As we approach the holiday season, instead of sugarplum fairies, many lawyers have visions of closed cases dancing in their heads. After all, there is nothing sweeter than the sound of a closed file- especially one that has been lingering for years. But before sending the file to the shredder or pushing boxes into a dusty warehouse, consider your firm’s file closure policy. Best practices mandate that all professionals, notably attorneys, engage in a series of important tasks when closing a file. Poor practices at the end of an assignment can lead to conflicts issues, document retention woes, client confusion or worse.

How and when to close a file is a component of best practices. Most professionals follow some document retention protocol (and if you don’t, you should). But an interesting wrinkle arises when it’s not entirely clear when the engagement has come to an end. Some cases are withdrawn, some clients sign an engagement letter but do not pursue the claim, and some clients decide to retain new counsel without documenting the decision. To take into account these uncertainties, professionals must implement safeguards to monitor each client relationship and, when necessary, to document that the professional relationship has ended. By keeping files up-to-date, both old and new, professionals can help to avoid many hazards and ethical dilemmas.

The closing process begins once a professional determines that a client or case is inactive. Effective closing of a file involves three critical steps: (a) drafting a closing letter to the client, (b) taking an account of any outstanding payments, and (c) initiating an administrative closing of the matter.

The closing letter serves to confirm that the case is complete and to reiterate core principles of the representation. For instance, a closing letter should restate the nature and scope of the representation, confirm how the matter was resolved, provide documentation as to why particular aspects of the case were handled in a certain way, and include a request to the client to provide notice if there is any aspect of the case that potentially remains unfinished. A properly drafted closing letter will help to establish that the representation is concluded and that the client consented to the resolution. Closing letters should be sent as soon as you’ve concluded a case or when you’ve decided to stop representing the client. The letter should also be clear and easy for the client to read. So try to keep the letter concise and avoid unnecessary legal jargon.

During the accounting process, the firm should analyze all expenses, bills, and funds paid to the firm. Identifying any outstanding payments from the client early will help to resolve any payment issues and facilitate a collection lawsuit if the client fails to pay. Lastly, firms must complete an administrative closing of the file. When a case has ended, or a client relationship is no longer active, it should be marked closed within the professional firm’s administrative system.

The key is to establish a sound case-closing protocol with collaborative input from colleagues tasked with closing cases. Some tips include:

• Promptly close files. Failure to do so could result in problems during conflict check procedures.
• Check the box. Develop a “file closing checklist.”
• Get paid. Only close a file after the final action has been completed and the bill has been paid in full. Don’t forget to refund any fees or advances that have not been earned.
• Get the memo. Consider a “closing file memo” requirement. Such a memo will provide a concise summary of the case, and creates a permanent record of your representation.
• Sign off. Confirm in writing any oral communications with clients regarding file closings.
• Keep tabs. Implement a system wherein the closed matter is flagged for review in a few months, to ensure there are no loose ends remaining.
• Remember the client. The client owns the file, even after the case is closed. Similarly, the duty of client confidentiality continues after files are closed.
• Go paperless. This will save time and space. Consider using a “closed” stamp and/or other system to indicate closed matters, and then mark the planned destruction dates on the folders. Strip the file of extraneous papers. Keep an index of all closed files as well as their locations. Consider converting the paper file to electronic format.
• Recycle. Develop a system where the briefs, research and other information from closed cases can be easily accessed for use in future cases.
• Create a closed case “purgatory”. Reportedly, since 95% of all references to closed cases occur within a year of the closing date, you may decide to create an “interim” status for those files for a few months after they close.

Closing a file can bring a sense of accomplishment and satisfaction. But timely closing of a file has ethical and practical incentives for lawyers as well. On the ethical side, the rules of professional conduct applied to current clients impose additional obligations than those applied to former clients. Thus, the failure to close old files can create unwanted conflict issues that prohibit representation of new clients. On the practical side, closing a client matter can help to establish a clear statute of limitations deadline and avoid equitable tolling claims that could expose the professional to prolonged liability. So, while the end of the year is a great time to focus on file closures, it is also a practical time to revisit your firm’s closing policy.

Seth Laver is a Partner in the Philadelphia office of Goldberg Segalla LLP where he focuses on the defense of professionals especially attorneys and accountants. He publishes articles, blogs and lectures on risk management tips impacting professionals. Out of the office, he busies himself coaching his children’s sports and attempting home renovation projects.