File Retention Guidelines Explained
A file retention policy is a predetermined plan for how long to keep your files after particular events occur. Like most definitions in the legal industry, it can become very complicated. Properly setting up a file retention policy includes understanding and adhering to state and federal laws, your state Bar Association’s rules, and your legal processes. You need to be aware of the risks your firm faces should your files be retained past their expiration date. Retaining files too long can leave your firm open to professional liability or a breach of confidentiality. It can also cause inefficiencies and claims that your firm committed malpractice by failing to produce old files.
If you handled an estate planning matter in 1970, you may want to hold onto that file forever. Not only is it yours forever, but it has no deadline and will probably never be asked about again. A 2010 bankruptcy that involved a loan from Chase, on the other hand, could come back to bite you, as that information will inevitably be requested sooner . The file retention policy for that is three years. The area that presents the most problems for law firms is how long to retain files. Should files be kept for five years, seven years, or forever? In the legal industry, this is a hotly debated question. One rule of thumb is to keep your files for ten years past when you have last heard about the matter, and keep them securely filed forever after. Depending on the type of law you practice, this can mean a significant storage problem for your firm. Law firms can experience heavy losses if they don’t meet file retention obligations, and if they don’t shut down cases once they’re over. But, retaining files indefinitely runs the risk of violating regulations like the Health Insurance Portability and Accountability Act (HIPAA) or the Family Educational Rights and Privacy Act (FERPA). Finding a balance between retaining files long enough to protect your firm and not keeping them longer than necessary is going to be different for everyone, which is why a file retention policy is so important.
Legal Requirements for Retention Policies
Law firms must comply with certain legal requirements for file retention policies. Yet as a practical matter, it is nearly impossible to state all of the requirements for every kind of practice area and jurisdiction in which a firm may practice. Thus, it is important for the firm to be aware of the need to identify specific requirements pertaining to particular jurisdictions and practice areas.
A good example of this is the handling of Immigration files. In the recent case of Matter of M-A-M-, the U.S. Court of Appeals for Sixth Circuit continued a trend with the federal courts expressing zero tolerance for the destruction of original immigration files. In this case, the Court stated that "the Government’s failure in this particular case to follow its own rules concerning raw immigration records appears to have been the result of simple negligence."
Another example is the state and local rules regarding the retention of attorney-client files. For example, under Cal. Rule of Prof. Conduct 3-700(D), California attorneys must keep certain client files for five years after termination of the attorney-client relationship. Similarly, Rule 1.16(d) of the ABA Model Rules of Professional Conduct stipulates that client files, including written pleadings and other written materials given to the lawyer by the client, must be surrendered to the client upon request "unless the lawyer has a retaining lien or a statutory lien and the client has not paid for the services giving rise to the lien" and if a retaining lien "the lawyer shall promptly notify the client. . . of the client’s right to obtain possession of all papers and property to which the lien attaches upon payment of any sums due." The Comment to Rule 1.16, provides that Rule 1.16(d) "entails a duty to surrender legal papers and property to which the client is entitled."
Advantages of an Effective Policy
A robust file retention policy provides numerous benefits to a law firm. Most importantly, it helps ensure compliance with all state and federal rules for record retention and destruction. In addition, it fosters efficiency in both the firm’s operations and its IT infrastructure. It does this by eliminating the need for businesses to retain records beyond their useful purposes, which results in decreased storage space and costs. Perhaps most importantly, it reduces liability.
Most states only require that in closed client matters, files be retained for five years following discharge (if there is no appeal of a final order) or after an appeal is exhausted if there is one. some states require two years for a bankruptcy file. many courts require a bankruptcy debtor to retain bankruptcy records for two years after the case is closed. For closed and inactive files on debtor representation matters, many bankruptcy courts recommend or require support documents to be shared and/or placed in the public record, for fees and costs charged under the disclosure statement. These and other statutory requirements impact your firm’s file retention policies.
Many firms routinely perform audits on their file retention policies to ensure compliance with all applicable laws and regulations. Likewise, many firms’ policies are updated to ensure that they are ever changing as law firms and companies evolve and change the way they practice law.
Elements That Make Up a File Retention Policy
When planning a file retention policy, there are several components that should be included. Retention Policy Statement, Storage Procedures and File Destruction Procedures fall under this category. Additional components may be added and/or eliminated depending on the law firm’s needs.
