GPSolo Magazine - Oct/Nov 2003

Preserving the Record

According to a recent survey, lawyers report that one of their greatest disappointments in practicing law is the large amount of paperwork. Although we may never have expected it before beginning our careers, documents dominate most legal practices.

Once a case is over—hopefully because you won, maybe because you lost, or sometimes because the client retained new counsel—the question becomes, how do you manage the documents from the file? In determining what to do, there are a number of practical considerations, as well as ethical constraints. This article highlights some issues to look out for, but be sure to check the guidance in your jurisdiction. The rules are far from uniform.

First, protect yourself. The number of legal malpractice suits is growing each year. When looking at your document retention practices, think how they would impact your ability to defend yourself.

Second, consider the client's perspective. Clients frequently view their lawyer as more organized and methodical than themselves. Often that is true, but clients' expectation of what is happening to their documents may be much different from their lawyer's actual practice. The attorney and client therefore need to reach an understanding about how the documents are being handled.

Third, remember your ethical obligations. In dealing with the issue of documents, both statutory and case law impose obligations on how lawyers need to handle documents after the case is over.

Fourth, none of this would be an issue if cost didn't matter. If we could make hundreds of copies and preserve everything for free, we could just save everything. Sometimes it may feel like we do that, but any realistic document management system has to take account of cost.

Before the Case Begins: Document Retention Policy

Even before a case starts, make sure your office staff knows what is supposed to happen to client files when the case is over. Certainly, you can draw up a written document retention policy—and we have all seen defendants who have them. As with any policy, there are good reasons to document it, particularly if there are a large number of people in the office. But regardless of whether a formal policy is written up, you and your key staff should come to an understanding on document retention issues as a matter of course.

During the Case

Confidentiality agreements. With increasing frequency, parties insist on only exchanging documents if there is a confidentiality agreement. Often these agreements require that the confidential documents be returned at the end of the litigation.

This agreement may seem acceptable in the heat of litigation—particularly when it means there will be less documents to deal with when the case is over. But you should think carefully before agreeing to that proposal.

If you have to return the documents, what happens if your client is dissatisfied with the outcome and wants to go over it with you or sues for malpractice? Those very same confidential documents that were returned may be precisely what you need in your defense. Also, there may be either follow-up or parallel litigation that arises from the same matter. If you have agreed to return the documents at the termination of one case, you may well be hampered in prosecuting the other proceeding.

When confronted with a request to return the documents, your first line of attack should be to draft a narrow provision governing what documents must be returned. Courts are clear that although the parties can agree among themselves about the treatment of confidential documents, courts are reluctant to grant protections over documents in discovery. Therefore, you have a great deal of leverage in drafting a narrow agreement—after all, you are likely to win if you go to court. Once the provision is drafted, be sure to retain the documents until past the statute of limitations for malpractice in your jurisdiction.

Sometimes an opponent will resist allowing you to retain the documents. A final compromise is to require opposing counsel to retain the documents during the malpractice statute of limitations period, plus some additional buffer time, with an agreement that the documents will be returned to you on request. Although you might suffer the embarrassment of asking for the documents back under this arrangement, there is a bright side: Opposing counsel will then have to pay for the storage costs.

Client termination. Clients change lawyers-sometimes at the lawyer's request and sometimes at the client's. Your obligations in terms of returning the file to the client depend a great deal on the circumstances of the departure.

Failure to pay. If the relationship is terminated because the client has refused to pay, the law in most jurisdictions is quite favorable to the lawyer. (Again, it is important that you check the status of the law in your jurisdiction to be sure.)

Generally, the common law recognizes that the lawyer has a "retaining lien" on any documents or materials in her possession from a non-paying client. A retaining lien is different from a "charging lien"; the latter entitles the lawyer to a portion of future recovery; the former is a passive lien that entitles the lawyer only to retain materials already in his or her possession. In most states, there is no need for any contractual provision or filing to trigger the retaining lien—it arises automatically when the client does not pay. Further, it covers any property a non-paying client has given a lawyer, including client documents, results of investigations, money, pleadings, and correspondence. Because a retaining lien is passive, the lien only covers materials in the lawyer's possession; it cannot be used to get materials the lawyer no longer possesses.

Thus, until the bill is paid in full, the lawyer is entitled to keep the client's entire file. If the non-paying client sues, typically a court will order the file returned only after the client has posted a security for the outstanding balance. The court can make a subsequent determination as to how much money the client owes.

There are relatively few exceptions to the retaining lien. Occasionally courts recognize an exception for indigency, or because a criminal conviction is at issue, or because of attorney malfeasance, but such exceptions are rare. Therefore, a lawyer can literally hold the client's file hostage until the bill is paid.

If you want to take advantage of the lien, be alert when a non-paying client suddenly wants to copy or take his file—it may be a sign that he intends to switch attorneys and leave you without any recourse. Certainly don't release a file until any outstanding bill is paid. If a non-paying client does switch attorneys without the file, make clear to the new attorney that you are not going to release the file until the bill is paid in full.

Fully paid clients. If a client retains new counsel and has fully paid his previous counsel, the previous counsel must turn over the client's "property" in the file to the successor counsel, or to the client. This is required by the ABA Model Rules and is the law in all jurisdictions.

There is no dispute that any documents provided by the client to the attorney are client property, and there is little dispute that pleadings and other public documents are also property of the client.

