The noose just tightened on selling your law practice

More than 60% of the Bar is made up of lawyer firms ranging in size from solo to 9.  In any business, one would think that paying attention to a demographic that provides such a high percentage of your revenue would be wise. Of course, that presupposes that your customer base has an alternative.

In the case of integrated (mandatory!) bar associations, lawyers must be members, must pay their dues no matter how they disagree with the policies of the staff or of its Board of Governors! Therefore, their views can be disregarded. Such was the case recently when sole practitioners objected to the new rule of professional conduct that requires lawyers to tell clients in writing when they do not carry E & O insurance (malpractice) coverage.

Today, in California, there was a hearing on the rule regarding the sale of a law practice. The proposed new rule will make the lawyers (both buyers and sellers) jump through more hoops and cause further delay to get a deal done, thus jeopardizing the entire deal. Who does this target? The sole and small firm practitioner.  Only they are involved, to the extent this happens, in the sale of their practice. Large firms don’t sell their practice. They can break up, they can merge, they can combine … they can move entire practice groups from one firm to another … but they don’t "sell" their practice … at least they don’t call it that and thus side step rule 1.17 regarding the sale of a law practice. (I will discuss the details of the new proposal in later posts.)

So why should the Bar care? Why should they fix something that isn’t broke? Good question. I might attribute nefarious motives to the actors, but that would be unkind … and generally untrue. Because the folks on the commission are honest, hard-working and capable lawyers. But, in their zeal to do right, they are not doing good. They are like the law school professor who puts forth hypothetical situations that, if ever, happen rarely and can be dealt with on a case by case basis. The California rule ain’t broke; therefore don’t fix it.

When the ABA commission looked at the rule, they backed away from the precipice of considerable change … ultimately because they realized that there was no need to alter the rule. They made one change … and I’m proud to say I was the catalyst for this discussion. They now allow a lawyer to sell a practice area and still remain in practice, but not in the area sold. For example, a probate and estate planning lawyer may want to sell the estate planning segment, but retain the probate segment. This will allow him to work less, reduce marketing and still make a contribution to the law. Any other course would require him to sell/close the entire practice and wait for death … or continue his practice while serving his clients with less vigor because of aging … to the detriment of the clients.  It is a shame that younger attorneys on the commission have little or no sympathy for this aging process.

I’ve seen it in my clients; I’ve seen it in my family. That was why I recommended that the ABA make the one change it did accept. Clients are better served, both those whose estate plans are handled by other lawyers interested in the segment they purchased, and those who are probating estates of decedents …

One example after another in recent years demonstrates the Bar focuses on its perception of public protection — I say its perception because I don’t think the public is truly protected by a number of its recent actions, two of which are mentioned above. It is also very clear, however, that the interests of the Bar’s largest demographic is either disregarded or adversely impacted by the Bar’s new rules. I have come to the conclusion that the Bar should be a voluntary organization … as is the American Bar Association … needing to justify its value each year in order to maintain its member participation and dues revenue. The "mandatory" Bar as we know it should only be a licensing agency ….

Do you know of other examples in the organized Bar that defiles the sole practitioner? Do you know other industries where such monopoly power gives them the right to disregard the interests of its customers/patrons/members? How about the health insurance industry? How about the increase in premium rates that recently went up 39% to people who literally had no choice of carriers, only the choice of paying the increased premium or dropping insurance coverage … How about the airline industry who, in response to recent "fliers’ bill of rights" announced a decrease in flight schedules and increase in fare prices? Other examples abound.

Unless the Bar is able and willing to enhance the value and contributions to lawyers from whom it receives dues, it should not exist in its present form.



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