3.11A PUBLIC DEFAMATION

3.11A PUBLIC DEFAMATION (3/10)

NOTE TO JUDGE

The instructions set forth below apply only where the plaintiff is a public official, public figure, or where the plaintiff is a private person but the defamatory statements involve a matter of legitimate public concern. See Berkery v. Kinney, 397 N.J. Super. 222 (App. Div. 2007), certif. denied, 194 N.J. 445 (2008) in which the court held that once a person becomes a public figure, even if he/she subsequently adopts a private lifestyle, he/she remains a public figure thereafter for purposes of later commentary or treatment of that commentary. See Footnote 1 below for the cases defining these terms.

1. General Element

For you to find that [plaintiff] is entitled to recover damages from [defendant] for defamation, you must find by clear and convincing evidence^[1] that [defendant] communicated to a person other than [plaintiff] a false and defamatory statement of fact concerning [plaintiff] with actual knowledge that the statement was false or with reckless disregard of its truth or falsity, thereby causing [plaintiff] to incur actual damages.

[Plaintiff] must prove five elements by clear and convincing evidence to prevail here. These five elements are: (1) that [defendant] made a defamatory statement of fact; (2) concerning [plaintiff]; (3) which was false and (4) which was communicated to at least one person other than [plaintiff] (5) with [defendant’s] actual knowledge that the statement was false or with [defendant’s] reckless disregard of the statement’s truth or falsity. I will now explain each of these five elements.

2. Elements

a. That [defendant] made a defamatory statement of fact.

A defamatory statement is a statement of fact which is injurious to the reputation of [plaintiff], or which exposes [plaintiff] to [choose applicable category] hatred, contempt or ridicule, or to a loss of the good will and confidence felt toward him/her by others, or which has a tendency to injure him/her in his/her trade or business.^[2]

To be defamatory, the statement must be a statement of fact. Statements of opinion are not actionable. You must not consider them in any way.^[3]

Here, the statement of fact alleged to have been made by [defendant] is ___________________. This may be interpreted in two ways: First, it may be understood to mean ______________________. This meaning is clearly defamatory to [plaintiff] if it exposed him/her to the contempt and ridicule of others; it is in this sense that [plaintiff] contends that it was generally understood. The second meaning, however, is _______________. In this sense, of course, the statement is innocent and non‑defamatory, and it is in this sense that [defendant] contends it was understood.^[4]

You must determine, in light of all the evidence, if the words used by [defendant] were understood in their defamatory sense by the reasonable person who read [heard] them. In this regard, you are, of course, free to consider the common and ordinary meaning of the words used in the context of the statement, but bear in mind that your deliberations are not to be governed solely by what you yourselves believe to be the meaning of the language used nor, indeed, by what you personally believe [defendant] intended to be understood. The test is what you find from all the evidence the words were understood to mean by the reasonable person who read [heard] them.^[5]

b. The plaintiff must prove that the defamatory statement concerned the plaintiff.

The second element that plaintiff must prove by a preponderance of the evidence is that the defamatory statement was read [heard] and understood by at least one other person to concern [plaintiff].^[6] The defamatory statement read [heard] by at least one person other than [plaintiff] was reasonably understood by them to refer to [plaintiff]. The actual naming of [plaintiff] is not necessary so long as those who read [heard] the statement understood that [plaintiff] was the subject of the statement. You are not to decide whether [defendant] intended the statement to refer to [plaintiff]; the issue is whether those persons reading [hearing] the statement reasonably understood the statement to refer to [plaintiff].

c. Plaintiff must prove that the defamatory statement is false.

The third element that [plaintiff] must prove by a preponderance of the evidence is that the defamatory statement was false.^[7] Here, [plaintiff] contends the defamatory statement is false; [defendant] denies that the statement is false. You must determine if the statement is true or false. In this regard, it is not necessary for you to find the statement true or false in every detail. It is enough if the defamatory gist or sting of the statement is substantially true or substantially false. In determining the truth or falsity of the statement, you must consider the entire context of the statement; words or phrases must not be isolated or taken out of context.

d. Plaintiff must prove that the defamatory statement was communicated to a person or persons other than the plaintiff.

The fourth element [plaintiff] must prove by a preponderance of the evidence is that the defamatory statement was communicated, orally or in writing, to at least one person other than [plaintiff].^[8] Therefore, it is not necessary that the defamatory statement be communicated to a large or substantial group. It is enough that it is communicated to a single person other than [plaintiff], so long as that recipient understood the statement in its defamatory sense.^[9]

e. Plaintiff must prove that defendant communicated the false statement to others with the actual knowledge that it was false or with a reckless disregard of whether it was true or false.

The fifth element plaintiff must prove by a preponderance of the evidence is that, when the statement was communicated to at least one other person by [defendant], [defendant] knew that the statement was false or acted in reckless disregard of whether it was true or false.^[10] This means that [defendant] must have actually known that the defamatory statement regarding [plaintiff] was false when he/she communicated it, or that [defendant] communicated the defamatory statement with a high degree of awareness that it was probably false, or that [defendant] truly had serious doubts as to the truth of the defamatory statement when he/she communicated it.

3. Burden of Proof

[Plaintiff] must prove each of the five elements I have just explained to you by clear and convincing evidence. Clear and convincing evidence means that proofs should produce in your minds a firm belief or conviction as to the truth of the claims made by [plaintiff]. The evidence must be as clear, direct and weighty and convincing as to enable a jury to come to a clear conviction, without hesitancy, of the truth of precise facts in issue.^[11] Clear and convincing is a standard of proof which requires more than a mere balancing of doubts or probabilities. It requires clear evidence which causes you to be convinced that the allegations sought to be proved are true.

