Guidelines for a File Retention and Destruction Policy for New Mexico Law Firms

WARNING AND DISCLAIMER

These Client File Retention and Destruction Guidelines are intended for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances.  Because of the unique characteristics of individual law firms, lawyers, clients and representations, no single set of guidelines can cover every situation.  Therefore, it is essential that every law firm and lawyer make an independent evaluation of their legal and professional obligations and conform these guidelines as necessary to meet those requirements.

Client File Basics

Lawyers customarily think of the files in their offices as their files.  That is, the paper and documents contained in those files belong to them, the lawyers, not their clients.  However, Advisory Opinion 2005-01 clearly acknowledges that the file and its contents are client property.

The Advisory Opinion dealt with three questions regarding client files:

1.  How long must a lawyer retain client files after representation of a client is complete?

2.  What are the lawyer’s obligations to review the client files before they are destroyed?

3.  What are the lawyer’s duties to communicate with a client about the lawyer’s intent to dispose of the client’s file?

The Advisory Opinion provides a “Short Answer” to those questions:

 Under most circumstances, a lawyer must retain a client’s file for a period of five years after representation of the client is complete in order to meet obligations under the Rules of Professional Conduct.   Before disposing of a file, the lawyer must review the file to determine which documents or other things are the client’s property and the client would expect returned.  The lawyer must return those items to the client.  The obligation of file review may be delegated to a non-lawyer, provided the non-lawyer receives adequate instruction and supervision from the lawyer.  Finally, a lawyer is not required to seek client instruction on file retention or disposition.  Instead, the lawyer is obligated to return documents or things which are the client’s property and the client would expect returned.  Notwithstanding the fact that the lawyer does not have an obligation to seek client instruction on file retention or disposition, it may be necessary to explain to the client the importance of retaining certain documents or things returned to the client.   

The entire opinion can be found below. Review of the entire opinion when developing a file retention and destruction policy is HIGHLY RECOMMNEDED.

Although not required by the Advisory Opinion, it is recommended that the firm disclose the file retention time period in its Engagement Letter or Fee Agreement.  The file retention policy should be reiterated in the Closing Letter.  The Closing Letter should advise the client to maintain current address and contact information with the law firm to ensure the file can be returned expeditiously.  Failure on the law firm’s part to be able to convey the file to the client at the conclusion of the retention period may result in the firm being required to maintain the file until such time in the future when it can be returned.

 What’s Right for You and Your Firm?

The initial consideration for any file retention policy is to determine what actions will be taken regarding the client’s file.  Generally, these actions are:

1. Closing the file;

2. Transferring the file to storage;

3. Returning “documents or things which are the client’s property and the client would expect returned” at the conclusion of the storage period;

3. Transfer, per client’s instructions, to a third-party, such as another lawyer or law firm;

4. Destruction of that portion of the file as permitted (non-original documents or documents which the client would not expect returned) at the conclusion of the storage period.

Each of the actions can require different tasks on a lawyer’s part to ensure the lawyer satisfies his legal and professional obligations.

With the foregoing in mind, the following is set forth as a sample law firm file destruction policy:

File Retention and Destruction Policy of the XXXXXXXXXX Law Firm

At the conclusion of a representation, generally, the first action taken on the file will be to close it in preparation of transferring to storage.  At this time the responsible lawyer shall:

1. Ascertain conclusively that the lawyer’s representation is unambiguously concluded, evidenced by the firm’s Closing Letter stating that the representation is concluded. 

2.  Depending on the type of representation, additional review should be engaged in before forwarding a file for storage.  For example:

a. In litigated matters, there should be a satisfaction of judgment or a final dismissal of the matter through settlement, exhaustion of appeals, or abandonment  thereof;

b. In a bankruptcy representation there should be a discharge or debtor payment of claims or discharge of the trustee or receiver;

c. A dissolution representation file should have a final judgment or dismissal;

d. A final judgment or dismissal of action should be in the file in tort actions.

3. Any document originally created electronically and maintained in electronic form thereafter (for example, e-mails), is part of the file.  The firm’s computers should be scanned to ascertain whether a particular file contains such documents.  If such documents are found they should be (pick one of the following options) [Printed to hard copy and placed in the file] [Segregated to an electronic file and maintained for the retention time period determined for that client’s file generally].

4. There should be a determination of all fee balances and the intended resolution as to any unpaid balances;

5. If money was placed in a trust account/IOLTA trust account during the representation, there should be a final accounting of all such proceeds.  Further, all recordkeeping requirements relating to trust accounts should be confirmed.  See Rules 17-204 NMRA and Rule 24-109 NMRA; 

6. Items in the file of intrinsic value should be noted at this time, and a determination made of whether such items are appropriately held in storage with the file, or should be immediately forwarded to the client.  Examples of items with intrinsic value include, but are not limited to, original wills, stock certificates, deeds, and/or any document that is evidence of a client’s interest in money or property;

File storage should be done in a manner that ensures the confidentiality of the client’s information and the physical integrity of the file. 

