Succession Planning — Updates for Rule 21

Episode Notes

Transcript

Molly Ranns :

Hello and welcome to another edition of the State Bar of Michigan’s On Balance Podcast on Legal Talk Network. I’m Molly Ranns

JoAnn Hathaway:

And I’m JoAnn Hathaway. We are very pleased to have April Alleman. Join us today as our podcast guest. April is succession planning counsel at the State Bar of Michigan and oversees the Interim Administrator program April and Alicia Chandler joined us in May of 2023 to introduce the new rules effective in September of 2023 that required Michigan attorneys to name a person with knowledge of their practice as well as an interim administrator for succession planning. Today, one year post implementation April will address updates pertaining to Rule 21. So as we get started, April, would you share some more information about yourself with our listeners?

 April Alleman:

Yeah, thanks JoAnn. Thanks Molly. Thanks for having me. So I’ve been at the state bar now for two years. Prior to that I was in private practice as an estate planning attorney and I do have experience in the state legislature as well as a legislative director. So I am happy to be here and talk about all things interim administrator planning.

Molly Ranns :

Thank you so much for being here today with us. April, as JoAnn mentioned, you were here last year to talk a little bit about the program. So for those who maybe haven’t listened to that episode or just need a refresher, could you give us some background on the interim administrator program?

 April Alleman:

Yeah, definitely. So that podcast is a great resource but for sure to go over about what we talked about then. So the interim administrator program comes from state Bar Rule 21 and from Michigan Court Rule 9.3 hundred at sec. These are the rules that created this, that JoAnn alluded to were effective in September of 2023. What these rules require is for private practice attorneys and that’s defined is an active Michigan attorney who has one or more clients for whom they use their Michigan law license for. So if that is you, you would be required to name this interim administrator and person with knowledge. This is required every license renewal and what that interim administrator is, it could be another attorney active Michigan attorney in good standing. It could be a law firm with one other active Michigan attorney in good standing, it could be your law firm as long as you had that additional attorney available.

Essentially what this person is there for is to assist your clients if you ever became unable to practice. So think of it like a succession plan almost if you became unable to practice for any reason. That’s defined within the court rule. This interim administrator is stepping in to help your clients retain new counsel if they needed to retain new counsel temporarily, assist them in any upcoming hearings that they have, return client files, return client monies, things of that nature, things that would need to be done if you became unable to practice. You could also, another option I guess for interim administrator would be to enroll in the state bars program. So the interim administrator program at the state bar also serves as interim administrator as needed. So those attorneys could opt into our program for a $60 annual fee and if that was the case, then they became unable to practice. We would match them to an interim administrator if we were unable to do so, the state bar. So myself would be serving as that interim administrator. So that’s also an option that’s available to those private practice attorneys.

JoAnn Hathaway:

Wonderful. So thank you for that great overview. April also as we move forward, I’d like to encourage our listeners again, as Molly mentioned to tune into April’s earlier podcast, detailing in full the launch of Rule 21. Again that podcast posted in May of 2023. So April, we are currently in our license renewal season. What will our members see this year during this renewal specifically as it pertains to the interim administrator program?

 April Alleman:

Yeah, so year two things are working a little bit differently. We didn’t want to have to have attorneys go through that designation process fully again if they didn’t have to. We didn’t want to have to have them nominate that attorney again and that attorney have to accept that nomination. That was all year one things that happen. So we wanted to give attorneys the ability to keep their prior designation from last bar year and move it through to this next bar year. So if this bar year 24, 25, and so what attorneys will see if they’ve already completed their interim administrator plan, when they get to that question on license renewal, there’ll be a popup that will show their prior year pick and they’ll be asked if they want to keep that or if they want to cancel and make a new selection. So if things have changed, the attorney got a new position, they’re in counsel or they’re a government attorney now and they’re not considered to be in private practice, they can go ahead and cancel their previous selection and choose to answer no to that private practice question.