If [plaintiff] proved each of the five elements I have outlined by clear and convincing evidence, [plaintiff] has met his/her burden of proof and is entitled to your verdict. If, however, [plaintiff] has failed to prove by clear and convincing evidence any of these elements, you must return a verdict for [defendant].

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^[1] The burden of proof imposed depends upon and is tied to the status of the plaintiff and the subject matter of the defamatory statement. Where the plaintiff is a public official or a “public figure” and the subject matter of the defamatory statement is a matter of legitimate public concern, the standard of proof is “clear and convincing” evidence. See New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed. 2d 83 (1964); Gertz v. Robert Welch, Inc., 418 U.S. 323, 945 S.Ct. 2997, 41 L.Ed. 2d 789 (1974); Lawrence v. Bauer Pub. Co., 89 N.J. 451 (1982); Marchiano v. Sandman, 178 N.J. Super. 171 (App. Div.), certif. denied, 87 N.J. 392 (1981); Vassallo v. Bell, 221 N.J. Super. 347 (App. Div. 1987) [involving a “limited purpose” public figure]. Where plaintiff is a private figure and the subject matter of the defamatory statement is a matter of legitimate public concern, the standard of proof is also clear and convincing. See Pitts v. Newark Bd. of Educ., 337 N.J. Super. 331 (2001); Burke v. Deiner, 97 N.J. Super. 465 (1984); Costello v. Ocean County Observer, 136 N.J. 595 (1994). The trial judge must make the determination as to the status of the plaintiff and whether the statements com­plained of by a private person are a matter of legitimate public concern. See Lawrence v. Bauer Pub. Co., supra; Dairy Stores, Inc. v. Sentinel Pub. Co., 104 N.J. 125 (1986); Rocci v. Ecole Secondaire, 165 N.J. 149 (2000) (The Supreme Court expands the definition of what is deemed to be “of public concern”).

^[2] See Maressa v. New Jersey Monthly, 89 N.J. 176 (1982), certif. denied, 459 U.S. 907, 103 S.Ct. 211, 74 L.Ed. 2d 169 (1982); Dairy Stores, Inc. v. Sentinel Pub. Co., supra; Restatement (Second) of Torts, Section 559 (1977).

^[3] The trial court must preliminarily determine whether any of the statements complained of are statements of opinion. If there are any statements of opinion in the publication complained of, the jury must be instructed that these statements are privileged and are not to be considered in any way in their deliberations. See Gertz v. Robert Welch, Inc., supra; Kotlikoff v. The Community News, 89 N.J. 62 (1983); Maressa v. New Jersey Monthly, supra; Dunn v. Gannett New York Newspapers, Inc., 833 F. 2d 446 (3d Cir. 1987); Karnell v. Campbell, 206 N.J. Super. 81 (App. Div. 1985); Restatement (Second) of Torts, Section 566 (1977).

^[4] The trial court must preliminarily determine whether the statement is defamatory on its face. Only when the court finds that a statement is capable of both a defamatory and non‑defamatory interpretation is the issue to be submitted to the jury. See Lawrence v. Bauer Pub. Co., supra; Romaine v. Kallinger, 109 N.J. 282, 290‑91 (1988); State v. Browne, 86 N.J. Super. 217 (App. Div. 1965); Sokolary v. Edlin, 65 N.J. Super. 542 (App. Div. 1961); Mosler v. Whelan, 48 N.J. Super. 491 (App. Div.), rev’d, 28 N.J. 397 (1958). When the statement is only capable of a defamatory interpretation, the plaintiff need not establish this element and it should be eliminated from the instruction.

^[5] See Restatement (Second) of Torts, Section 563 (1977).

^[6] See Gnapinsky v. Goldyn, 23 N.J. 243 (1957); Scelfo v. Rutgers Univ., 116 N.J. Super. 403 (Law Div. 1971); Dijkstra v. Westerink, 168 N.J. Super. 128 (App. Div. 1978); Restatement (Second) of Torts, Sec. 564 (1977). Where the defamatory statement concerns a group or class of persons of which plaintiff is a member, the plaintiff must establish some reasonable application of the words to himself/herself. See Mick v. American Dental Ass’n, 49 N.J. Super. 262, 285‑87 (App. Div. 1958); Restatement (Second) of Torts, Section 564A (1977).

^[7] See Pitts v. Newark Bd. of Educ., supra; Rocci v. Ecole Secondaire, supra (where the Supreme Court stated that defamation exists where the defendant otherwise acted with reckless disregard of truth); also see footnote 10 concerning the fifth element as to definition in defamation law of the term “actual malice.” Philadelphia Newspapers, Inc. v. Hepps, 475 U.S. 767, 106 S.Ct. 1558, 89 L.Ed. 2d 783 (1986); Sisler v. Gannett Co. Inc., 104 N.J. 256 (1986); Herrmann v. Newark Morning Ledger Co., 48 N.J. Super. 420 (App. Div. 1958), aff’d on reh’g, 49 N.J. Super. 551 (App. Div. 1958); LaRocca v. New York News, Inc., 156 N.J. Super. 59 (App. Div. 1978); Scelfo v. Rutgers Univ., supra; Dorney v. Dairymen’s League Co‑op. Ass’n, 149 F. Supp. 615 (D. N.J. 1957); Restatement (Second) of Torts, Section 581A (1977).

^[8] See Gnapinsky v. Goldyn, supra at 252‑53; Restatement (Second) of Torts, Section 577 (1977). Note that the communication of a defamatory statement to a third person may be qualifiedly privileged. See text and footnotes on Qualified Privilege under “Private Defamation” (Charge 3.11B), infra.

