Cessation of Practice Procedure

Cessation of practice procedure rests primarily on Part XIII of the Texas Rules of Disciplinary Procedure. 

The Mechanics of TRDP Part XIII

Rule 13.01 provides that the lawyer, or a qualified stand-in, shall give written notice that the attorney ceased practice. “If the client has consented to the assumption of responsibility for the matter by another attorney licensed to practice law in Texas, then the above notification requirements are not necessary and no further action is required.” Tex. Rules Disciplinary P. R. 13.01. 

In extraordinary circumstances – with active matters pending and no lawyer handling them with client consent – any interested person may request that a court assume jurisdiction over the lawyer’s practice. The petition may be filed in district court or, if the attorney has died, in statutory probate court. Venue rests in the county of the attorney’s residence. 

The petition must be verified, stating: 

1. That an attorney licensed to practice in Texas has:
   • Died,
   • Disappeared,
   • Resigned,
   • Become inactive,
   • Been disbarred or suspended, or
   • Become physically, mentally, or emotionally disabled and:
   • Cannot provide legal services necessary to protect the interests of clients.

2. That cause exists to believe court supervision is necessary because the attorney left client matters for which no other attorney licensed in Texas has, with consent of the client, agreed to assume responsibility.
3. That there is cause to believe that the interests of one or more clients of the attorney or one or more interested persons or entities will be prejudiced if the proceeding is not maintained.

Tex. Rules Disciplinary P. R. 13.02. 

The court reviews the petition and determines whether to issue a show cause order. A show cause order directs the lawyer at issue, the lawyer’s personal representative, or those with access to client files, to appear and show cause why the court should not assume jurisdiction. 

At the hearing, the court determines whether one or more of the events stated in Rule 13.02 has occurred. If court supervision is necessary, the court assumes jurisdiction and appoints one or more Texas-licensed attorneys to serve as custodians of the practice. The appointment order states powers and responsibilities of the custodians under Rule 13.03. Tex. Rules Disciplinary P. R. 13.03. 

Pursuant to Rule 13.03, “The custodian shall observe the attorney-client relationship and privilege as if the custodian were the attorney of the client and may make only such disclosures as are necessary to carry out the purposes of [TRDP Part XIII].” The rule also provides liability protection: “Except for intentional misconduct or gross negligence, no person acting under this part may incur any liability by reason of the institution or maintenance of a proceeding under this Part XIII.” Tex. Rules Disciplinary P. R. 13.03. 

A new rule, TRDP 13.04, allows for voluntary appointment of custodian attorneys, with similar liability protection. A 13.04 custodian does not become the new lawyer for the clients. Indeed, if the custodian steps into representation of a client, “the lawyer’s role as custodian terminates, and the lawyer’s actions are subject to the Texas Disciplinary Rules of Professional Conduct regarding the client-lawyer relationship.” Tex. Rules Disciplinary P. R. 13.04. 

Guidelines for Custodianship

Each cessation of practice is unique. If you serve as a court-appointed custodian, keep in mind the language of the appointment order. If conditions change, seek guidance from the court. Likewise, 13.04 custodians may encounter situations in which court supervision is needed. Do not hesitate to seek guidance in court. 

1. Keep a Record
   Keep a record from the start. At some point, a report will be needed to end the custodianship. Track hours and expenses and keep receipts. This will be useful in preparing your report.
2. Seek Assistance from Office Staff
   Staff, if any, often have the most knowledge of the law practice.
   
3. Find Persons with Knowledge of the Law Practice
   If the lawyer had no staff support, search for officemates, close colleagues, and relatives. Find those who may have the most knowledge of the law practice.
   
4. Secure Access to Files
   Locate keys, access codes, and passwords. Find file cabinets, electronic storage, and digital files. There may be boxes in storage; keep looking.
   
5. Search for Insurance Policies
   The lawyer may have insurance coverage relating to interruption or cessation of practice. Contact the lawyer’s insurance agent, if any. Search for professional liability policies, business liability policies, and any other policies that may apply.
   
