Vol. 71, No. 9,
September 1998
Risk Management
Have license, will travel, Part IV:
File Custody Disputes Are Common
When Lawyers Leave Law Firms
By Ann Massie Nelson
When lawyers part
ways, the dissolution frequently is compared to a divorce - right down to
the custody battle over clients and their files.
Ironically, the file belongs to neither the firm nor the departing attorney,
but to the client. Yet both the attorney who represented the client and
the law firm have an interest in maintaining the file, both for risk management
and marketing reasons.
In a recently released opinion, E-98-1, the State Bar's Professional
Ethics Committee stated that lawyers in dissolving firms should agree on
the handling of client files and must transfer files to a departing or new
lawyer upon client request. The opinion goes on to say those arrangements
"do not obviate the ethical and fiduciary duty to maintain and properly
handle client files." 1
"What that means for you as the departing lawyer is that your responsibility
for client files does not end, even when you no longer have access to or
control over client files," says Sally E. Anderson, claims counsel
at Wisconsin Lawyers Mutual Insurance Co.
Client files can become a hot potato when firms are in transition, as
in the case of one law firm that refused to release closed files to departing
attorneys, then months later said "come pick up your client files"
when the firm dissolved. "No, thanks," said the departing attorneys,
who did not want to become the repository of the dissolved firm's archives.
Four corners of client files
When determining the fate of client files, think of every client file
as having four corners that you must carefully balance: legal, practical,
financial, and personal.
Legal. When a lawyer leaves a law firm, clients have the right
to select their counsel and to designate the custody of their files. At
one Madison firm, the departing attorney and the firm send a joint letter
to clients, asking them to respond in writing with their decision regarding
their files. (A sample letter accompanies this
column.)
The more difficult question for departing lawyers and their firms is
what to do with closed files when former clients cannot be found. Even though
clients drop off your radar screen, your responsibility for their files
continues. Ethics opinion E-98-1 advises at a minimum the files should not
be destroyed until six years have passed after the last act that could result
in a claim being asserted against the lawyer.
"In Wisconsin the statute of limitations for legal malpractice claims
runs from the discovery date, that is, the date the client knew or should
have known of the attorney's error or omission," Anderson advises.
"In many areas of practice, for example, estate planning, real estate,
and representation involving minors, there is no 100 percent safe time to
purge your files."
Practical. The client may be the legal owner but you are the caretaker
of the file, a role most lawyers gladly accept. The next time the client
needs legal representation, who will come to mind? You. After all, you have
the files.
This prospect of future income (more than the portent of lurking malpractice
claims) is why parting lawyers will go into battle mode over files. Rather
than follow Solomon's advice and divide the baby in half, the obvious (but
costly) solution is to photocopy or scan the files and give both parties
a copy.
Keep in mind that all original documents need to be sent to clients.
Write a cover letter listing the documents enclosed and ask the client to
return a signed copy of the letter, acknowledging receipt of the documents.
Keep copies of the original documents, correspondence, and all related work
product. Assign a purge date to the file. Ethics opinion E-98-1 recommends
keeping a record of destroyed files.
If your firm does not have a file-purging policy, start today with every
new file. (Don't wait until the day you find time to purge old files: It
won't come.) Let clients know when they retain you what information you
will keep and for how long, Anderson says. Ethics opinion E-98-1 advises
lawyers to discuss file retention and destruction in either the engagement
letter or a letter sent when the representation concludes.
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Ann Massie Nelson is director of communications at Wisconsin
Lawyers Mutual Insurance Co. Past risk management columns appear on the
WILMIC web site, with permission of
the State Bar of Wisconsin. |
Financial. Making and storing duplicate files is expensive, particularly
for litigation firms where a single file may occupy yards of drawer space.
While parting lawyers may not need or want entire files, reviewing each
file may be impossible and more costly than duplicating or scanning.
Many law firms purchase systems for condensing files or rent storage
space at rates considerably less than prime office space. At the Madison
firm of Lathrop & Clark, closed files are stored in a central, condensed
filing area, basement file space, or off-premises storage site, depending
upon the anticipated need for access. Each file's location is tracked in
a common database so the file can be quickly located and retrieved, according
to Jerry McAdow, a partner in the firm. At WILMIC, files closed longer than
a specified time period are scanned and stored electronically. The paper
files are shredded and recycled.
Whether you store, scan, or destroy files, take care to ensure confidentiality.
Duty to maintain client confidentiality continues after your representation
ends or the firm disbands.
Personal. Defying the laws of physics, a nearly magnetic attraction
for paper exists in the legal universe. "So much of what lawyers do
exists on paper or in their heads. Files may be the only physical manifestation
of their work," Anderson says. "When firms dissolve or lawyers
leave a practice, the files can become symbolic of other issues in the dispute
or a way of keeping score."
Like the divorcing couple at war over the 1986 Toyota, lawyers need to
remember that the most valuable assets are not stored in file drawers and
musty basements, but in the experience, reputation, and respect they take
with them wherever they practice.
And if that's not enough, just keep repeating, "It's only paper."
Endnotes
1 - See E-98-1, Disposition of Closed
Client Files, 71 Wis. Law. 28 (July 1998).
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