Or if we definitely want to keep our prior designation, we don’t want to have to change that. We simply can choose to keep it and that will move that designation through to this current bar year without having to get that attorney or law firm to accept that designation again. So it’s kind of making it really easy to just pull through that prior year pick so that you don’t have to go through that same process again. And as always this question, the interim administrator plan can be changed in their member area interim administrator planning section of that member area at any time during the year if things do change.

Molly Ranns :

Thank you, April. That is so helpful. So as the director of the Lawyers and Judges Assistance Program in Michigan, I’m on a director’s listserv with other directors around the country and I get questions a lot about succession planning and I always point people over to you and Alicia and our interim administrator program. I think really people are looking to Michigan right now as to how it’s been established and to how it’s going. A question I get a lot is what happens when an attorney becomes unable to practice? Can you talk a little bit about that,

 April Alleman:

Molly? That’s a great question. I love that other stays are looking to Michigan as to how they can create this type of mandatory succession planning in other states. I love talking to other individuals, other employees of state bars, about this program, about what we’ve done. So it was a huge endeavor. But I’m happy that we’re here and we’re continuing through on this. If another attorney or someone’s calling the state bar and they have knowledge of another attorney being unable to practice, this could be opposing counsel, this could be a colleague, this could be a friend of that attorney court staff, a judge. They should be calling state bar. So they should be calling my department specifically that interim administrator program. If anyone’s coming across this in practice and they’re like, Hey, I’m not able to get in touch with this attorney. It’s been a few court hearings that have passed and I’ve heard nothing.

Or a client is unable to get in touch with their attorney and they’re like, I don’t know what’s happening. They should be calling us at the interim administrator program. So we can start looking into what’s going on if an interim administrator is needed and try to figure out exactly if this actually is the attorney’s been unable to become unable to practice or if it’s something different. So that inability to practice, inability to practice. It’s defined in Michigan Court Rule 9.301 A. So there’s a whole list of reasons as to why an attorney would become an effective attorney and what that means. But essentially what it really gets down to is that private practice attorney is unable to practice for some reason. So if someone becomes aware of that, I think the first step should be contacting the state bar, specifically my department, so we can look into that claim and determine if an interim administrator is needed.

JoAnn Hathaway:

April, I’m sure that information will be very helpful to our membership as the practice management advisor for the State Bar of Michigan. I’ve spoken to many attorneys who have had difficulty determining if a member of their practice is compromised and even sometimes determining if they themselves are compromised. So it’s not an easy determination for sure. Another question that often arises comes from those attorneys considering appointment, what is needed when seeking appointment as an interim administrator,

 April Alleman:

It’s never easy to have those conversations. So we get a lot of those calls too where an attorney is calling from a law firm, maybe they’re a managing partner and they’re of counsel has been there, they were a former managing partner, they retired, became of council, and they don’t really know how to approach this when it’s hard. When we tend to, as we get older, I hate throwing everyone into one group because it’s not always the case, but sometimes it’s harder for us to see that hey, we’re not as young as we once were. We’re not able to do the same things or even have the same capacity that we did as when we were younger. So those conversations are really hard to have. I tend to just say you need to have those conversations. It’s not easy to approach this in a way that if those conversations aren’t had, but in regards to what happens when seeking appointment as interim administrator, what proofs are needed.

So we have what’s defined as effective attorney within the court rule, what the judge is going to need as to proofs determining that that attorney actually is an affected attorney as defined. That changes, it varies depending on which option we’re going with that temporary and permanent disability is an option there. That one I would say tends to err on the side of, okay, what does the probate court determine in their proofs when a conservatorship or guardianship is needed, when the state bar is acting and the affected attorney, we’re using that portion of the definition to determine that the attorney is an affected attorney. That’s what we’re looking for. Deceased, that’s a little bit easier. We have a death certificate or we have an obituary to just show the court that this attorney has passed away and they had active clients. So you need the fact that the attorney has become an affected attorney as defined, you need to prove that to the court, but you also need to prove this necessity factor that okay, we have an affected attorney, but also the appointment of an interim administrator is necessary because they have active clients or because they have an IOLTA and they’re the only one on the iolta.

