraise themselves of the relevant rules to ensure that the process proceeds smoothly.  Professionals who fail to consider the impact of dissolution on their clients could expose themselves to liability, even if their firm no longer is deemed to exist as a legal entity.