9.12Appointment of Interim Administrator¹

Subchapter 9.300 of the Michigan Court Rules imposes obligations on private practice attorneys and the State Bar of Michigan with regard to identifying, designating, and serving as Interim Administrators when an attorney becomes unable to practice. This may require the court to rule on an ex parte petition for the appointment of an interim administrator. See MCR 9.305.

A.Commencement of Proceedings²

“A proceeding for the appointment of an Interim Administrator is commenced by the filing of an ex parte petition by the Interim Administrator in the circuit court for the county in which the Affected Attorney lives, last lived, or maintains or last maintained an office for the practice of law.” MCR 9.305(A). “If an Interim Administrator is unable to serve, he or she must promptly notify the State Bar, and the State Bar must promptly identify a replacement Interim Administrator using the list maintained by the State Bar under Rule 21(C) of the Rules Concerning the State Bar of Michigan or its own staff under attorney supervision as a measure of last resort.” MCR 9.305(A).

Petition Requirements. “The petition must set forth facts proving that the attorney is an Affected Attorney[.]” MCR 9.305(A)(1)(a). The petition must also set forth facts proving that “the appointment of an Interim Administrator is necessary to protect the interests of the Affected Attorney’s Clients or the interests of the Affected Attorney” and that “the attorney proposed to be appointed as Interim Administrator is qualified under [MCR 9.305].” MCR 9.305(A)(1)(b)-(c). Finally, the petition “must be verified or accompanied by an affidavit or declaration under penalty of perjury of a person having personal knowledge of the facts.” MCR 9.305(A)(2).

Service of Process. “The petition and any supporting documents must be served upon the Affected Attorney if the whereabouts of the Affected Attorney are known, the Affected Attorney’s estate if the Affected Attorney has died, and on the fiduciary for the Affected Attorney, if one has been appointed. See MCR 2.103 – 2.108. If the petition is filed by the Designated Interim Administrator, it must also be served upon the State Bar of Michigan by email at an address designated by the State Bar of Michigan pursuant to MCR 2.107(C)(4) or by electronic service pursuant to MCR 1.109(G)(6).” MCR 9.305(A)(3).

B.Order of Appointment³

The court must appoint one or more Interim Administrators if it determines that the petitioner has proven by a preponderance of the evidence that the attorney is an Affected Attorney and the appointment of an Interim Administrator is necessary to protect the interests of the Affected Attorney’s Clients or the interests of the Affected Attorney. MCR 9.305(B).

Unless good cause exists to appoint a different Interim Administrator, the court must appoint the Designated Interim Administrator or the Interim Administrator proposed by the State Bar under MCR 9.305(A). MCR 9.305(B)(1). The circuit court may appoint additional Interim Administrators upon a finding of good cause. MCR 9.305(B)(2).

An order appointing an Interim Administrator must specifically authorize the Interim Administrator to:

“(a) take custody of and act as signatory on any bank or investment accounts, safe deposit boxes, and other depositories maintained by the Affected Attorney in connection with the Law Firm, including all lawyer trust accounts, escrow accounts, payroll accounts, operating accounts, and special accounts;

(b) disburse funds to clients of the Affected Attorney or others entitled thereto; and

(c) take all appropriate actions with respect to the accounts.” MCR 9.305(B)(3).

An order appointing an Interim Administrator is effective immediately upon entry unless the court orders otherwise. MCR 9.305(B)(4). The order may require the Interim Administrator to submit interim and final accountings and reports and may allow or direct portions of any accounting relating to the funds and confidential information of the clients of the Affected Attorney to be filed under seal. MCR 9.305(B)(5).

C.Service of Notice of Interim Administrator's Appointment⁴

“Upon receipt of an order of appointment of an Interim Administrator, the petitioner must serve the Notice of Appointment of an Interim Administrator’s appointment, including the name and address of the Affected Attorney, and the name, business address, business telephone number, business email address, and P number of the Interim Administrator on the Affected Attorney, the Affected Attorney’s estate if the Affected Attorney has died, and the Affected Attorney’s fiduciary. If the petitioner is the Designated Interim Administrator, service must also be made on the State Bar of Michigan. If the petitioner is the State Bar of Michigan, service must also be made on the Interim Administrator. The State Bar of Michigan must publish the notice in the Michigan Bar Journal and on the State Bar of Michigan website.” MCR 9.305(C).

D.Objection to Appointment⁵

“Within 14 days after service of the Notice of Appointment, any interested person may file objections to the order of appointment of an Interim Administrator specifying the grounds upon which the objection is based. Although the filing of one or more objections does not automatically stay the order appointing Interim Administrator, the court may order that the appointment be stayed pending resolution of the objection(s).” MCR 9.305(D).

E.Duties of Interim Administrator

An Interim Administrator must:

•take custody of the files and records;

•take control of accounts, including lawyer trust accounts and operating accounts;

•review the files and other papers to identify any pending matters;

•promptly notify all clients represented by the Affected Attorney in pending matters of the appointment of the Interim Administrator, in writing, where practicable;

•promptly notify, in writing, where practicable, all courts and counsel involved in any pending matters, to the extent they can be reasonably identified, of the appointment of an Interim Administrator for the Affected Attorney;

•deliver the files, funds, and other property belonging to the Affected Attorney’s Clients pursuant to the clients’ directions, subject to the right to retain copies of such files or assert a retaining or charging lien against such files, money, or other property to the extent permitted by law;

•take steps to protect the interests of the clients, the public, and, to the extent possible and not inconsistent with the protection of the Affected Attorney’s Clients, to protect the interests of the Affected Attorney; and

•comply with the terms of the agreement between the Affected Attorney and the Interim Administrator. MCR 9.307(B)(1)-(8).