6. Search for Organizational Documents of Entities
   The documents that created entities through which the lawyer practices or practiced may touch on interruption or cessation of practice.
   
7. A Word on Conflicts of Interest
   Be careful to avoid matters that may pose a conflict of interest for you or your clients. If a conflict exists, defer to another custodian attorney or seek guidance from the court.
   
8. Preserve Confidentiality
   Maintain confidentiality and protect the attorney-client privilege. A custodian attorney abides by Tex. Disciplinary Rules Prof'l Conduct R. 1.05.
   
9. Persons to Notify That the Attorney Ceased Practice
   Send written notice to clients, cocounsel, opposing counsel, courts, insurance carriers, landlords, and any other person or entity having reason to be informed of the cessation of practice.
   
10. Client Access and Referrals for Legal Services 
    

    Alert clients to the custodianship. Provide contact information so clients can actively communicate with you. Urge clients to obtain new counsel. 

    If cessation is sudden and unexpected, local colleagues may be willing to step in as new counsel at reduced rates. Keep in mind, however, the antisolicitation rules; see Tex. Disciplinary Rules Prof'l Conduct R. 7.03. 

    Clients who did not agree in advance of cessation who their new lawyers would be will likely choose their own counsel. 

    You may refer clients to certified lawyer referral services, including the State Bar of Texas Lawyer Referral and Information Service (https://www.texasbar.com/AM/Template.cfm?Section=Lawyer_Referral_Service_LRIS_). 

    You may also refer clients to legal service programs, such as those summarized at Affordable Legal Services (https://www.texasbar.com/AM/Template.cfm?Section=Affordable_Legal_Services). 

    Many self-help resources are available at TexasCourtHelp.gov (https://www.texascourthelp.gov/).

      
11. A Word on Straying into the Role of New Counsel
    Do address scheduling, extensions of time, and continuances. Consider with caution whether court filings may be required to prevent prejudice to the client’s rights. Review the agreement or order that creates the custodianship, and always keep in mind that the role of custodian does not encompass the function of new counsel. Observe closely the antisolicitation rules; see Tex. Disciplinary Rules Prof'l Conduct R. 7.03. If you do step in (or stumble into) the role of new counsel, liability protection under TRDP 13.03 and 13.04 may be forfeited.
    
12. Preserve Communications and Instructions
    Put communications in writing and confirm oral communications in a follow-up writing. Provide written notice that the attorney’s law practice is in custodianship and that the client should retain new counsel. If the client wishes to send the file to new counsel, have the client sign a transfer authorization. If the client picks up their file, have them sign for it. Provide written notice to each client with a closed file that they may collect it or authorize its destruction. Obtain the client’s signature to confirm release of the file and written authorization if the client wants the file destroyed.
    
13. Retain Copies of Substitution Orders
    Retain copies of substitution orders, including appointment orders that reassign court-appointed cases to new counsel.
    
14. Inventory Client File
    

    The general rule in Texas is that the file belongs to the client, but there is no encompassing rule for how long a lawyer must keep the file. Tex. Comm. On Prof'l Ethics, Op. 627 (2013). 

    Locate and inventory all files, including all physical and electronic files. Note that closed files may be stored in more than one location. Physical files may be stored in public warehouses, at the attorney’s home, or even with a client. Electronic files may be stored on servers, hard drives, laptops, home computers, and/or removable media, such as jump drives or disks. Ask staff, relatives, and close friends about off-site locations, passwords, and keys. 

    Update files with any new mail. Document status, actions you have taken, and action contemplated. Subject to privilege for confidential information, include a summary in the custodian’s report.

15. Secure Content with Intrinsic Value or That May Give Rise to Significant Property Rights
    Files may contain original wills, signed contracts, stock certificates, promissory notes, property deeds, trust instruments, or other original documents like birth and marriage certificates and passports. Such items must be safeguarded, returned to the client, or disposed of, if at all, by court order. Special attention should be paid to open files and closed files in which it appears the client’s or the attorney’s interest may be ongoing, including files that contain corporate books and records, intellectual property files, documents pertaining to minors (such as custody and support judgments and adoption records), or other matters of ongoing interest.
    
