Wisconsin Lawyer
Vol. 79, No. 4, April
2006
Retaining Client Files
How long must a Wisconsin firm retain client files before destruction?
What if you can't locate the client? What are your fiduciary duties?
The State Bar Law Office Management Assistance Program advisor answers
these frequently asked questions.
by Nerino Petro
When investigating how to deal with client records and property, turn
first to the Supreme Court Rules. Obviously, you need to be concerned
with property of existing clients, but what about files and property for
clients you can't locate? What fiduciary responsibilities do you
owe? While many attorneys think of files as only consisting of paper
(pleadings, correspondence, notes, and the like), client files also may
contain other "property" of the client or a third party, such
as stock certificates, checks or other negotiable instruments, and
instruments of title for real and personal property. SCR 20:1.15(a)(4)
and (10) define property that is considered to be fiduciary property or
trust property. Of fiduciary property, SCR 20.1.15(a)(4) states:
Nerino Petro, Northern Illinois 1988, is
the advisor to the State Bar of Wisconsin Law Office Management
Assistance Program (LOMAP). He assists lawyers in improving their
efficiency in delivering legal services and in implementing systems and
controls to reduce risk and improve client relations. Visit the Law
Practice Management area at www.wisbar.org regularly for practice
management guidance. You can reach Petro at (800) 444-9404, ext. 6012;
PracticeHelp@wisbar.org.
"(4) 'Fiduciary property' means funds or property of a
client or 3rd party that is in the lawyer's possession in a
fiduciary capacity that directly arises in the course of, or as a result
of, a lawyer-client relationship. Fiduciary property includes, but is
not limited to, property held as agent, attorney-in-fact, conservator,
guardian, personal representative, special administrator, or
trustee."
Of trust property, SCR 20.1.15(a)(10) states:
"(10) 'Trust property' means funds or property of clients
or 3rd parties that is in the lawyer's possession in connection with
a representation."
The distinction between fiduciary property and trust property is
important, because of the provisions of SCR 20:1.15(e)(6):
"(6) Record retention. A lawyer shall maintain complete records of
trust account funds and other trust property and shall preserve those
records for at least 6 years after the date of termination of the
representation."
SCR 20:1.15(e)(6) clearly establishes that records for trust accounts
and trust property must be maintained for a minimum of six years after a
lawyer has ended representation.
Although it is not as definitive as SCR 20:1.15, SCR 20:1.16 provides
additional information on protecting a client's interests, including
rights to papers in the client's file.
"(d) Upon termination of representation, a lawyer shall take steps
to the extent reasonably practicable to protect a client's
interests, such as giving reasonable notice to the client, allowing time
for employment of other counsel, surrendering papers and property to
which the client is entitled and refunding any advance payment of fee
that has not been earned. The lawyer may retain papers relating to the
client to the extent permitted by other law."
SCR 20.1.6(a) establishes Wisconsin lawyers' ongoing duty and
obligation to protect client confidences when disposing of files:
"(a) A lawyer shall not reveal information relating to
representation of a client unless the client consents after
consultation, except for disclosures that are impliedly authorized in
order to carry out the representation, and except as stated in
paragraphs (b), (c) and (d)."
There is no time limit on this obligation. This Rule adds a concern of
how files are disposed (in addition to the concerns raised by SCR
20.1.15) when deciding: 1) how long to keep client files; and 2) how
they are destroyed, if and when the decision is made to destroy
them.
Two Wisconsin ethics opinions address the concerns raised by SCR
20.1.15 and 20.1.6 and provide a framework to consider when establishing
a file retention and destruction policy. Unfortunately, the first
opinion, E-84-5, referenced informal opinions of the American Bar
Association and provided little information, leaving readers with their
questions still unanswered. However, opinion E-98-1, titled Disposition
of Closed Client Files, provides readers with greater detail and
suggestions to follow. One pertinent excerpt states:
"[W]hile lawyers should not have the burden of maintaining client
files forever given the attendant costs and economic burden, it is clear
that certain safeguards should be followed before a file is
destroyed.
"1. The lawyer has specific responsibility to hold client property
in trust under SCR 20:1.15. The lawyer must be satisfied that the files
have been adequately reviewed. To do otherwise, such as a spot check,
would run the risk that client property or original documents would be
destroyed.
"2. The existence of client property, or information that could
not be replicated from other sources if necessary, and the age of the
materials in the files are all factors that should be considered in
determining the reasonableness of the decision to destroy the file. For
example, client property or original documents such as wills or
settlement agreements ordinarily should not be destroyed under any
circumstances, and the level of effort to locate a missing client should
be more diligent where there is actual client property involved than
where, for example, the file is a long resolved collection file.
See S.C. Ethics Op. 95-18, ABA/BNA Man. Prof. Conduct
45:1208.
"3. 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. Cf. Kaap, The Closed File
Retention Dilemma, 1 Wis. B. Bull. 25 (Jan. 1988).
