We all hope our law firms will exist in perpetuity, but experience tells us most legal associations will come to an end.
The focus used to be on what to do with the paper files when a firm ceased to exist. With more accessible technology catering to the legal profession, the bar association receives fewer calls asking what to do with a room (or garage) full of paper files when a firm breaks up.1 This has given way to a new question: what do you do with all those electronic files, stored on a server or in the cloud, when a firm ceases doing business?
First, look at the partnership agreement. Does it outline what to do with client files in the event the firm dissolves? If it doesn’t, have that conversation with your partners now and amend your partnership agreement. If you employ associates, your employment agreement should lay out the protocol to be followed in the event the associate leaves. The Ohio Board of Professional Conduct provides a wealth of information in the Ethics Guides available on its website: Client File Retention Guide (2016), Switching Firms Guide (2017), and Succession Planning Guide (2017).
What are the options for electronic files? Can the files be segregated by attorney? Hopefully, your files are set up so if an attorney leaves, their open electronic files can be pulled and sent with them through an electronic file transfer or a thumb drive. That same process can be followed if the firm dissolves. (If the firm remains in existence, the firm can and should retain a copy of the file).
But what if all the files are on a server, accessible to all attorneys in the firm? If the server is cloud-based, one option is to go through the files and divide them up to be transferred to each attorney’s new server.2 What if the files are so voluminous that it really doesn’t make sense to go through all of them and divide the files up? Should each attorney retain access to the old firm’s cloud-based server? Determining who has access and what exactly they have access to would need to be done on a case-by-case basis. Consider potential conflicts with client matters at new firms and confidentiality concerns. Remember that all attorneys will continue to have the same ethical obligations regarding the attorney-client privileged information on the server as when they were part of the (soon-to-be-dissolved) law firm.3 Attorneys should not add any new files to the server, or new information to existing files. Former law partners should not have access to any new attorney-client privileged information.
What if you have a physical server? You could review all of the files, segregate them by attorney, and transfer them to each attorney’s new cloud-based server. This could be expensive and time-consuming. One alternative is to agree that one of the partners will maintain the physical server. This should be an attorney who retains possession of the server, not a non-attorney staff member. The attorney would be responsible for providing any files on the server to former firm attorneys or clients who may request them. The soon-to-be former partners should agree on how this will be done, who is responsible for sharing in the cost of maintaining the server, whether the partner maintaining the server will be compensated, and how long the server will be maintained.4 Again, conflicts of interest and confidentiality issues should be considered.
How long do you maintain those old files? As is often the case in our profession, it depends. Your firm should have a file retention policy in place, and you should maintain and ultimately destroy the files in accordance with that policy.
If you don’t have a file retention policy in place, you must develop and implement one as soon as possible. The length of time attorneys retain files after closing tends to vary by case type and practice area.5 Wills or prenuptial agreements, for example, may need to be retained longer than standard personal injury files. A good file retention policy indicates that files will be destroyed at (or after) a date certain. The file retention policy should be communicated to the client, in writing, through the fee agreement or engagement letter.6 And the information regarding file destruction should be reiterated to the client in the closing letter at the end of the case.7
In addition, pursuant to Rule 1.15(a), attorneys must keep IOLTA records for seven years.8 This includes the fee agreement of any client who had money in the IOLTA.9 You should also consider the statute of limitations (one year) and statute of repose (four years) for attorney malpractice claims in Ohio10 when designing your file retention policy.
A cause of action for legal malpractice accrues and the one-year statute of limitations begins to run on the latter of when: 1) the client discovers or, in the exercise of reasonable diligence should have discovered, the resulting damage or injury; or 2) the attorney-client relationship for that particular transaction or undertaking terminates.11 A copy of the client file is absolutely necessary in defending a malpractice claim. As such, many malpractice carriers impose their own file retention period on the attorneys and law firms they insure. Be sure to check with your malpractice carrier to ensure your file retention policy complies with their required retention period.
Ohio’s adoption of a statute of repose in 2021 should give attorneys more peace of mind about disposing of closed files. While the statute of limitations may begin ticking at different times, the statute of repose begins ticking at the time of the lawyer’s act or omission, regardless of when the client discovers the error.12 With certain limited exceptions, Ohio’s statute of repose bars all legal malpractice claims commenced more than four years after the occurrence of the lawyer’s act or omission that forms the basis for the claim.13
Attorneys are often hesitant to dispose of any files. However, if you design and follow a good file retention policy, you will be less likely to end up in the position of figuring out what to do with an overabundance of files if your partnership ends. For a sample document retention policy that can be used as a starting point in designing your own, please see the attached sample box.
In addition to having a solid partnership agreement and a file retention policy, everyone in your partnership should have a succession plan to avoid holding onto a plethora of files. The Board of Professional Conduct provides an Ethics Guide on Succession Planning (2017). OBLIC requires a named successor for your malpractice policy. An Inventory Attorney Program form and checklist are available on the CBA website. Take advantage of these resources.
Take steps now to protect yourself and your clients if your partnership ends. Include information in your partnership agreement on how files will be divided if the association comes to an end, or in the event a partner leaves the firm or passes away. Make sure your fee agreements and engagement letters clearly explain to clients how to obtain their files, how long their files will be retained, and what will happen to their files if an attorney leaves the firm. Reiterate your file retention policy in your closing letter. If you deal with client file issues up front, you can avoid headaches down the line, as you head into retirement or move on to your next great adventure in the practice of law.
The authors of this article are a subcommittee of the Ethics Committee: Rachel Alexander, Phyllis Bossin, George Jonson, and Megan Roach. Rachel Alexander is an Associate at Moskowitz & Moskowitz LLC. Phyllis Bossin is Principal at Phyllis G. Bossin Co. LPA. George Jonson is Partner at Montgomery Jonson LLP. Megan Roach is Assistant Counsel at the Cincinnati Bar Association.
1 Paper files need to be maintained in secure, confidential storage with access to the involved lawyers until the files reach the document retention date and then confidentially destroyed.
2 If the old firm is going out of existence, clients with closed files in storage should be notified of the fact the firm is closing, and how to obtain a copy of their file. The alternative is to keep the old firm website up, with the information that the firm closed on (date), the new contact information for each attorney at the old firm, and information about how to get a copy of a client file – specifically, contact the lawyer who worked on your case. That website should stay up until the last of the old firm’s files have reached the document destruction date and all files have been destroyed.
3 See Prof. Cond. R. 1.6 and 1.9.
4 The server will need to be maintained until the document destruction date for all stored files has been reached and all stored files have been destroyed.
5 Ohio Board of Prof. Cond., Ethics Guide- Client File Retention (2016), p. 4.
6 See Exhibit A Box
7 See Exhibit B Box
8 Prof. Cond. R. 1.15(a). Also note that “Upon dissolution of any law firm, the former partners, managing partners, or supervisory lawyers shall promptly account for all client funds and shall make appropriate arrangements for one of them to maintain all records generated under division (a) of this rule.” Prof. Cond. R. 1.15(f).
9 Id.
10 O.R.C. 2305.117
11 O.R.C. 2305.117(A); Omni-Food & Fashion, Inc. v. Smith, 38 Ohio St. 3d 385, 385, 528 N.E.2d 941, 942 (1988).
12 Mark M. Mikhaiel & M. Elizabeth Monihan, Ohio Enacts a Legal Malpractice Statute of Repose, 31 No. 5 Ohio Prob. L.J. NL 2 (May/June 2021)
13 O.R.C. 2305.117(B)-(D).