16. Be Alert to Lawful Restrictions on the Client’s Access to Contents in the File
    

    Specific content in the file may be reviewable by the custodian but restricted from disclosure to the client. Be watchful for protective orders and markings that limit disclosure to “Attorney’s Eyes Only.” Other restrictions may apply by statute, rule, or standing orders. Examples of restricted access include: 

    • Criminal case discovery obtained from the prosecution may be restricted from the client. Tex. Code Crim. Proc. art. 39.14(f), (g). 
    • Trade secret and proprietary information discovery may be restricted from the client. Misc. Order 62, ¶22 and Ex. A (N.D. Tex. Nov. 17, 2009) (standing protective order applicable to patent cases in the Northern District of Texas); Local Rules for the United States Court for the Eastern District of Texas, app. B, P. R. 2-2 (local rule applicable to patent cases in the Eastern District of Texas). 
    • National security information discovery may be restricted from the client. Classified Information Procedures Act (“CIPA”), 18 U.S.C. app. 3; see U.S. v. Bin Laden, 2001 WL 66393 *2 (S.D. New York 2001) (“defense counsel have been cleared to review a category of classified documents that they may not share with their clients”). 

    The custodian may be restricted from disclosing information concerning the whereabouts or identifying information of children, crime victims, confidential informants, undercover officers, jurors, and others. This is not an exhaustive list; other restrictions may apply.

Guidelines for Disposition of Client Files

The following guidelines are to assist the custodian toward final disposition of client files. 

1. Promptly Return Client Files upon Request 
   Screen files for content that may be restricted from disclosure to the client. Subject to screening, return the file promptly, even if the client has an outstanding balance. It is advisable to designate a single pickup location for all client files. Coordinate with the client on time and location. Ask for identification, and absent written consent from the client, limit release of the file to the client. Have the client sign an acknowledgement of receipt. Alternatively, with written consent from the client, the file may be returned by certified mail; be sure to get proof of delivery.
   
2. Transfer Files to Third Parties Promptly upon Client Request
   Be sure to obtain a transfer authorization signed by the client. Obtain a written acknowledgement of receipt from the third-party recipient.
   
3. Properly Store Files of Clients Who Cannot Be Reached and Files That May Not Be Destroyed
   Maintain a record of the location of stored files and who to contact to arrange retrieval. Notify the Bar of where closed files will be stored and the name, address, and phone number of the contact person for retrieving each.
   
4. Destroy Client Files Only If Authorized
   Methods of authorization include (a) the client’s written authorization, (b) court order obtained through a motion for authorization to destroy files, or (c) if applicable, authority set forth in a file-retention provision of the client’s fee agreement. Subject to authorization, destruction of the file should be complete: Shred the file or have it shredded by a company that provides professional shredding services. Prepare a list of client files destroyed with dates of destruction. Subject to confidentiality precautions, a list may be included in the custodian’s report.
    

Guidelines for Office Contacts

The following guidelines address office contacts for the duration of the custodianship. 

1. Personal Contacts
   Establish contact with authorized stand-ins for the lawyer. This might be a legal representative, a legal guardian, or a personal representative of the lawyer’s estate.
   
2. Mail and Packages
   Notify the U.S. Postal Service and other carriers as needed. Notify office neighbors.
   
3. Voicemail and Email
   Log voicemail, if possible. If passwords are not available, disconnect all voicemails and consider using a simple answering machine instead. Coordinate with the lawyer’s estate or other authorized stand-in to arrange forwarding of email to a designated inbox or responsible person. It may also be possible to reject or answer all emails with a notice instructing the sender whom to contact. 

IOLTA, Other Trust Accounts and Escrow Accounts

In court-appointed custodianship, the court may or may not empower the custodian to close out the lawyer’s trust and escrow accounts. These accounts may be subject to handling by an entity, if any, out of which the lawyer practiced. Additionally, final reconciliation of the IOLTA may be a task for the lawyer’s estate or a Texas lawyer appointed by the estate. See Tex. Est. Code ch. 456. 

