The Bleeding Edge of Change: Getting Control of Client Files

Lawyers are not necessarily known for being cutting-edge adopters of technology, particularly those in small- to medium-sized firms. In fact, it's more of a bleeding edge, as lawyers in all size firms are being painfully thrust into using sophisticated technology solutions to manage cases along with all the attendant print and electronic records. A comprehensive and reliable enterprise-wide electronic records management system is critical for tracking, storing and retrieving client files to reduce ethical, malpractice and compliance risks for law firms.

In its simplest form, electronic records management for client files is a somewhat linear process with three components: conflict checking, active management (current case files) and file storage. An overriding issue is whether the firm stays in compliance with federal, state and other regulatory agencies during each phase.

Before your firm spends any money on new technology solutions, it should conduct an audit of the processes, procedures and systems currently being used for conflict checks, client-attorney communication, internal firm communications, file set-up and storage and retrieval of closed case files. The audit should represent a hard look at how the firm actually manages client files and should address obvious holes in the system that put the firm at risk for misplacing, losing or accidentally destroying critical documentation.

The audit should give the full picture of where the files, the client and the firm are at risk at any given point during a case. The second step is to create a written strategy with the intent of building a cohesive set of policies, procedures and technological solutions to close the gaps and protect the firm against the possibility of negligence or non-compliance issues.

A firm's records management strategy should include the following elements as a starting point:

• Development of a process that can be consistently followed by all members of the firm, beginning with conflict checks tracking client files through storage and final disposal.
• Development of a document retention policy, including how long to store print, electronic and other property, how and when to destroy materials, under what circumstances the policy should be suspended, the parties responsible for managing, enforcing and updating the policies and related processes, how case files are to be categorized and stored and who can have access to stored files at a later date.
• Development of a proposal mapping out existing technology that can be used, as well as additional hardware, software or Web-based applications needed to create a comprehensive and compatible system of case file management. The proposed ideas should allow scalability that takes capital investment and firm growth into consideration and should address various methods of archiving print and electronic information that will aid in easy retrieval, regardless of the type of materials.
• Development of a backup system or series of systems for short-term and long-term recovery.

The specific hardware and software you choose to satisfy your records management strategy will depend on what you have in place today, what investment you are willing to make for the future and the culture of your lawyers and staff.

Conflict Checking

Accurate conflict checks pose an increasing challenge to firms as client lists expand and opposing party and client relationships become more complex. With increasing pressure to find reliable and thorough ways to avoid conflict of interest problems, creating and maintaining a system must be an ongoing commitment for the best interests of the firm and its clients.

Law firm conflict checks fall into three broad categories: other people's memories, single reference systems and multi-reference systems. Common sense should prevail if your firm relies at all on the memory system. Yet, how many firms continue to send internal e-mails asking whether a conflict would arise from a new client? This method has to assume that everyone is in the office promptly reads all e-mails ' not likely in these times.

A single reference system, such as an accounting or customer relationship management (CRM) system, is an improvement, but still focuses on one category of information not necessarily intended for conflict management. Each system has a primary purpose, which may or may not have included provisions for conflict checking when installed. This type of checking is certainly more efficient than the memory method, but lacks the ability to make complex associations between inactive clients, current clients and the new client.

A multi-reference system provides a deeper level of protection by searching multiple layers of firm information. For this to happen, independent systems such as e-mail, accounting, CRM, document management (including engagement and disengagement letters), and calendaring must be linked and have full text searching capabilities.

For obvious reasons, firm-wide systems offer more dependable results than single-user systems. If the firm cannot implement a multi-reference system, then the next best solution may be to purchase a single-user case management license to use exclusively for conflict management. The more detailed the input (clients, former clients, opposing counsel, witnesses, third-parties and anyone else involved in past and current litigation or transactions), the better the chances of catching conflicts.

Perhaps one of the most interesting emerging technologies in this area is the use of artificial intelligence to search various systems to identify potential conflicts. Rather than looking for simple matches such as a name or company, the search mechanism looks for connections or patterns in documents and other information to discover potential conflicts.

Active Case Management

Once a client has successfully passed the conflict-checking step, the most unwieldy stage of records management begins with the generation of client-lawyer e-mails, voicemails and other documents. Other lawyers and staff members are often asked to participate in a case or a deal and, instantly, bits of information are dispersed throughout the firm.