^[9] See Comments b and c to Restatement (Second) of Torts, Sec. 577 (1977). See Rocci v. Ecole Secondaire, supra; Pitts v. Newark Bd. of Educ., supra. (The courts have held that a plaintiff should not be able to recover for the harm flowing from republication of a defamatory statement when the plaintiff himself/herself knowingly causes the material to be distributed).

^[10] The plaintiff must prove “actual malice” which exists when a defendant has actual knowledge that the statement he/she is making is false or when he/she entertains serious doubts as to its truth. See Pitts v. Newark Bd. of Educ., supra; Burke v. Deiner, supra; see New York Times v. Sullivan, supra; Garrison v. Louisiana, 379 U.S. 64, 85 S.Ct. 209, 13 L.Ed. 2d 125 (1964); St. Amant v. Thompson, 390 U.S. 727, 88 S.Ct. 1323, 20 L.Ed. 2d 262 (1968); Lawrence v. Bauer Pub. Co., supra; Marchiano v. Sandman, supra; Binkewitz v. Allstate Ins. Co., 222 N.J. Super. 501 (App. Div.), certif. denied, 113 N.J. 378 (1988).

^[11] Aiello v. Knoll Golf Club, 64 N.J. Super. 156, 162 (App. Div. 1960); see Matter of Jobes, 108 N.J. 394, 407 (1987); State v. Hodge, 95 N.J. 369, 376 (1984).

OPINION 692 Retention of Closed Clients’ Files(Supplement)

OPINION 692 Retention of Closed Clients’ Files(Supplement) October 28, 2002

ADVISORY COMMITTEE ON PROFESSIONAL ETHICS

Appointed by the New Jersey Supreme Court

The ACPE has been asked to clarify Opinion 692, in which the Committee responded to a request for advice concerning the length of time an attorney must retain a client file following the final disposition of a matter. There the Committee held that, absent specific instructions or express agreement, and excepting “property of the client,” attorneys are required by applicable ethics rules and principles to retain and maintain closed files for seven years. The Committee noted in Opinion 692 that RPC 1:15(a)(b) may, by implication, require that “property of the client” be maintained indefinitely. The opinion defined such property as (1) “…that which the client has entrusted to the attorney, such as original documents, photographs, things …” and (2) “…that which has been created or obtained by the attorney as part of the undertaking and for which the client retained the services of the attorney…” By way of example of the latter category, Opinion 692 refers to original wills, trusts, deeds, executed contracts, corporate bylaws and minutes, and, in a footnote, points out that what may be included in this category of property depends on the nature of the representation and the matter. See Opinion 692, fn 2.

The first of the two inquiries before the Committee seeks clarification of Opinion 692 in the following respects:

(a) provision of a more specific explanation of what constitutes “property of the client,” including whether medical records, x-rays, expert reports, deposition transcripts, and answers to interrogatories constitute property of the client;

(b) whether the entire file or only that portion falling within the definition of “property of the client” must be retained for seven years; and

(c) whether there must be separate agreements concerning destruction, prior to the expiration of the seven-year period, of the “property of the client” and the remainder of the file.

In responding to this inquiry, the Committee takes this opportunity to provide guidance to the bar on a related issue, namely, (d) who bears the responsibility to retain and maintain closed client files under certain circumstances.

The second inquiry seeks the Committee’s clarification in cases where the insurer hires counsel to represent its insured, (e) as between the insurer and an insured, who is the client for purposes of providing instructions on file retention or destruction.

(a) Definition of Property of the Client

As Opinion 692 emphasized, determining what constitutes property of the client is fact sensitive and depends on the nature of the matter and of the representation itself. We note that the definition adopted and examples referenced in Opinion 692 are consistent with definitions adopted and examples used in other states. See, for example, Cal. Standing Comm. on Prof’l Responsibility & Conduct, Formal Opinion 2001-157 (2001) (finding that a lawyer has an obligation to permanently safeguard original materials and materials of inherent value); Mich. Ethics Comm., Opinion R-5 (1989) (requiring record retention plans to include safeguards for permanently maintaining client property such as stock certificates, original wills, and unrecorded deeds); ABA Comm. on Ethics and Prof’l Responsibility, Informal Opinion 1384 (1977) (stressing that a lawyer should not discard or destroy property of the client or information that the client may foreseeably need).

In responding to the current request for clarification, we apply the Opinion 692 definition of “property of the client” and conclude that in most cases, including those involving personal injury or malpractice claims, medical records, x-rays, expert reports, deposition transcripts, and answers to interrogatories do not constitute property of the client. That does not mean, however, that there is no case in which such materials and documents could ultimately fall within the definition of property of the client. It may well be that, depending on the nature of the matter or the representation itself, it would be foreseeable that the former client will need such documents in the future to protect an interest or defend a claim. In such a case, the types of documents specifically referenced in the inquiry (medical records, x-rays, expert reports, deposition transcripts, and answers to interrogatories) could constitute “property of the client”

and, as such, be subject to the retention requirement applicable to client property. See Opinion 692 and below. Practitioners will need to apply discretion to these matters on a case-by-case basis.

(b) What Portion of the File Must be Retained for Seven Years

Absent specific written instructions or an express agreement or other legal authority, such as a court order,

(1) property of the client must be returned, or retained and maintained indefinitely (see Opinion 692, finding that R.P.C. 1.15(b) “implies that ‘property’ of the client may never be destroyed without the client’s permission or some legal authority such as a court order”); and

(2) the remainder of the file must be retained and maintained for seven years (see Opinion 692, concluding that a client can reasonably expect an attorney to have a file available for seven years after the conclusion of representation).