So things like that would then bring in that, okay, it’s necessary for the court to appoint an interim administrator.

Molly Ranns :

That is all very helpful. April, and we are now going to take a short break from our conversation with April Alleman to thank our sponsors. Welcome back. So

JoAnn Hathaway:

Happy to be here today with April Alleman Succession Planning Council at the State Bar of Michigan talking about Rule 21 pertaining to succession planning.

Molly Ranns :

So April, I had mentioned that I get a lot of questions on the director’s listserv about succession planning and what we’re doing here in Michigan and how things are going. And so I’ve been giving out your number and encouraging folks to contact you. Can you walk me through what happens when your department gets a call about a potential affected lawyer?

 April Alleman:

Yeah, definitely. So when we get notified, we’ll conduct an inquiry into that necessity factor that we talked about before, that need for an interim administrator. So that needs to be before the state bar really moves forward with trying to match if this person was enrolled in the program, trying to match them to an interim administrator. We need to make sure that it’s actually necessary. So if someone’s calling, they’re saying, Hey, what we talked about before, we’re like, Hey, I haven’t heard from this opposing counsel in a while. Or client is calling someone of that nature trying to determine what’s going on with their attorney. We’ll start looking into, okay, did this affect an attorney or potential affected attorney, I should say designate an interim administrator. So we’ll be able to look at that and see, hey, yes, this year they had a BC law firm as their interim administrator.

This is the contact person they put down for a BC law firm. So we’ll be able to, we first attempt to reach out to the affected attorney. Sometimes we get calls and we’re able to reach the affected the potential affected attorney right away. So it’s not as dire as the caller was saying. So that definitely happens sometimes, but if we’re not able to reach that potential affected attorney, we’ll then look at the interim administrator, that designated interim administrator or the person with knowledge and try to determine, try to piece together what’s going on. Okay, is this a lapse in communication for some point? Was the attorney on vacation and the client forgot what exactly is happening here and is there actually an affected attorney and is there a need for an appointment? So we kind of just kind of verify those facts that we’ve been given to determine what’s the next.

So from there, if we determine that there is a potential affected attorney that this attorney’s passed away or something’s happened to fit them into that definition in the court rule, the next step depends on who’s been designated. So if this affected attorney designated their own interim administrator, we’ll kind of help that interim administrator through, okay, this is the next step you need to move for appointment. Here’s the scale forms available. You need to file for an appointment and then this is what you can expect next. If the affected attorney is enrolled in the program, so they paid that $60 fee, the state bar will then move to try to match them to a willing interim administrator. And we do that. We manage this list of willing interim administrators. So those are attorneys in Michigan who answered, yes, I want to join this list to be matched to an interim administrator as needed. So we’ll use that list to try to match this affected attorney to one of those willing interim administrators. If we’re unable to do that for any reason, then the state bar served as interim administrator. So there’s kind of a process that happens, a kind of inquiry into those facts that we were given by the caller to determine if next steps are necessary and then it kind of just follows that process through

JoAnn Hathaway:

April. I’m sure those attorneys who are potential interim administrators have questions concerning their duties. When you’re having conversations with these potential administrators, what are some of the things you discuss?

 April Alleman:

So the first thing I like to tell these potential interim administrators that are moving for appointment is their scale forms available. Those court forms are available already. Don’t take time drafting your own parte petition. It’s already there for you. Go ahead and fill it in and get that to the court. So there’s scale forms available all the way through. There’s not one for the final accounting, which is required as part of the court rules, but there are scale forms for most of the forms needed when filing for interim administrator. I’d say take a look at those and I like to send those to those interim administrators that are calling. I also let those interim administrators know that there will be a new matter filing expense. No one likes to hear this, that they’ll have to pay the court that filing fee. It’s that full $175 filing fee.

