2013-02-11-01

The Supreme Court of South Carolina

RE: Succession Planning Amendments to the South Carolina Appellate Court Rules

Appellate Case No. 2010-163374

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ORDER

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The Court has adopted a number of amendments to the South Carolina Appellate Court Rules concerning the appointment of attorneys to protect the interests of clients under Rule 31, RLDE, Rule 413, SCACR, and attorney succession planning. 

First, based on recommendations made by the American Bar Association Standing Committee on Professional Discipline, the Court has amended Rule 31, RLDE, to create a receiver position within the Office of Commission Counsel.  The receiver will handle matters formerly handled by members of the bar appointed as attorneys to protect clients' interests when lawyers are transferred to incapacity inactive status, disappear or die, or are suspended or disbarred, but no partner, personal representative or other responsible party capable of conducting the lawyers' affairs is known to exist.  To fund the position, the Court has increased the Additional License Fee to Support Lawyer and Judicial Disciplinary Functions by $20 for Regular Members of the Bar.  While the receiver will be authorized to ask this Court to appoint attorneys to assist the receiver, the employment of a receiver will substantially reduce the number of attorneys appointed to assist in protecting clients' interests under Rule 31.       

In conjunction with the creation of a receiver position, the Court has also adopted Rule 1.19, RPC, Rule 407, SCACR: Succession Planning.  This rule, which was based on a rule originally proposed by the South Carolina Bar, encourages lawyers to prepare written, detailed succession plans, which include the selection of a successor attorney to assume responsibility for the interests of the lawyer's clients in the event of the lawyer's death or disability from the practice of law.  A list of successor attorneys will be kept by the Bar. 

These amendments, which are set forth in the attachment, are effective July 1, 2013.  However, the Court recommends lawyers immediately consider and prepare written, detailed succession plans as described in Comment 2 to Rule 1.19.  Succession planning will not only help reduce the number of appointments under Rule 31, but it will also protect clients, law firms, and lawyers and their estates when lawyers die or are disabled from the practice of law.  Furthermore, the South Carolina Bar's Practice Management Program (PMAP) has a number of excellent resources available for lawyers who wish to formulate succession plans, including published articles, general advice on winding down a practice, and sample forms.

s/Jean H. Toal                                  C.J. s/Costa M. Pleicones                          J. s/Donald W. Beatty                             J. s/John W. Kittredge                             J. s/Kaye G. Hearn                                  J.

Columbia, South Carolina
February 11, 2013

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Rule 31, RLDE, Rule 413, SCACR, is amended to provide as follows:

RULE 31
ORDER OF RECEIVERSHIP

(a) Employment. Commission counsel shall employ a member of the South Carolina Bar who has been admitted under Rule 402, SCACR, as a standing receiver.  The receiver shall not otherwise engage in the practice of law, except to the extent a staff attorney would be authorized to do so under Rule 506, SCACR, or as explicitly authorized by these rules.  The receiver shall not serve in a judicial capacity.

(b) Petition. If a lawyer has been transferred to incapacity inactive status, has disappeared or died, or has been suspended or disbarred, and no partner, personal representative or other responsible party capable of conducting the lawyer's affairs is known to exist, disciplinary counsel shall petition the Supreme Court for an order of receivership appointing the receiver to inventory the files of the inactive, disappeared, deceased, suspended or disbarred lawyer and to take action as appropriate to protect the interests of the lawyer and the lawyer's clients.  If the Supreme Court determines that a lawyer suffers from a physical or mental condition that adversely affects the lawyer's ability to practice law but decides that a transfer to incapacity inactive status is not warranted, it may appoint the receiver to protect clients' interests.  The order of receivership shall be public.