An Interim Administrator is not required to expend his or her own resources when exercising the duties and powers identified in MCR 9.307 but may request reimbursement under MCR 9.313 if they do.⁶  MCR 9.307(A).

An Interim Administrator may assist and cooperate with the Affected Attorney and/or the Affected Attorney’s fiduciary in the continuance, transition, sale, or winding up of the Law Firm, but may purchase the Law Firm only upon the court’s approval of the sale. MCR 9.307(E)-(F).

All Interim Administrators must obtain and retain professional liability insurance that covers conduct performed as an Interim Administrator. MCR 9.315. Absent informed, written consent, an Interim Administrator cannot represent an Affected Client in a pending matter in which the client was represented by the Affected Attorney, other than to temporarily protect the interests of the client, unless and until the Interim Administrator has concluded the purchase of the Law Firm. MCR 9.317. Written consent by the Affected Client must include an acknowledgment that the client is not obligated to retain the Interim Administrator. Id.

F.Inventory, Accounting, and Reporting⁷

The Interim Administrator must “file with the court an inventory of the Affected Attorney’s interest-bearing trust accounts for deposit of client and third-party funds within 35 days after entry of the order of appointment, unless an inventory has already been filed with the court.” MCR 9.307(C)(1).

The Interim Administrator also must “account for all receipts, disbursements, and distributions of money and property for the Affected Attorney, including its interest-bearing trust accounts for deposit of client and third-party funds.” MCR 9.307(C)(2).

The Interim Administrator is required to “file with the court a final written report and final accounting of the administration of the Affected Attorney and serve a copy of each on the State Bar of Michigan.” MCR 9.307(C)(3). “The State Bar of Michigan may petition the court for an interim accounting if it has reason to believe the Affected Attorney’s affairs are being mismanaged.” MCR 9.307(C)(4).

G.Conflict of Interest

“If the Interim Administrator determines that there is a conflict of interest between the Interim Administrator and an Affected Attorney’s Client, the Interim Administrator must notify the client, the State Bar of Michigan, and the circuit court that made the appointment and take all appropriate action under the Michigan Rules of Professional Conduct.” MCR 9.307(D).

H.Protection of Client Information, Privilege, Files, and Property

“The circuit court has jurisdiction over all of the files, records, and property of clients of the Affected Attorney[.]” MCR 9.311. The court “may make any appropriate orders to protect the interests of the clients of the Affected Attorney and, to the extent possible and not inconsistent with the protection of clients, the interests of the Affected Attorney[.]” Id. This includes, but is not limited to, “orders relating to the delivery, storage, or destruction of the client files of the Affected Attorney.” Id. “The Interim Administrator may maintain client documents in paper or electronic format,” or “destroy any client document pursuant to the law office file retention policy or as necessary to meet ethical obligations, whichever is shorter, without returning to the court for permission to do so.” Id.

I.Compensation⁸

1.Compensation and Reimbursement Available

Except as otherwise provided for by an agreement with the Affected Attorney, an Interim Administrator is entitled to reasonable compensation and reimbursement for actual and reasonable costs incurred in connection with the performance of their duties. MCR 9.313(A).

Reimbursable expenses include, but are not limited to:

•the costs incurred in connection with maintaining the staff, offices, and operation of the Law Firm; and

•the employment of attorneys, accountants, and others retained by the Interim Administrator in connection with carrying out the Interim Administrator’s duties. MCR 9.313(A).

2.Request for Compensation or Reimbursement.

The Interim Administrator may file a motion with the court that ordered the appointment seeking compensation or reimbursement. MCR 9.313(B)(1). “Unless the Interim Administrator and the Affected Attorney or the Affected Attorney’s estate have reached an agreement otherwise, the Interim Administrator will be paid from the Law Firm if funds are available; if funds are not available from the practice, the attorney may file a claim against the estate in a probate court.” Id. “The claim must include an accounting of all receipts, disbursements, and distributions of money and property of the Law Firm.” Id.

If the Interim Administrator was matched to an Affected Attorney through the list maintained by the State Bar of Michigan and subsequently appointed by the court, they may seek payment or reimbursement from the State Bar of Michigan for expenses identified in MCR 9.313(A). MCR 9.313(B)(2).

3.Award of Compensation or Reimbursement.⁹ 

The court may enter a judgment awarding compensation and expenses to the Interim Administrator against:

•the Law Firm;

•the Affected Attorney, or;

•any other available sources. MCR 9.313(C).

A judgment serves as “a lien upon all property of any applicable Law Firm or Affected Attorney retroactive to the date of filing of the petition for the appointment of an Interim Administrator under [MCR 9.305]” but “is subordinate to possessory liens and to non-possessory liens and security interests created prior to it taking effect[.]” MCR 9.313(C). A judgment lien “may be foreclosed upon in the manner prescribed by law.” MCR 9.313(C).