Fax machines are just one of the once familiar technologies that many businesses are now abandoning in favor of scanning, mailing or sharing digital documents via online platforms. Not surprisingly, the more conservative legal and financial industries are two of the last holdouts when it comes to faxes.
Even so, many lawyers are beginning to embrace the convenience and affordability offered by the concept of a paperless office. However, doing so can raise an assortment of ethical issues, since the confidentiality of client information must always be maintained, regardless of the format in which it is stored or distributed.
The Committee of Professional Ethics of the New York State Bar Association recently addressed issues of client confidentiality and alternate methods of data storage in Opinion 940 (October 16, 2012). In this case, the inquiring attorney asked two questions: 1) Whether a law firm may use tape backups containing confidential client data, where the tape backups are stored offsite by a third party, and 2) are electronic copies sufficient when the New York Rules of Professional Conduct require an attorney to maintain certain records or must the attorney retain the paper originals?
The committee’s answer to the first question drew on its analysis from a prior opinion, Opinion 842, which addressed the ethical obligations of lawyers when using a cloud computing service to store confidential client data. The committee concluded that “the principles governing use of a ‘cloud’ storage system would also govern use of backup tapes maintained away from the firm’s premises.”
The committee explained that a lawyer must exercise reasonable care to protect the confidentiality of that information and suggested that steps to take include ensuring “that the provider maintaining the backup tapes ‘has an enforceable obligation to preserve confidentiality and security, and that the provider will notify the lawyer if served with process requiring the production of client information’ … and (will) (i)nvestigate the provider’s ‘data storage security measures, policies, recoverability methods, and other procedures to determine if they are adequate under the circumstances.’”
Next, the committee addressed the issue of whether a lawyer’s duty to maintain certain types of records for seven years pursuant to Rule 1.15(d)(1) was met by the retention of electronic copies. The committee explained that the answer depended on the types of records at issue and then identified certain documents which should generally be retained in their original paper form, including wills, deeds, contracts, promissory notes and some bank records.
Thus, the committee concluded that “(f)or certain kinds of records, the rules require that original paper documents be kept if the lawyer receives or initially maintains paper originals in the ordinary course of business. For certain other kinds of records, the rules require retention but permit a lawyer to keep electronic copies in lieu of paper originals if the electronic copies are in a format that preserves an image not subject to alteration without detection. For yet other kinds of records that must be retained, the rules permit electronic copies to be kept in lieu of paper originals without restriction.”
So, the bottom line is that in most cases retaining documents as required by Rule 1.15(d)(1) in electronic form is ethical. Likewise, it is ethical to store confidential client with a third party, whether on tape backups or otherwise. But prior to outsourcing the storage and maintenance of client data to a third party, lawyers must ensure that they have a basic understanding of the services and technologies provided by the provider and must exercise due diligence in researching the provider and the services provided.