by J.R. Phelps and Terri Olson
Lawyers who die, disappear, abandon their practice, or become suspended or disbarred from the practice represent a serious problem not only to the Bar, but to the clients who have been left without representation. For those lawyers wishing to fill this void by accepting appointment as an inventory attorney there is little guidance currently available. This column will attempt to enlighten those lawyers interested in seeking an appointment about some of the practical problems associated with becoming an inventory attorney.
At present the Rules Regulating The Florida Bar provide for the appointment of an inventory attorney in Rule 1-3.8:
(a) Whenever an attorney is suspended. disbarred, becomes a delinquent member, abandons his practice, disappears, or dies and no partner, personal representative, or other responsible party capable of conducting the attorneys affairs is known to exist, the appropriate circuit court, upon proper proof of the fact, may appoint an attorney or attorneys to inventory the files of the subject attorney and to take such action as seems indicated to protect the interests of clients of the subject attorney, as well as the interest of that attorney.
(b) Any attorney so appointed shall not disclose any information contained in files so inventoried without the consent of the client to whom such file relates except as necessary to carry out the order of the court which appointed the attorney to make the inventory.
As the reader can see, these rules are quite generally stated and do not hint at the specific areas of difficulty faced by lawyers and clients in dealing with these situations. Consider the following scenarios.
Ms. Walters, whose final dissolution hearing has been scheduled for Monday morning, calls up her lawyer on Friday with a question concerning the child support amount they agreed on. The secretary, who has always been quite polite with her, answers briefly and in a distracted manner. In response to Ms. Walter's request to speak with the attorney, the secretary informs her that he died the previous evening. After Ms. Walters has murmured her sympathy, she ventures to ask what she should do about her hearing. “I don't know.” says the secretary. “It's just too soon to think about that. Look, it's really crazy here today; maybe you could call again later."
Mr. Silvers has been waiting for two months for a response to his attorney's settlement offer in a slip-and-fall case and is beginning to fidget. He calls his lawyer and gets only a telephone answering machine, but he is not surprised because the attorney is a sole practitioner whose secretary is frequently out on errands. A week later, beginning to be annoyed, he calls again; the office phone has been disconnected. In a real panic now, he jumps into his or and drives down to the law office. There is no one there. Uncollected mail bulges out of the box, and a conspicuous notice with the heading “Complaint for Distress for Rent” is tacked to the door.
Lawyers reading the above examples may well have an uneasy feeling in the pits of their stomachs; these stories represent some of the genuine honor stories of the legal world. Fortunately, in most cases where a lawyer dies or simply disappears, someone—a partner in the firm or a trusted attorney friend who has been asked in advance to handle matters—and step in, reassure clients that their interests are still protected, and begin to sort through the masses of briefs, memoranda, letters, notes, and exhibits that make up the typical open case file.
It's a standard joke that attorneys' dependents are like the cobbler's children who go without shoes, as lawyers are notorious for not making necessary arrangements regarding their estates. This can extend to their practices as well, and when an attorney dies, disappears, is declared incompetent, or otherwise is unable to assist with closing his or her practice and has not provided for anyone to take over, Rule 1-3.8 of the Rules Regulating The Florida Bar allows the court to appoint an inventory attorney to inventory the files of the subject attorney and to take such action as seems indicated to protect the interests of clients of the subject attorney, as well as the interest of that attorney.”
Generally, an inventory attorney will be appointed after someone connected with the practice of the attorney who died or disappeared — a secretary or someone sharing office space—notifies the Bar and asks what should be done. The Bar then petitions the court to appoint an inventory attorney. The petition and the ensuing order set out the specific duties of the inventory attorney. These may be as limited or as broad as the Bar and court consider necessary. Since the rule pertaining to the duties of the IA is very general, it is extremely important that the Bar, court, and IA agree, in writing, on what the specific duties of the IA will be.
Normally, the Bar and the court simply want “whatever needs to be done to be done,” but this will, of course, vary from situation to situation. The IA will certainly be asked to go through the deceased's files and determine what should be done in each case. The inventory attorney may be asked to attend to more routine matters such a pursuing accounts receivable or even seeing that the deceased attorneys bills have been paid.
While the primary concern of the Bar will naturally be to protect the clients involved and see that pending matters are referred to other attorneys as quickly as possible, involving the IA in these other, more mundane matters should certainly be considered. If no one has paid the light bill, the landlord, or other creditors (and this is entirely possible if the attorney has simply left town), the IA will be faced with moving all the files to his or her office, frantically working with the deceased attorney's database while two burly men are trying to remove the computer, or even being locked out by the landlord.
Another question concerns whether the inventory attorney will be able to draw from the practice's accounts. For instance, no other person can be as helpful to the IA as the deceased attorney's secretary, but almost no secretary will be willing to stay on and assist unless some arrangements are made for salary. While an order appointing an IA will normally state the IA's authority to have access to the practice's accounts, the limits and manner of this access need to be firmly established. Will the IA be reimbursed later for out-of-pocket expenses or be able to draw from the practices account? Will a provision be made for the secretary to be paid from the account as well? Can other accounts payable be dealt with? No single correct method of handling these questions exists for all situations which the IA may experience, but the IA, Bar, and court should be able to confer and decide on the most appropriate course of action.
