Arkansas and Wisconsin weigh in on client files in different ways and on different sides.

The need for clarity with respect to what makes up the “client file” has been an issue I have tried to stay up to date on dating back to our unsuccessful efforts back in 2009 to convince the Tennessee Supreme Court to adopt a rule – what would have been RPC 1.19 — to address the issues.  As I’ve explained before, our unsuccessful RPC 1.19 was patterned largely after North Dakota’s Rule 1.19.  There is no ABA Model Rule addressing client files and, as recently as last year, the ABA’s guidance as to client files still leaves many questions open so states navigate these waters pretty much on their own using only the language about lawyers’ obligations to “surrender papers and property of the client” in their versions of Model Rule 1.16.

As you may recall from a couple of posts I wrote last year, some seven years later we’ve obtained some real clarity in Tennessee on a few fronts as to client files through two Formal Ethics Opinions issued by our Board of Professional Responsibility.  Particularly, we now have clear guidance that we are an “entire file” jurisdiction rather than an “end product” jurisdiction regarding what are the contents of the client file.

Late last year, Arkansas adopted its own RPC 1.19 addressing client file issues but although they went with an approach that adopts a black letter rule to address the matter, they’ve gone in the opposite direction from us as Arkansas RPC 1.19 opts for an “end product” approach.  Technically, Arkansas has been an “end product” jurisdiction for more than seven years dating back to a 2009 opinion of the Arkansas Supreme Court – Travis v. Committee on Professional Conduct.  You can read the Arkansas Supreme Court order with the full text of RPC 1.19 and its comments here.

The architecture of this new Arkansas rule tackles client file questions in two parts.

RPC 1.19(a) defines what makes up the contents of the client file both positively [(a)(1) identifies items that are in] and negatively [(a)(2) identifies items that are excluded] .  The most important exceptions being “the lawyer’s work product,” “internal memoranda,” and “legal research” materials.  It appears though that (a)(2)(E) serves to override any attempt to view (a)(1) as a comprehensive identification of what is included as that subpart explains that anything that isn’t listed as excluded in (a)(2)(A-D) are things that “shall be considered to be part of the client file to which the client is entitled.”  RPC 1.19(a) also addresses the need to honor requests by the client for delivery of file and when a lawyer may charge costs of copying or retain a copy for their own purposes.  Smartly, the rule also expressly clarifies that a lawyer and client can address all of those issues regarding copy costs and delivery costs in a fashion they prefer by contract as part of the engagement agreement.

RPC 1.19(b) addresses the length of the obligation to retain client file records and under what circumstances a lawyer can destroy client files in his possession.  Five years is the default length of time chosen for retention in Arkansas, and any time after that the lawyer is free to destroy the file materials.  RPC 1.19(b)(3) also makes clear that these time frames can be varied by contract between attorney and client.  RPC 1.19(b)(4) takes certain criminal matters out of the general rules of retention and destruction, however, and instead requires the lawyer to maintain the client’s file for the life of the client in those particular situations.

Another jurisdiction has weighed in recently but differs from what Arkansas has done both structurally and substantively.  Wisconsin recently put out an ethics opinion to further clarify the obligations lawyers have to clients in terms of turning over files at the end of the representation.  Wisconsin, like Pennsylvania, denies public access to its ethics opinions, but you can read a well-written article about Wisconsin Formal Ethics Op. EF-16-03 here.

The primary focus of the formal opinion appears to be clarifying that lawyers can neither try to leverage retaining the client file in order to obtain payment nor condition turning the file over upon the execution of a release of malpractice liability.  (Both things you might be surprised to hear about how often lawyers attempt to do despite the perils.)

But Wisconsin’s latest opinion on the subject matter also addresses some of the same vital issues that are at the heart of resolving situations involving disputes between attorneys and clients over who is entitled to what.  Unlike Arkansas, Wisconsin takes an approach more in keeping with the “entire file” approach to the question as several items carved out from the file in Arkansas are not in Wisconsin.  The Wisconsin opinion specifically identifies “legal research and drafts of documents that are relevant to the matter” as being included in the client file as well as “[a]ny materials for which the client has been billed, either directly or through lawyer or staff time.”

Yet, the Wisconsin opinion does limit certain categories of items as being allowed to be withheld from the client — including two items that were at the heart of the battles that doomed our effort in Tennessee to adopt an RPC 1.19 of our own — “materials containing information, which, if released, could endanger the health, safety, or welfare of the client or others,” and “materials that could be used to perpetrate a crime or fraud.”  Interestingly, however, the Wisconsin opinion also crafts an exclusion for materials that seems pretty antithetical to the idea that the guidance is really consistent with Wisconsin being an “entire file” jurisdiction:

Materials containing the lawyer’s assessment of the client, such as personal impressions and comments relating to the business of representing the client.  If a lawyer’s notes contain both factual information and personal impressions, the notes may be redacted or summarized to protect the interests of both the lawyer and the client.

