MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2005-01
Retention of Client Files Where Law Firm Operated Exclusively as a Title Insurance Agency Practice
Your letter states that you are a member of the Maryland bar and you are seeking an opinion regarding your ethical obligations to store files of your former practice. You state that your former practice was a professional corporation using your full name – John Doe, P.C. (the “PC”). The PC was formally dissolved by Articles of Dissolution filed with the Maryland State Department of Assessments and Taxation in July 2003. You further indicate that the type of work you conducted while operating the PC was exclusively a title insurance agency practice, and that you were also licensed as a Title Insurance Agent by the Maryland Insurance Administration. All of the PC’s files consist of files in connection with underwriting title insurance policies. The PC handled no other type of work.
About a month before the PC was dissolved, you sent notices to all former title insurance companies with which the PC acted as an agent, giving notice of the impending dissolution of the PC and notifying each title insurance company “of the PC’s position with regard to maintaining the title insurance files”. Since that time, you have had various conversations with representatives of several title insurance companies concerning the storage of the files and the anticipated destruction of the files. For the past year, you have rented storage facilities for all files and voluntarily serviced any follow-up inquiries and work. At the end of this one year period, you offered to give the files to the title insurance companies. In the alternative you offered to continue to service the files for free if the title insurance company would simply pay the storage rental fee. Neither alternative has been accepted. Each of the title insurance company representatives has declined the opportunity to either assume the cost of a storage unit for the files or take possession of the files.
You ask whether the steps you have taken fulfill your ethical obligations with respect to the dissolved PC or whether you have to continue to pay out of your personal funds and service the files for some sustained time period despite the dissolution of the corporation. In particular, you have referred the Committee to the recent Court of Appeals case, Attorney Grievance Commission v. Lichtenberg, 379 Md. 335 (2004), where the Court found that an attorney licensed by the Court of Appeals “does not engage in the active practice of law but instead was acting as a title agent whose main business activity is to conduct real estate settlements, which is governed, pursuant to the Insurance Article of the Maryland Code, by the Commissioner of the Insurance Administration.” Id, at 353.
The Committee has issued several opinions in the past regarding a lawyer’s responsibilities to maintain files. See Dockets 85-77, 89-58, 92-2, 93-9, 93-39 and 94-28.1 The Committee has adopted and often repeated the following standards promulgated by the American Bar Association:
1. Unless the client consents, a lawyer should not destroy or discard items that clearly or probably belong to the client. Such items include those furnished to the lawyer by or on behalf of the client, the return of which could reasonably be expected by the client, and original documents (especially when not filed or recorded in the public records).
2. A lawyer should use care not to destroy or discard information that the lawyer knows or should know may still be necessary or useful in the assertion or defense of the client’s position in a matter for which the applicable statutory limitations period has not expired.
3. A lawyer should use care not to destroy or discard information that the client may need, has not previously been given to the client, and is not otherwise readily available to the client, and which the client may reasonably expect will be preserved by the lawyer.
4. In determining the length of time for retention or disposition of a file, a lawyer should exercise discretion. The nature and contents of some files may indicate a need for longer retention than do the nature and contents of other files, based upon their obvious relevance and materiality to matters that can be expected to arise.
5. A lawyer should take special care to preserve, indefinitely, accurate and complete records of the lawyer’s receipt and disbursement of trust funds.
6. In disposing of a file, a lawyer should protect the confidentiality of the contents.
7. A lawyer should not destroy or dispose of a file without screening it in order to determine that consideration has been given to the matters discussed above.
8. A lawyer should preserve, perhaps for an extended time an index or identification of the files that the lawyer has destroyed or disposed of.
These standards should be used as a guide in deciding whether to retain or dispose of closed files. With regard to item 5 above, please note that this standard pre-date the changes in the ethical rules and the adoption of the requirement to preserve such records for five years. See the discussion below of Rule 1.15(a).
