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.

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).

Wisconsin Lawyer