Client files and digital law practices: rethinking old concepts in an era of lawyer mobility.

• Author: Rhodes, Allison D.

The rise of lawyer mobility is a recent and remarkable development within the legal profession. In the past, movement of lawyers between firms was uncommon, but over the last thirty years lateral hiring has become the norm rather than the exception, and lawyers may expect to change their practice locales numerous times over their professional careers. The recent wide acceptance of lawyer mobility caused one court to describe the "revolving door" as a "modern-day law firm fixture." (1)

The era of lawyer mobility began in the 1980s and shows no signs of subsiding. To the contrary, in recent years, lateral moves of entire practice groups have become common. The moves are made possible because client loyalties run to lawyers as well as their firms, and some clients are more interested in the lawyers employ than the firms they retain. As an economic reality, client portability is vital to lawyer mobility. (2)

The lawyer or law firm that controls client files has distinct advantages in any competition for clients. Not surprisingly, disputes over control and possession of client files have long occupied the attention of courts and ethics committees, which over the years have developed a significant body of case law and ethics opinions addressing myriad issues relating to client files. This authority, however, is largely directed to a world of "hard copy" files where pieces of paper neatly assembled within file folders invite a property-based analysis whenever disagreements over possession or access arise. Until recently, the most significant development requiring any rethinking of settled norms was the development of inexpensive duplicating mechanisms (e.g., copy machines, which replaced carbon copies). Although this development was significant on many levels, the greater ease with which hard copy material could be duplicated did not require fundamental changes in the law's approach to client files.

The digitization of client files and law firm intellectual property, however, severely tests the existing framework for defining the relative rights and interests of law firms, lawyers, and clients. Digital files reduce or eliminate some recurring problems with hard copy files. For example, the digital file may be duplicated easily and inexpensively, thereby eliminating disputes over hard copy materials that arise when material is voluminous and can only be duplicated at substantial expense. The ease of digital duplication, however, renders client files and firm intellectual property highly portable, and facilitates the movement of lawyers from firm to firm. The portability of digital files poses significant challenges to firms attempting to mitigate the effects of lawyer mobility.

This article discusses the effects of digitizing client files and firm information in light of lawyer mobility and evaluates the existing framework of law and ethics developed largely in a world of hard copies. The article also offers some practical suggestions for firms seeking to assert greater control over client information and firm intellectual property.

1. A PRIMER ON LAWYER MOBILITY

   In sometimes less than artful ways, the law and ethics norms that developed to address lawyer mobility attempt to balance the interests of the client desiring to retain or replace counsel, the firm seeking to preserve its client balance, and the departing lawyer hoping to move clients seamlessly to a new practice environment. Most importantly, ethics norms allowing clients to hire or discharge their lawyers at any time set the stage for lawyer mobility and provide a significant advantage to lawyers who change firms. (3)

   1. Questions of Timing: Client Solicitation

      For strategic and risk assessment reasons, the lawyer planning a departure may seek the earliest possible contact with a client to receive assurance of the client's loyalty and the necessary authorizations to control the client's files. Applying principles grounded in fiduciary duties, however, courts generally discourage "jumping the gun" and require lawyers to notify their firms of departure plans before clients are solicited. (4) The leading case on point, Meehan v. Shaughnessy, (5) describes the need to provide firms with "an equal opportunity" to compete for clients, a conclusion seemingly consistent with established fiduciary norms grounded in partnership and agency law. (6) Because solicitation of clients must await the lawyer's notice of departure to the firm, it follows that securing client authorizations on file transfers should not occur until the even later point when clients have been solicited and have had an opportunity to reflect on their decisions.

      Allowing clients the opportunity to reflect on their decisions is the premise underlying recurring recommendations that notification of clients be accomplished through a joint communication from the firm and the departing lawyer. (7) Such a communication informs the client of the lawyer's departure, advises the client of his or her right to choose counsel, and seeks some direction as to the client's wishes and the management of files. Although joint notice is designed to be a means of achieving informed client choice, the difficulties associated with lawyer-firm cooperation at this stage may be substantial, a point recognized in opinions recommending joint notice. (8) The goal of joint notice is effectuating client choice, and the means to this end is leveling the playing field between firms and departing lawyers in the competition for clients.

      It should be noted, however, that a limited strand of authority in ethics opinions suggests clients may be solicited before firms are given notice of departure. In particular, the American Bar Association's Standing Committee on Ethics and Professional Responsibility issued a 1999 opinion indicating that clients may be solicited before departure plans are announced. (9) The ABA's implication that departing partners may solicit firm clients without giving notice to their firms potentially creates some real mischief. The opinion is more limited than a casual reading would suggest. The potential for misinterpretation arises from the opinion's statement that notifying clients before informing the firm of pending departure is not a violation of the Model Rules. While this may be an accurate statement, the Model Rules are not the primary standards for regulating the relationships of lawyers in a firm as between each other. Virtually every case that addressed the issue emphasized that a lawyer violates fiduciary duties to the firm and its partners by soliciting clients before informing the firm of departure plans. The ABA opinion offers a very specific point on the timing of solicitation under ethics standards and without regard to fiduciary duties owed to firms and colleagues.

   2. The Importance of the Client File to the Mobile Lawyer and Her Client

      Departing lawyers and the firms they leave and join must consider how to meet clients' needs during and after any transition. Effective client representation generally requires access to the client's file. From the principle that a client is free to discharge a firm at any time, it follows that the client also has the power to direct the discharged firm to transmit relevant files to the lawyer or firm of the client's choice. A firm faced with the abrupt departure of one or more of its members, in most circumstances, is (or, at least, should be) powerless to frustrate the will of a client by refusing prompt delivery of the requested files.

      The client's right to hire and discharge lawyers remains the overriding ethics principle, but, as noted, when the client exercises that right in the context of lawyer mobility, its application may meet some resistance. As a result, the timing of access to client files may be critical in implementing client choice. The departing lawyer may seek, at the earliest possible moment, the client's authorization to remove files from the firm. The firm, however, may prefer the status quo of inaction and delay because as long as it has primary custody of client files it may be in the best position to provide continuing representation.

      The strength of clients' rights to their files derives from the virtually unrestricted power of clients to discharge a lawyer at any time, with or without cause, and usually even if the discharge violates the terms of a retainer agreement. (10) This discharge power would be meaningless without the corresponding ability to direct delivery of the client's file to successor counsel. As the New Hampshire Bar Association Ethics Committee pointedly observed: "A client's file is a client's property. Upon the client's request, a lawyer is obligated to deliver the file to the client.... Many lawyers have a hard time accepting the fact that the words mean just what they say." (11)

   3. Beyond Client Files: Firm Property and the Departing Lawyer

      To complicate matters, firm intellectual property may exist both within and outside client files, thereby creating three competing interests in the same collection of data (i.e., the client, the client's lawyer, and the owner of any intellectual property). That a law firm may have intellectual property rights is without question, but in the absence of clear agreements between the affected parties, the nature of these rights is murky, and success in denying departing lawyers access to and use of information in which the firm may have proprietary rights is spotty at best.

      Some firm intellectual property may relate directly to the clients the firm represents. Strong intellectual property rights attach to trade secrets, a status occasionally assigned to client lists, but at least in theory, applicable to a wide range of information developed by firms. (12) The ease with which potential trade secrets may be downloaded poses significant challenges for firms, particularly given the ambiguity of firms' property rights and the lack of development of the law in this area. The...