(c) Duties.  The receiver shall:

(1) Take custody of the lawyer's active and closed files and trust or escrow accounts. The chair or vice chair may issue such orders as may be necessary to assist the receiver in obtaining custody over such files and accounts, to include orders compelling the lawyer or a third party to take specific action regarding the files and accounts.  The willful failure to comply with such an order may be punished as a contempt of the Supreme Court.  A party who wishes to challenge such an order must immediately seek review of the order by petition to the Supreme Court;

(2) Notify each client in a pending matter, and in the discretion of the receiver, in any other matter, at the client's address shown in the file, by first class mail, of the client's right to obtain any papers, money or other property to which the client is entitled and the time and place at which the papers, money or other property may be obtained, calling attention to any urgency in obtaining the papers, money or other property;

(3) Publish, in a newspaper of general circulation in the county or counties in which the lawyer resided or engaged in any substantial practice of law, once a week for three consecutive weeks, notice of the discontinuance or interruption of the lawyer's law practice.  The notice shall include the name and address of the lawyer whose practice has been discontinued or interrupted; the time, date and location where clients may pick up their files; and the name, address and telephone number of the receiver.  The notice shall also be mailed, by first class mail, to any errors and omissions insurer or other entity having reason to be informed of the discontinuance or interruption of the law practice;

(4) Release to each client the papers, money or other property to which the client is entitled.  Before releasing the property, the receiver shall obtain a receipt from the client for the property;

(5) With the consent of the client, file notices, motions or pleadings on behalf of the client where jurisdictional time limits are involved and other legal counsel has not yet been obtained; and

(6) Perform any other acts directed in the order of receivership.

(d) Term of Order. The term of an order of receivership shall be for a period of no longer than 9 months.  Upon application by the receiver, the Supreme Court may extend the term of the order as necessary.

(e) Representation of Clients. Clients should be encouraged to engage other counsel as soon as possible.

(f) Termination of Receivership. When the provisions of (c) above and the order of receivership have been complied with, the receiver shall apply to the Supreme Court for termination of the receivership.  The application shall contain the written releases of clients to whom files and other property were returned, information regarding the efforts made to contact the lawyer's remaining clients, an inventory of the files and other property remaining in the receiver's possession and an itemized account of the expenses incurred in carrying out the order of receivership.  Upon approval of the application by the Supreme Court, all files and property remaining in the receiver's possession shall be retained by the Commission. Unless otherwise ordered by the Supreme Court, the files shall be retained by the Commission for a period of 3 years at which time they shall be destroyed in a manner which protects their confidentiality.  Other client property remaining in the possession of the Commission after 3 years shall be disposed of in a manner as ordered by the Supreme Court.

(g) Appointment of Attorneys to Assist the Receiver.  Upon petition of the receiver, the Supreme Court may appoint members of the South Carolina Bar as needed to assist the receiver in performing duties under this rule.  With the exception of reasonable and necessary expenses, such as postage, telephone bills, copies, supplies and the cost of publishing legal notice in the newspaper, an appointed attorney shall serve without compensation as a service to the legal profession.  However, the Supreme Court may order that the appointed attorney be reimbursed a reasonable amount for other expenses, such as the appointed attorney's time or the time of support staff, when it determines that extraordinary time and services were necessary for the completion of the required duties or when the appointment has worked a substantial hardship on the appointed attorney's practice.  The Supreme Court shall determine the reasonableness of necessary expenses and other expenses.¹  Expenses which are approved and awarded by the Supreme Court shall be paid from funds remaining in the lawyer's accounts.  If no such funds exist, payment shall be made first from any budgeted allocation of the Additional License Fee to Support Lawyer and Judicial Disciplinary Functions and then from the Lawyers' Fund for Client Protection under Rule 411, SCACR. If the appointed attorney's expenses are paid by the Lawyers' Fund for Client Protection, the Supreme Court may order the lawyer to reimburse that Fund.

(h) Protection of Client Information.  Neither the receiver nor an attorney appointed to assist the receiver shall be permitted to disclose any information contained in the files inventoried without the consent of the client to whom the file relates, except as necessary to carry out the order of receivership or order of appointment.

(i) Order Appointing Successor Lawyer.  Where a lawyer has died or become disabled from practicing law, and the lawyer has named a successor lawyer in accordance with Rule 1.19, RPC, Rule 407, SCACR, the successor lawyer may petition the receiver to request an order of succession appointing the successor lawyer to inventory the files of the disabled or deceased lawyer and to take action as appropriate to protect the interests of the lawyer and the lawyer's clients.

