KBA Ethics Opinion E-436 Provides Updated Guidance on Retention and Disposal of Closed Client Files

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KBA E-436 (5/17/2013) addresses one of the more demanding management requirements of law practice – what to do with closed client files. The opinion includes ethics, policy, and practical advice on this issue. Key points are:

  • A lawyer is not required to bear the expense of storing former client files permanently.
  • A “… lawyer must provide the client anything in the file to which the client is entitled.”
    • The Committee suggests that this be covered in a letter of engagement and at the conclusion of the matter. (Editor’s note: Presumably with a closing letter.)
  • If the file has not been provided to the former client upon request of the client or at matter closing, as a matter of good practice, the file should be retained for five years.
    • The Committed noted that the rules governing client trust account records require a five year retention period for trust account records and that it is logical to retain the entire file for that period of time.
  • Some files must be retained for longer than five years.
    • The Committee gave as examples files of claims of minor children until the child reaches the age of majority, tax matters as long as client liability is possible, and files involving a representation in which a malpractice claim might be made.
  • As a matter of good practice clients should be informed of the firm’s closed file retention policy to include the right to materials in their file; that the file will be maintained for only a specified time; and that the file will be destroyed at the end of that time.
    • The Committee stressed that the letter of engagement should be clear that the client agrees to the firm’s file retention policy by signing the letter of engagement.
  • Before disposing of a file, it must be screened for original documents or other documents that cannot be replaced. Examples are original wills, trust documents, and deeds.
    • The Committee noted that such documents should be extracted from the file at the time the matter is concluded. (Editor’s note: Presumably returned to the client at that time.)
  • The method of disposing of former client files must be done in a manner to protect client confidentiality. “The result must be complete destruction of the materials in the file as would be the case with incineration or shredding.”

A Risk Management Perspective on KBA E-436
The promulgation of KBA E-436 is a good reason for a review of what Lawyers Mutual offers as risk management advice for managing the retention and destruction of closed client files keyed as much as possible to the opinion.

How long should a lawyer retain a closed client file?
We agree with the Ethics Committee that closed client files should be maintained for five years at a minimum. Our recommendation, however, is that a complete copy of the file be maintained for ten years and longer if the statute of limitations has not run on the matter within the ten-year period. Some files may require permanent retention. The following is our list of examples of files that may require retention longer than the recommended ten years:

  • cases involving a minor or incompetent who is still a minor or incompetent ten years after the work is performed.
  • estate plans for clients who are still alive ten years after the work is performed.
  • wills and estate probate matters.
  • contracts, notes, and bills paid over time still being paid off after 10 years.
  • cases including a civil judgment that needs to be renewed.
  • files establishing a real estate basis.
  • title opinions and associated notes.
  • criminal law files (at least as long as the client is alive).
  • corporate books and records (e.g., charters, stock certificates, minutes, bylaws).
  • files of problem clients or cases.
  • adoption, child support, alimony, and custody proceedings files.
  • files concerning structured settlements.
  • trust deeds.
  • cases with recyclable work product.

What constitutes the client file that must be given to a client?
The KBA Ethics Committee in Ethics Opinions E-235 (1980) and E-395 (1997) provided the following guidance on what records must be given to a client:

  • Notes and memos to the file prepared by the attorney containing recitals of facts, conclusions, recommendations.
  • Correspondence between attorney and client.
  • Correspondence between the attorney and third parties.
  • Material furnished by the client.
  • Searches made at the expense of the client.
  • Copy of pleadings and the like file in an administrative or court proceedings.
  • Legal research embodied in memos or briefs.

At the time these opinions were rendered maintaining client files in electronic files was not a major consideration. It is now. Apply the applicable guidance above on what electronic files belong in a client’s file. Be sure that you manage electronic files so that access to files kept on superseded systems can be retrieved when the firm changes computers, software, and backup procedures. More than one firm was embarrassed to find when trying to retrieve files on a superseded system that they had not retained the technology to find and open required files.

Use letters of engagement and closing letters to notify a client of firm procedures for returning client files and disposition of client files
A letter of engagement should get client agreement on how the client file will be managed. A specific time and procedure for claiming files after the representation should be fixed including a warning that the files are subject to destruction if not claimed as stipulated. Include in letters of engagement who pays for file copying and whether files may be returned in electronic format. The following is a sample engagement provision for disposition of files at the termination of the engagement:

Once our engagement in this matter ends, we will send you a written notice advising you that this engagement has concluded. You may thereafter direct us to return, retain or discard some or all of the documents pertaining to the engagement. If you do not respond to the notice within sixty (60) days, you agree and understand that any materials left with us after the engagement ends may be retained or destroyed at our discretion. Notwithstanding the foregoing, and unless you instruct us otherwise, we will return and/or preserve any original wills, deeds, contracts, promissory notes or other similar documents, and any documents we know or believe you will need to retain to enforce your rights or to bring or defend claims. You should understand that “materials” include paper files as well as information in other mediums of storage including voicemail, email, printer files, copier files, facsimiles, dictation recordings, video files, and other formats. We reserve the right to make, at our expense, certain copies of all documents generated or received by us in the course of our representation. When you request copies of documents from us, copies that we generate will be made at your expense. We will maintain the confidentiality of all documents throughout this process.

Our own files pertaining to the matter will be retained by the firm (as opposed to being sent to you) or destroyed. These firm files include, for example, firm administrative records, time and expense reports, personnel and staffing materials, and credit and account records. For various reasons, including the minimization of unnecessary storage expenses, we reserve the right to destroy or otherwise dispose of any documents or other materials retained by us within a reasonable time after the termination of the engagement. (From The Association Of The Bar Of The City Of New York Committee On Professional And Judicial Ethics Formal Opinion 2010-1)

At the conclusion of a matter:

  • Assign the file a closed file index number.
  • Check for outstanding fees and proper client trust account documentation.
  • Return client property such as original documents being sure to copy any returned documents necessary for the firm to have a complete file.
  • Strip the file of duplicate documents, etc. – do not remove work product such as drafts, phone messages, or research notes.
  • Send a closing letter to the client. (See the article in this newsletter: Closing Letters: When Does A Client Become a Former Client?)
  • Assign a file destruction date and calendar it in the office closed file index.
  • At the time a file is calendared for destruction notify the client by certified mail. Advise that in the absence of instructions to the contrary the file will be destroyed after the date indicated in the notice.

Other risk management considerations
Files of Missing Clients: KBA Ethics Opinion E-433 (5/19/2012) is a recent comprehensive treatment of how lawyers should deal with missing clients including records retention. We recommend it for your file on records management.

Lawyer Copy of Closed Client Files: Sometimes clients ask lawyers to destroy all copies of their file. It may not be prudent for the lawyer to comply with this request for purposes of malpractice claim defense or to avoid complicity in questionable conduct of a client. SCR 3.130 (1.16), Comment (9) covers return of a client file including language that expressly allows a lawyer to retain a copy of the file.

Sources for Review of Firm File Retention and Destruction Procedures: This article relies substantially on KBA Bench & Bar articles The Secret Life of Client Files and The Amazing Client Electronic Files. They are available on Lawyers Mutual’s Website at lmick.com – click on Resources, Subject Index, Files, and then on the articles.

 


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