How long does a Wisconsin firm need to retain client files before destruction?

By at 31 January, 2006, 3:37 pm

While this information is specific to Wisconsin Lawyers, it raises many of the same issues and ethics concerns facing lawyers throughout the United States. For Wisconsin Lawyers, the Wisconsin Supreme Court Rules are the place to begin any investigation when it comes to dealing with client records and property. Not only do existing clients need to be of concern, but what about files and property for clients that you can’t locate, are there fiduciary responsibilities that are raised? While many attorneys think of files as only consisting of paper for pleadings, correspondence, notes, etc., client files may also contain other “property” of the client or a third party. Examples include stock certificates, checks or other negotiable instruments, instruments of title for real and personal property, etc. SCR 20:1.15(a)(4) and (10) provides definitions of property that is considered as Fiduciary property or Trust Property. This is important as SCR
20:1.15(e)(6) provides that:

(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.

This Rule clearly establishes that records for trust accounts and trust property must be maintained for a minimum of 6 years after a lawyer has ended representation.

SCR 20:1.16 also provides additional information, although not as definitive as SCR20:1.15, on protecting a client’s interests including rights to papers in their 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) below, establishes the ongoing duty and obligation of Wisconsin Lawyers 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 and this Rule adds one more concern 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.

There are two Wisconsin ethics opinions which address this question and provide a framework to consider. The first opinion E-84-5, referenced informal opinions of the American Bar Association. Unfortunately, as with many such opinions, there was a dearth of details leaving the reader with their question still unanswered. However, opinion E-98-1, titled Disposition of Closed Client Files provides greater detail and suggestions to follow. One pertinent excerpt states:

…while 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.

Opinion E-98-1 raises the interesting possibility of limiting the time necessary to maintain these 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 6 year trust property requirement of SCR 20:1.15(e). What this opinion and other resources, including Ann Massie Nelson’s April 2003 Wisconsin Lawyer article titled Managing Records Effectively or the very detailed review by Lee R. Nemchek in her article titled Records Retention in the Private Legal Environment: Annotated Bibliography and Program Implementation Tools, clearly show is that there is no simple and definitive answer to this question. Since the Wisconsin statute of limitations for legal malpractice is 6 years after the date the error is discovered, not when the representation ended, there will be varying dates depending on the type of file. A real estate file disposal date will be different than an estate planning file. Additionally, malpractice suits are not the only potential means of action by a party who is not happy with their representation: you shouldn’t forget the ability to file a grievance with the Office of Lawyer Regulation.

A party has 10 years to file a grievance subject to tolling for a disability or active concealment by the attorney. 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 within 10 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 didn’t address this issue, but SCR 21:18 needs to be taken into consideration when establishing a file retention and destruction policy. Furthermore, some malpractice carriers, including Prolegia, recommend a 10 year file retention period for the lawyers they insure. Prolegia provides a sample file retention policy for review and adaptation by their customers. Another sample policy is included with Nemchek’s Records Retention in the Private Legal Environment: Annotated Bibliography and Program Implementation Tools article.

While you can opt for a 6 year retention period, a better policy would be to maintain your records for 10 years, unless varied by your representation agreement and not running afoul of the Supreme Court Rules. Any policy that you do create, to be successful, should strive for 3 things:

1 – Be straight forward, concise and as simple as possible
2 – Clearly detail both the firm’s and the client’s duties and obligations
3 – Must be implemented and followed by everyone in the firm!

Additional sources to review:

Materials on Client File Retention – American Bar Association Center for Professional Responsibility

File Retention Policies and Requirements By Kenneth L. Jorgensen – Minnesota State Bar Association

When May I Destroy My Old Files? – The Florida Bar

Developing a File Retention Policy for Your Firm – State Bar of Georgia

Categories : Hmmm! | Practice Management

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