The attorney has several choices when it comes to getting necessary funds from an estate. Ideally, the attorney and the personal representative of the estate could meet and set out a written agreement allowing for the practice's accounts to be available to the attorney for necessary expenses associated with closing out the practice. Since the court would have the power to make these funds available in any case, there is really no reason for the personal representative to reject this kind of agreement. If the personal representative hesitates or hedges, the IA may point this out.
There are certain circumstances, however, where court intervention will be necessary. If the attorney has been suspended, judged incompetent, or merely disappeared, there obviously will be no personal representative as such. Mid, in unfortunate cases, a personal representative may exist but unconditionally refuse to cooperate. In those situations, the IA may apply to the court to freeze the assets of the practice and may deposit all funds in trust into the courts registry and may petition either for reimbursement for documented expenses or for recognition by the bank as signatory on the account, whichever seems more appropriate to the situation.
Any attorney who dies with even a few cases open is bound to have money owed that has not been paid yet or, also likely, not even been billed. Depending on the extent of the responsibilities set out by court order, the inventory attorney, working closely with the deceased's personal representative, may need to see that all possible accounts receivable are billed for, paid, and credited to the estate. Of course, if this is normally handled by a secretary or bookkeeper who is able to continue working for the practice for a short time, that person may also handle this, although the IA should be involved in the process.
While the personal representative may wish to be involved in this to ensure that no money that should go to the estate is being kept from it, the representative should be made aware that the inventory attorney has a responsibility to keep client files confidential. Tactful explanation at the outset of the inventory attorneys work should go far toward mitigating any sense that the estate's concerns have been surrendered to a secretive outsider.
An additional benefit of expediting the collection of all accounts receivable and of promptly billing for all possible additional horns is the reassurance it gives to the personal representative that the actions of the inventory attorney won't deplete the estate. By the time the inventory attorney has filed the final reports with the court, he or she will likely have kept the office open and running, complete with secretary, for at least a few extra weeks, arranged for file storage off the premises, signed up for malpractice insurance for the estate, and performed numerous other minor operations, all of which cost the estate. To prevent an ugly situation where the personal representative and the court-appointed attorney end up back in court arguing over use of the estate's funds, the inventory attorney can show that far from being a drain on the estate, he or she is helping to collect money owed to it.
Obviously much of the ease with which this can be accomplished will depend on how well the deceased attorney kept his or her books. Although the court-appointed inventory attorney will have access to all of the financial records of the practice, practitioners frequently don't update their ledgers until the bills go out. For example, a lawyer who has just put in four hours of billable work for a client may only make a marginal notation of this until the statement is sent. The experienced secretary can be invaluable here, as in other places, as a decoder to piece together enough information to justify a bill.
It would be convenient for the inventory attorney if all lawyers billed on an hourly basis. In those cases, provided the deceased kept good records, the inventory attorney would need only examine the client ledger to see what part of the work done had been billed, check to make sure payment has been received for that portion, and bill for any remainder. Many attorneys, however, either charge a flat fee for a particular service or adjust their fees to fit the complexity of the case and the potential gain to the client. Others operate on a contingency basis. How can the inventory attorney bill for a trial-ready 35 percent contingency-based case that has not yet been won, or for a simple will that has been drafted but not reviewed by the client? There are, unfortunately, no hard rules for determining these things. The IA will have to determine on a case-by-case basis, referring to the original fee agreement with the client, what an appropriate fee was for the amount of work that was done.
If a deceased attorney was keeping the property of a client for some reason, it must be returned to the client as soon as possible. The inventory attorney should remember to check with the deceased attorneys banks for safe deposit boxes, as these also may contain client property. Money held in trust accounts should also be returned. However, the inventory attorney should check the deceased's records carefully to ensure that the ownership of none of this money was disputed before giving it back.
The IA should remember that even if an arrangement is worked out with the deceased's client to continue on the matter, this arrangement is separate from, not an extension of, the original agreement the client had with the deceased. Therefore, not only should a new fee agreement be made up, but any funds remaining in trust must be returned to the client and any money then advanced for costs or expenses deposited in the IA's trust account.
Sometimes lawyers forget that wills are the client's property and not simply files to be retained. All wills and trust agreements must be returned immediately to the clients, and the IA should check whether the deceased was listed as a personal representative or trustee on any of them. If so, a letter should be sent along with the will informing the client that the will should be updated.
Clearly, the first priority of the inventory attorney is a quick review of the open cases to check for upcoming court appearances, important scheduled meetings, and so forth. Frequently, if the deceased does not have a careful filing system or general ledger, the first step will be trying to determine which files are open and which files are not. Each case file needs to be reviewed at this point to see if the matter appears to have been concluded. But if the file is unclear, the inventory attorney may turn to the ledgers to see if a final bill has been prepared or to the time records for a listing of work done on the matter. If no final billing statement was prepared, the IA should proceed on the assumption that the case is active.