The law is split, however, on whether a firm's internal legal memorandums, notes, and investigatory interviews are the client's property or the firm's. Early ABA informal opinions and the case law in a number of states hold that these documents are prepared for the lawyer's own use and thus are not client property that must be returned.

Other states, however, hold that all documents generated in connection with the litigation are the client's property to which the client is entitled at the end of the case. These courts have given two reasons for this rule. First, the attorney is the client's fiduciary, and therefore the attorney must return all materials. Second, the client is entitled to any work she paid for. Courts that analyze cases under the paid-for-the-document analysis typically focus on whether the client was billed for the work reflected in the documents at issue. Therefore, in these jurisdictions virtually all documents need to be returned.

An additional twist occurs when the client is considering a malpractice lawsuit and wants the documents. In this situation, some law firms have asserted a work product privilege to retain the file. Some courts have accepted this approach. Most courts, however, and particularly those that see all materials in the file as being the client's, reject attempts to hold onto the file. They reason either that the client can waive the privilege or that the fiduciary duty trumps any fear of a malpractice lawsuit.

Therefore, if for some reason you do not want to surrender all materials in the file, check the law in your jurisdiction to see what can be withheld.

After the Case is Over

If you are lucky you will never need to deal with any of the problems above. But every case comes to an end, and you will have to dispose of the file. There are two basic approaches: One is to return the entire file to the client; the other is to store it yourself for a certain period before destroying it.

Returning the file to the client. Certainly, returning the file fulfills your obligation to the client and saves storage costs. However, this approach has a number of drawbacks. First, if you are hoping for repeat work from the client, returning the file may signal to a layperson that you are finished representing him. Retaining the file encourages clients to continue thinking of you as their attorney. Second, unless you make a copy of the entire client file, you cannot refer to it if the client calls with a follow-up question, if you need the materials in another case, or if the client disputes your services.

Retaining the file. Alternatively, you could retain the file for a certain period and then destroy i—unless you have the resources to maintain the file permanently. Although this approach does not have the drawbacks listed above, the file's eventual destruction raises a number of issues.

First, most ethics opinions on the issue require the attorney to retain the file for a "reasonable" time. As with any requirement of reasonableness, it's difficult to know in advance how long a particular file needs to be kept—and even harder to make a general rule. Therefore, you should set the time period far enough out so that the file's destruction is not a problem.

Second, many clients view their lawyers as a permanent safe deposit box for the entire case file. As lawyers we know that files are eventually destroyed, but ask your clients and you will likely be surprised that they think lawyers keep files forever. Conversely, if the client has his or her own document destruction policy, be sure you destroy the file consistent with the client's policy.

Third, you may need the file again, either for dealing with that client or perhaps another client who has a matter involving similar legal or factual issues.

Fourth, if the file is sent to a commercial storage site, there is generally a charge each time the file is retrieved for the client.

There are several solutions to these issues. First and foremost, always send a closing letter to the client. There are many reasons for a closing letter, but an important one is discussing the client file. In that closing letter align everyone's expectations by telling the client how long the file will be retained, and that it will destroyed thereafter. Be sure to specify how long the file will be retained in your office before it is placed in off-site storage, as well as the approximate fee if the client wishes to retrieve the file after that. Additionally, in that letter you may want to offer the client the option of taking the file now, or just prior to its destruction. By giving the client that option, you make it even harder for the client to argue that the file should not have been destroyed.

In deciding how long to retain files, consider the various statutes of limitation in your state. When you have completed a particular file, consider any peculiarities in that matter, including the client's document retention policy, and whether the matter is permanently resolved or whether the obligations stretch over a longer period of time. For example, if you fail to destroy a client's documents pursuant to the client's protocol and there is subsequent litigation, the documents you have retained will be subject to discovery by opposing counsel. Your client will not be thrilled when it discovers that its in-house document retention policy has been circumvented by its outside counsel.

With the advent of technology, solutions are beginning to emerge that might help with file retention issues. Some lawyers now scan the entire client file onto a CD—allowing the file to be retained in very little storage space and opening the possibility of permanent record storage. That can help reduce some of the problems above. However, until your office retains every document, give serious thought to file destruction, as well as the client's expectations.

Special Considerations

In many cases it may make sense to return or retain particular documents. A good practice is to send all original settlement agreements to the client, alerting her to save the document, while retaining a copy with your firm. Of all documents, an original settlement agreement is of particular importance to the client. It may need to be referred to again or possibly used in future litigation. It is hard to know at what point that document could be safely destroyed. The loss or accidental destruction of that agreement is too great a risk to place on your firm. Therefore, consider giving the original document to the client.

Be sure to save a copy of the agreement for your own records— particularly any document that relates to attorney fees. At year's end, as well as during any subsequent audit, the IRS may ask to verify both your income and its source. Having the agreement available is crucial. Because of its importance both to you and the client, as well as its generally small size, it may be worth saving a copy of the agreement permanently.

When a matter is concluded, the last thing most of us want to think about is record retention. However, our obligation to our clients—and ourselves—requires that we pay attention to the issue. With a little thought up front and some simple steps at the end, you can do your part to preserve the record.

J. Nelson Thomas is an attorney with Dolin, Thomas & Solomon in Rochester, New York, who concentrates his practice in employment. He can be reached at nthomas@theemploymentattorneys.com.

 

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