Opening files thus becomes the crucial place to begin an electronic records management system that can continue through storage of closed files and, ultimately, the planned retention and destruction of files. Since most business is transacted electronically, it not only makes sense to automate as much of the records management process as possible, it has become a necessary way to mitigate risk and fulfill the obligations lawyers have to their clients.

In early 2006, the Supreme Court Advisory Committee on Professional Ethics published an opinion stating that it is permissible to archive client records electronically, provided measures are taken to protect confidentiality. Materials deemed to be client property, such as wills, deeds, contracts and other executed documents, would still need to be retained in their original forms, but work product generated by lawyers can be stored in electronic format.

While recognizing that converting data to digital formats is a positive step forward, the Committee was concerned about preserving client confidentiality at remote third-party electronic locations. The Committee's opinion stressed that lawyers need to take 'reasonable affirmative steps to guard against the risk of inadvertent disclosure' to third parties. The Committee put the burden on lawyers to use sound judgment to guard against unauthorized access, though it noted that it is impossible to keep records absolutely invulnerable.

Many state Bars also have addressed the issue of electronically storing client documents, including scanning paper documents, and have found the practice ethically permissible.

An electronic system, either housed on the firm's server network or externally on a Web-based application, is a matter-centric approach to servicing a client, protecting access and confidentiality and tracking documents. A well-developed, integrated system can perform full-text indexing of documents, e-mails, attachments and any other stored pieces of information to enable designated parties access to a complete client file. Even scanned documents can be converted to searchable text via an optical character recognition (OCR) PDF document and indexed into the records system.

E-mails can also be converted and entered as official components of the file. Storing e-mails related to active or closed matters on a localized system does not allow easy access to the contents, puts the content at risk for getting lost or deleted and does not properly protect confidential information. After a case closes, particular e-mails may never be declared as a record and, therefore, may not be included as part of the client file. Lawyers should strive to classify e-mails as they are received so preservation can be ensured. E-mail systems were not designed as large-scale, ongoing repositories for client information. Getting e-mails out of Inboxes and into a managed system will likely be a tough challenge for many firms.

Of course, some amount of paper will always have to be maintained; keeping executed documents such as wills, deeds, handwritten documents with evidentiary significance, and contracts solely in electronic form is insufficient. It is useful, however, to scan the documents that must be retained in original formats and to include a notation as to the precise location where the materials are stored. An electronic note, indexed within the electronic file, can also be included to detail any physical materials that are part of the file and where they are located.

Housing paper files does not have to be entirely separate from technology. On the more advanced side, firms can centralize paper files in a records information room (much like a library) and install an intelligent tracking system such as radio frequency identification (RFID) on each file folder. Each file folder label is programmed and has an embedded antenna to literally broadcast its whereabouts. A small, hand-held device can scan a row of folders in seconds and index the data to a main database. The database tracks file location and usage and can be complemented by a doorway reader to automatically capture the name of the user and the file upon exiting. Systems like this offer a high degree of loss protection and chain of custody for paper-based information.

Lawyers at firms that do not develop a records management system may find themselves at risk because incorrectly filed documents, e-mails or other materials cannot be found and produced on demand. The ramifications can be serious; ranging from adverse jury instructions, a mistrial, dismissal of a client's claims, or malpractice claims against the lawyer.

When a case concludes, case documents, indexes, e-mails and other content can be declared as a permanent part of the case file, 'packed up' digitally for archiving and become subject to the firm's retention and disposal policies. Further, the firm should consider integrating information left on PDAs and other mobile devices into the records management system. The future cost savings of digitally storing client files is substantial, not to mention the ease of retrieving archived materials.

As an aside, and on a document-by-document basis, lawyers have an obligation to protect confidential information, including metadata (data embedded in an electronic document). Even though there has been much discussion over the years about the revealing information contained in metadata, this issue still presents problems for some lawyers. Ethics opinions by state bars vary in how to handle the issue of inadvertent transmission of metadata, so the best measure is to check your local regulations. The New York State Bar has opined that lawyer-recipients have an obligation not to exploit inadvertent or unauthorized transmission of such information; doing so would constitute dishonesty, fraud, deceit or misrepresentation and prejudice to the administration of justice. As a matter of good habit, lawyers should employ 'scrubbing' software to eliminate a document's metadata or convert documents prior to transmission into formats such as PDFs to eliminate the temptation to opposing counsel to view unintended embedded data.

