Rutgers School of Law, OAL case ACPE554

115 N.J.L.J. 565
May 16, 1985

ADVISORY COMMITTEE ON PROFESSIONAL ETHICS

Appointed by the New Jersey Supreme Court

OPINION 554

Retention of Client's File after
Termination of Employment Relationship

    An attorney was engaged to represent on a contingent basis a father, mother, and their son in a personal injury matter.
    Suit was filed against two defendants. Interrogatories and depositions were used to get at the facts, and the insurance carrier for the primary defendant offered $15,000 (the limit) for a settlement of the father's claim. This sum was paid into court. No other offers of settlement have been made.
    More than two years after the plaintiff's attorney began his representation, he received a letter from another attorney stating that he had been requested to represent the clients above mentioned, and a form of authorization was enclosed directing the original attorney to turn over the contents of his file to the other attorney's office. The new attorney said he would protect any reasonable lien which the original attorney might have as a result of his work product to date. The lien would be paid from any settlement or verdict which might result from the litigation.
    The original attorney, by letter, answered that a lot of work had been done, that the attorney for the primary defendant had offered the policy limits of $15,000 on the father's claim, that this sum had been deposited in court, and that counsel for the other defendant had indicated he would entertain a settlement demand for the other claims: He further said:
    "With regard to fees, we have agreed that":
    1.    I am to be reimbursed for all out-of-pocket expenses and the expense of photocopying the file for you.

    2.    Regarding the father, I will be entitled to a fee of $ 5,000 (based on one-third of the offer of $15,000.00) plus 50% of the attorney fee you generate upon any recovery in excess of $15,000.00 on the father's behalf.

    3.    Regarding the son and his mother, I will be entitled to a fee of 50% of the attorney's fee you generate attributable to their claim.

    4.    You will assume responsibility for payment of any expenses relating to this matter.

    The new attorney answered, in substance, as follows: I agree to paragraph one and the first half of paragraph two. I refuse the second half of paragraph two, and paragraph three, but I agree to paragraph four."
    Thereafter, the new attorney demanded the right to pick up the entire file, and the original attorney offered to give the plaintiffs' and defendants' answers to interrogatories and the original depositions of all parties, and allow the new attorney to review the entire file to indicate any other items he might require to complete his file.
    The new attorney insisted on receiving the whole file from the original attorney, but this was refused.
    The real question is what is the ethical responsibility of a discharged attorney to his former client and his or her new attorney.

    It should be noted that in this case, there is no suggestion that the discharge was based on cause.
    RPC 1.16(d) of the Rules of Professional Conduct provides as follows:
        (d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law. (Emphasis added).

    The Court in In re Estate of Poli, 134 N.J. Super. 222(Cty. Ct. 1975) said that a client has the absolute right to discharge his attorney and terminate the relationship at any time with or without cause.
    The Court further said, at page 226:
    In summary, we hold that an attorney discharged with or without cause is entitled to the reasonable value of his services rendered to the time of discharge. We further hold that the cause of action to recover compensation for services under a contingent fee contract does not accrue until occurrence of the stated contingency.

    Cf. Stein v. Shaw, 6 NJ 525 (1951). In Niebuhr v. Sassadeck, 15 N.J. Misc. 285 (Sup. Ct.),190 A. 783 (1937), aff'd 120 N.J.L. 183 (E&A 1938) the attorney's services were nearly completed on his discharge, and therefore quantum meruit was held not to be applicable in determining the amount of the fee.
    RPC 1.4(a) and 1.15(b), (c), and (d) provide as follows:
        1.4(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.

        1.15(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive.

        1.15(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.

        1.15(d) A lawyer shall comply with the provisions of R. 1:21-6 ("Recordkeeping") of the Court Rules.

    In our Opinion 445, 104 N.J.L.J. 567 (1979), the inquiry was whether an attorney who had been completely paid all outstanding fees could refuse to deliver the client's original file, citing DR 9-102(B) 4 and Opinion 203, 94 N.J.L.J. 298 (1971).
    In Opinion 203, the ethical question presented was whether a professional corporation might refuse to honor the request of a client to permit one of the withdrawing attorney stockholders to take that client's file with him. The answer was negative, because a client has the right to be represented at all times by counsel of his own choosing. Even if the corporation had not been fully paid, there would be no justification for failing to deliver to the client "whatever the client was entitled to receive."
    The question, which has not previously been answered by us, is the meaning of RPC 1.15(b) and (c), which deals with "Safekeeping Property". RPC 1.15(b) says that a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive.
    We believe that the client or his new attorney is entitled to receive the file with everything which is or was essential for the completion of the litigation.
    But who is to pay for the copying of the material?
    If the new lawyer asks to review the file and indicates the particular material he needs, it could be promptly copied. This would tend to reduce the cost to him, since he may already have copies of many documents which the original attorney had sent to the client. A demand to take away the file is not fruitful and can be very expensive when the reasonable costs are charged to the new attorney.
    We can find no precedent deciding who pays for the copy work. It seems to us that when a client changes attorneys, the burden should rest with the client and his new attorney. Payment of the charges may have to await the outcome of the litigation, but the obligation to pay is created when the copies of the records are made available to the client or his new attorney. The original attorney has a genuine interest in retaining the records and documents for his protection against possible malpractice suits, or an ethical or tax inquiry.
    In another related inquiry, an attorney states that for many years past, he represented a husband and wife in their personal and business matters. All matters have been closed and the attorney has been paid. A new attorney has sent said attorney a letter demanding everything in his files.

    Is the original attorney obligated to comply with this request?
    We believe he must do so but, as previously stated, it is the obligation of the new attorney or his client to pay for the copy work or, if litigation is pending, agree to make payment out of the proceeds of the litigation.
    In another related inquiry, the attorney raises three fact situations:
    1.    An attorney in a matrimonial matter which is pending for judicial determination is discharged or seeks to withdraw. The client asserts that the client's new attorney needs the file to try the matter, but that the client has no money to currently pay the bill (this happens especially when the client is a housewife who expects to pay for legal services out of the proceeds of sale of residence or by court order compelling husband to pay), or that the bill amount is in dispute.

    2.    An attorney in a contingent fee case is discharged either prior to or after initiating suit but before settlement or judgment.

    3.    An attorney in a non-court matter is discharged and the amount of the bill is in dispute.

    The foregoing Opinion has settled the ethical question, but the related inquiry raises substantive questions which are outside the jurisdiction of this Committee. These questions should be addressed to the Court in which the case is or was pending; and in a non-court matter, the attorney should urge the former client to apply under R. 1:20A for arbitration of the fee dispute. If the former client refuses to do so, the matter will ultimately have to wind up in a court.
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