By: Chris McDonough Esq.
Recently, on two separate occasions, I was contacted by experienced, well-respected attorneys with file and record retention questions. It seems there still is confusion regarding exactly which records must be kept for seven years and in what format those records may be maintained. This brief article will hit the high points. There are many excellent resources available to attorneys who require additional information, and anyone who wants more information should feel free to contact me.
The Rules of Professional Conduct control record retention under Rule 1.15(d) “Required Bookkeeping Records.” Subsection (1) sets forth those records that must be maintained “for seven years after the events that they record.” The time trigger for the seven-year maintenance period is specific to the event the record records. This means that determining an appropriate file destruction date depends upon the last such record created; i.e. the destruction date for the file must be at least seven years and one day from the date of the last such event for which the document was created.
In general, the Code requires that you only need to keep those records and documents relative to escrow, client fees, and retention. There are no mandatory time requirements for other records; although there are some common sense recommendations.
Specifically, you must keep all records you make and receive relative to money transferred in or out of your escrow account(s). These records must specify the source of the funds, those persons for whom the funds are held, to whom specific amounts were paid, etc. It is expressly required that you maintain all bank statements, check stubs, checkbooks, canceled checks and deposit slips for each professional account you open. This includes escrow accounts of course, as well as operating accounts and any other account related to your practice.
You must also maintain for seven years all records relative to client retention, legal fees and expenses. These include retainers, fee and expense agreements, bills to clients, money paid to clients, invoices and proof of payment to experts, court reporters, etc., as well as a retainer and closing statements filed with OCA.
Interestingly, escrow account ledger books are not included in the list of seven-year documents under subsection (1). They are mentioned under subsection (2) and are treated by the grievance authorities as records that must be produced if demanded within seven years.
In practice, any lawyer who holds escrow must maintain ledger records of all deposits and disbursements for each active escrow account they have. You must have an overall account ledger, which must describe every transaction within the account and show a running balance in the account after each transaction recorded. That account ledger must be sufficient to reconcile against the bank statement for that account each month and to explain each transaction in the account.
A separate, second ledger must be maintained for every client matter for which escrow is deposited. That ledger should indicate the client matter for which an escrow is created, the opening balance, the purpose for the escrow and the specifics regarding each debit and credit that occurs. These individual matter ledgers must show a zero balance at the conclusion of the matter as against the opening entry.
These required records need not be kept in their original format. You may transfer them to any “medium that preserves an image of the document that cannot be altered without detection.” This Rule was added in 1999 to reflect the rapid changes in document-storage technology. The Rule allows you to choose any medium that is reliable and maintains an accurate image of the original. However, because the Rules also informs us that a lawyer must produce these records to an enforcing agency upon demand, and that failure to maintain them or produce them is a violation of the Code which can lead to disciplinary action, it is strongly recommended that the copying method chosen is highly reliable.
Lastly, as stated above, there are no specific retention rules or time periods for those records, documents, etc. not mentioned above. This does not mean that you should just toss these others right after completing a case. Remember that the burden of proof is always on the attorney to demonstrate that he or she acted properly should a client bring a grievance. Without a basic file, this is extremely difficult. Similarly, the statute of limitations on attorney malpractice runs three years from termination. Therefore, it makes good practice sense to cull each file down to a core file that contains the mandatory records, which reflects the work performed in that particular case, and which retains those significant documents, communications, notes, etc. that might be required to defend yourself should a client file a grievance or malpractice suit.
 As of November 1, 2017, I will be Special Counsel to the law firm of Foley Griffin, LLP. My new address will be “Chris McDonough Esq., Foley Griffin LLP., 666 Old Country Road, Suite 305, Garden City, N.Y. 11530.” The office number is 516.741.1110.
 Rule 1.15(d)(3).
 Rule 1.15(I) and (J).
Foley Griffin LLP
666 Old Country Road, #305
Garden City, N.Y. 11530
(516) 741-9171 (fax)