The Wisconsin opinion also addresses the inability of the lawyer to hold the file hostage as a way to first receive payment and provides a clear answer that a lawyer cannot refuse to provide the entire file at the end of the representation based on an argument that lawyer provided everything to the client along the way during the life of the representation.  The Wisconsin opinion also offers insight on when the lawyer has to provide a client with an electronic copy of a file and stresses that while a lawyer can retain a copy of the file, the lawyer cannot charge for that expense because that is being done for the lawyer’s own benefit.

Another interesting wrinkle of the Wisconsin opinion is that it gives a nod to a scenario that is rarely discussed in such opinions — though it does come up in discussions of “red flags” of new client intake matters — but that is an exceedingly difficult situation to deal with:  “There may be unusual circumstances where a client has specifically instructed a lawyer not to surrender a file to a successor counsel, and the lawyer must abide by those instructions.”

In the end though, both the Wisconsin opinion and, in part, the Arkansas rule, offer guidance that furthers what ought to be the primary, practical guidance for lawyers given the disparities that exist on this issue from jurisdiction to jurisdiction — the more focus can be given to these issues in an engagement agreement such that you can have a contractual agreement between lawyer and client on just what will be provided, how, and when (and at whose cost) the better off all involved will be.

 

Fixing a bad ethics opinion – Kudos to the TN BPR!

Late in 2015, the Tennessee Board of Professional Responsibility issued Formal Ethics Opinion 2015-F-160 addressing issues regarding retention of client files.  I wrote here about a significant problem with the part of the opinion that indicated that our RPC 1.15(b) required retention of all client files for a five-year period.  The problem, to me, was of such significance that I couldn’t leave the criticism to a forum like this one where, if I’m lucky, it is read by a couple of hundred lawyers.  So, I also submitted a longer column about the problematic ethics opinion to the ABA/BNA Lawyers’ Manual on Professional Conduct, which was kind enough to accept it and publish it.

I am extremely pleased to report that the BPR has done the right thing and amended 2015-F-160.  You can go read 2015-F-160(a) in its entirety at the BPR”s website here.  But, the important takeaway can be summed up as: (1) only records of the funds (i.e. the kinds of financial records spelled out in more detail in Tenn. Sup. Ct. R. 9, Section 35.1(a)(2)) must be retained for five years; (2) the BPR does recommend as a guideline that lawyers retain all client files for 5 years from the end of the representation; and (3) lawyers and clients certainly can establish their own arrangement regarding a time period for retention.

As indicated in the title, the BPR deserves kudos for acting to amend this ethics opinion.

(P.S. While we’re fixing things, how about fixing the way Formal Ethics Opinions display on the BPR website?  Horizontal scrolling is a bad look – plus printing is a bit of a nightmare.)

TN issues formal ethics opinion on client files that’s bad in a very sneaky way.

Many moons ago at this point, I wrote a post here with some criticism about ABA Formal Ethics Opinion 471  and the various questions important to client file issues on which it punted.  Back then I also wrote about how our effort in Tennessee to get an ethics rule adopted (it would have RPC 1.19 in Tennessee) that would identify specifics for client file materials issues was unsuccessful.

Earlier this week, the BPR in Tennessee (our disciplinary authority) published a formal ethics opinion that certainly goes further than the ABA opinion in terms of answering questions, but now makes me wish I had not criticized the ABA opinion as much for punting questions.  Our BPR, in an apparently earnest effort to be helpful (at least I hope that is what it was), has managed to create a minimum 5-year requirement for retaining all client files out of whole cloth.

Formal Ethics Opinion 2015-F-160 upon a quick read seemed like a decent client file opinion.  Only in writing about the opinion did I come to understand how seriously flawed it is in a very important respect.

You can go read the full 8-page version of the BPR opinion here.  2015-F-160 addresses three questions: (1) how long should client file materials be retained by lawyers after matters are completed; (2) who owns the materials in the client file; and (3) what are the responsibilities that a retiring lawyer has with respect to client files?

As to the second question, the BPR adopts the “entire file” approach rather than the “end product” approach and says the client owns the entire file.  As to the third question, the BPR does a good job of pointing out that just because you retire doesn’t end your responsibility as to files and distinguishes between what that burden means for a lawyer who was a solo practitioner versus one who practiced in a firm.

But it is the portion of the opinion that addresses how long client file materials must be retained that will prove to be highly controversial and deserves real scrutiny.

When I first read it, I thought all the opinion was trying to say was that the only guidance that could be found in the ethics rules was that RPC 1.15(b) required trust accounting records had to be kept for at least five years after a representation was over.  But, no, the opinion through some questionable use of ellipses actually stakes out a position that because client files are property of the client, RPC 1.15(b) mandates that all client files must be retained for at least five years from the end of the representation.  Imposing a five-year retention period for client files might be a good idea and might be something that even would be worth putting into our ethics rules somewhere, but to act like it is already in there strikes me as a very disingenuous approach.

 

Here is how the BPR has gone about the process of justifying a claim that the five year requirement applies to client files as a whole (all ellipses below are theirs not mine):

Tennessee Rule of Professional Conduct 1.15 is the foundation for the lawyer’s obligation to maintain client records, which states in pertinent part:

(a)  A lawyer shall hold property and funds of clients or third persons that are in a lawyer’s possession in connection with a representation separate from the lawyer’s own property and funds.