Docket and Calendar Controls

One of the most significant risk management issues facing law firms is docket and calendar control. The American Bar Association reported that over 26% of all claims made against lawyers involved administrative errors. Of those errors, 19% were directly related to calendaring mistakes. In response to this problem, the software industry responded with an array of docket and calendaring applications. Ideally, a firm should have a centralized computer system with consistent and accurate data entry by a designated staff member. More than one person should know how to enter data and monitor the system. All docket or calendar information should be funneled to the central system that can issue reminders to the lawyer and their assistants as important dates approach.

Storage Optimization

Sending boxes filled with reams of client files to storage seems archaic, but is still probably the most common method of retention by law firms. The accumulation of massive amounts of paper is expensive to maintain and store, and the financial costs of indiscriminate paper storage cannot be overlooked. As a result, some firms are moving entirely to electronic storage for archived files.

State Bars have weighed in on these electronic storage options and have generally found them permissible. Some opinions find it permissible to store electronic records on third-party servers or Internet-based applications as long as reasonable care is taken to protect the files and keep the information confidential; other states require lawyers to obtain client consent before destroying paper copies and keeping only electronic versions. As previously mentioned, executed documents that have significance in their original paper form may not be destroyed and must be maintained as original documents.

Managing the client file life cycle electronically, from initial set-up through storage, simplifies the process significantly, allows consistent application of retention and disposal policies and provides cheaper, quicker access to archives. Digitizing files offers obvious storage cost-benefits, but also allows for efficient retrieval and enhanced risk management.

As for risk management, the statute of limitations on legal malpractice claims generally begins once a client discovers possible negligence and runs for years thereafter, depending on your state, which could expose a lawyer and its firm to claims well beyond a file's normal retention period. Storing client files electronically makes longer retention periods more cost-effective and long-term risk management more feasible.

Emerging Leaders in Electronic Records Management

Moving from a disparate records management system to a user-friendly, matter-centric system can cause some initial heartburn. Old records, both paper and electronic, will have to be sifted through, cleaned up and migrated to the new system.

Willing participants or not, lawyers are fast becoming leaders in the electronic records management field. As keepers of vast record repositories, the goal for every law firm should be a firm-wide, unified records management system capable of searching multiple repositories to efficiently locate client information and expand the system to include the storage of closed files. Achieving this goal means lawyers will be on the leading edge of electronic records management technology, not kicking and screaming on the bleeding edge.

Lawyers are not necessarily known for being cutting-edge adopters of technology, particularly those in small- to medium-sized firms. In fact, it's more of a bleeding edge, as lawyers in all size firms are being painfully thrust into using sophisticated technology solutions to manage cases along with all the attendant print and electronic records. A comprehensive and reliable enterprise-wide electronic records management system is critical for tracking, storing and retrieving client files to reduce ethical, malpractice and compliance risks for law firms.

In its simplest form, electronic records management for client files is a somewhat linear process with three components: conflict checking, active management (current case files) and file storage. An overriding issue is whether the firm stays in compliance with federal, state and other regulatory agencies during each phase.

Before your firm spends any money on new technology solutions, it should conduct an audit of the processes, procedures and systems currently being used for conflict checks, client-attorney communication, internal firm communications, file set-up and storage and retrieval of closed case files. The audit should represent a hard look at how the firm actually manages client files and should address obvious holes in the system that put the firm at risk for misplacing, losing or accidentally destroying critical documentation.

The audit should give the full picture of where the files, the client and the firm are at risk at any given point during a case. The second step is to create a written strategy with the intent of building a cohesive set of policies, procedures and technological solutions to close the gaps and protect the firm against the possibility of negligence or non-compliance issues.

A firm's records management strategy should include the following elements as a starting point:

• Development of a process that can be consistently followed by all members of the firm, beginning with conflict checks tracking client files through storage and final disposal.
• Development of a document retention policy, including how long to store print, electronic and other property, how and when to destroy materials, under what circumstances the policy should be suspended, the parties responsible for managing, enforcing and updating the policies and related processes, how case files are to be categorized and stored and who can have access to stored files at a later date.
• Development of a proposal mapping out existing technology that can be used, as well as additional hardware, software or Web-based applications needed to create a comprehensive and compatible system of case file management. The proposed ideas should allow scalability that takes capital investment and firm growth into consideration and should address various methods of archiving print and electronic information that will aid in easy retrieval, regardless of the type of materials.
• Development of a backup system or series of systems for short-term and long-term recovery.

The specific hardware and software you choose to satisfy your records management strategy will depend on what you have in place today, what investment you are willing to make for the future and the culture of your lawyers and staff.