At the end of the seven-year retention period, a lawyer has an obligation to examine the closed file to determine whether it contains property of the client. If a file contains such property, the lawyer should take reasonable steps to notify the former client. Reasonable steps include, but are not limited to, mailing a notice to the client’s last known address by regular or certified mail and waiting a reasonable period for a response. Cf. D.C. Legal Ethics Comm., Opinion 283 (1998) (holding that an attorney must make a reasonable effort to reach the former client by sending a letter to the client’s last known address and waiting an appropriate period of time (perhaps six months)).[1]

Some files may contain client property that has inherent value, such as bonds, stocks, or jewelry. Where a file contains inherently valuable property and the client cannot be found at the end of the seven-year retention period, the lawyer should dispose of the property in accordance with New Jersey’s Uniform Unclaimed Property Act, N.J.S.A. §§ 46:30B-1 to -109.

While the inquiry here at issue did not include a specific question on retention of criminal files, the Committee takes this opportunity to provide guidance to the criminal bar by noting that it will generally not be prudent to dispose of criminal files after seven years. That is because criminal convictions can have significant consequences long after the final judgment, sentencing, and closure of the case.[2] Thus, absent an express agreement, a lawyer should not discard or destroy files relating to criminal matters while the client is alive.[3] Accord, State Bar of Cal. Standing Comm. on Prof’l Responsibility and Conduct, Opinion 2001-157 (2001) (holding that client files in criminal cases cannot be destroyed without the client’s authorization while the client is alive).

Finally, we emphasize again that practitioners must use their judgment and apply discretion, and must consult substantive law requirements in particular practice areas to determine the appropriate retention period beyond the required seven years for files or portions of files in certain matters. For example, where the matter involves a minor, materials in the file may affect the client’s rights well beyond the seven-year retention period. See, for example, N.J.S.A. § 2A:14-21 (providing that the statute of limitations for claims brought by minors tolls until the minor reaches majority). Thus, a lawyer may need to retain file records relating to the representation of a minor until the minor reaches majority and thereafter until the statute of limitations runs. Cf. D.C. Legal Ethics Comm., Opinion 283, fn. 10 (1998) (explaining that files relating to matters involving a minor may need to be kept beyond the minimum five-year retention period established in that jurisdiction). See also N.J.S.A. § 2A:14-7 (providing for a twenty year statute of limitations for actions relating to real estate).

Other extended retention requirements may apply by operation of state and federal laws that require particular information to be retained for more than seven years. While these requirements may not specifically apply to attorneys, to the extent an attorney has these types of records in a client file, and absent an agreement with the client, the attorney may be required to maintain them for the period specified in the applicable law. See, for example, 29 U.S.C. § 1059 (a)(1) (ERISA) (requiring indefinite retention of documents essential to the determination of benefits payable to employees); 29 C.F.R. § 1910.1020(d) (OSHA) (requiring that medical records pertaining to an employee’s exposure to toxic or hazardous substances in the workplace be retained for the duration of employment plus thirty years).

Before destruction, whether based on the client’s consent or at the end of the seven-year retention period, the attorney should carefully review the file’s contents to make certain that documents that the lawyer is required by law to maintain or that the client may foreseeably need are not destroyed. Once again, the Committee notes that counsel must exercise reasonable discretion in these matters, based upon the particular facts, and as may be required by applicable law.

As Opinion 692 emphasized, when destroying client files, the manner in which they are destroyed must conform to the confidentiality requirements of RPC 1.6. See Opinion 692 (stressing that “simply placing the files in the trash would not suffice”). Accordingly, a lawyer must take appropriate measures to ensure that confidential and privileged information remains protected from improper disclosure.

(c) Agreements to Destroy Client Property

The inquirer has asked for clarification whether there must be separate agreements concerning destruction of property of the client in less than seven years. Specifically, the inquirer seeks guidance whether, in the case where there is a general agreement with the client on the destruction of the entire file (in a retainer agreement or otherwise), a specific agreement is required for the destruction of “property of the client” that may be contained in the file.

As Opinion 692 makes clear, an agreement to destroy property of the client should be executed only after the property is in the attorney’s possession, and should specifically describe the property intended to be destroyed or otherwise disposed of. See Opinion 692 (holding that if a general retention policy calling for the destruction of a closed file “is intended to be made applicable to ‘client property’ . . . the agreement should be executed only after the property is in the attorney’s possession”). Therefore, unless the attorney is in possession of the client property before a retainer agreement is signed, generally an agreement to destroy a file contained in a retainer agreement is insufficient to permit destruction of client property.

(d) Responsibility For Retention and Maintenance of Closed Client Files Under Certain Circumstances

From time to time the Committee has been asked for guidance on the question of who has responsibility for the retention and maintenance of client files, including property of the client, in circumstances where a sole practitioner retires or dies, the attorney who worked on the matter leaves the firm, or when the firm dissolves. The Committee takes this opportunity to provide guidance to the bar on this issue.