(b) …. property shall be identified as such and appropriately safeguarded.  Complete records of such … property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.

(d) … Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client … any property that the client … is entitled to received and, upon request by the client …, shall promptly render a full accounting regarding such … property.

I think you would be hard pressed to find lawyers in Tennessee, who prior to the issuance of this opinion, would ever have taken the position that the five year requirement in RPC 1.15(b) applied to anything other than bank records or safety deposit box records.  Hopefully, you the reader, will understand why when I give you the versions of (b) and (d) sans ellipses:

(b)  Funds belonging to clients or third persons shall be deposited in a separate account maintained in an FDIC member depository institution having a deposit-accepting office located in the state where the lawyer’s office is situated (or elsewhere with the consent of the client or third person) and which participates in the required overdraft notification program as required by Supreme Court Rule 9, Section 29.1.  A lawyer may deposit the lawyer’s own funds in such an account for the sole purpose of paying financial institution service charges or fees on that account, but only in an amount reasonably necessary for that purpose.  Other property shall be identified as such and appropriately safeguarded.  Complete records of such funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.

(d)  Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person.  Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such funds or other property.

Reads a lot different with the gaps filled in, doesn’t it.  It sure doesn’t read like a rule that contemplates the client file as being the type of property being referred to that has to be kept separate.  Under this approach, I guess, if you are on a plane and you put a book you own to read on the plane into the same accordion file folder holding the client file you are also going to read on the flight, then you’ve just engaged in unethical commingling.  Right?

And, in case the intention of (b) as not being about client files wasn’t otherwise clear, Comment [2] to our RPC 1.15 states as follows:  “Paragraph (b) of this Rule contains the fundamental requirement that a lawyer maintain funds of clients and third parties in a separate trust account.  All such accounts, including IOLTA accounts, must be part of the overdraft notification program established under Supreme Court Rule 9, Section 29.1.”

I can’t say I’m speechless because I just wrote 1000 words about this, but …

 

New ABA Formal Ethics Opinion Avoids As Many (or More) Questions Than It Answers Actually

Several years ago, we attempted in Tennessee to have our Court adopt an ethics rule that would specifically address what constituted client file materials. The effort was unsuccessful despite the fact that the rule we proposed was a strong, well-written rule. The primary reason we were unsuccessful was (as you’ll decipher from pages 24-25 of the PDF at the next link) that prosecutors and criminal defense attorneys were united in being uncomfortable with the rule because of how it would apply to criminal defendants. If you want to take a gander at our unsuccessful proposed RPC 1.19, you can find it here at pages 103-04. The lesson that at least I walked away from the experience learning was that coming up with a comprehensive solution within the ethics rules to what belongs to the client, and what belongs to the lawyer, is likely too difficult a task to manage.

From a practical standpoint, my typical advice to lawyer clients in this area tends to be that the starting point is that everything in your file is likely required to be produced to your client, or former client, if requested and that work through particular materials item by item to see if you can justify withholding/withstand attack on a decision to hold back. This usually, for example, ends up meaning that, when you study the language of our RPC 1.16(d), anything that the lawyer might think would be worth holding on to because its value to the case might cause the client/former client to make good on owed attorney fees is something that the rule specifically requires the lawyer to turn over because “retention of the work product will [] have a materially adverse effect on the client with respect to the subject matter of the representation.”

Today, the ABA has issued Formal Ethics Opinion 471, entitled “Ethical Obligations of Lawyer to Surrender Papers and Property to which Former Client is Entitled.” Although this opinion will be of some use to lawyers, I think that it really manages to further demonstrate how difficult it is to provide bright-line guidance in this area. It carves away many facts/factors and issues that usually are really important and in the mix when lawyers are trying to make these decisions and thereby doesn’t answer a stream of questions that lawyers usually want to know answers to in this area, such as:

  • What if the client/former client hasn’t paid all my bills and still owes me money? Can’t I use the lien law to hold back file materials?
  • I’m not sure I have stuff going back more than 4 or 5 years. Is that going to be a problem?
  • Do I have to give them a paper copy and an electronic copy of the same items, or can I just do one or the other, and who picks?
  • What if I’ve given them copies of everything as the matter progressed? Do I have to provide that stuff again?

Some of these questions are at least acknowledged in the opinion in footnotes or otherwise as topics that lawyers should be encouraged to try to plan for or reach agreement in advance with their clients.

But even as to the one question that the opinion announces it is deciding, its answer is significantly less than definitive. While the lead headline will likely be that the ABA Opinion adopts the “end product” rather than “entire file” approach. Lawyers who just pay attention to the headline might be walking into a real mess because, to me, one of the most important aspects of the opinion from a practical standpoint is the last paragraph on page 6 and the last sentence of the conclusion.  These parts are where the ABA explains that if the client terminates the lawyer’s representation  before a matter is over, then even things such as notes and memos generated for the lawyer’s own internal purposes and which are not “end product” must also be provided if necessary to avoid harming the client’s interests.