Conflict Checking

Accurate conflict checks pose an increasing challenge to firms as client lists expand and opposing party and client relationships become more complex. With increasing pressure to find reliable and thorough ways to avoid conflict of interest problems, creating and maintaining a system must be an ongoing commitment for the best interests of the firm and its clients.

Law firm conflict checks fall into three broad categories: other people's memories, single reference systems and multi-reference systems. Common sense should prevail if your firm relies at all on the memory system. Yet, how many firms continue to send internal e-mails asking whether a conflict would arise from a new client? This method has to assume that everyone is in the office promptly reads all e-mails ' not likely in these times.

A single reference system, such as an accounting or customer relationship management (CRM) system, is an improvement, but still focuses on one category of information not necessarily intended for conflict management. Each system has a primary purpose, which may or may not have included provisions for conflict checking when installed. This type of checking is certainly more efficient than the memory method, but lacks the ability to make complex associations between inactive clients, current clients and the new client.

A multi-reference system provides a deeper level of protection by searching multiple layers of firm information. For this to happen, independent systems such as e-mail, accounting, CRM, document management (including engagement and disengagement letters), and calendaring must be linked and have full text searching capabilities.

For obvious reasons, firm-wide systems offer more dependable results than single-user systems. If the firm cannot implement a multi-reference system, then the next best solution may be to purchase a single-user case management license to use exclusively for conflict management. The more detailed the input (clients, former clients, opposing counsel, witnesses, third-parties and anyone else involved in past and current litigation or transactions), the better the chances of catching conflicts.

Perhaps one of the most interesting emerging technologies in this area is the use of artificial intelligence to search various systems to identify potential conflicts. Rather than looking for simple matches such as a name or company, the search mechanism looks for connections or patterns in documents and other information to discover potential conflicts.

Active Case Management

Once a client has successfully passed the conflict-checking step, the most unwieldy stage of records management begins with the generation of client-lawyer e-mails, voicemails and other documents. Other lawyers and staff members are often asked to participate in a case or a deal and, instantly, bits of information are dispersed throughout the firm.

Opening files thus becomes the crucial place to begin an electronic records management system that can continue through storage of closed files and, ultimately, the planned retention and destruction of files. Since most business is transacted electronically, it not only makes sense to automate as much of the records management process as possible, it has become a necessary way to mitigate risk and fulfill the obligations lawyers have to their clients.

In early 2006, the Supreme Court Advisory Committee on Professional Ethics published an opinion stating that it is permissible to archive client records electronically, provided measures are taken to protect confidentiality. Materials deemed to be client property, such as wills, deeds, contracts and other executed documents, would still need to be retained in their original forms, but work product generated by lawyers can be stored in electronic format.

While recognizing that converting data to digital formats is a positive step forward, the Committee was concerned about preserving client confidentiality at remote third-party electronic locations. The Committee's opinion stressed that lawyers need to take 'reasonable affirmative steps to guard against the risk of inadvertent disclosure' to third parties. The Committee put the burden on lawyers to use sound judgment to guard against unauthorized access, though it noted that it is impossible to keep records absolutely invulnerable.

Many state Bars also have addressed the issue of electronically storing client documents, including scanning paper documents, and have found the practice ethically permissible.

An electronic system, either housed on the firm's server network or externally on a Web-based application, is a matter-centric approach to servicing a client, protecting access and confidentiality and tracking documents. A well-developed, integrated system can perform full-text indexing of documents, e-mails, attachments and any other stored pieces of information to enable designated parties access to a complete client file. Even scanned documents can be converted to searchable text via an optical character recognition (OCR) PDF document and indexed into the records system.

E-mails can also be converted and entered as official components of the file. Storing e-mails related to active or closed matters on a localized system does not allow easy access to the contents, puts the content at risk for getting lost or deleted and does not properly protect confidential information. After a case closes, particular e-mails may never be declared as a record and, therefore, may not be included as part of the client file. Lawyers should strive to classify e-mails as they are received so preservation can be ensured. E-mail systems were not designed as large-scale, ongoing repositories for client information. Getting e-mails out of Inboxes and into a managed system will likely be a tough challenge for many firms.

Of course, some amount of paper will always have to be maintained; keeping executed documents such as wills, deeds, handwritten documents with evidentiary significance, and contracts solely in electronic form is insufficient. It is useful, however, to scan the documents that must be retained in original formats and to include a notation as to the precise location where the materials are stored. An electronic note, indexed within the electronic file, can also be included to detail any physical materials that are part of the file and where they are located.