Retention Policy Statement
The retention policy statement includes retention periods, such as the statute of limitations period for the types of cases the firm handles. The primary elements to consider for each type of information in the various types of records the firm keeps are:
Retention Period
The retention policy statement also specifies the retention period for retaining client files and firm’s records. Some firms set policy to retain all client files for a certain period of time from the date of its last activity; for example, for four years from the last entry in the file. A firm may also set policy specifically for retaining signed documents; for example, for five years from their retention date.
A common practice is to retain client files for at least as long as the statute of limitations period for the types of cases the firm handles. For example, generally the statute of limitations for personal injury is two years; for medical malpractice it is three years. A popular retention policy is six years from the date of activity in the file. This provides adequate time for the statute of limitations period to have lapsed. It also provides for retention of drafts of signed documents, such as wills, deposits, and other client instructions. Not all firms have this level of retention; however, it is becoming more common.
Storage Procedures
Records storage procedures are the next component in the file retention policy. There should be procedures describing the types of files the firm archives, the method of filing, the locations; for example, archival storage provider, internal storage facility, files easily accessible in the office, etc. The policy should also specify the retention period for the archived files and assign individual(s) responsible for tracking the archived files, including the location of the files and establishing an efficient retrieval process.
There could be cost involved depending on the storage method. The law firm should weigh both the costs of storage against the risks of making the file inaccessible and losing the capacity to compete with other firms that are using technology that makes their records more accessible.
File Destruction Procedures
The final component of a file retention policy are the file destruction procedures. There are a few considerations to keep in mind such as:
An important benefit is that once firm staff is trained in the procedures, there is less need for additional supervision and reliance on others. As the old adage goes, "an ounce of prevention is worth a pound of cure."
Tips for Policymaking
Maintaining consistent and effective file retention policies is crucial to making sure any law firm’s information management strategies are compliant and that the firm’s data, client data, and work products are preserved for as long as necessary, and disposed of in the most efficient way possible.
Maintaining these policies, though, is usually a far more complicated affair than creating them in the first place. Client retention policies need to be strictly enforced, meaning all applicable staff can easily access the appropriate files so proper messages can be sent out to clients when it is time to retain or dispose of files. Regular "housekeeping" on stored files can help mitigate the risk of hanging on to cases longer than the applicable statute of limitations, and any documents a firm should have retained could be misplaced or miscategorized, leading to missed opportunities for retaining files as well.
One of the best ways to stay on top of file retention policies is to get staff trained, including training focused specifically on making file retention compliance requirements part of their daily responsibilities.
Staff education and training should be held at regular intervals, scheduled to reinforce good habits , so that knowledge does not become stale. Make sure to give staff access to both internal resources (such as a manual or an intranet) and external resources (such as the ABA Legal Technology Assessment tool). For those in need of extra assistance, consider showing them how to use legal technology that can help them more easily manage files, or making a tech-savvy staff member available to field questions.
In addition, investing in technology such as automated text recognition search tools to categorize files and implementation of e-discovery technology can ensure easier, more efficient file retention management. With the right technology tools in place, attorneys and staff can quickly search for files by account, client or date, easily determine which files belong to which clients and what files have come and gone.
Frequent application use and execution of automated procedures will lead to elimination of many retention headaches before they even begin to develop. Consider working with a provider like Novitex to help streamline these processes.
These strategies can enable the firm to establish a completely accountable, totally transparent and consistently compliant file retention policy.
Common Issues and How to Overcome Them
Many firms struggle with technology limitations in some areas. We find that this is often a product of having too many programs to do one thing or having multiple platforms in which matters are housed based on case type or jurisdictional requirements. This creates a situation in which it is difficult to centralize the vast majority of data. Many firms have turned to the cloud to consolidate their matter data and have created a process for utilizing software Api’s (Application Interface Protocol) or creating files exports from multiple programs and importing them into the firm’s new data repository. The technology solutions are out there to create a centralized location for the firm’s data, but over and over again we see the same problems when it comes time to enforce file retention policies.