If the custodian is tasked to close the IOLTA, bear in mind that there may be more claims on the IOLTA than there are funds in the IOLTA. Do not hesitate to seek guidance from the court on how to report and distribute funds. 

Additionally, Texas Disciplinary Rule of Professional Conduct 1.14(a) provides, in part, that “Other client property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.” 

A Word on Temporary Cessation of Practice

Some cessations of practice may prove temporary. The lawyer may be in a coma, then wake up. A missing attorney might reappear. Whatever the circumstance, it may get complicated! 

If the practice is in court-appointed custodianship, keep in mind: The court appointed you; review the appointment order; if unclear, seek guidance from the court. The court may decide to revisit the order for custodianship, then again it might not! 

If the custodianship is by agreement under TRDP 13.04, review the custodian agreement. Ideally, the agreement will have terms for what to do if the lawyer revives or reappears. If the agreement is unclear, consider seeking guidance from a court. 

Wrapping Up

1. Closing Documents 
   

   To close a court-appointed custodianship, submit the custodian’s report and move the court to dissolve the custodianship. Address disposition of client files, expenses incurred, and other details, while still preserving confidentiality. Submit a proposed order to dissolve the custodianship. 

   Custodian agreements under TRDP 13.04 should include a process for terminating custodianship. Review the agreement, comply with the terms, and if unclear, consider seeking guidance from the court.³

2. The Question of Compensation for the Custodian
   

   TRDP Part XIII does not address compensation for custodial services. No rule requires or precludes payment. 

   If the cessation at issue is sudden and unexpected, the local bar may be needed to recruit a team of volunteers. With a team, the burden is shared, and volunteers may be eligible for pro bono credit. 

   The expense of custodianship is sometimes borne by agreement with the lawyer’s family or the lawyer’s estate. If the lawyer practiced out of an entity, the entity may be a resource. If the entity is in receivership, the receivership court may be a forum to request costs. 

   If custodianship is by agreement under 13.04, be sure that the written agreement addresses compensation. In all other instances, consider how you might address it in court.

Resources

1. Law Practice Resources, About Us: https://www.texasbarpractice.com/about-us/
2. Succession Planning: https://www.texasbarpractice.com/law-practice-management/plan/
3. Portal to Online System for Advance Designation of Custodian Attorneys: https://www.texasbar.com/AM/Template.cfm?Section=Succession_Planning&Template=/Succession/vendor/Instructions.cfm
4. Sale of a Practice: https://www.texasbarpractice.com/law-practice-management/article/best-practices-when-selling-a-practice/
5. Closing a Practice: https://www.texasbarpractice.com/law-practice-management/close/
6. Part XIII of the Texas Rules of Disciplinary Procedure (Cessation of Practice): https://www.legalethicstexas.com/resources/rules/texas-rules-of-disciplinary-procedure/voluntary-appointment-of-custodian-attorney-for-cessation-of-practice/
   • The mechanics of TRDP Part XIII differentiate between ordinary cessations and cessations involving extraordinary circumstances. Ordinary cessations channel through TRDP 13.01.
   • In extraordinary circumstances, any interested person may petition a court to assume jurisdiction over the lawyer’s law practice. Prerequisites for the petition appear at TRDP 13.02. If the court assumes jurisdiction, the court will appoint one or more Texas attorneys to serve as custodian-attorneys under TRDP 13.03.
   • Under TRDP 13.04, lawyers may enter agreements for custodianship, appointing their own custodian attorneys.
7. Opinion 627 (Disposition of Files and File Screening): https://www.legalethicstexas.com/resources/opinions/opinion-627/
8. Opinion 657 (Additional File Screening in Criminal Cases – Example of Attorney’s Eyes Only Information): https://www.legalethicstexas.com/resources/opinions/opinion-657/
9. Sample of Template Pleadings in the Event of Court-Appointed Custodianship, (Linked at Bottom Right): https://www.texasbarpractice.com/law-practice-management/close/