Ordinarily, clients of a law firm employ the firm as an entity rather than employing a particular member of the firm. See State v. Belluci, 81 N.J. 531, 541 (1980) (reasoning that the access to confidential information among members of a firm and the shared economic interest of the entire firm support “treating a partnership as one attorney”); Staron v. Weinstein, 305 N.J. Super. 236, 242 (App. Div. 1997) (“When a client retains a lawyer [associated with a law firm] the lawyer’s firm assumes the authority and responsibility of representing that client, unless the circumstances indicate otherwise . . . .”) (citing Restatement (Third) of Law Governing Lawyers § 26, cmt. h (Proposed Final Draft No. 1, 1996)). Accordingly, under RPC 1.16, a law firm has an ethical obligation to protect the interests of former clients. Where a client employs a firm, it is the firm that has the obligation to comply with the procedures for disposition of client files set forth in Opinion 692 as clarified in this opinion. See N.Y. State Bar Assoc. Comm. Prof’l Ethics, Opinion 623 (1991) (holding that a law firm, and not just the member of the firm who actively represented a client, has a professional obligation to maintain that client’s closed files). Likewise, in the event that a firm dissolves, the former partners or members of the firm have a professional and ethical obligation to make arrangements for the disposition of client property in a manner consistent with this opinion and Opinion 692. This requirement conforms with the ethical obligations imposed on many of New Jersey’s licensed professionals to establish procedures for retrieval of records following the cessation of their practices. See, for example, N.J.A.C. 13:30-8.7(f) (Dentists); N.J.A.C. 13:35-6.5(h) (Physicians); N.J.A.C. 13:42-8.1(h) (Psychologists); N.J.A.C. 13:44E-2.2(g) (Chiropractors).

Under RPC 1.3, a sole practitioner has an ethical duty to plan for disposition of files in the event of his/her death or retirement. See Model Rules of Prof’l Conduct R. 1.3 cmt. 5 (amended 2002) (“To prevent neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each practitioner prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action.”); ABA Comm. on Ethics and Professional Responsibility, Formal Opinion 92-369 (1992) (noting that the Model Rules on diligence and competence require a sole practitioner to plan for death); Fl. State Bar Assoc. Comm. of Prof’l Ethics, Opinion 81-8 (1981) (holding that when planning for death, a lawyer must make a diligent effort to contact all clients, review each file for documents that must be safeguarded, and index such documents before putting them in storage or turning them over to the attorney who assumes control of the practice). RPC 1.3 specifically requires a lawyer to act “with reasonable diligence and promptness in representing a client.” We conclude that “reasonable diligence” requires a sole practitioner to make arrangements for disposition of client files in the event of death or retirement. This is an obligation which all law firms and sole practitioners must prepare for now.

When a sole practitioner has not arranged for file disposition in the event of death or disability, New Jersey Court Rule 1:20-19 provides for the disposition of the practice, including client files[4]. Pursuant to Rule 1:20-19, an interested party may petition the Assignment Judge in the vicinage where the attorney maintained a practice to appoint a member of the bar to perform an inventory of the practitioner’s files and take actions necessary for the protection of the attorney’s clients. N.J. Ct. R. 1:20-19(a). Cf. Model Rules for Lawyer Disciplinary Enforcement, 28 (1989). When dealing with retention and disposition of client files and client property, the appointed attorney must comply with the seven-year time period established in Opinion 692 and clarified in this opinion. See ABA Comm. on Ethics and Professional Responsibility, Formal Opinion 92-369 (1992) (concluding that ABA Informal Opinion 1384 regarding the duty to preserve client files applies to lawyers who assume responsibility for a deceased practitioner’s clients).

(e) As Between the Insurer and the Insured, who is the Client for Purposes of Complying with the Requirements set forth in Opinion 692, as Clarified Herein

Concerns about the disposition of closed client files multiply in the conflict-ridden tripartite relationship among a law firm, an insurance company, and the insured party. Based on RPC 1.6 and 1.8 and legal precedent, the Committee reaffirms that the insured, and not the insurer, is the client for the purposes addressed in this opinion and in Opinion 692. To the extent that Opinion 542 conflicts with this holding, we now reject it.

In Opinion 542, we addressed whether an attorney for an insured breached his duty of confidentiality by delivering closed files to the insurer without retaining copies. N.J. Advisory Comm. on Prof’l Ethics, Opinion 542 (1984). We explained that the insured and insurer could agree to the disposition of claims files. However, we emphasized that the attorney must return all materials unrelated to the claims at issue to the insured, unless the insured authorized other means of disposal. Although we held that the attorney’s procedure described in that inquiry for disposing of claims files was proper, we limited our response to files that contained no confidences of the insured. Opinion 542 did not address whether the attorney’s duty to safeguard client property limited the attorney’s ability to transfer the entire claims file to the insurer. However, to the extent that Opinion 542 does permit destruction of a file based on a contract between the insured and the insurance company, it is rejected.

Although this is an issue of first impression in New Jersey, prior decisions regarding the relationship between the attorney, an insurance carrier, and the insured support a finding that the file and all “client property” belong to the insured.[5] In New Jersey, courts have concluded that an attorney’s primary duty is to the insured. Prevratil v. Mohr, 145 N.J. 180, 194 (1996); Lieberman v. Employers Ins. of Wausau, 84 N.J. 325, 338 (1980) (emphasizing that the relationship between defense counsel and the insured should be treated as if the insured had hired and paid for the attorney’s services); Montanez v. Irizzary-Rodriquez, 273 N.J. Super. 276, 286 (App. Div. 1994) (concluding that defense counsel cannot ethically attack the credibility of the insured given the undivided loyalty that the attorney owes to the insured); Longo v. Am. Policyholders’ Ins. Co., 181 N.J. Super. 87, 92 (App. Div. 1981) (holding that an attorney has an ethical obligation to represent the insured with undivided loyalty); N.J. Advisory Comm. on Prof’l Ethics, Opinion 542 (1984) (“We first observe that in the situation where an attorney is employed by an insurance company to represent the interests of the insured party to an action, that attorney’s client is the insured.”). Similarly, the New Jersey Supreme Court has held that an attorney owes undivided loyalty to the insured. Lieberman, supra, 84 N.J. at 338-39. Based on the existence of an attorney-client relationship between the attorney and the insured, the Lieberman Court stressed that “there is no diminishment of ethical obligations and standard of care applicable to insurance defense counsel.” Id. Accordingly, as a baseline, the attorney owes all ethical obligations, including the obligations to safeguard client property and protect client interests, to the insured and not the insurer.

