Files, liens, terminating representation among AEAC’s first (binding!) ethics opinions
The Arizona Supreme Court’s two-year-old Attorney Ethics Advisory Committee has issued, with the court’s blessing, its first four ethics opinions over the past two months. Three of the opinions deal with significant topics lawyers routinely face: client files, termination of representation, and liens.
Opinion EO-19-0009 succinctly clarifies lawyers’ obligations regarding client files, effectively rendering impotent about a dozen old State Bar of Arizona advisory opinions. It also plows new ground on two important issues.
Opinion EO-20-0001, which addresses terminating representation, essentially ratifies old State Bar Op. 09-02 because it includes, virtually word for word, the content of that opinion. It also includes a new discussion cautioning withdrawn lawyers about disclosing client information to successor counsel without client consent.
Every lawyer who has clients should read the files and termination opinions. Lawyers who are managers or supervisors should circulate the opinions to their subordinates.
The third opinion – EO-19-0004/0005/0007 – consolidates three opinion requests about liens, explains what constitutes sufficient notice under ER 1.15(f), and concludes that a lawyer need not respond to a lienholder’s request for information before the lawyer takes possession of property.
Lawyers whose practices includes liens should read this opinion!
Finally, the AEAC’s fourth opinion – EO-19-0006 – addresses the far less common issue of whether a law firm may impose a per-client fee on a departing associate who takes clients with them. The opinion concludes that such a policy violates ER 5.6(a), which is the same conclusion a State Bar opinion reached but the new opinion corrects the old opinion’s analysis.
Remember, these are binding opinions. Lawyers must comply with them. Although issued by a Supreme Court committee, the opinions have been submitted to and approved by the Supreme Court.
The AEAC replaced the State Bar’s Committee on the Rules of Professional Conduct (also known as the Ethics Committee), which, for decades, had issued written ethics opinions that were advisory only. (Read more about the AEAC in my blog post here.)
As Rule 42.1, Ariz. R. Sup. Ct., requires, proposed drafts of these four opinions were publicized and open for public comment, then eventually submitted to the Supreme Court for review. The Supreme Court approved the file and ER 5.6(a) opinions on November 3, and the other two opinions on December 15. As of December 31, the file, termination, and ER 5.6(a) opinions were posted on the AEAC’s website but the lien opinion was not.
The AEAC appears to have attempted to adopt the old State Bar opinion format, which had an introductory summary, facts, question(s) or issues(s) presented, applicable ERs, relevant ethics opinions, analysis, and conclusion. The AEAC’s opinions don’t use that structure consistently, however.
1. Opinion EO-19-0009 (client files)
EO-19-0009 contains this introductory summary:
Lawyers must retain sufficient information regarding the work they have done on a matter to permit the client to understand what was done for them and to permit a subsequent lawyer to take up the matter if the lawyer is discharged, withdraws, or is unable to continue the representation for other reasons such as death, disability, or discipline. This obligation informs the lawyers’ obligations concerning what materials they keep, how they store and organize those materials, and what they do with records at the end of a representation.
A good baseline statement but, of course, the devil is in the details. Exactly what must a lawyer keep in their files?
The old State Bar opinions – about a dozen all together -- were anything but clear and concise on the file issue, despite efforts otherwise. During my tenure at the State Bar, the Ethics Committee issued Opinion 08-02, which it tried to make as comprehensive as possible but still fell short on giving adequate guidance. For example, the opinion implied that because everything done on behalf of a client became part of the client file, the lawyer could not clean out the file. The Ethics Committee several years later issued a mea culpa of sorts in Opinion 15-02, which disavowed any previous opinion that could be read that lawyers could not dispose of duplicates or other documents “incidental to the representation, or not typically maintained by a working lawyer, unless the lawyer has reason to believe that, in all the circumstances, the client’s interests require that these documents be preserved for eventual turning over to the client.” But what did that mean for all of the other points in Opinion 08-02? Or any of the many other file-related opinions?
The new EO-19-0009 provides a succinct roadmap:
What materials must lawyers retain in their files? Whatever they need to so the client understands “what was done for them” and a subsequent lawyer can take over if representation ends. But a lawyer doesn’t have to keep everything.
How should lawyers store their files? Securely, restricting access as necessary and keeping backups. The opinion specifically notes that filed should be “continuously maintained” so they can be promptly provided to the client.
What file materials must lawyers give to clients at the termination of representation? Whatever the lawyer must maintain must be given to clients. In addition, lawyers “must give a client sufficient notice before a file is destroyed to permit the client to request a copy while the file remains available.” But lawyers may obtain informed consent to their file-retention policy at the beginning of representation.
This last topic is where the opinion plows new ground, on two points.