The hardest part is often getting the attorneys to accept that retaining a matter once it is closed, does not mean the firm can never again go back to the opened file if necessary. While you can also store closed and archived matter data online, with the proper indexed search capabilities, we often recommend to firms that they don’t keep unlimited data online to reduce the cost and risk of retaining data that is not required. With the advent of recent regulatory and compliance requirements, firms must look at their data and make some tough decisions. The risks associated with failing to retain the required type of data or not having the data readily available, puts law firms at risk. We have also seen many firms experience a spike in data as attorneys utilize more cloud-based programs, leaving only the firm’s emails and perhaps some call summaries as the only items left on the server. Each firm has to determine at what point they are willing to pay to store the data online. We have no tolerance for law firms who delete their data without going through the proper steps of either providing it to the person requesting the data or finding out if it is for a proper purpose. Many firms have been asked to retain expired timeslips as part of a regulatory request with less than a month to comply. We support firms by obtaining the proper timeslip software and allowing for the extraction of data from the files.
Firms find that the hardest part of mastering file retention policies is not in the technology, but rather in the rules they are putting in place and how the policies are enforced. We implement an enforced retention policy that adheres to the firm’s business requirements, compliance requirements, and litigation requirements on a matter by matter basis. From this point, we create reports and visuals to document the progress and present to the firm on a quarterly or semi-annual basis. By making the effort to review these reports quarterly, the firms are properly prepared should a client come forward during an audit and make a request to have their:
We strongly believe that the mastery of file retention, both software and the legalese, is critical to law firm risk management programs. The ability for attorneys to practice without the knowledge of proper file retention is very limited and firms need to invest in the proper programs to ensure that they are protecting the interests of their clients and their firm.
Upcoming Trends in File Retention
The future of litigation will require us to redefine the most basic elements of our law practice including file retention. Law firms can only deal with so many "manual" processes. As computers and systems of record continue to evolve, more and more of our legal documentation will be delivered digitally. So much so that a paper file may never be created. Newer software programs are making it easier for new cases to be opened and closed in a fully digital environment. While we have had legal records management systems for years, and now document management systems, the files increasingly will only contain digitally created documents such as e-discovery, pleadings, court orders, documents to be recorded etc. Another driver for metadata to be integrated into our files going forward is that this information is critical as we begin to adopt artificial intelligence and advanced analytics.
Most records management systems have the capability of electronic file retention, but with digital files, this will become a critical component. In a study by Everlaw, "How AI Is Changing the Legal Landscape," they discuss how artificial intelligence (AI) is playing an increasing role in litigation. But it won’t just be limited to the e-discovery phase of a case. Machine learning will extend to every aspect of a case. The way we manage files will need to evolve. And the next step — by making decisions on big data — AI has the potential to reward or penalize firms for how they manage their files and their information. For example, the paper states, AI will be able to tell whether certain documents were not saved or uploaded correctly once a case is over. Or how efficiently discoverable material of a particular kind was extracted. For example, if a paralegal failed to remove attorney-client privilege from a discovery response, that would have been made apparent after the fact. "We don’t just want these tools to help partners with their front-end strategy and negotiation with the other party , but to make sure things are running smoothly all the way past the e-discovery phase, through production, through depositions, and maybe even to trial."
Your e-file will evolve from this integration so it will become your system of record. And once a file is in your system of record, e-file retention policies will need to be carried out just like your paper retention policies. So as we look to digital file retention policies, remember that you are moving towards an electronic system of record, and that transition to this system of record will require some sort of standardization on data formats, systems, and compliance automation and reporting that we have always done with our paper records.
Good news law firms! You actually do have a head start on this. It’s basically just that from this day forward, the way we manage our records will change from manual processes to automated processes. You have been doing this for years with batch scanning and converting to PDF. Now we’re just taking it a step further and continuing to create efficiencies in how we manage our files that are digital from day one.
So while it may be unfathomable to never have a paper record again in perpetuity, the reality is that will not be the case going forward. Email and e-documents will actually be scanned and combined into a digital file that is a True Copy. There really could come a day where your client no longer needs a paper copy of their file since the only copy in existence is electronic. This will certainly be the case in e-discovery. A client will never go to trial with a paper copy of their file. A paper file will never have gone to court. Not all records or some files will not be able to exist in a physical format. But as long as our court systems and juries still require printed information and the ability to bring those physical records to court, we will still continue to manage a hybrid e-file/paper file system for the foreseeable future. That being said we do still have a long way to go before we get to this "digital day after" for litigation.