At this point, the IA must find out what the most immediate needs are for the active cases. Ideally, the deceased will have a docket or calendar, tither manual or computerized, that the inventory attorney can check for upcoming important dates. If no docket system exists, the only recourse may be a thorough sifting of the open files to search for court dates, filing deadlines, and appointments.
Since the practice will probably have been neglected for at least days, if not weeks, it's entirely likely that an important date looms, or has passed. If a court date or deadline has been missed, then the court must be notified immediately of the reason. By the time the IA catches up with the action, the matter may have been dismissed. To protect the client's interests, the IA must promptly see whether any remedial action can be taken to ameliorate the situation.
If a court appearance is scheduled in the near future, the inventory attorney should check with the court at once to see if an extension is possible. The court will generally treat such a request kindly, but the IA should realize that the court is not required to grant an extension, and indeed as in the case of an attorney who had already repeatedly filed for extension before disappearing or being suspended—may be quite reluctant to do so. If this happens, the IA's options are limited: proceed with the case or find a suitable person who can take over on short notice.
Once emergencies have been taken care of, the IA can proceed to the routine notification to clients with matters pending that the attorney has died. The IA (in this case, not the secretary) should send a letter informing the client of the following:
1) The attorney has died or disappeared. If it is the latter, the dignity of the entire profession would be well served by a tactful representation of the situation.
2) The court has appointed the IA to examine the files and help clients with pending cases find a competent person to represent them.
3) Since the client apparently has a case pending, the client should promptly make an appointment with the IA to review the case file and decide what should be done.
If the IA hears nothing from the client within a reasonable time, the secretary should try to track down the client. If all else fails, a certified letter should be sent.
Once the client shows up for an appointment with the IA, the IA must proceed cautiously. Most IA's take on the difficult job of reviewing a deceased attorney's files in the hope that they can get some work out of it. It is perfectly permissible for them to offer, on review of a client's file, to take the client's case themselves. They may not, however, do any of the following: represent themselves as the "successor" to the deceased attorney's practice or imply that they have "taken over” the entire practice or “bought it out"; imply that refusing to use their services will ‘‘waste time” finding another attorney; or represent themselves as competent in an area of law in which they are not. They must, on the other hand, make it clear to the client that no action at all can be taken until the client approves it.
If the IA doesn't want to take on the client's matter or feels incompetent to do so, the inventory attorney may suggest another attorney as an alternative and offer to forward the client's files to that attorney. Although there is nothing unethical about permitting a client to walk out the door with file in band, it is better practice for the IA to gain authorization to forward it. For one thing, the client may not understand how urgent the situation is and may wait so long to make an appointment with the new attorney that the case cannot proceed. For another, an unscrupulous client may take advantage of the situation by "misplacing" an important document and later claiming malpractice on the part of the deceased attorney. It is never wise to allow a client to depart with the only copy of an open file. If the client insists on removing the file the inventory attorney should copy it.
Closed files represent another hazard for the IA. Dealing with them is a tedious. time-consuming, and largely pro bono process. It is also unfortunately, true that no matter how the IA chooses to deal with the closed file, potential problems will remain. An IA who returns all closed files to the client faces the possibility that the client will remove or alter portions of the file and claim malpractice. An IA who arranges for storage of all closed files for five or 10 years will incur expenses personally or for the estate. If the deceased practiced for more than a few years, some of the inactive files may be old enough to have out-of-date addresses for the clients.
While closed or inactive files again represent an area where individual decisions most be made for what is most appropriate in the given situation, there are some things the IA can do to protect himself or herself the clients, and the deceased. First of all, the files should be reviewed to determine what the matter concerned, how old the file is, and whether the file contains any important or original documents. If the IA has decided to destroy any old files, a system should be worked out so that important documents are flagged and retained. The IA also may write to each client at the last known address (and advertise, if this does not work), offering the option of destroying the file or returning it to the client, If the client opts to have the file returned, the IA should always get a receipt for it that itemizes the information in the file at the time it was returned.
But when the file is too important or too recent to be destroyed, and the client cannot be located, the IA. may have no choice but to find a place to store the files. The retention time will depend on the applicable statutes of limitation for the jurisdiction and for the area of practice.
Many lawyers feel that the need for insurance stops when the practice does. This belief, however, is shortsighted and can result in an estate's being wiped out by damages. If the relevant statute of limitations tolls from the time an error is discovered, a malpractice claim can easily be brought against a dead person -- even against one dead for some years.
The inventory attorney may protect the interests of the estate in several ways. First, lump-sum malpractice insurance should be bought for the estate and maintained until all possible statutes of limitation for malpractice claims have expired. In addition, the IA should ensure that the malpractice insurance records not only for the estate's insurance but also for the previous policies are kept in case a claim is brought.
FORM - Order Appointing Inventory Attorney
J.R. Phelps is director of the Law Office Management Advisory Service (LOMAS) of The Florida Bar He received his B.B.A. from Marshal! University in Huntington, West Virginia.
Terri Olson is research analyst for the Law Office Management Advisory Service (LOMAS) of The Florida Bar.
This column is submitted on behalf of the General Practice Section, Lewis H. Hill III, chairman, and William A. Cain, editor.