What Should I Do About Lost or Stolen Client Files?

imagesIs there any worse feeling than having your briefcase or laptop stolen?

While it can be hard to bounce back from such an experience, there are immediate steps you should take  if you discover that confidential client files have been compromised.

  1. File a police report.
  2. Don’t risk your personal safety. While Find my iPhone and MyLaptopGPS can track lost or stolen mobile devices and laptops, leave the police work to the police.  Do not confront the thief.
  3. If your laptop or mobile device is missing or stolen, notify your IT department.
  4. Change your network user name and password.
  5. Consider changing your user name and password for all accounts – anything you access via the Web.
  6. Check lost-and-found if applicable.  Believe it or not, laptops, devices, and briefcases get turned in by honest citizens.  Don’t give up until you try.
  7. Monitor Craigslist.  If you believe a thief has posted your property for sale, inform police.
  8. Contact your business insurance or liability carrier.  Property, valuable papers, or data breach coverage may cover the cost of replacing your laptop or reconstructing files. Beginning in 2013, the PLF added a Data Breach and Cyber Liability Endorsement to all excess coverage plans. The endorsement provides coverage for information security and privacy liability, privacy breach response services, regulatory defense and penalties, website media content liability, and crisis management and public relations services. Read more here.
  9. Inform your clients.  This is never easy, but clients must be informed if confidential information has been compromised. A sample notification letter is available on the PLF website.  Select Practice Management > Forms > Client Relations > “Notice to Clients re Theft of Computer Equipment.”
  10. Begin reconstructing your file.  Lawyers who are straightforward about an office break in or theft often find that clients are sympathetic, understanding, and more than willing to help.  With a bit of luck, you should be able to reconstruct most or all of your file from your backup or documents supplied by clients.
  11. Going forward, consider storing passwords or other sensitive information in an encrypted password manager.
  12. Backup, backup, backup!  Online backup services are a great way to automatically back up your laptop’s data.  Read more about backup protocols and available resources on the PLF website. Select Practice Management > Forms  > Technology > “How to Backup Your Computer.”
  13. If the theft occurred during an office break in, reassess building security. Talk to the building owner or property manager about alarms, surveillance, or other measures.
  14. Learn more by reading Protect Confidential Files – It Helps!
  15. Call your friendly Law Practice Management Advisor for help.

Establishing a Successful Home-Based Practice

Shingle Style CottageWhat does it take to establish a successful home-based practice?  Are there hidden pitfalls to drafting legal documents in your spare bedroom?

Learn whether you would be suited to working from home by considering these nine criteria:

Dedicated Office Space

Find a bedroom, den, or other area you can dedicate to full-time work.  Practicing at the kitchen table is less than ideal if it means assembling and disassembling your “office” each day.

Family and Confidentiality

If you live with others, take appropriate precautions to prevent access to client information (on computers and mobile devices as well as physical client papers).  The laptop you share with your spouse is not suitable for your law practice.

Boundaries

Failing to set personal boundaries can result in one of two extremes: nothing gets done or all you do is work.  Several years ago I met a home-based lawyer who reached out for help with procrastination and time management.  During the work week the lawyer let family chores and home responsibilities rule. To meet client deadlines, the lawyer worked all weekend.  As you might imagine, the lawyer’s spouse was not happy with this arrangement.  I have also witnessed the opposite. Workaholic tendencies are amplified tenfold when your commute is just down the hall….

Isolation

Working from home usually means working alone.  Make a concerted effort to get up and out.  Set concrete goals to attend CLEs, networking events, bar committee meetings, or go to lunch with colleagues.  Make these contacts a regular part of your schedule.

Privacy and Professionalism – Your Address and Telephone Counts

Arrange for a business mailbox at the post office, UPS Store, or through an executive suite and get a dedicated business phone.  This can be your cell, Google Voice [if you can still get a number], a VoIP provider, a virtual receptionist, or anything else you can figure out.  Using your home address or home telephone allows clients, opposing parties, and opposing counsel unfettered access to your personal life.

