E-document ethics and the rise of regulation

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It’s been a great week for conversations with Law21 readers, because I’ve also had a terrific correspondence with John Gillies, head of Practice Support at Cassels Brock in Toronto. John brought to my attention an opinion issued this past summer by the New York City Bar Association regarding lawyers’ ethical obligations to retain and provide clients with relevant electronic documents.

The obligations set out in the opinion, while not unreasonable in any broad sense, set a markedly higher standard of conduct than many firms are currently maintaining. I think they’re noteworthy for two reasons: one, because firms with offices in New York (which include many global giants) are now bound by these standards (which could well become the de facto standard in other jurisdictions); and two, because we’re going to see a lot more of this: regulation of lawyers’ conduct regarding their work and their clients.

The NYC Bar asked itself the following questions:

What ethical obligations does a lawyer have to retain e-mails and other electronic documents relating to a representation? Does a lawyer need client permission before deleting e-mails or other electronic documents relating to the representation? When a client requests that a lawyer provide documents relating to the representation, may the lawyer charge the client for the costs associated with retrieving e-mails and other electronic documents from accessible and inaccessible storage media?

Read the whole opinion for the complete answer — it’s not long — but the gist is that standards that currently apply to storage and access of paper documents apply equally to e-documents. That might sound like common sense, but think about the impact. The electronic documentation that any given client matter produces is massive: emails to clients and colleagues, draft versions of memos, timekeeping records, Blackberry messages, and so on. If you printed out every e-document and added it to the case file (and please don’t), that file would be about ten times higher.

Here are some highlights of the opinion’s specifics (emphasis added throughout):

Some e-mail systems automatically delete e-mails after a period of time, so the lawyer must take affirmative steps to preserve those e-mails that the lawyer decides to save. In addition, e-mails generally are not coded, or otherwise organized, to facilitate their later retrieval.  Thus, a practice with much to commend it is to organize saved e-mails to facilitate their later retrieval, for example, by coding them or saving them to dedicated electronic files.

Otherwise, it may be exceedingly difficult and expensive for the lawyer to retrieve those e-mails, and, as discussed in this Opinion, the lawyer must not charge the client for retrieval costs that could reasonably have been avoided.

In New York, a client has a presumptive right to the lawyer’s entire file in connection with a representation, subject to narrow exceptions.

It is prudent for lawyer and client to discuss the retention, storage, and retrieval of electronic documents at the outset of the engagement and to consider memorializing their agreement in a retention letter.

These five bolded directives and recommendations represent practices and principles that most firms honour in the breach rather than the recognizance. Here’s what John had to say on the subject:

[M]ost law firms acknowledge that they are doing a poor job of ensuring that they capture all relevant electronic records. (Mainly, they refer to e-mails, but many firms capture voice mails in Outlook as electronic files.)

In the old days, when all correspondence was in paper form, one’s secretary ensured that all relevant documents were filed in the paper file. These days, however, the filing responsibility tends to fall on the lawyers themselves. Some of them work out some sort of division of labour with their assistants, some try to do it all themselves (and then agonize as to how they docket the time!), and some give up and don’t even bother.

In principle, this opinion simply records what “should” be taking place already. The problem is that, in fact, not all of the relevant matter-specific electronic documents are getting filed.

Most large firms have instituted a document management system (DMS), so in principle (again), all firm-authored documents are saved to the specific matter folder in the DMS. But because of the cost involved, not all firms have a DMS. Accordingly, if there’s no DMS, each lawyer and assistant stores documents “somewhere” on the hard drive. (And then good luck trying to retrieve them later!)

As well, even if there is a DMS, some lawyers, for various reasons, are reluctant to have their work product available for their colleagues to find via the DMS search function. Those people will therefore tend to save their work in private workspaces that are not accessible to others.

In practice, it is safe to say that most firms fall short of the requirements set out in this opinion. The interesting thing will be seeing what firms do to (a) bring all relevant electronic documents into their filing systems, and (b) get the recalcitrant partners to save their client work product onto the DMS.

Three points here. First, lawyers have never taken data organization — or knowledge management, if you will — quite as seriously as they should. That era might now be ending: information has swelled to the point where it simply has to be organized to be of any use, and the profession’s standard-setters are finally starting to integrate technological advances with ethical expectations (cf. the CBA’s new Guidelines for Practising Ethically with New Information Technologies).

That’s going to force change on firms, and not just on the IT or KM people. As John says, lawyers will need to radically overhaul their view of documentation, and come to accept that the default setting for client-related documents of every kind is a filing system, not the recycling bin. That’s going to be a tough transition to make and a nigh-impossible one to enforce — but that’s where things are headed.

And that’s the second point. What we have here is the collision of two forces: a regulatory edict that law firms must organize e-information for clients’ benefit, running square into lawyers’ longstanding unwillingness to organize their data for anyone’s benefit, let alone their clients. The question is: who’ll come out on top?

For the longest time, the smart money has been on lawyer intransigence. By sheer weight of momentum and the absence of countervailing forces, any number of poor practices and attitudes in law firm culture continue to roll right along. Countless challenges to hourly billing, for example, have wound up flattened underneath the behemoth, and after so many inaccurate pronouncements that “It’s different this time,” it’s tempting to believe that nothing will change here either.

But you know, maybe it is different this time. “Deregulation” is 2008’s dirtiest word, and correspondingly, the powerful regulator that keeps the rich elitists in line while looking out for the little guy is on the rise. I think law firms are going to start feeling the regulatory pinch rather more than they have in the past.

Regulators are going to be given stronger mandates and more resources to pursue them — along with the clear message that if they don’t do a good job of it, the government will. Ask the Law Society of England & Wales about how well that can turn out. Watch to see whether and to what degree law firms with New York connections are held to account to this ethical opinion — that’ll be the canary in the coal mine.

And that brings us to the third interesting thing: if regulated standards of conduct do increase (and are enforced), then a law firm’s ability to brand itself in this regard will be reduced. Right now, a law firm can sell ready access to a client’s files and information, served up easily and with a smile, as an exceptional and differentiating client service. Firms that provide clients with extranets, from which they can access and download data 24/7, are still on the cutting edge today. Well, it’s now conceivable that such extranets will become mandatory in the near-to-mid future.

This one ethics opinion alone has the potential to reshape and redefine the standards for a law firm’s entire legal work product process. If this trend expands to include strict regulatory attention to the lawyer-client relationship itself, then all bets are off.

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One Response to “E-document ethics and the rise of regulation”

  1. Doug Cornelius

    Jordan -

    It should not come as a surprise that email is part of the client file. But sadly, few lawyers treat it that way. They leave email lying around, largely irretrievable.

    The email problem is not limited to law firms. Every industry is having issues grappling with the storage. In part, email is so cheap and ethereal that it gets tossed around in the wind.

    Financial service firms in the U.S. are on board because of regulation under the Investment Advisers Act.

    I think it will take a few more law firms getting sued to get them to pay attention to document retention (physical and electronic). Given the status of the economy, that could happen soon.

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