"4. In the ideal situation, the lawyer would have discussed the
issue of file retention/destruction in either the engagement letter with
the client or in the letter terminating or completing the relationship
or engagement. Absent an express agreement with the client, the lawyer
should at a minimum try to reach the client by mail at the client's
last known address, should advise the client of the intent to destroy
the file absent contrary client instruction, and should wait a suitable
period of time (perhaps six months) before taking action to destroy the
files. See Los Angeles County Ethics Op. 475 (1993), ABA/BNA
Man. Prof. Conduct 1001:1703.
"5. The lawyer should keep a record or index of files that have
been destroyed for a reasonable period of time. See ABA
Informal Op. 1384."
Wisconsin Ethics Opinion E-98-1 raises the interesting possibility of
limiting the time necessary to maintain client records by including a
provision in your representation agreement that specifically details
your record retention policy. There is no specific rule or opinion that
prohibits such an agreement between the lawyer and the client. However,
any such agreement will not allow you to abrogate specific requirements,
such as the six-year trust property requirement of SCR 20:1.15(e). What
this opinion and other resources1 clearly
show is that there is no simple and definitive answer to the question of
when is it safe to destroy the file. Since the Wisconsin statute of
limitation for legal malpractice is six years after the date the error
is discovered, not after the date the representation ended,2 there will be varying destruction dates depending
on the type of file. The appropriate disposal date for a real estate
file will be different than the appropriate disposal date for an estate
planning file. Malpractice suits are not the only potential means of
action by a party who is not happy with a lawyer's representation: a
client also can file a grievance with the Office of Lawyer Regulation
(OLR).
As set forth in SCR 21:18, a client has 10 years to file a grievance.
This time limit is subject to tolling for a client's disability or
an attorney's active concealment of his or her conduct. The full
text of SCR 21:18 states:
"(1) Information, an inquiry, or a grievance concerning the
conduct of an attorney shall be communicated to the director [of the
OLR] within 10
To Learn More
-
Materials on Client File Retention, American Bar Association Center
for Professional Responsibility, www.abanet.org/cpr/ethicsearch/
file_retention.html.
-
File Retention Policies and Requirements, by Kenneth L. Jorgensen,
Minnesota State Bar Association, www2.mnbar.org/benchandbar/2004.
-
File Retention Guidelines Including Commentary, Connecticut Bar
Association, www.ctbar.org/article/view/304/1/35.
-
Sample Law Office File Retention/Destruction Policy, Prolegia, www.mlmins.com/MemberServices
/OnlineLibrary.
-
When May I Destroy My Old Files? The Florida Bar,
www.floridabar.org/tfb/TFBMember.nsf.
-
Developing a File Retention Policy for Your Firm, State Bar of
Georgia, www.gabar.org/programs
/law_practice_management.
- Opening
and Maintaining Client Files: A comprehensive article published by
the Law Society of British Columbia. 606 KB
years after the person communicating the information, inquiry or
grievance knew or reasonably should have known of the conduct, whichever
is later, or shall be barred from proceedings under this chapter and SCR
chapter 22.
"(2) The time during which a person who knew or should have known
of the attorney's conduct is under a disability as provided in Wis.
Stat. § 893.16 (1997-98) and the time during which the attorney
acted to conceal the conduct from or mislead the person who knew or
should have known of the conduct regarding the conduct are not part of
the time specified in sub. (1)."
The ethics opinions did not address the issue of a client filing a
grievance with the OLR rather than commencing a malpractice lawsuit, but
SCR 21:18 needs to be considered when lawyers establish a file retention
and destruction policy. Furthermore, some malpractice carriers recommend
a 10-year file retention period for the lawyers they insure. Ask your
carrier for a sample file retention policy for review and adaptation by
its policyholders.3
Conclusion
While you can opt for a six-year retention period, a better practice is
to maintain your client records for 10 years, unless the time period is
varied by your representation agreement and does not run afoul of the
Supreme Court Rules.
To be successful, any file retention policy should:
1) be straightforward, concise, and as simple to understand as
possible;
2) clearly detail both the firm's and the client's duties and
obligations; and
3) be implemented and followed by everyone in the firm!
Endnotes
1Ann Massie Nelson, Managing
Records Effectively, 76 Wis. Law. 22 (April 2003); Lee R. Nemchek,
Records Retention in the Private Legal Environment: Annotated
Bibliography and Program Implementation Tools, American Association
of Law Libraries, <www.aallnet.org/products/2001_01.pdf>.
2Wis. Stat. § 893.52. In actions
for legal malpractice the date of injury, rather than the date of the
negligent act, commences the period of limitation. Auric v.
Continental Casualty Co., 111 Wis. 2d 507, 331 N.W.2d 325
(1983).
3A sample file retention policy also
is included with Nemchek's article, see supra n.1.
Wisconsin Lawyer