(j) Succession Education.  The receiver shall have primary responsibility for conducting educational efforts on the need to protect clients through planning for succession in practice.

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Rule 4(e)(2)(F), RLDE, Rule 413, SCACR, is amended to provide as follows:

(F) provide advice and assistance to the receiver and attorneys appointed to assist the receiver; and,

Rule 5(b)(10), RLDE, Rule 413, SCACR, is amended to provide as follows:

(10) provide advice and assistance to the receiver and attorneys appointed to assist the receiver; and,

Rule 13, RLDE, Rule 413, SCACR, is amended to provide as follows:

 RULE 13
IMMUNITY FROM CIVIL SUITS

Communications to the Commission, Commission counsel, disciplinary counsel, or their staffs relating to misconduct, incapacity, or the inability to participate in a disciplinary investigation or assist in the defense of formal proceedings and testimony given in the proceedings shall be absolutely privileged, and no civil lawsuit predicated thereon may be instituted against any complainant or witness.  Members of the Commission, Commission counsel and staff, disciplinary counsel and staff, any receiver or attorney appointed to assist the receiver under Rule 31, and any supervising or monitoring attorney appointed under Rule 33 shall be absolutely immune from civil suit for all conduct in the course of their official duties.

Rule 30(d), RLDE, Rule 413, SCACR, is amended to provide as follows:

(d) Refund of Fees and Return of Property.  A disbarred or suspended attorney shall promptly refund any part of any fees paid in advance that has not been earned.  The lawyer shall also deliver to all clients being represented in pending matters any papers or other property to which they are entitled and shall notify them and any counsel representing them of a suitable time and place where the papers and other property may be obtained, calling attention to any urgency for obtaining the papers or other property.  If a receiver or an attorney to assist the receiver has been appointed under Rule 31, the return of client fees and property shall be accomplished by the receiver or the attorney appointed to assist the receiver.

 

Rule 32, RLDE, Rule 413, SCACR, is amended to provide as follows:

RULE 32
REINSTATEMENT FOLLOWING A DEFINITE SUSPENSION
OF LESS THAN NINE MONTHS

Unless otherwise provided for in the Supreme Court's suspension order, a lawyer who has been suspended for a definite period of less than 9 months shall be reinstated to the practice of law at the end of the period of suspension by filing with the Supreme Court, and serving upon disciplinary counsel and the Commission on Lawyer Conduct, an affidavit stating that the lawyer is currently in good standing with the Commission on Continuing Legal Education and Specialization and the South Carolina Bar, has fully complied with the requirements of the suspension order, and has paid any required fees and costs, including payment of necessary expenses and compensation approved by the Supreme Court to the receiver or the attorney appointed to assist the receiver pursuant to Rule 31, RLDE, to protect the interests of the lawyer's clients for necessary expenses, or to the Lawyers' Fund for Client Protection if the Fund has paid the attorney appointed to assist the receiver under Rule 31(g), RLDE.  If suspended for conduct resulting in a criminal conviction and sentence, the lawyer must also successfully complete all conditions of the sentence, including, but not limited to, any period of probation or parole.  In such a case, the lawyer must attach to the affidavit documentation demonstrating compliance with this provision.  The affidavit filed with the Supreme Court shall be accompanied by proof of service showing service on disciplinary counsel and the Commission on Lawyer Conduct, and a filing fee of $200. When all preconditions set out in this rule are met, the Court shall issue an order of reinstatement. The order shall be public.

Rule 33(f)(11), RLDE, Rule 413, SCACR, is amended to provide as follows:

(f) Criteria for Reinstatement and Readmission.  A lawyer may be reinstated or readmitted only if the lawyer meets each of the following criteria:

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(11) The lawyer has paid necessary expenses and compensation approved by the Supreme Court to the receiver or the attorney appointed to assist the receiver pursuant to Rule 31, RLDE, to protect the interests of the lawyer's clients for necessary expenses, or to the Lawyers' Fund for Client Protection if the Fund has paid the appointed attorney under Rule 31(g), RLDE.                                                   

The final paragraph of Rule 411(c)(1), SCACR, is amended to provide as follows:

The Committee is further authorized to disburse funds as ordered by the Supreme Court pursuant to Rule 31, RLDE, Rule 413, SCACR.  Unless otherwise provided by the order of the Supreme Court, the Committee shall be entitled to reimbursement from the suspended, disbarred, disappeared, or deceased attorney or his estate.