In addition, Ethics Opinion 94-28 notes that the Committee cannot opine on legal matters, but recommends the review of the Maryland Annotated Code, Business Regulation Article, Section 1-304 (1998) which is entitled “Destruction of Business Records”.
Rule 1.15 of the Rules of Professional Conduct addresses the safekeeping of property belonging to a client. Initially a legal determination must be made by you as to what part, if any, of the file constitutes the property of the client. This Committee is not authorized to give legal advice and would decline to issue an opinion as to whether or not a particular part of a file belongs to you as opposed to the client. Assuming that a portion of the file belongs to the client, Rule 1.15 obligates you to safeguard that property and specifically states as follows:
“(a) A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with the representation separate from the lawyer’s own property. Funds shall be kept in a separate account maintained pursuant to Subtitle BU of the Maryland Rules. Other property shall be identified as such as appropriately safeguarded. Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after the termination of representation.”
Subject to any contractual obligation to the contrary, the Committee finds nothing improper with an attorney sending a client who he has not represented for five years a letter indicating that he intends to destroy that client’s file or, in the alternative, offering to return the file to the client. Assuming that your files are composed of copies of records, the originals of which are in the possession of the client, you have had no active representation of the client for at least five years, and you have offered to return the files to the client, none of the facts presented in your inquiry would indicate any ethical impediment to the destruction of the subject files at this time. Absent any legal or contractual obligation to maintain files beyond a five-year period, and absent any reasonably known detriment to the client, it is the Committee’s opinion that the decision to destroy the file is within the discretion of the attorney once he has offered to return the records and said offer has been refused.
It is clear from Rule 1.15(a), however, that you must continue to retain any files for a period of five years after the termination of representation of your clients. To the extent your representation of any client was terminated less than five years ago, you must retain the files for such client. In addition, requires that you as an attorney exercise reasonable efforts in an attempt to deliver property to a client or third party. What steps will be deemed reasonable will vary with the circumstances, but we suggest that if any other reasonable means can be undertaken by you to deliver the files to the title insurance companies – such as boxing them and having them delivered to such companies – you should seriously consider taking such steps before you decide to destroy the files.
The Committee does not believe the Lichtenberg case is pertinent with respect to your question. In Lichtenberg, the Court was considering whether the attorney, licensed as a title insurance agent and operating a real estate title company conducting real estate settlements through a business entity separate from his law practice, had committed an ethical violation with respect to the handling of money deposited into the title insurance company’s escrow account. In this situation, a provision of the Insurance Article addressed the legal responsibilities of the title settlement agent – who does not have to be an attorney. Based upon this provision, the parties stipulated – and the Court agreed – that providing real estate settlement services does not constitute the practice of law. In addition, the attorney was conducting the real estate settlements through a business entity separate from his law practice, not through a professional service corporation.
With respect to your question regarding the storage and destruction of files, your law firm’s name and letterhead clearly indicate you held yourself out as a practicing lawyer and you acknowledge you were practicing as a lawyer – even though your practice may have been materially limited to a very narrow field. You have not cited any provision of the Insurance Article regarding the storage and/or destruction of files held by an attorney acting as a title insurance agent, nor do you cite any provision of the Insurance Article stating that a title insurance agent does not have to be an attorney. Given that you clearly held yourself out to the public and your clients as a lawyer and you were clearly functioning as a lawyer through a law practice, we believe you should follow the guidelines of our prior opinions with respect to the storage and destruction of your former firm’s files to avoid any violation of your ethical obligations under the Rules.
1 Copies of the Opinions cited by the Ethics Committee may be found at the MSBA website at www.msba.org.
REFERENCES:
Ethics Docket 85-77, 89-58,92-2, 93-9,93-39 and 94-28
Attorney Grievance Commission v. Lichtenberg, 379 Md. 335, 842 A.2d 11 (2004)
Rules 1.15(a) and (b)