The Risk Manager, Spring 2006

The legal profession offers a gentle landing for older lawyers. Rather than completely retiring they often enter a form of senior status that lets them maintain office space in the firm and handle only a few, or is some cases, no client matters. There is a natural tendency in the firm to relax oversight of these lawyers and assume they pose little malpractice exposure. While that assumption may be true, it does not warrant excluding senior status lawyers from any of the firm’s work control and risk management programs.

A New York firm learned this lesson the hard way. After 26 years of practice a lawyer retired from a prominent New York firm. As a retired partner he was allowed to keep office space at the firm. Apparently without the firm’s knowledge, the retired lawyer served as trustee of a relative’s trust account that was to be used for her benefit. She suffered from dementia and was living in a nursing home. The lawyer misappropriated over $500,000 from the trust to support a lavish life style for him and his family. The end result was that the firm paid to the trust $575,000 as part of an agreement severing the lawyer’s ties with the firm and the lawyer was disbarred.

The risk management principle at work here is that a firm must monitor the activities of senior status lawyers connected to the firm in any way just like other lawyer in the firm:

  • Senior status lawyers must use the firm’s work control and docketing system, billing procedures, and work product review procedures.
  • No firm lawyer, including senior status lawyers, should be allowed to open client trust accounts or fiduciary accounts under their exclusive management – all firm lawyers must use the firm’s financial management system.
  • Senior status lawyers should be required at least annually to update the firm on:
    • their membership in organizations;
    • service as an officer, director, or other interests in business;
    • performance of fiduciary services such as trustee, conservator, administrator, or executor; and
    • powers of attorney held involving financial matters.
  • All members of the firm should be given specific guidance on the relationship of the firm with senior status lawyers.

Source: In the Matter of Allan Blumstein, 2005 WL 2354996 (N.Y.A.D. 1 Dept.) 2005 N.Y. Slip Op. 06886; Hinshaw & Culbertson, The Lawyers’ Lawyer Newsletter, p.2, Dec. 2005.