First, the opinion defines a previously undefined phrase. Although Arizona’s ER 1.16 is the same as the ABA Model Rule 1.16, our comment includes a homegrown paragraph, comment [9], that’s not part of the ABA Model Rule comment:
Ordinarily, the documents to which the client is entitled, at the close of the representation, include (without limitation) pleadings, legal documents, evidence, discovery, legal research, work product, transcripts, correspondence, drafts, and notes, but not internal practice management memoranda. A lawyer shall not charge a client for the cost of copying any documents unless the client already has received one copy of them.
This paragraph has always been immensely helpful because of how it explicitly describes the content of files. But “internal practice management memoranda” has never been defined.
EO-19-0009 now defines “internal practice management memoranda” as being records related to “billing, scheduling, and staffing.” Other than citing to comment [9], it does not rely on any authority for doing so, saying only
Per ER 1.16, comment 9, the client is not entitled to internal memoranda that relate solely to practice management issues such as billing, scheduling, and staffing.
The State Bar proposed the language of comment [9] in its 2002 rule-change petition but did not explain “internal practice management memoranda.” A person who purportedly suggested that phrase long ago told me it was not meant to exclude from the file anything that would help a client contest charged fees. None of the old State Bar opinions that have anything to do with files appear to exclude “billing, scheduling, and staffing” records from client files.
I question putting “billing” records into the “internal practice management memoranda” category because “billing” is so intimately connected to any representation.
So what file materials must lawyers give clients at the termination of representation? Everything, except for “billing, scheduling, and staffing” records. But remember that because ethics opinions deal only with a lawyer’s professional-responsibility obligations, there may be other times when a lawyer must provide those “internal practice management memoranda” – the “billing, scheduling, and staffing” records -- such as in a malpractice action or responding to a bar charge.
The opinion’s second new point has to do with charging for “special copying requests.” The opinion states the long-time rule (already included in Arizona’s existing comment [9]) that clients are entitled to one copy without additional charge, and that lawyers may charge for additional copies. But the opinion goes on to say that “the lawyer may charge for … special copying requests that have associated costs, such as[] scanning a file maintained in paper form.”
So we have authority saying that a lawyer may charge for “special copying requests.”
Now that this opinion exists, there is no reason to pay attention to the confusing and contradictory line of State Bar opinions about client files. Pay attention to this opinion.
2. Opinion EO-20-0001 (terminating representation)
EO-20-0001 contains this introductory summary:
Lawyer-client relationships sometimes end earlier than the lawyer and client anticipated at the start of the representation. A lawyer’s withdrawal from representation is not always agreed upon by the client and may also be under touchy circumstances, such as dishonesty of the client or nonpayment of fees owed to the lawyer. Further, a client may fire a lawyer at any time, for good or bad reasons. A lawyer faced with such situations must uphold the lawyer’s ethical responsibilities to the client despite that the representation is at, near, or has reached an end. Client confidentiality must be protected unless the ethical rules specifically allow disclosure, and any disclosures must be made as narrowly as possible. If, in a court setting, the tribunal does not allow the withdrawal, the lawyer can seek relief from a higher court, but must protect the client’s interests and competently represent the client until and unless an order for withdrawal is granted. A withdrawing lawyer must advise the client and new counsel of pending court dates, status of the case, and anything else necessary and appropriate for the smooth transfer of the representation. Any fees charged to the client for withdrawal-related work must be reasonable. Of course, the client is entitled to the client file consistent with Ethics Opinion No. EO-19-0009, regardless of the circumstances for the withdrawal.
The opinion includes this conclusion:
A client remains so until the lawyer’s withdrawal is complete regardless of the reasons for and timing of the cessation of the lawyer-client relationship. The withdrawing lawyer must protect the client’s interests despite any dispute between the lawyer and the client and despite any wrongdoing of the client. Any disclosures of confidential information must be strictly limited to those circumstances authorized by the Rules of Professional Conduct. Fees must always be reasonable and appropriate. A withdrawing or withdrawn lawyer should participate in an orderly transition to new counsel or pro per representation to minimize prejudice to the client from the withdrawal. Once a lawyer is withdrawn, ethical obligations continue as for any former client.
If you’ve read State Bar of Arizona Ethics Op. 09-02, these two paragraphs will sound familiar. In fact, most of EO-20-0001 will sound familiar. That’s because the new opinion includes, virtually word for word, the content of the State Bar opinion. That’s good, in a way, because it means the Supreme Court has validated that old but very helpful opinion on which many lawyers have relied for years.
The significant parts of the old State Bar opinion now subsumed by EO-20-0001 include:
When withdrawing from representation, a lawyer “ordinarily should resist any disclosure during the withdrawal process in favor of citing and follow[] the directions in Comment [3] to ER 1.16 to state that professional considerations require withdrawal of the lawyer.”
If disclosure is “reasonably necessary,” only the least amount of confidential information should be disclosed.