But interim administrators, the court world does allow for reimbursement and compensation. So it is also something that I tell interim administrators to keep track of. So yes, it’s great to be aware that you’re going to have that cost, but also all these additional costs and also compensation, you’re able to seek that from either the estate of the affected attorney or other fiduciary or the affected attorney themselves and for those matched in term administrators. So those would be the ones that the state bar matches to an enrolled affected attorney. So enrolled in that program. There also is an additional avenue if they were unable to seek reimbursement and compensation fully from that estate or other fiduciary or the affected attorney themselves. They can seek that from the State Bar of Michigan. And if anyone has any questions on what that compensation and reimbursement looks like, I’ll give my contact information at the end, but I’d be happy to talk about that.

Other things we discuss is what happens after appointment. So the priority would switch to client notification. That’s going to be a big thing notifying opposing counsel, notifying other party court notification. So you want to get everything you can situated as to, okay, what did this affected attorney’s docket look like for their upcoming hearings? Are there emergencies coming up? Can I get an adjournment for this client? That’s going to be the big thing that happens after that appointment. And sometimes that happens prior to depending on if that person when knowledge has the authority to look at that information as well, which sometimes does happen. The next big thing I talk to those potential interim administrators that are calling is those client trust accounts, those iolta, those non IOLTA accounts and sometimes even the operating account. So the rule does allow for the operating account to be controlled by the interim administrator if necessary.

Usually at the state bar is acting, we’re only dealing with the aass or the non aass, those client trust accounts because the operating account is usually able to be covered by either the estate of that affected attorney or other fiduciary. But that’s going to be the next thing that those interim administrators need to be aware of reconciling. That is probably going to be the bulk of the time spent as interim administrator because those duties are to protect the interests of those affected clients, and that means reconciling and returning any unearned fees back to the client. And sometimes when that’s not your own iolta, that takes much longer than if it was a IOLTA that you’re familiar with. The other thing I like to talk about with attorneys is that always be conscious that it’s the client who chooses their own attorney. So if you’re acting as interim administrator and this client wants to move on to another attorney, you need to do everything you can to facilitate that and make sure that happens. So signing substitutions of counsel if that’s needed, returning the client file, returning client monies, things of that nature. So just being aware of what your duties are outlined in those court rules.

Molly Ranns :

April, we’ve talked a lot about the potential interim administrator and the potential affected attorney, and you just started talking a little bit about the client. One of the main components of this rule I imagine is protecting the interests of the client. Can you expound on what that might look like in practice?

 April Alleman:

Yeah, definitely. And that is protecting the affected clients, protecting the public. Those are the main goals of this rule. But it does also allow for protecting the interests of the affected attorney. And this is going to come up as well when if the affected attorney was unable to reconcile their I OTA account fully and they have earned fees in that account. So making sure that those do get paid correctly to the attorney. But the main goal is protecting the interest of those clients. So the interim administrator has a duty to protect the interest of the client, which usually means letting client know they need to hire a new counsel. So if this was a death that’s easier to say, Hey, your attorney’s not coming back, these are your options. That gets harder when it’s temporary disability or for some reason the attorney has a medical leave that’s a little bit harder to determine when does a client need to look for a new attorney, especially if it’s planned that their attorney’s going to be back in a month.

So kind of balancing that, but it’s easy when it’s a death. So client needs to hire a new attorney. Attempting to adjourn or receive an extension on upcoming deadlines is another way to protect that client’s interest so that client has time to find new counsel. Client has time to get their file returned. Client has time essentially is the big thing. It’s just making sure the client receives fair treatment. So it’s important to remember as we come across this in practice, that client’s not asking for this to happen. They’re not asking for this extension because they didn’t get their attorney the necessary information, which is a common reason that extensions are asked for or because the attorney didn’t do something that they were supposed to do. This is an unexpected circumstance, so we should approach this with as much empathy as possible. No one wants to have to deal with this.