Housing paper files does not have to be entirely separate from technology. On the more advanced side, firms can centralize paper files in a records information room (much like a library) and install an intelligent tracking system such as radio frequency identification (RFID) on each file folder. Each file folder label is programmed and has an embedded antenna to literally broadcast its whereabouts. A small, hand-held device can scan a row of folders in seconds and index the data to a main database. The database tracks file location and usage and can be complemented by a doorway reader to automatically capture the name of the user and the file upon exiting. Systems like this offer a high degree of loss protection and chain of custody for paper-based information.

Lawyers at firms that do not develop a records management system may find themselves at risk because incorrectly filed documents, e-mails or other materials cannot be found and produced on demand. The ramifications can be serious; ranging from adverse jury instructions, a mistrial, dismissal of a client's claims, or malpractice claims against the lawyer.

When a case concludes, case documents, indexes, e-mails and other content can be declared as a permanent part of the case file, 'packed up' digitally for archiving and become subject to the firm's retention and disposal policies. Further, the firm should consider integrating information left on PDAs and other mobile devices into the records management system. The future cost savings of digitally storing client files is substantial, not to mention the ease of retrieving archived materials.

As an aside, and on a document-by-document basis, lawyers have an obligation to protect confidential information, including metadata (data embedded in an electronic document). Even though there has been much discussion over the years about the revealing information contained in metadata, this issue still presents problems for some lawyers. Ethics opinions by state bars vary in how to handle the issue of inadvertent transmission of metadata, so the best measure is to check your local regulations. The New York State Bar has opined that lawyer-recipients have an obligation not to exploit inadvertent or unauthorized transmission of such information; doing so would constitute dishonesty, fraud, deceit or misrepresentation and prejudice to the administration of justice. As a matter of good habit, lawyers should employ 'scrubbing' software to eliminate a document's metadata or convert documents prior to transmission into formats such as PDFs to eliminate the temptation to opposing counsel to view unintended embedded data.

Docket and Calendar Controls

One of the most significant risk management issues facing law firms is docket and calendar control. The American Bar Association reported that over 26% of all claims made against lawyers involved administrative errors. Of those errors, 19% were directly related to calendaring mistakes. In response to this problem, the software industry responded with an array of docket and calendaring applications. Ideally, a firm should have a centralized computer system with consistent and accurate data entry by a designated staff member. More than one person should know how to enter data and monitor the system. All docket or calendar information should be funneled to the central system that can issue reminders to the lawyer and their assistants as important dates approach.

Storage Optimization

Sending boxes filled with reams of client files to storage seems archaic, but is still probably the most common method of retention by law firms. The accumulation of massive amounts of paper is expensive to maintain and store, and the financial costs of indiscriminate paper storage cannot be overlooked. As a result, some firms are moving entirely to electronic storage for archived files.

State Bars have weighed in on these electronic storage options and have generally found them permissible. Some opinions find it permissible to store electronic records on third-party servers or Internet-based applications as long as reasonable care is taken to protect the files and keep the information confidential; other states require lawyers to obtain client consent before destroying paper copies and keeping only electronic versions. As previously mentioned, executed documents that have significance in their original paper form may not be destroyed and must be maintained as original documents.

Managing the client file life cycle electronically, from initial set-up through storage, simplifies the process significantly, allows consistent application of retention and disposal policies and provides cheaper, quicker access to archives. Digitizing files offers obvious storage cost-benefits, but also allows for efficient retrieval and enhanced risk management.

As for risk management, the statute of limitations on legal malpractice claims generally begins once a client discovers possible negligence and runs for years thereafter, depending on your state, which could expose a lawyer and its firm to claims well beyond a file's normal retention period. Storing client files electronically makes longer retention periods more cost-effective and long-term risk management more feasible.

Emerging Leaders in Electronic Records Management

Moving from a disparate records management system to a user-friendly, matter-centric system can cause some initial heartburn. Old records, both paper and electronic, will have to be sifted through, cleaned up and migrated to the new system.

Willing participants or not, lawyers are fast becoming leaders in the electronic records management field. As keepers of vast record repositories, the goal for every law firm should be a firm-wide, unified records management system capable of searching multiple repositories to efficiently locate client information and expand the system to include the storage of closed files. Achieving this goal means lawyers will be on the leading edge of electronic records management technology, not kicking and screaming on the bleeding edge.