Offsite Records Storage - Passing the costs along to the client

Firms have traditionally struggled with the creation and implementation of a records retention policy.  As an alternative option to consider - pass the storage costs on to your clients.  I know you are probably struggling with getting clients to pay for traditional cost recovery items, but if you are charging for copies, prints, scans, etc. then technically, the documents belong to the client.  Think about addressing the following in the client engagement letter:  Outline how you will dispose of their records.  Consider the following options:

• All documents will be shipped to the expense at the conclusion of the case at their expense
• Firm will retain these documents for the client based on your records retention policy until DATE at a rate of $x/month/box after which they will be destroyed at a rate of $x/box
• Firm will retain these documents for the client based on the Firm’s records retention policy until DATE at a rate of $x/month/box after which they will be destroyed at a rate of $x/box
• Firm will destroy all documents at a rate of $x/box
• The client can select which option they want to utilize at the beginning of the engagement. If at the end, then an “unless instructed otherwise” option should be included

Don’t Be Held Hostage by Offsite Records Storage Fees!

Nobody likes to be held hostage – actually, it’s something that people dread. And yet lots of law firm administrative executives have put up with “Hostage Fees”, the permanent withdrawal fees that are embedded in their offsite records storage contracts. Many law firms agreed to these terms decades ago when they first started to use these vendors. The fees have continued to grow unchecked and now amount to, in some cases, seven-digit termination charges.

The original reason for these fees (usually $3.00 to 6.00 per box) was to protect the offsite storage vendors in case a large client withdrew their boxes and they suddenly had excess capacity that they built specifically for that client. That is no longer the case. Nowadays the purpose of these “hostage” fees is twofold:

1. To prevent the firm from competitively shopping their storage contracts and possibly moving their storage volume, and

2. So that it does not make economic sense (in most cases) to destroy files that are stored offsite. That means you’ll pay for storage of the files indefinitely, even if you don’t need them any more and they could be destroyed.

So, ask yourself, are these fees a concern for your firm? Does your firm recognize these fees as the liability that they are? Do you think these fees allow the offsite storage company to charge other fees (for example, the famous re-boxing charge) and compromise their commitment to service? Darn right they do.

One of the best ways you can reduce or eliminate these fees is to initiate a competitive bid process, which will put your incumbent vendor in the position of vying to keep your business. Remember that you are in a buyer’s market now for offsite records storage, so you should be in the catbird seat calling the shots, not in the hostage seat!