And so the new rules really give us that ability to address this as quickly as possible, but unfortunately they’re still going to be delays that happen, especially as new council is stepping in and things of that nature. So approach this with as much empathy as you can if you see this in practice is the main thing. But yeah, protecting the client’s interest is a really big goal and interim administrator can step in temporarily. The rule does allow for that, but really they should be focusing on finding new counsel for that affected client if that’s necessary. If the affected attorney isn’t coming back in a timely matter and getting that client file back and getting that client those unearned fees back

JoAnn Hathaway:

April being one year out from rural 21, many of our members are really interested to know how the year looked in hindsight. So can you share some numbers of what the 20 23 20 24 bar year looked like in regard to the IA program?

 April Alleman:

Yeah, and numbers are always fun to look at for sure. So for that last bar year, so actually today is the last year of the 2324 bar year. So we had 20,451 private practicing attorneys. So these are attorneys who chose unlicensed renewal yes to that private practice question, which was do you have one or more clients for whom you use your Michigan law license for? So of those 20,000 attorneys, 16,982 of them designated their own interim administrators. So this is what once who unlicensed renewal chose a law firm or another attorney as their interim administrator and then that attorney or law firm accepted the nomination. And then about 3000 hundred and 62 attorneys enrolled in the state bars program. So this is where they paid that $60 fee. They chose the state bar to act as their interim administrator by matching them to a willing interim administrator or then serving as interim administrator if they were unable if the state bar was unable to match.

And then the remaining amount of that 20 ish thousand either no longer have designations in place or have been auto-enrolled. So auto-enrolled happens if for some reason the attorney didn’t comply with those new rules and so they needed to comply for their license to continue. And so they were auto-enrolled in the state bars program. Another statistic here, we have about a little over 2000 2031 attorneys who joined that list of attorneys willing to serve as interim administrator. This is where the state bar would match or attempt to match an enrolled affected attorney to a willing interim administrator. This is the list we would use. We have a little over 2000 attorneys on that list and that question fast every year. So attorneys can join that list during license renewal. They’re also able to join it by going to their member area interim administrator planning section.

That’s also available to be done midyear at any time. So last year, so this last bar year state bar served in four cases, so four cases where we served as interim administrator and all four are still currently ongoing and we are wrapping up a few of them. Then we matched two interim administrators in two matters that needed an affected attorney. So these were enrollees that were matched with a willing interim administrator. And then there are about 22 cases that the state bar is aware of where an interim administrator is acting for an affected attorney that they themselves that affected attorney they themselves designated to serve. So there’s about 22 of those cases, but there likely are more, but those are just the ones that we’re aware of.

JoAnn Hathaway:

Wonderful. Thank you for that, April. This has all been such helpful information. With that, we’ve come to the end of our show and Molly and I would like to thank our guests today, April Alleman for a wonderful program.

 April Alleman:

Thank you guys.

JoAnn Hathaway:

If our listeners would like to follow

Molly Ranns :

Up with you, what is the best way to reach you?

 April Alleman:

They can get me by email or phone. So my direct dial is 3 4 6 6 3 9 2. You can get me direct on that. You can also email at [email protected]. So again, that’s i a p at mich, MICH bar .org.

Molly Ranns :

Thank you so much April for joining us again.

 April Alleman:

Yeah, thank you guys.

Molly Ranns :

This has been another edition of the State Bar of Michigan’s On Balance Podcast. I’m JoAnn Hathaway.

And I’m Molly Rands. Until next time, thank you for listening.

Annoncer:

Thank you for listening to the State Bar of Michigan On Balance Podcast, brought to you by the State Bar of Michigan, and produced by the broadcast professionals at Legal Talk Network. If you’d like more information about today’s show, please visit legal talk network.com. Subscribe via Apple Podcasts and RSS. Find the State Bar of Michigan and Legal Talk Network on Twitter, Facebook, and LinkedIn, or download Legal Talk Network’s, free app in Google Play and iTunes. The views expressed by the participants of this program are their own and do not represent the views of nor are they endorsed by Legal Talk Network or the State Bar of Michigan or their respective officers, directors, employees, agents, representatives, shareholders, and subsidiaries. None of the content should be considered legal advice. As always, consult a lawyer.

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