RPC 1.8, Conflict of Interest, makes clear that an attorney has an ethical obligation to preserve the insured’s confidentiality. Pursuant to RPC 1.8, an attorney can only accept compensation from a third party if “there is no interference with the lawyer’s independence of judgment or with the lawyer-client relationship,” and the client’s confidential information is protected. See also Restatement of the Law (Third) Governing Lawyers § 134, ill. e (2000) (directing an attorney to maintain the confidentiality of the insured). Documents that an insured delivers to the attorney in the course of representation, such as medical records or financial statements, constitute “property of the client” as that term is defined in Opinion 692 and clarified in this Opinion. These materials may contain client confidences that, under RPC 1.8, cannot be disclosed to the insurance carrier without the informed consent of the insured. Therefore, concerns over maintaining client confidences support a finding that the insurer cannot control the disposition of closed client files.

Because the attorney’s employment by the insurer does not limit the attorney’s ethical obligations to the insured, the Committee holds that materials contained in a claims file that clearly fall within the meaning of “property of the client” must be disposed of in accordance with the insured’s instructions, or maintained indefinitely under RPC 1.15(b). The insured may consent to the destruction or retention of a claims file by the insurer, but such consent must be fully informed. Therefore, the insured must be aware of the materials contained in the file at the time the insured gives consent. See In re Rules of Prof’l Conduct and Insurer Imposed Billing Rules and Procedures, 299 Mont. 321, 346-47 (2000) (“[F]or an insured to make fully informed consent to disclosure of detailed professional billing statements, the consent must be contemporaneous with the facts and the circumstances of which the insured should be aware.”). Accordingly, in most cases, an insured may not consent to disposal of client property by way of a provision to that effect in a liability policy executed before any claims materialize.

In sum, legal precedent in this State makes clear that the insured is the client of the attorney, even where the insurance carrier hires and pays for the attorney’s services. All resulting ethical obligations, including the obligation to retain closed client files and property of the client, apply to the insured. Thus, the Committee concludes that, where a claims file contains materials delivered by the insured to the attorney or prepared or obtained for the insured in the course of representation, the attorney must obtain the insured’s instructions or consent regarding the disposition of the property in accordance with Opinion 692 and this opinion.

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[1] The New Jersey Administrative Code provisions regulating other licensed professionals provide guidance on the scope of “reasonable efforts.” Pursuant to the Code, when preparing to retire or terminate their practices, psychologists, chiropractors, dentists, and physicians must establish procedures by which patients may obtain treatment records. See N.J.A.C. 13:30-8.7(h) (Dentists); N.J.A.C. 13:35-6.5(h) (Physicians); N.J.A.C. 13:42-8.1(h) (Psychologists); N.J.A.C. 13:44E-2.2(g) (Chiropractors). These procedures and a notice of cessation of the practice must be published in “a newspaper of general circulation in the geographic location of the licensee’s practice, at least once each month for the first three months after the cessation.” Id.

3

[2] See, for example, N.J.S.A. § 2C:7-2 (providing that a registered sex offender who has not committed an offense within fifteen years after conviction or release, whichever is later, can apply for termination of the registration obligation); N.J.S.A. § 2C:43-7.1 (authorizing extended sentencing for repeat violent offenders).

[3] The New Jersey Public Defender maintains files for 50 years pursuant to a departmental policy that was approved by the State Records Committee pursuant to N.J.S.A. § 47:3-20 in 1983.

[4] The Court Rule alternative is unlikely to be as practical and effective as advance planning by the responsible firm or practitioner.

[5] Neither the courts nor the legislature in this State has addressed whether the insured and the insurer are, in some circumstances, both clients of the attorney. See Paradigm Ins. Co. v. Langerman Law Offices, 200 Ariz. 146, 154 (2001) (holding that “when an insurer assigns an attorney to represent an insured, the lawyer has a duty to the insurer arising from the understanding that the lawyer’s services are ordinarily intended to benefit both insurer and insured when their interests coincide”). Because we find that this is a question of substantive law, we do not address it. See N.J. Ct. R. 1:19-2 (granting the Committee jurisdiction over inquiries concerning the proper conduct for members of the New Jersey bar). However, if, in the future, the courts or legislature determine that an attorney owes a duty of loyalty to both the insurer and the insured, the Committee will have to revisit the question of retention and destruction of the insured client’s files and property.

2A:23C-6 Exceptions to privilege.

2A:23C-6 Exceptions to privilege.

6.Exceptions to Privilege.

a.There is no privilege under section 4 of P.L.2004, c.157 (C.2A:23C-4) for a mediation communication that is:

(1)in an agreement evidenced by a record signed by all parties to the agreement;

(2)made during a session of a mediation that is open, or is required by law to be open, to the public;

(3)a threat or statement of a plan to inflict bodily injury or commit a crime;

(4)intentionally used to plan a crime, attempt to commit a crime, or to conceal an ongoing crime or ongoing criminal activity;

(5)sought or offered to prove or disprove a claim or complaint filed against a mediator arising out of a mediation;

(6)except as otherwise provided in subsection c., sought or offered to prove or disprove a claim or complaint of professional misconduct or malpractice filed against a mediation party, nonparty participant, or representative of a party based on conduct occurring during a mediation; or

(7)sought or offered to prove or disprove child abuse or neglect in a proceeding in which the Division of Youth and Family Services in the Department of Children and Families is a party, unless the Division of Youth and Family Services participates in the mediation.