Meeting with Clients

This is best done outside your home.  One of the easiest solutions is an executive suite.  If this isn’t economically feasible, you may know a colleague with a spare office or conference room.

If you pursue one of these options, keep one eye on confidentiality and the other on conflicts.  I am not saying that borrowing someone’s conference room makes you a “firm member” for conflict purposes, but I am asking that you remain attentive to how such arrangements may evolve.

Whatever you do, don’t use coffee shops.  Revisit the comments above.  For help in selecting an executive suite, visit the PLF’s Web site.  Search for the form/practice aid “Virtual Law Practice.”

Home Office Permits

Projecting professionalism and protecting your privacy are the foremost reasons for not meeting clients at home, but if you need more, I am happy to oblige.

Most municipalities regulate home offices – which could, in the right circumstances – have a substantial impact on neighboring homes.  (Parking is the first issue that comes to mind.)

Do your research!  At a minimum, expect to complete an application and pay a fee.  You may also be required to notify neighbors, wait for the objection time to pass, and attend a neighborhood hearing on your permit application.

Premises Liability

The typical renter’s or homeowner’s policy covers risks associated with social invitees who slip and fall on your premises. It does not cover risks associated with business invitees who are injured on your premises [unless you purchase an appropriate rider or endorsement].  Of course, if you are uninsured you assume all the risk all the time.

Business License

If you live in a municipality that requires licensure, purchasing a business license is another step in addition to obtaining a home office permit.

[All Rights Reserved 2014 Beverly Michaelis]

 

The Nontraditional Law Practice

A nontraditional law practice can be anything a lawyer wants it to be:

  • Hybrid or alternative fee arrangements;
  • Unbundling;
  • Virtual law practice;
  • Home-based practice;
  • All the above; or
  • Something else entirely

Hybrid or Alternative Fee Agreements (AFAs)

As more clients push back against the hourly rate model, lawyers are looking for unconventional ways to price legal services.  One of the most popular?  The hybrid or alternative fee agreement (AFA).

Before you enthusiastically embrace this option, read this post and make sure your AFA satisfies the 5 “C’s” test:

  • Clarity
  • Completeness
  • Compliant
  • Common sense
  • Can’t be excessive

Hybrid or alternative fee agreements are often combined with other elements of a nontraditional practice.  Used correctly, they can be a huge asset.

Unbundling: Have it Your Way

With unbundling, clients pick and choose discrete services from a menu of available choices:

Providing limited legal services is not a new concept. Transactional lawyers have long served in the role of document reviewer or preparer. So how is unbundling different? It takes the idea one step further by employing a team approach in which the lawyer and client decide who will do what based on the legal services required by the client’s case. The client takes a much more active role in the matter and often assumes responsibility for pro se court filings and appearances.

Keep in mind that unbundling has its risks: Unbundling in the 21st Century: How to Reduce Malpractice Exposure While Meeting Client Needs and its ethical limitations.  See Unbundling Legal Services: Limiting the Scope of Representation and The Ethics of Unbundling:  How to Avoid the Land Mines of “Discrete Task Representation.”

Virtual Law Practice or Home Practice?

A virtual law practice or virtual law office (VLO) is a term of art referring to online delivery of legal services through a secure client portal.  If you are interested in creating a VLO, Stephanie Kimbro’s book Virtual Law Practice: How to Deliver Legal Services Online is a must.  [Available on the ABA Web store here. If you are not an ABA member, save money at checkout by using the Professional Liability Fund’s (PLF’s) discount code OSBPLF.]  Also see this post about click wrap or click through fee agreements.

VLOs aside, most lawyers who express an interest in practicing virtually mean they want to work from home – due to economic necessity, personal choice, or both.  In next week’s post, I’ll discuss the nine steps to establishing a successful home-based practice.

