New NC Ethics Opinions Related to Practice Management
Brian Oten and Peter Bolac provided their annual update on what is happening at the North Carolina State Bar during their recent Expert Series CLE. In addition to topics such as legal deserts, changes to CLE rules, the new random audit selection process, and much more, they discussed two recently adopted ethics opinions related to billing and handling of aged client files upon sale or closure of a practice.
Billing Considerations for Overlapping Legal Services
2022 Formal Ethics Opinion 4 was adopted October 27, 2023. The summary says that the opinion rules that “a lawyer may provide services to multiple clients simultaneously and explore various billing structures for overlapping services”. This opinion expands on when a lawyer may bill for efforts taken on behalf of multiple clients. As is always the rule with fees, they should not be excessive, and any efficiencies created by the provision of overlapping service are passed on to the client.
This opinion clearly lays out several hypothetical billing situations (calendar calls, travel, etc.) and explains in detail how to avoid excessive billing. One interesting point the opinion makes is that “the hourly billing structure is the most problematic billing structure when providing overlapping or simultaneous services because billing full hourly rates to multiple clients while providing such services produces clearly excessive, inaccurate, and misleading or dishonest fees.” If you are interested in exploring alternatives to the billable hour, watch Jessica Bednarz and Lauren Lester discuss value-based billing, including how to establish pricing based on your firm’s needs and outcomes.
Sale or Closure of a Law Practice and Proper Handling of Aged Client Files
2023 Formal Ethics Opinion 1 was adopted April 21, 2023. The summary says that the opinion “clarifies a lawyer’s professional responsibility when closing and/or selling a law practice and when handling aged client files”. The background hypothetical contemplates a lawyer who, after 40 years of practice, decides to sell and retire. The attorney “did not dispose of any client files created during [their] 40 years of practice”. The inquiries and responses discuss:
- detecting conflicts checks before transferring client files to the buyer
- whether the selling attorney can continue to offer limited legal services
- whether all clients should be notified of the sale or just current clients
- specifics about file transfers from former and current clients
- dealing with original documents of legal significance
- retention and destruction
- transfer of trust funds
- differing duties based on whether an attorney sells their practice or retires
If you are considering closing or selling your practice this is an especially important and helpful opinion that considers the steps the seller and buyer of a law practice must go through for a successful and ethical transaction.
If you are planning to sell your practice, recognize that some buyers may not want 40 years of documents and the responsibility that comes with them. Here are a few articles to help you begin to reduce your stored client documents, return files and originals to clients, and make your firm a more attractive sales proposition.
- Documenting File Destruction – North Carolina Bar Association
- Client Service – Alternatives to Keeping Original Documents – North Carolina Bar Association
- Rock, Paper, Scissors: Shredding Options for Old Files – North Carolina Bar Association
Conclusion
Your opinion matters! The State Bar asks for feedback and listens as opinions are proposed before they are adopted. Rules too! Keep up with proposed rules amendments and proposed opinions on the NC State Bar website and submit your thoughts and comments.