When a file is being transferred to the client or transferred, per client’s instructions, to a third-party, such as another lawyer or law firm, the firm’s Closing Letter should specifically clarify the circumstances under which the file is being transferred.

File Destruction Policy

At the XXXXXXXXXXXXXXXX Law Firm, files will be maintained for a minimum period of five years from the conclusion of the representation.  However, it may be appropriate in some circumstances to maintain our clients’ files for a longer period of time to protect both the law firm’s and client’s interests.  The reviewing lawyer shall consider all relevant factors that bear on the appropriateness of file retention and/or storage, including, but not limited to:

1. Whether the statute of limitations for legal malpractice has run, or has    been tolled.  To know whether the action has been tolled in any particular situation requires the application of the discreet facts of the case to the law on tolling a statute of limitations;

2. If the representation was of a minor client, has the client reached majority age at the time of review;

3. Whether client expressed dissatisfaction with the representation or outcome;

4. Whether there remains an unsatisfied judgment that cannot be renewed.  The file should be maintained until such time as a malpractice action could no longer be brought after the date for renewal expires;

5. If minor children were tangentially involved a file shall not be destroyed until all such children reach majority age, plus the extinguishment of their rights to a malpractice action;

6. In a dissolution representation, a file shall be maintained so long as there are any acts left to be executed by any party, and during the pendency of an award of spousal maintenance or child support,

7. When there is a structured settlement, the file shall be maintained until all payments are made;

8. In collections cases, the file shall be maintained until the judgment is paid or until renewal of the judgment is no longer viable, plus the time for bringing a malpractice action;

9. In criminal representations, the file shall be maintained for the longer of either:

a) the length of incarceration and/or parole, or the satisfaction by the client of any alternative sentence, such as Community Service, fines, disgorgement, restitution, SES or SIS, or

b) the period of time for bringing a malpractice action;

10. In corporate representations, the file shall be maintained for the life of the corporation plus the period of time for bringing a malpractice action;

11. In estate planning, estate administration and probate matters, the file shall be maintained until the resolution of the final accounting plus the time period for bringing a malpractice action;

12. In Trust administration matters, the file shall be maintained until all operative trust   clauses are exhausted, plus the time period for bringing a malpractice action;

13. Any other condition or circumstance requiring continued maintenance of the file.

Client Notification

At the conclusion of the storage period, original documents in the client file or other documents which are the client’s property and which the client would expect returned, will be indexed and returned to the client.

 Client File Destruction

After all appropriate documents and other client property have been returned to the client, any remaining documents or client property will be destroyed.  As regards all client files, the law firm shall maintain records of:

1. The file’s opening and closing;

2. The date of the conclusion or termination of the representation;

3. The date, manner and an index of documents and other property returned to the client;

4. If date, manner and an index of the documents and other property destroyed;

5. The attorney that authorized the destruction.

Client File Destruction – Exception

In the event that a client cannot be located at the expiration of the file retention period, the inability to locate the client will be noted in the law firm’s Master Client File List and the file will be returned to storage.

Advisory Opinion 2005-01

March 18, 2005

TOPIC:  Destruction of Closed Files

RULES IMPLICATED:  NMRA (2005) 16-101, 16-104, 16-115 and 17-204 

DISCLAIMER: 

The Ethics Advisory Committee is constituted for the purpose of advising lawyers on the interpretation of the Rules of Professional Conduct, as applied to the inquiring lawyer’s duties.  The Committee’s opinions are not binding.  The opinions expressed in herein are the consensus of the members of the Committee who considered the request.  These opinions are meant to assist lawyers in their course of conduct.  The rules of procedure for the Ethics Advisory Committee further provide that the Committee is not to render opinions on matters of substantive law.

QUESTIONS PRESENTED: 

1. How long must a lawyer retain client files after representation of a client is complete?

2. What are the lawyer’s obligations to review the client files before they are destroyed?

3. What are the lawyer’s duties to communicate with a client about the lawyer’s intent to dispose of the client’s file?

SHORT ANSWER:

Under most circumstances, a lawyer must retain a client’s file for a period of five years after representation of the client is complete in order to meet obligations under the Rules of Professional Conduct.   Before disposing of a file, the lawyer must review the file to determine which documents or other things are the client’s property and the client would expect returned.  The lawyer must return those items to the client.  The obligation of file review may be delegated to a non-lawyer, provided the non-lawyer receives adequate instruction and supervision from the lawyer.  Finally, a lawyer is not required to seek client instruction on file retention or disposition.  Instead, the lawyer is obligated to return documents or things which are the client’s property and the client would expect returned.  Notwithstanding the fact that the lawyer does not have an obligation to seek client instruction on file retention or disposition, it may be necessary to explain to the client the importance of retaining certain documents or things returned to the client.   