[All Rights Reserved 2014 Beverly Michaelis]

 

I Say Of Counsel You Say…

Of Counsel relationships remain a strong area of interest for lawyers who are drawn to the idea of creating a professional affiliation. In that quest, there are many misunderstandings about what an of counsel relationship is:

 

To better understand of counsel relationships, start here.  Also see this excellent post from Solo Practice University.

If you decide to pursue an of counsel relationship, enter into a written agreement to avoid misunderstandings.  See the American Bar Association publication, The Of Counsel Agreement, 4th EditionIf you are an Oregon lawyer, save money at checkout by using our ABA Books for Bars discount code, OSBPLF.

Of counsel arrangements may also implicate your professional liability coverage.  If you are an Oregon practitioner, please contact our coverage experts at 503.639.6911 or 800.452.1639 – particularly if you carry excess professional coverage liability with the PLF.

If you are forming an of counsel relationship and have any uncertainty whatsoever about how to craft a proper agreement, consult with outside counsel. Lastly, Don’t confuse being of counsel with being an independent contractor. See Mission Impossible? Working as an Independent Contractor in Oregon and this post.  [Pertaining to contract lawyers, but providing a good review of the issues surrounding independent contractor status.]

All Rights Reserved [2014] Beverly Michaelis

Leaving Your Firm

Parting isn’t always such sweet sorrow.  In fact, it can be downright contentious.

If you are contemplating leaving your firm, do your research. Meeting your ethical obligations fulfills only part of your responsibilities.

IF YOU ARE A PARTNER

Conduct your partnership withdrawal in a manner that honors the contractual and fiduciary responsibilities owed to your fellow partners.  Contractual duties are controlled by your written partnership agreement.  Fiduciary duties are described in case law and codified by statute in Oregon’s Revised Partnership Act.

IF YOU ARE NOT A PARTNER

Review your employment contract, employment letter, office policies, office procedures, or any other applicable terms that may control the process for terminating your relationship with your current firm or your obligations upon departure.

ARE ISSUES LIKELY TO ARISE?

Consult outside counsel experienced in the areas of lawyer mobility, partnerships, fiduciary duties, lawyer separation, and law firm dissolution.

PUT CLIENTS ABOVE ALL ELSE

If you are making a lateral move to another firm or setting up your own practice, remember that the client’s freedom of choice in selection of counsel is paramount.  Always put the interests of your clients first.  Keep the transition as amicable, professional, and stress-free as possible.  Contentious withdrawals alienate clients and damage relationships.

GIVE NOTICE TO YOUR FIRM BEFORE YOU CONTACT CLIENTS

Inform the firm of your decision to leave before contacting any clients.  Failing to give adequate and timely notice to your firm or partners before you contact clients is a violation of the duty of loyalty owed by a lawyer to his or her firm based on their contractual or agency relationship.  It may also constitute conduct involving dishonesty, fraud, deceit, or misrepresentation in violation of Oregon RPC 8.4(a)(3).

RESOURCES

The Professional Liability Fund has extensive resources for Oregon lawyers who are departing a firm, withdrawing from a partnership, or dissolving a firm.  Visit our Web site for more information.

All rights reserved [2014] Beverly Michaelis.

 

 

Thinking about Partnership?

A potential partnership between lawyers sparks many issues – capitalization; entity formation; allocation of profits, losses, income, and expenses; restrictions on partnership authority; division of management duties; decision-making; withdrawal; and more.

But the most important consideration is often ignored: basic compatibility.

Do good friends make good partners?

Not necessarily. The interests or characteristics that draw two or more people together as friends do not always translate well to the business world.  This includes the practice of law.

Sometimes money gets in the way.  Or you could be polar opposites when it comes to work ethic or work style.

