UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 02-14
Law Firm has been in existence since 1989 and has maintained most client files at the conclusion of the legal matters. Lawyer A has been with the firm since its inception but is now ready to wind down his career. Lawyer B, who was hired in 1998, will remain with the firm. Lawyer B has had no contact with the vast majority of clients of the firm prior to 1998.
Questions:
1. What ethical obligations does Lawyer B owe to the former clients of Lawyer A?
2. What obligations does Lawyer A have in maintaining the files of former clients?
3. How long must a file be maintained? Under what circumstances may a file be destroyed?
4. Should a file be returned to the client at the close of the practice?
Summary:
1. If Lawyer B is purchasing Lawyer A's existing practice, then Rule 1.17 applies and Lawyer A should retain the files of inactive clients and Lawyer B would have no more of an ethical obligation to Lawyer A's inactive clients than he had prior to the purchase. Unless Lawyer B was involved with the inactive client prior to the purchase, Lawyer B would have no ethical obligations to Lawyer A's clients. If Lawyer B is continuing the existing firm, then the inactive clients are still clients of the firm and Lawyer B would have a continuing duty to those clients, including the general duties of competence, confidentiality, communication, and conflicts of interest.
2. If Lawyer B purchases Lawyer A's practice pursuant to Rule 1.17, then Lawyer B should not take possession of the files of Lawyer A's former clients and is not obligated to them. If Lawyer B merely continues the existing firm's practice, then the files remain files of the firm and Lawyer B would be required to maintain those files as he would maintain any other file of the firm.
3. Because a client file is the property of the client, under Rule 1.15 it is appropriate for the lawyer to retain records of the property for a minimum of six years after the end of the representation. File contents should not be disposed of until such time as it is reasonable to believe that their disposal will not prejudice or potentially prejudice the rights of the client.
4. Rule 1.16(d) requires that upon termination of representation, the lawyer shall return papers and property to which the client is entitled.
Opinion:
It would appear from the facts given, that Lawyer A and Lawyer B are the only lawyers in the firm. Lawyer B's ethical obligations relating to the former clients of Lawyer A depend on whether Lawyer B is purchasing Lawyer A's law practice or continuing the representations undertaken by Lawyer A. If a purchase, both Lawyer A and Lawyer B have an obligation to ensure that the requirements of Rule 1.17 are followed. Rule 1.17(a)(4)(iv) presumes that the selling lawyer will retain files of inactive clients unless specific actions are undertaken. It stands to reason, then, that if Lawyer B will not take possession of Lawyer A's inactive files, that he would also owe no ethical duties to the inactive clients to which those files pertain. The Comment to Rule 1.17 makes note of the continuing duties to an inactive client that remain vested in the selling lawyer. In the event of the sale of a law practice, the purchasing attorney owes no ethical obligations to the inactive clients of the selling attorney whose files remain in the possession of the selling attorney.
Conversely, if Lawyer B is not purchasing Lawyer A's practice, but is continuing the existing firm, then the clients are clients of the firm and the firm has an ongoing obligation to them. Inactive clients refer to clients whose files have been closed due to completion or termination of the representation. As a practical matter, Lawyer B's continuing ethical obligations to those inactive clients may be limited. However, Lawyer B's agreement to take over the firm is tantamount to accepting representation of all the clients of the firm, the inactive clients of A become the inactive clients of Lawyer B, and the general duties any law firm owes its inactive clients remain.
If Lawyer B does not wish to take on the responsibilities inherent in an ongoing practice, including the obligations to the inactive clients as well as the responsibility for their files, Lawyer B should purchase Lawyer A's law practice pursuant to Rule 1.17, and insist that Lawyer A retain possession of all his inactive client files.
Separate from the issues regarding Lawyer B's responsibilities to inactive clients and their files is the issue of how long any client file must be kept and under what circumstances may a client file be destroyed. Rule 1.15 deals with the safekeeping of a client's property. In SC Bar Ethics Adv. Op. #98-33, we indicated, in the absence of an agreement with the client, the attorney should retain files for at least six years and may place the files on computer disks or other electronic media. Depending on the nature of the material, retention beyond six years may be necessary if destruction might prejudice the client. See SC Bar Ethics Adv. Op. #95-18. The safest course is to enter into a reasonable agreement with the client regarding file retention. SC Bar Ethics Adv. Op. #92-19.
With regard to returning a file at the close of a law practice, Rule 1.16 (d) of the SCACR provides, "upon termination of representation, a lawyer shall take steps to the extent reasonable and practical to protect a client's interests...surrendering paper and property to which the client is entitled... the lawyer may retain papers relating to the client to the extent permitted by other law." Rule 1.15(b) states, "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..."1 If a client file contains property belonging to the client and (1) it has not already been returned to the client, (2) no written agreement governing the file's retention has been entered into between the client and the lawyer, and (3) the client has not abandoned its property after reasonable notice, then the client file should be returned to the client at the close of the practice. If a client file does not contain any property belonging to the client, then there is no duty to return the file to the client at the close of the practice unless the failure to return the file to the client will prejudice the client in any way.
1 For a discussion of what file materials the client is entitled to receive, see SC Bar Ethics Adv. Op. #92-37.