Rule 608(f)(4)(C), SCACR, is amended to provide as follows:

(C) A member who receives an appointment as an attorney to assist the receiver under Rule 31, RLDE, contained in Rule 413, SCACR; or receives an assignment to investigate a matter as an attorney to assist disciplinary counsel under Rule 5(c), RLDE; or receives an appointment as counsel under Rule 28(b), RLDE, or Rule 28(b), RJDE, shall receive credit for the appointment under this rule.  The Office of Disciplinary Counsel shall notify the appropriate clerk of court of the appointment, and the clerk shall mark the list to reflect the appointment.  If the member is relieved of this appointment before it is substantially completed, the Supreme Court or the Office of Disciplinary Counsel shall notify the clerk so that the credit may be withdrawn.

The Court adopts Rule 1.19, RPC, Rule 407, SCACR, which provides as follows:

RULE 1.19: SUCCESSION PLANNING

(a) Lawyers should prepare written, detailed succession plans specifying what steps must be taken in the event of their death or disability from practicing law.

(b) As part of any succession plan, a lawyer may arrange for one or more successor lawyers or law firms to assume responsibility for the interests of the lawyer's clients in the event of death or disability from practicing law.  Such designation may set out a fee-sharing arrangement with the successor.  Nothing in this rule or the lawyer's designation shall prevent the client from seeking and retaining a different lawyer or law firm than the successor.  The lawyer to be designated must consent to the designation.

(c) A registry shall be maintained by the South Carolina Bar.  The successor lawyer(s) shall be identified on the lawyer's annual license fee statement.

Comment

[1] The rule serves as an encouragement, especially to sole practitioners, to arrange for the orderly protection of clients.

[2] A detailed succession plan should include written instructions concerning how and where client information is stored; bank account details, including operating and trust account information; information concerning disposition of closed client files, law office equipment, and payment of current liabilities; instructions to gain access to computer and voicemail passwords; and information detailing how the successor will be compensated.

[3] Where a detailed succession plan has been prepared, the designated successor should step in to wind down the practice without need of a court appointment.

[4] The client retains the power to select other counsel.  The successor lawyer should ensure that the client is aware of that discretion and of any arrangement under which a portion of the fee is to be shared with the absent lawyer or his estate.

[5] The lawyer may designate multiple, different successors for different types of cases.  Individual client interests may be better served if multiple lawyers agree to be successors.

[6] Law firms may also designate successors for lawyers, even if such successors are not members of the firm.  Such a designation would be done according to the governing approval process of the particular law firm.

[7] A registry is maintained for the voluntary designations.  There is no requirement that a successor be listed in the registry.  The registry, however, can serve as a starting point to determine if there is a succession plan in the event of the unexpected death or disappearance of a lawyer.  A lawyer who names a successor should contact the South Carolina Bar and inform the Bar of the designation.

Comment 5 to Rule 1.3, RPC, Rule 407, SCACR, is amended to provide as follows:

[5] To prevent neglect of client matters in the event of a practitioner's death or disability, it is the better practice, and the duty of diligence may require, that each lawyer or law firm prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer's death or disability, and determine whether there is a need for immediate protective action.  See Rule 1.19.

Rule 410(k)(1), SCACR, is amended to provide as follows:

(k) Additional License Fee to Support Lawyer and Judicial Disciplinary Functions.   Members in good standing (other than deceased members) shall also pay an additional fee which shall be placed in a separate account by the South Carolina Bar and shall be disbursed as directed by the Supreme Court to help defray the costs of operating the Commission on Judicial Conduct, the Commission on Lawyer Conduct, and the Office of Disciplinary Counsel.

(1) Regular Member.  The additional license fee for a regular member who has been admitted to practice law in this State or any other jurisdiction for less than three years shall be $40.  The additional license fee for all other regular members shall be $70.