FACTUAL BACKGROUND: 

The requestor has several closed client files and seeks guidance on the length of time a lawyer is required to retain files upon completion of representation of the client and the manner in which the lawyer may dispose of those files.     

 ANALYSIS:[1]

Questions related to the disposition of client files raise three distinct issues for consideration by a lawyer intending to destroy or otherwise dispose of a client’s file.  First, a lawyer must establish the length of time the lawyer is required to retain client files following the completion of the representation.  Second, the lawyer must determine the extent of the lawyer’s obligation to review client files prior to their destruction.   Finally, a lawyer planning to dispose of client files must determine the extent of the lawyer’s duty to communicate with a client about the lawyer’s intent to destroy that file.

1. Duty to Safekeep Property

 a.         Rules 16-115 and 17-204 

Rule 16-115(A) imposes a duty upon a lawyer to hold and properly safeguard property of a client that is in a lawyer’s possession.  “Complete records of . . . account funds and other property shall be kept by the lawyer in a manner that conforms to the requirements of Rule 17‑204 of the Rules Governing Discipline and shall be preserved for a period of five (5) years after termination of the representation of the client in the matter or the termination of the fiduciary or trust relationship.”  NMRA (2005) 16-115(A).  Similarly, Rule 17-204 requires a lawyer to maintain “complete records of . . . other property received from or on behalf of a client which [has] at any time come into his possession.”  Furthermore, Rule 16-115(B) requires that a lawyer shall promptly deliver to the client, funds or other property that the client is entitled to receive.  While Rules 16-115 and 17-204 deal primarily with client funds, it was the opinion of the Committee that their requirements to maintain complete records of “other property” for a period of five years following the termination of representation extends to client files or documents.

b.         Advisory Opinion 1988-1

This Committee has previously interpreted Rule 16-115 in Advisory Opinion 1988-1.  Advisory Opinion 1988-1 is based on current rules and remains good advice.  Advisory Opinion 1988-1 recognizes a lawyer’s duty, under Rule 16-115(B), to return all property to a client, including any client documents which have not already been returned.  That opinion suggests, and the Committee agrees, that the contents of each file should be reviewed and any original documents or documents which the client would expect to be returned should be removed and returned to the client in accordance with Rule 16-115(B).

The lawyer contemplating destruction of a client file should note, however, that some instances may require that files be retained for a period of longer than five years in light of the circumstances surrounding the case.  See, Adv. Op. 1988-1.  On occasion, further litigation or legal proceedings regarding the subject matter of the case are likely or imminent.  The most obvious of these situations is the preparation of a will or a trust by a lawyer, the interpretation of which may become an issue many years after it was prepared.  To accommodate such situations, the lawyer should identify the types of files which should be kept beyond the five year period required by Rule 16-115(B) and retain any such files.    

2.         Duty to Provide Competent Representation (16-101)

As the Committee identified in Advisory Opinion 1988-1, a second concern raised by the destruction of client files is a lawyer’s obligation to review the file and return any original documents or documents which the client would expect returned.  Frequently, because of the volume of material to be reviewed when destroying client files older than five years, lawyers delegate these duties to non-lawyer staff members.  The review of a file to determine which items should be returned to a client implicates the requirements of Rule 16-101, which mandates that a lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.  NMRA (2005) 16-101.  It is the opinion of the Committee that the review of client files to be destroyed may be performed by a non-lawyer; however, the lawyer must insure that the non-lawyer is competent to recognize and determine which documents must be returned to the client or retained beyond the five year period, by providing adequate instruction and supervision.

3.         Duty to Communicate with Clients (16-104)

Finally, a lawyer contemplating the destruction of a client file must consider his obligation to notify all former clients whose files are to be destroyed to seek their instructions on file retention and disposition.  Rule 16-104 requires that a lawyer shall keep a client reasonably informed about the status of a matter, promptly comply with reasonable requests for information, and explain matters to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.  A lawyer had no obligation to send letters to clients for whom it held no original documents or other documents which are the client’s property and the client would expect returned. 

With regard to clients whose files contained original documents or other documents which are the client’s property and the client would expect returned, the lawyer is obligated to return those documents to the client, as discussed above.  See NMRA (2005) 16-115(B).  Therefore, it is unnecessary to seek instructions on file retention and disposition from these clients, as the documents should simply be returned to the client.  In some instances, however, it may be necessary to explain the importance of retaining such documents to the client.  For example, the firm may wish to advise a client that he should retain his original will so that it may be probated upon his death. 

[1] As noted in the Disclaimer, this analysis sets forth considerations under the New Mexico Rules of Professional Conduct and does not consider obligations or requirements that may exist under applicable substantive law.