How Technology Illiteracy Can Cost Solos Big Money

Not a proper document retention policy.

Not a proper document retention policy.

Solo practitioner Barbara Katsos may have believed she was saving money when back in 2009, she relied on AOL as an email server, used Microsoft Word to organize clients’ electronic files, hired a computer “expert” of unknown credentials recommended by a non-lawyer friend and printed out hard copies of important emails and documents. Unfortunately, 8 years later, Katsos’ low rent, gerry-rigged case management system will now cost her big time. A recent ruling out of the Eastern District of New York requires Katsos to pay attorneys’ fees and costs as a sanction for her negligence in failing to preserve all documents related to her representation of a former client who subsequently sued for malpractice. The case is a must-read for solos — and in fact, all lawyers — because it’s a primer on how not to implement technology.

Here’s the backstory. In 2006, Katsos, a solo practitioner, was retained by an ice cream franchisee that owned three stores for legal advice on dealing with its creditors following financial losses resulting from an extended power outage. Long story short, Katsos’s negligent representation made the situation worse, forcing the owner to file for bankruptcy. The client fired Katsos in early 2009, retained new counsel and sued for legal malpractice.

When it was learned during discovery that Katsos had gotten rid of her office computers without preserving all relevant email and electronic files, the plaintiff sought sanctions for violations of Rule 37 of the FRCP. The judge agreed that Katsos “had a duty to preserve documents arose when her client terminated the relationship” in a ruling widely reported on e-discovery blogs  back in 2013.

The case didn’t end there. Because an award of sanctions hinged on an assessment of  Katsos’s “culpable state of mind” and the “relevance of the documents,” the court ordered an evidentiary hearing and, last month, rendered a ruling. Before I get to the result, I want to commend every solo and small firm lawyer to read this train wreck of a decision closely to learn how not to run a law office. If you don’t have the time for that, here’s a quick summary of some of the findings:

  • Katsos ran a solo practice consisting of herself, an office manager, paralegals, and interns who each had a computer — though Katsos couldn’t identify the brand, the operating system or whether the machines were networked;
  • Katsos testified that she never took any CLE classes to try to expand her knowledge of this area because she was “introduced to lawyering as lawyering” and “spent a lot of time with issues, with client issues, and trying to resolve client problems”;
  • Katsos used AOL for the firm’s email address, though one of the paralegals didn’t like AOL and set up an email account on Microsoft Outlook. Katsos printed out some emails that she deemed significant and added them to the client files; it appears that her staff did not;
  • Katsos believed that AOL would retain all of her emails when it actually deleted them after 30 days if the user didn’t instruct otherwise;
  • Katsos contracted for tech support with an individual referred by a colleague and with no expertise in working with law firms. She used him on a project basis, paying either in cash or in-kind with legal services. When the firm’s machine went down with the “blue screen of death” in 2009, Katsos’s tech guy declared them unsalvageable but did not make any attempt to recover files believed to be lost before reconfiguring the machines, nor had he backed up files (or recommended backup) in the nearly 10 years he was consulting for the firm;
  • Katsos’s staff apparently had free rein over use of computers. Her office manager used her machine to play solitaire, while the “interns were downloading things they probably should not have been downloading” — which introduced viruses that shut down the system and resulted in the loss of files;
  • Katsos did not have a formal, written policy in place for retention of electronic files.

Based on the evidence, the judge declined to sanction Katsos, who the ruling describes as a “solo practitioner utterly naive about her obligations to preserve electronic evidence.” The judge found that Katsos’s culpability, while negligent did not rise to the level of gross negligence, and further that the plaintiffs failed to demonstrate any prejudice. Nonetheless, the court found that an award of attorneys’ fees and costs was warranted (and those fees won’t be insignificant given that the matter necessitated a hearing).

Sponsored

The lessons of Distefano v. Law Offices of Barbara Katsos are clear: lawyers — even solos — must have a document retention policy in place that instructs staff on what documents are to be included in a client file and how and where those files should be saved (this document retention policy from the Alabama State Bar is comprehensive, albeit somewhat outdated). Lawyers should also extend these policies to outsourced staff and contractors working under their supervision and control. In addition, lawyers must at least familiarize themselves with the technology used in their firm, and exercise due diligence in hiring tech consultants.

Solos need to put a policy in place ASAP — because moving forward, courts are unlikely to have any sympathy for lawyers like Kastos. Recall that back in 2009, cloud-based practice management systems like Clio and Rocket Lawyer were just a year old, and the dozen or so other platforms that have developed since weren’t even around. At the time only 16 percent of lawyers  had adopted cloud-based practice management tools — notwithstanding that cloud-based systems — with online document storage and client portals — make document preservation and back-up nearly foolproof.

As a result, a lawyer like Katsos would have had no choice but to invest in a pricey case management system and high cost consultants to preserve electronic documents — and it’s doubtful that a struggling lawyer like Katsos could have afforded those costs. With the advent of the cloud, a similarly situated practitioner today could choose from a wide variety of cloud-based practice management systems at a range of price points — which means that the “poor naive solo” card that the judge took into account of in Kastos’s case isn’t likely to work in the future.

The bottom line is that even solos who are truly uncomfortable with technology (or believe like Katsos that only “lawyering” matters) must devote the time to educate themselves on technology or spend the money on competent consultants. Although gaining technology competence may seem onerous and pricey, as Ms. Katsos is now painfully aware, those costs are a bargain compared to the alternative: footing the bill for attorneys’ fees and sanctions for failing to properly preserve electronic documents.


Sponsored

Carolyn ElefantCarolyn Elefant has been blogging about solo and small firm practice at MyShingle.comsince 2002 and operated her firm, the Law Offices of Carolyn Elefant PLLC, even longer than that. She’s also authored a bunch of books on topics like starting a law practicesocial media, and 21st century lawyer representation agreements (affiliate links). If you’re really that interested in learning more about Carolyn, just Google her. The Internet never lies, right? You can contact Carolyn by email at elefant@myshingle.comor follow her on Twitter at @carolynelefant.