Maybe you are two peas in a pod with the same dislikes, which can be deadly.  The example that comes to mind is accounting.  Billing, recordkeeping, accounting, and reconciling can be outsourced, but should still be supervised.  As partners, the buck stops with you:

Lawyers must account for every penny of [client] funds as long as the funds remain in their possessionThis responsibility cannot be delegated, transferred, or excused by the ignorance, inattention, incompetence, or dishonesty of the lawyer or the lawyer’s employees or associates. A lawyer may employ others to help carry out this duty but must provide adequate training and supervision to ensure that all ethical and legal obligations to account for those monies are being met. In re Mannis, 295 Or 594, 668 P2d 1224 (1983) (lawyer reprimanded although he was unaware employee was commingling funds).  Excerpted from A Guide to Setting Up and Using Your Lawyer Trust Account, published by the Professional Liability Fund (2014).

How to size up a potential partner

For two lawyers considering a partnership, compatibility can be gauged best by joining forces as solos in an office share.  Each lawyer maintains his or her own practice, following the usual recommendations for an office sharing situation.  See the Professional Liability Fund (PLF) form/practice aid, “Office Sharing Guidelines” available on the PLF Web site.  

In an office share you can assess your potential partner’s work ethic, work style, and work habits first hand.  You will also learn how your potential partner approaches division of responsibility and money when the time comes to allocate and pay office share expenses.  You have the option of collaborating on individual cases while maintaining your independence.  This will give you intimate knowledge of your potential partner’s capabilities as a lawyer.

If the office sharing arrangement is successful, and you can come to terms on partnership formation issues, you are likely to have a successful union.  If the office sharing arrangement is not successful, you can accept the experience as a “lesson learned” and terminate the office share without the mess of a formal partnership dissolution.

For those who are convinced they have a winning partnership

Occasionally I meet two lawyers who are absolutely convinced they will form the perfect partnership.  They forge ahead, without the benefit of an office share experience, and later regret their decision.

I don’t wish to dampen anyone’s enthusiasm, and sometimes folks are absolutely right in their assessment.  If you’ve known each other for years, and “just know” it will work I would ask you to do this simple exercise first:

Schedule a time to get together with your potential partner.  Bring two legal pads and two pens.  Allow fifteen minutes for each person to make a list of the goals he or she has for the partnership.  Each person should be able to answer: what do I hope to get out of this?  How will partnering up be a significant improvement over my current working situation?  Exchange lists.  What you learn may surprise you.

Note:  Each set of potential partners can decide how long to allocate to this process, but there is an advantage in keeping the list-making phase short and sweet: limited time is more likely to result in someone writing down the first (unedited) thoughts that come to mind.  Limited time also forces participants to be succinct.

Understandably, such an exercise will always be one person’s idea.  But please don’t initiate such a meeting and arrive with a list prepared in advance.  If you prefer a mulling and polishing period, tell your partner several days in advance so each person has an equal amount of time to prepare.

All Rights Reserved [2014] Beverly Michaelis

 

 

The Five C’s of Hybrid Fee Agreements

Call it a hybrid fee agreement (HFA) or an alternative fee agreement (AFA).  Lawyers are looking for creative ways to appeal to clients who are resisting the traditional hourly rate approach.

Employment Law HFA

Consider the employment law case that is less than a slam dunk.  You could put in many hours only to see no fee. Ah, the life of a contingent fee practitioner.

Or is it?  One creative lawyer decided to offer his client a hybrid fee arrangement: a reduced hourly rate of $100 per hour with a 25% contingent kicker in the event of a recovery. (Lower than the “going” contingent rate of 33%.)  If the client agrees, and your fee agreement passes the test below, there is nothing wrong with such an arrangement.

Family Law HFA

Among family law practitioners – who are forbidden to take a contingent fee – a popular hybrid fee arrangement incorporates a flat fee earned upon receipt with an hourly rate that kicks in at a specific stage. The flat fee compensates the lawyer for work done in the early stages of a case: initial consultation; file opening; drafting and finalizing the Petition for Dissolution (or preparing a response); serving the opposing party; drafting and serving the first request for production of documents.  The flat fee could encompass additional services – each lawyer can determine where the cut-off should be – but charging a flat fee for time spent from the first consultation through initial discovery is predictable and easy to do.  Again, if the client agrees and your fee agreement passes the test below, this is a perfectly fine arrangement.