b.There is no privilege under section 4 of P.L.2004, c.157 (C.2A:23C-4) if a court, administrative agency, or arbitrator finds, after a hearing in camera, that the party seeking discovery or the proponent of the evidence has shown that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and that the mediation communication is sought or offered in:

(1)a court proceeding involving a crime as defined in the "New Jersey Code of Criminal Justice," N.J.S. 2C:1-1 et seq.; or

(2) except as otherwise provided in subsection c., a proceeding to prove a claim to rescind or reform or a defense to avoid liability on a contract arising out of the mediation.

c.A mediator may not be compelled to provide evidence of a mediation communication referred to in paragraph (6) of subsection a. or paragraph (2) of subsection b.

d.If a mediation communication is not privileged under subsection a. or b., only the portion of the communication necessary for the application of the exception from nondisclosure may be admitted. Admission of evidence under subsection a. or b. does not render the evidence, or any other mediation communication, discoverable or admissible for any other purpose.


L.2004, c.157, s.6; amended 2006, c.47, s.22.

2A:23C-5 Waiver and preclusion of privilege.

2A:23C-5 Waiver and preclusion of privilege.
5.Waiver and Preclusion of Privilege.

a.A privilege under section 4 of P.L.2004, c.157 (C.2A:23C-4) may be waived in a record or orally during a proceeding if it is expressly waived by all parties to the mediation and:

(1)in the case of the privilege of a mediator, it is expressly waived by the mediator; and

(2)in the case of the privilege of a nonparty participant, it is expressly waived by the nonparty participant.

b.A person who discloses or makes a representation about a mediation communication that prejudices another person in a proceeding is precluded from asserting a privilege under section 4 of P.L.2004, c.157 (C.2A:23C-4), but only to the extent necessary for the person prejudiced to respond to the representation or disclosure.

c.A person who intentionally uses a mediation to plan, attempt to commit or commit a crime, or to conceal an ongoing crime or ongoing criminal activity is precluded from asserting a privilege under section 4 of P.L.2004, c.157 (C.2A:23C-4).

L.2004,c.157,s.5.

Ethics Committee Opinion 701 Advisory Committee on Professional Ethics Electronic Storage And Access of Client Files

Ethics Committee Opinion 701

Advisory Committee on Professional Ethics

Electronic Storage And Access of Client Files

Advisory Committee on Professional Ethics

Appointed by the Supreme Court of New Jersey

The inquirer asks whether the Rules of Professional Conduct permit him to make use of an

electronic filing system whereby all documents received in his office are scanned into a digitized

format such as Portable Data Format (“PDF”). These documents can then be sent by email, and as the

inquirer notes, “can be retrieved by me at any time from any location in the world.” The inquirer notes

that certain documents that by their nature require retention of original hardcopy, such as wills, and

deeds, would be physically maintained in a separate file.

In Opinion 692, we set forth our interpretation of the term “property of the client” for purposes

of RPC 1.15, which then triggers the obligation of a lawyer to safeguard that property for the client.

“Original wills, trusts, deeds, executed contracts, corporate bylaws and minutes are but a few examples

of documents which constitute client property.” 163 N.J.L.J. 220, 221 (January 15, 2001) and 10 N.J.L.

154 (January 22, 2001). Such documents cannot be preserved within the meaning of RPC 1.15 merely

by digitizing them in electronic form, and we do not understand the inquirer to suggest otherwise, since

he acknowledges his obligation to maintain the originals of such documents in a separate file.

On the other hand, we also noted in Opinion 692 that a client file will likely contain other

documents, such as correspondence, pleadings, memoranda, and briefs, that are not “property of the

client” within the meaning of RPC 1.15, but that a lawyer is nevertheless required to maintain at least

for some period of time in order to discharge the duties contained in RPC 1.1 (Competence) and RPC

1.4 (Communication), among others. While traditionally a client file has been maintained through

paper records, there is nothing in the RPCs that mandates a particular medium of archiving such

documents. The paramount consideration is the ability to represent the client competently, and given

the advances of technology, a lawyer’s ability to discharge those duties may very well be enhanced by

having client documents available in an electronic form that can be transmitted to him instantaneously

through the Internet. We also note the recent phenomenon of making client documents available to the

client through a secure website. This also has the potential of enhancing communications between

lawyer and client, and promotes the values embraced in RPC 1.4.

With the exception of “property of the client” within the meaning of RPC 1.15, therefore, and

with the important caveat we express below regarding confidentiality, we believe that nothing in the

RPCs prevents a lawyer from archiving a client’s file through use of an electronic medium such as

PDF files or similar formats. The polestar is the obligation of the lawyer to engage in the

representation competently, and to communicate adequately with the client and others. To the extent

that new technology now enhances the ability to fulfill those obligations, it is a welcome development.

This inquiry, however, raises another ethical issue that we must address. As the inquirer notes,

the benefit of digitizing documents in electronic form is that they “can be retrieved by me at any time

from any location in the world.” This raises the possibility, however, that they could also be retrieved

by other persons as well, and the problems of unauthorized access to electronic platforms and media

(i.e. the problems posed by “hackers”) are matters of common knowledge. The availability of sensitive

client documents in an electronic medium that could be accessed or intercepted by unauthorized users

therefore raises issues of confidentiality under RPC 1.6.

