February 28, 2018

Supreme Court Rule 776 allows the Supreme Court or a circuit court to appoint an attorney to act as a court-appointed Receiver of a law practice. The Rule is limited to circumstances in which an attorney has died, become disabled or has disappeared and no partner, associate or executor or other responsible party is available to close the law practice. If no available members of the bar from the same judicial circuit can serve as Receiver, the ARDC may be appointed. 

Serving as a court-appointed Receiver is an important service because clients may be harmed if no one is available to retrieve and return files to clients. Once appointed, Rule 776 directs the Receiver to make an inventory of the lawyer’s files, notify the lawyer’s clients in pending matters of the unavailability of their lawyer and recommend prompt substitution of attorneys. To discharge those duties, the Receiver should arrange to take possession of the files and records, prepare a written inventory of the lawyer’s files, send letters to clients in pending matters to notify them of the situation and investigate the status of matters pending before courts or administrative tribunals. 

The Receiver should also gather financial records to determine if funds remain in a client trust account, and if so, should attempt to identify the rightful owner(s) of those funds so that the funds may be distributed.

Receivers may interview former landlords, family members, employees, friends, and associates of the lawyer to learn about the nature of the lawyer's practice, the financial institutions he or she used for business and client trust accounts, and the number and nature of pending legal matters the lawyer was handling. Receivers may also obtain the lists of cases in which the lawyer was attorney of record from court clerk’s offices and administrative agencies.

Once the Receiver has compiled a list of the lawyer’s pending matters, the Receiver should attempt to locate files for these matters, and attempt to tender those files to the clients. If matters are identified for which no files can be found, the Receiver should try to identify parties and counsel from court records, and notify all involved of the lawyer’s unavailability. 

The Receiver may also arrange to have the post office forward any mail addressed to the lawyer’s office to the Receiver. Often, this correspondence reveals which financial institution the attorney used, and it may also provide important information about pending matters in which the lawyer is still counsel of record. 

If clients do not respond to the Receiver’s letters, the Receiver may send second letters or try to reach clients by phone or email. If mail is returned by the post office, the Receiver can ask the post office for updated addresses for clients.

When clients respond to the Receiver and requests their files, the Receiver should make careful records of the names of the clients and the dates on which files were returned. It may be advisable to ask the clients to sign receipts, though files returned by certified mail provide sufficient proof of the return.

The Special Circumstances of Rule 776(c)

Rule 776(c) provides that the Receiver may apply for a wide range of relief, including a stay of any applicable statutes of limitation or time limitations for appeals, or to vacate or obtain relief from judgments.

To identify potential matters warranting action pursuant to Rule 776(c), the Receiver should review court clerk's records for pending cases. Factors to consider are whether an action was dismissed or an adverse judgment entered against the attorney's client.

Reviewing the attorney's client trust account records

Receivers should take special care in dealing with client trust accounts. Rule 776(b) states that a Receiver may sequester client funds of the lawyer if necessary. The Receiver should conduct a diligent search for any client trust accounts and records relating to account activity and then try to ascertain the owners of any funds held in trust accounts. The Receiver may need to subpoena banks to obtain relevant records. If the Receiver can identify rightful owners of the funds, the Receiver can then petition the court for permission to disburse the funds to those owners.

Concluding the Receivership

After the Receiver has taken all necessary steps to close the lawyer’s practice, the Receiver should prepare a final report advising the court of the actions taken and seek an order of discharge pursuant to Rule 776(f). The report should recite the more important actions taken by the Receiver, such as preparing the inventory, sending letters to all known clients, making efforts to return files and recommending that the clients seek other counsel. The Receiver should also describe action taken with respect to any trust accounts. Lastly, the Receiver should also ask for permission to destroy unclaimed files and records after a set period.

Over the next several years, Illinois courts may see more situations requiring law practice Receiverships as the population of aging attorneys increases. Rule 776 may emerge as a valuable tool for the bench and bar over the next decade.