Does your HFA or AFA Pass the Test?

Every fee agreement must satisfy the 5 “C’s” test:

  • Clarity
  • Completeness
  • Compliant
  • Common sense
  • Can’t be excessive

Clarity

If a fee agreement is ambiguous, it must be construed against the lawyer. Cf. OSB Formal Ethics Op No 2005-15.” Oregon State Bar (OSB) Formal Ethics Opinion No. 2005-124.

If you decide to experiment with your fee agreements, strive to be as clear as possible.  With the employment law scenario, the main challenge is the math.  Conceptually the idea is pretty clear.  With the family law scenario, the number one problem is failing to explain what the client is “buying” with the initial flat fee earned upon receipt.  Just how far does the $1,000 initial payment go and when does the $200 per hour rate kick in?

Completeness

Consider all possibilities.  A good example in the employment law context: if you have the right to recover attorneys fees, address this in your agreement.  See OSB Formal Ethics Opinion No. 2005-69 [Attorney fee awards are the property of the client unless “the terms of the fee agreement expressly provided that Lawyer was entitled to the greater of the fee computed thereunder or the court-awarded amount.”]  Fee agreements should address all conceivable outcomes.

Compliant

If your client is entering into a contingent fee agreement, he or she must execute the “Oregon State Bar Model Explanation of Contingent Fee Agreementbefore signing an agreement with you.  If you are charging a flat fee earned upon receipt, read and comply fully with Oregon RPC 1.5, Oregon RPC 1.15, and OSB Formal Ethics Opinion 2005-151 (Revised 2011).  May I also suggest reviewing this excellent article: Helen Hierschbiel, “Alternative Pricing Models: What’s in a Fee?,” Oregon State Bar Bulletin (November 2011).  Practice Tip: flat fee earned upon receipt fee agreements must include special “disclosure” language set out in Oregon RPC 1.5.

Common Sense

Don’t torture yourself or the client trying to figure out the math of your hybrid fee agreement.  Once you’ve developed a sample, run it by your next door neighbor or another lay person.  Ideally, run it by several nonlawyer friends.  Does it make sense to them?  If not, go back to the drawing board.  Remember: “If a fee agreement is ambiguous, it must be construed against the lawyer. Cf. OSB Formal Ethics Op No 2005-15.” Oregon State Bar (OSB) Formal Ethics Opinion No. 2005-124.

Can’t be Excessive

“The Oregon State Bar Legal Ethics Committee has also said that split contingent/hourly fee agreements do not automatically violate the rules of professional conduct. See OSB Formal Ethics Opinion No. 2005-54. However, the committee cautions lawyers that a fee that appears to be lawful at the outset, may turn out to be clearly excessive in the end….” Helen Hierschbiel, “Alternative Pricing Models: What’s in a Fee?,” Oregon State Bar Bulletin (November 2011).

All fees are subject to a look-back at the end of the case. The employment law HFA is more likely to be challenged than the family law HFA.  In the employment law scenario, tabulate the total hourly fees charged to the client and your contingent fee share of the recovery.  Add the two together.  Do these exceed the standard contingent rate of one-third?  If they do, you may be on perilous ground. Helen’s article, Alternative Pricing Models: What’s in a Fee? discusses all the factors that go into gauging the reasonableness of a fee.

Parting Thoughts

Developing HFAs or AFAs that are ethically compliant and legally enforceable can be done – don’t get discouraged.  In fact, the ABA Law Practice Division (ABA LPD) will soon release Alternative Fees for Business Lawyers and Their ClientsIf you are an Oregon lawyer and want this book (who wouldn’t?) but do not belong to the ABA, use the Professional Liability Fund discount code at checkout to save money: OSBPLF.

All Rights Reserved [2014] Beverly Michaelis