Harry S. Margolis, BridgeTower Media Newswires
There are a lot of baby-boomer attorneys still practicing law. Regardless of whether they would like to, they won’t be able to do so forever, which raises several questions. Where will their clients go? What will happen to their client files? Will they reap any benefit from the goodwill they have built up over decades? Is there a way they can keep their hands in the profession without all the responsibility of running a law practice?
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Standard planning, or lack thereof
Attorneys who are members of larger firms have built-in answers to these questions. But those who are solo practitioners or part of smaller firms of other baby-boomer lawyers must find their own solutions.
Many don’t, whether through lack of motivation or despite efforts to plan that don’t work out (such as seeking a younger partner to take over the practice).
Still, things often do work out well, as the practices of older attorneys gradually dwindle at the same time they take more time off or spend the winters in warmer climes. This can give older attorneys a continuing income, allow them to keep serving their clients, and provide them the satisfaction of keeping their hands in the profession and being of use. The pandemic-induced move to remote work has facilitated the graduated approach to retirement.
But all too often things don’t work out. The attorney becomes ill or passes away, and his or her clients and staff — if any — are left high and dry. Family members must pick up the pieces. We’ve sought case files from widows of deceased or incapacitated attorneys who have them stored in boxes in the garage.
In essence, what was a valuable practice becomes a liability.
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A better alternative
The firm of Russell, McTernan, McTernan & Fruci exemplifies an alternative to this lack of planning. How things worked may serve as a model for other lawyers and law firms in a similar situation.
The four RMMF partners were ready to retire and did not have anyone coming up in the firm to take over their practice. So they approached our firm, Margolis & Bloom.
We worked out an arrangement that permitted them to ease out of their practice over six to 12 months, made sure their clients and client files had a place to go, and compensated them for the client revenue that came to our firm.
In addition, their key employee joined our firm and is still providing a valuable contribution to the representation of clients from her old firm.
Here are the elements of the agreement:
• RMMF merged into our firm, and the RMMF attorneys became “of counsel.” We took over the lease to their office space, which was in a building owned by one of the retiring partners. The RMMF attorneys continued to work for six to 12 more months, each on his own schedule.
• We made substantial efforts to spread the word of the merger, writing to all RMMF clients, advertising in the local newspaper, and holding an event at the RMMF office.
• We assigned a lawyer from our firm to spend time in-person at the RMMF office to meet with clients there (this was pre-pandemic). The RMMF attorneys made introductions to their key clients.
• Fundamental to the success of the transition was that the key RMMF employee joined our firm. The RMMF telephone number now rings in our office but is directed to this employee’s direct line.
• We took over RMMF’s files. We required that they scan their paper files so that they came over as digital files. All the original estate planning documents they were holding for clients were moved to our storage facility. Their database of client information was imported into our client management system.
• We required RMMF to purchase a “tail” liability insurance to cover any malpractice claims that might be aimed at the firm prior to the merger. The RMMF attorneys have been covered under our malpractice policy for any claims made for representation occurring post-merger.
• We pay the RMMF lawyers a portion of the revenue we collect for clients who come from them. This is calculated on a monthly basis, against a minimum payment each month no matter the amount of revenue. This continues for seven years (a compromise between our proposal of five years and theirs of 10). For the period of time that they continued to work, we paid them an additional percentage of the revenue received on their cases.
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Conclusion
This is just one model of how retiring attorneys at small firms might exit the practice of law while assuring their clients, staff and client files are in good hands. Some practitioners may be able to find younger attorneys to take over their practices. Some join much larger firms. Others simply close up shop.
One of the challenges in coming to agreement on a merger or the sale of a practice is that the value of the practice is often so integral to the work contributed by the exiting attorney. The practice may seem much more profitable than any purchasing firm is willing to pay, but much of the income produced by the firm comes from the labor of the departing lawyer. It’s not as if the firm manufactures the proverbial widgets and will continue to do so with or without the contribution of the retiring lawyers.
The value of the practice must be discounted by the cost of paying other attorneys to do the work. There’s real value, though perhaps not as much as would appear looking at the firm’s gross income. But if everyone recognizes that that is the case, a deal can be struck.
All in all, the RMMF-Margolis & Bloom merger has been beneficial for all concerned. Our firm has additional profitable business that we would not have garnered without the merger. And we added a valuable new member to our staff. Still, it involved a considerable amount of work and didn’t necessarily revolutionize our business.
Meanwhile, the RMMF partners were able to retire knowing that their clients and their client files would be in responsible hands. They have received and continue to receive additional income — not enough to support their retirement but substantially more than they would have received had they simply closed up shop.
Perhaps the most important aspect of this arrangement for the RMMF attorneys is that it has allowed them to leave a positive legacy for the practice and reputation they built in the community over many decades.
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Harry S. Margolis represents seniors, and individuals with special needs and their families, at Margolis & Bloom, which has offices in Boston, Norwood and Wellesley.