A lawyer usually may charge for work “in support of a smooth transition to new counsel or pro per representation … if otherwise appropriate under the fee agreement and if the withdrawal is not clearly solely due to the lawyer’s circumstances (such as a lawyer closing the lawyer’s law office in favor of public employment).”
The new EO-20-0001 also includes an additional section advising withdrawn lawyers about the limitations on disclosing client information to successor counsel unless the client consents. This is an incredibly important point that many lawyers miss: ER 1.6 (confidentiality) applies, even when a withdrawn lawyer is communicating with replacement counsel. ER 1.6(a) says:
A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted or required by paragraphs (b), (c) or (d). or ER 3.3(a)(3).
EO-20-0001 says that ER 1.6(a) impliedly authorizes disclosures about “pending court dates, a detailed status of the matter and issues, and anything else necessary and appropriate for the smooth and efficient transfer of the representation.” In addition, a withdrawing lawyer usually is impliedly authorized to transfer the client file to new counsel, even without the client’s express direction.
However, if the file contains information that should not be transferred without client informed consent, the withdrawing lawyer may need to cull that information from the file. The opinion gives this example:
[I]f the client sent threatening emails to withdrawn counsel, it may not be prudent for withdrawn counsel to include those emails in the file sent to new counsel, even though client is entitled to a copy of the client “file” including all substantive documents, which includes emails.
The AEAC includes this recommendation in the opinion:
Because of these uncertainties inherent in transfer of the representation and client file, it is the recommendation of the Committee that a withdrawing lawyer seek the client’s consent to disclose specific confidential information to successor counsel as part of the transition.
3. Opinion EO-19-0004/0005/0007 (ER 1.15(f) notice)
EO-19-0004/0005/0007 contains this introduction:
Rule 1.15(f) of the Arizona Rules of Professional Conduct (“ER 1.15(f)” or “the Rule”) provides an ethical “safe harbor” to lawyers who distribute disputed property — including funds — in the lawyer’s possession after providing notice to third persons known to claim an interest in the property. See ER 1.15 cmt. 1 (2014 amendment). The questions before the Attorney Ethics Advisory Committee (the “Committee”) are: what constitutes sufficient notice under ER 1.15(f) where the lawyer is in possession of property that is the subject of a disputed health care provider lien asserted under A.R.S. §§ 33-931 through 33-936, and what obligations does the lawyer have to respond to requests for information before coming into possession of the property?
Based upon the language of ER 1.15(f), Comments to the Rule, and lawyers’ ethical obligations to their clients, the Committee concludes notice under the Rule, in this context, is sufficient if it includes:
a description of the property, including the amount of funds if any;
the client’s name;
the name of the tortfeasor and the tortfeasor’s insurance carrier (if known);
an acknowledgment that disputed property is in the lawyer’s possession;
the mailing address, telephone number, and email address where the third party can provide notice to the lawyer of the commencement of an action by the third party asserting an interest in the property;
date of the third-party recovery; and
the proposed distribution of the disputed property (e.g., to the client).
The notice must be sent promptly after the lawyer receives the disputed property under ER 1.15(d). However, where the lawyer does not have possession of any disputed property, a lawyer is not required by ERs 1.4, 4.4, or 1.15 to respond to requests for information by third parties who may have an interest in any future recovery being sought by the client.
The proposed opinion, as the AEAC sent it to the Supreme Court, includes a dissent by four committee members who argue that the amount of a tort victim’s recovery is not information necessary “to allow the third person to take appropriate action to protect its interests.”
I hope the Supreme Court deletes the dissent before posting the opinion. Giving direction to lawyers that includes a dissent makes no sense, when the opinion has been vetted by the very body that can say whether ER 1.15 means what the opinion says versus what the dissent says.
4. Opinion EO-19-0006 (ER 5.6(a))
EO-19-0006 contains this introductory summary:
Though Fearnow v. Ridenour, Swenson, Cleer & Evans, 213 Ariz. 24 (2006) made it clear that ER 5.6 does not categorically prohibit all agreements imposing financial disincentives on a departing lawyer who continues to practice in competition with their previous firm, imposing a per-client fee on a departing associate directly interferes with client choice and is prohibited. This Opinion supersedes State Bar of Arizona Ethics Opinion 09-01.
EO-19-0006 doesn’t change State Bar Op. 09-01’s conclusion that the per-client fee violated ER 5.6, just the analysis. Op. 09-01 inexplicably did not mention – let alone discuss – Fearnow, which then (as now) was the only Arizona appellate opinion that directly analyzed ER 5.6. I was ethics counsel in 2009 when the State Bar’s committee issued Op. 09-01, but I don’t recall why the committee did not mention Fearnow in the opinion.
Updated 12/31/20 to correct the paragraph that discusses which opinions are posted on the AEAC’s website. The ER 5.6(a) opinion is posted; the lien opinion is not.