The obligation to preserve client confidences extends beyond merely prohibiting an attorney

from himself making disclosure of confidential information without client consent (except under such

circumstances described in RPC 1.6). It also requires that the attorney take reasonable affirmative

steps to guard against the risk of inadvertent disclosure. Thus, in Opinion 692, we stated that even

when a closed client file is destroyed (as permitted after seven years), “[s]imply placing the files in the

trash would not suffice. Appropriate steps must be taken to ensure that confidential and privileged

information remains protected and not available to third parties.” 163 N.J.L.J. 220, 221 (January 15,

2001) and 10 N.J.L 154 (January 22, 2001). Similarly, in ACPE Opinion 694 and CAA Opinion 28

(joint opinion), we joined with the Committee on Attorney Advertising in finding that two separate

firms could not maintain shared facilities where “the pervasive sharing of facilities by the two separate

firms as described in the Agreement gives rise to a serious risk of a breach of confidentiality that their

respective clients are entitled to.” 174 N.J.L.J. 460 and 12 N.J.L. 2134 (November 3, 2003).

And in Opinion 515, we permitted two firms to share word processing and computer facilities

without becoming “office associates” within the meaning of R. 1:15-5(b), but only after noting that

“the material relating to individual cases of each attorney is maintained on separate ‘data’ disks used

only by their respective secretaries and stored (while not in use) in each of their separate offices.” 111

N.J.L.J. 392 (April 14, 1983).

We stress that whenever attorneys enter into arrangement as outlined herein, the

attorneys must exercise reasonable care to prevent the attorney's employees and

associates, as well as others whose services are utilized by the attorney, from disclosing

or using confidences or secrets of a client.

The attorneys should be particularly sensitive to this requirement and establish office

procedures that will assure that confidences or secrets are maintained.

Id.

The critical requirement under RPC 1.6, therefore, is that the attorney “exercise reasonable

care” against the possibility of unauthorized access to client information. A lawyer is required to

exercise sound professional judgment on the steps necessary to secure client confidences against

foreseeable attempts at unauthorized access. “Reasonable care,” however, does not mean that the

lawyer absolutely and strictly guarantees that the information will be utterly invulnerable against all

unauthorized access. Such a guarantee is impossible, and a lawyer can no more guarantee against

unauthorized access to electronic information than he can guarantee that a burglar will not break into

his file room, or that someone will not illegally intercept his mail or steal a fax.

What the term “reasonable care” means in a particular context is not capable of sweeping

characterizations or broad pronouncements. But it certainly may be informed by the technology

reasonably available at the time to secure data against unintentional disclosure. Obviously, in this area,

changes in technology occur at a rapid pace. In 1983, for instance, when Opinion 515 was published,

the personal computer was still somewhat of a novelty, and the individual floppy disk was the

prevailing data storage device. The “state of the art” in maintaining electronic security was not very

developed, but the ability to prevent unauthorized access by physically securing the floppy disk itself

satisfied us that confidentiality could be maintained. By implication, at the time we were less

accepting of data stored on a shared hard drive, even one that was partitioned to provide for individual

private space for use by different firms, because of the risk of breach of confidentiality under

prevailing technology.

We are of course aware that floppy disks have now become obsolete, and that it is exceedingly

unlikely in this day and age that different law firms would attempt to share hard drive space on a

conventional desktop computer, given the small cost of such computers in today’s market. New

scenarios have arisen, however. It is very possible that a firm might seek to store client sensitive data

on a larger file server or a web server provided by an outside Internet Service Provider (and shared

with other clients of the ISP) in order to make such information available to clients, where access to

that server may not be exclusively controlled by the firm’s own personnel. And in the context

originally raised by the inquirer, it is almost always the case that a law firm will not have its own

exclusive email network that reaches beyond its offices, and thus a document sent by email will very

likely pass through an email provider that is not under the control of the attorney.

We are reluctant to render an specific interpretation of RPC 1.6 or impose a requirement that is

tied to a specific understanding of technology that may very well be obsolete tomorrow. Thus, for

instance, we do not read RPC 1.6 or Opinion 515 as imposing a per se requirement that, where data is

available on a secure web server, the server must be subject to the exclusive command and control of

the firm through its own employees, a rule that would categorically forbid use of an outside ISP. The

very nature of the Internet makes the location of the physical equipment somewhat irrelevant, since it

can be accessed remotely from any other Internet address. Such a requirement would work to the

disadvantage of smaller firms for which such a dedicated IT staff is not practical, and deprive them and

their clients of the potential advantages in enhanced communication as a result.

Moreover, it is not necessarily the case that safeguards against unauthorized disclosure are

inherently stronger when a law firm uses its own staff to maintain a server. Providing security on the

Internet against hacking and other forms of unauthorized use has become a specialized and complex

facet of the industry, and it is certainly possible that an independent ISP may more efficiently and

effectively implement such security precautions.

We do think, however, that when client confidential information is entrusted in unprotected

form, even temporarily, to someone outside the firm, it must be under a circumstance in which the

outside party is aware of the lawyer’s obligation of confidentiality, and is itself obligated, whether by

contract, professional standards, or otherwise, to assist in preserving it. Lawyers typically use

messengers, delivery services, document warehouses, or other outside vendors, in which physical

custody of client sensitive documents is entrusted to them even though they are not employed by the

firm. The touchstone in using “reasonable care” against unauthorized disclosure is that: (1) the lawyer

has entrusted such documents to an outside provider under circumstances in which there is an

enforceable obligation to preserve confidentiality and security, and (2) use is made of available

technology to guard against reasonably foreseeable attempts to infiltrate the data. If the lawyer has

come to the prudent professional judgment he has satisfied both these criteria, then “reasonable care”

will have been exercised.1

1

In the specific context presented by the inquirer, where a document is transmitted to him by email

over the Internet, the lawyer should password a confidential document (as is now possible in all

common electronic formats, including PDF), since it is not possible to secure the Internet itself against

third party access.