July 23, 2013
Departing Partners and the Handling of Client Files in California
A substantial body of case law and ethics opinions addressing the handling of client files has developed over the years surrounding the concept that a client’s file is a client’s property. (Rose v. State Bar (1989) 49 Cal.3d 646.) This notion is based on the underlying idea that clients may discharge an attorney at any time, with or without cause, in the interest of obtaining the successful prosecution or defense of a claim. (Fracasse v. Brent(1972) 6 Cal.3d 784.) Since effective client representation generally requires access to a client’s file, if a client chooses to follow a departing partner, the client’s entire file should be transferred from the law firm to the departing partner immediately. (Rose v. State Bar (1989) 49 Cal.3d 646; California Rules of Professional Conduct, Rule 3-700(D).)
Although there is a general consensus that the client ultimately determines who controls the client file by either staying with the current firm, following a departing partner, or finding new representation altogether, the most salient issue regarding the transfer of client files concerns the scope of the client file itself – in other words, which documents must be transferred upon departure. According to California Rules of Professional Conduct, Rule 3-700(D), client files include “…correspondence, pleadings, deposition transcripts, exhibits, physical evidence, expert’s reports, and other items reasonably necessary to the client’s representation…” (Emphasis added.) At first glance, identifying and transferring these particular documents may seem relatively straightforward; however, this process itself becomes significantly more complicated when trying to determine what belongs to the client, what belongs to the firm and what belongs to the departing partner.
Typically, an attorney will have no difficultly differentiating between an exhibit and a deposition transcript, both of which are clear examples of what a client file encompasses. However, the boundaries defining what portion of these documents must be transferred are blurred when the documents implicitly contain attorney work product and/or the firm’s intellectual property. A partnership, like any business, has a right to protect its confidential information and trade secrets from disclosure to third parties or competitors. (See Code of Civil Procedure section § 3426.1; ReadyLink Healthcare v. Cotton (2005) 126 Cal.App.4th 1006.) In fact, most partnership agreements contain express language protecting or regulating the dissemination of such information. Likewise, client documents that contain attorney work product implicate the protection of that privilege – which is held exclusively by the attorney (or the firm), and not the client. (Lasky, Haas, Cohler & Munter v. Superior Court (1985) 172 Cal.App.3d 264, 271-279.) But with the growth of technology and digitalization of files where firm intellectual property or work product may be unavoidably embedded into documents, the scope of the client file has become increasingly difficult to recognize. Therefore, a departing partner who is transferring client files to a new firm, must not only take the legal and ethical duties of the client into account, but also technological considerations when handling a client’s files.
When making a lateral move, a departing partner should also take time to examine all existing agreements that may affect the transfer of client files. The scope of client files that are legally transferrable may be limited by the existence of non-disclosure agreements, protective orders, and even the firm’s partnership agreement. (California Rules of Professional Conduct, Rule 3-700.) Some agreements may only put restrictions on the notification process that a departing partner must follow (i.e. joint notification process), while other agreements may articulate potential limitations regarding the timing of access to client files after notification. (State Bar of California, Committee on Professional Responsibility and Conduct, Formal Opinion 1985-86, at p. 3.) In any case, it is imperative that a departing partner takes into consideration all legally enforceable documents that may impact this process.
The proper handling of client files is an important issue that a departing partner must consider when leaving an existing firm. This often involves a careful examination and balancing of the partner’s own interests, the client’s interests, and the interests and rights of the law firm from both an ethical and legal standpoint.
(Editor’s note: Jennifer Lien, a summer law clerk in the Firm’s San Francisco office, contributed to this article.)