Ethics
2000
Unless you have been asleep for the past four
years, you know by now that the Supreme Court has adopted sweeping changes to
the Rules of Professional Conduct as a culmination of the Ethics 2000
process. These changes will go into
effect on
Get it right and get it in writing. With revisions to the terminology section of
the Rules, the Court has introduced two important new concepts: “informed
consent” (Rule 1.0(f)) and “confirmed in writing” (Rule 1.0(b)). Informed consent, which supplants the old
concept of “consent after consultation,” means that a person agrees to a course
of conduct after communication by the lawyer of reasonably adequate information
and explanation about the material risks and reasonable alternatives. “Confirmed in writing” means that there is a
writing that confirms that the person has given informed consent. Which brings us to another new term – “writing”
– which the Court defines as “a tangible or electronic record of a
communication … including handwriting, typewriting, printing, photostating, photography, audio or video recording and
email.”
The most significant application of these new
terms is with regard to conflicts of interest.
In order to obtain a waiver of nearly every type of conflict of
interest, the lawyer must get the client’s informed consent confirmed in
writing. This applies to what are now
called “concurrent conflicts of interest,” [including conflicts that arise
between current clients (Rule 1.7(a)(1)) or between a current client and the
lawyer or some other person (Rule 1.7(a)(2))], to conflicts between current
clients and former clients (Rule 1.9), to conflicts arising out of former
employment with a government agency and service as a public officer (Rule
1.11), to conflicts between clients and prospective clients (Rule 1.18), and to
conflicts arising when the lawyer is serving as a third party neutral (Rule
2.4). It also includes waivers of
conflicts when entering into a transaction with a client (Rule 1.8(a)) and when
negotiating an aggregate settlement for multiple clients (Rule 1.8(g)). Even in circumstances where a written confirmation
is not mandated, informed consent is required before a lawyer can proceed in
any matter that presents a conflict of interest (see e.g. Rules 1.8(f) and
1.8(k)).
Fee sharing is another situation in which an
agreement with a client must be confirmed in writing (Rule 1.5(e)). Regardless of how the fee is divided between
lawyers from separate firms, the client must agree to the arrangement,
including each lawyer’s share, and the lawyers must get confirmation of that
agreement in writing. The Court stopped
short of adopting the Bar’s proposal that all fee agreements be reduced to
writing; however, written contingency agreements must now be signed by the
client (Rule 1.5(c)).
Confidential information may be revealed in
limited circumstances. Previously, a lawyer had the discretion to
reveal confidential information only with client consent, to prevent the client
from committing a criminal act, or to defend a criminal, civil, or disciplinary
action. There are now five additional
circumstances under which a lawyer may reveal confidential information to the
extent the lawyer believes reasonably necessary. Those circumstances are to prevent
“reasonably certain death or substantial bodily harm” (Rule 1.6(b)(2)), to
prevent the client from committing “a crime or fraud that is reasonably certain
to result in substantial injury to the financial interests or property of
another” when the client is using the lawyer’s services to do it (Rule
1.6(b)(3)), to “prevent, mitigate or rectify” the injury resulting from such a
crime or fraud (Rule 1.6(b)(4)), to obtain legal advice about whether the
lawyer is in compliance with the Rules of Professional Conduct (Rule
1.6(b)(5)), and to comply with a court order or “other law” (Rule
1.6(b)(7)). The lengthy comments to Rule
1.6 provide extremely useful guidance to the lawyer who finds herself in a
situation in which she believes that she must reveal client confidences, even
when such disclosure is adverse to the client.
When the client is an organization, a lawyer may
reveal confidential information when she knows that an officer, employee, or
other person associated with the organization/client is engaging or intends to
engage in conduct that is a violation of a legal obligation of the
organization/client, a violation of law that could be imputed to the organization/client,
or that is likely to result in substantial injury to the organization/client
AND the highest authority that can act on behalf of the organization/client is
the offender or refuses to act to prevent or remediate the offense (Rule
1.13(b)& (c)). However, disclosure
must be limited to that which the lawyer reasonably believes necessary to
prevent substantial injury to the organization/client.
When a client has diminished capacity, is at
risk of substantial harm, and can’t protect his own interests, a lawyer may
reveal confidential information in the course of taking protective action (Rule
1.14(c)). Of course, disclosure must be
limited to that which is reasonably necessary to protect the client’s interests.
Along the same lines, the revisions to Rule 3.3
expand the circumstances in which a lawyer must disclose information to avoid
criminal conduct by another. Under the
prior rules, a lawyer was required to disclose a material fact to a tribunal
when necessary to avoid assisting a client in a crime or fraud. With the adoption of the new provisions, a
lawyer in an adjudicative proceeding who knows that a person (not just a
client) has committed or intends to commit a crime or fraud related to that
proceeding (not limited to that which requires or desires the lawyer’s
assistance), must take remedial measures.
Those remedial measures might include disclosure to the tribunal. Additionally, a lawyer is subject to sanction
not only for knowingly making a false statement to a tribunal, but now also for
failing to correct a false statement the lawyer previously made (Rule
3.3(a)(1)). The duties imposed in Rule
3.3 apply not just to appearances before a tribunal, but also in ancillary
proceedings such as depositions. As an
added note, the definition of tribunal now includes a court, an arbitrator in
binding proceedings, a legislative body, an administrative agency, or any other
body acting in an adjudicative capacity (Rule 1.0(n)).
Put your clients’ money in the trust account and
keep your own money out. Revisions to Rule
1.15 make it clear that the purpose of a trust account is to keep your clients’
money safe and separate from your own.
The Court’s prior finding that a lawyer may not maintain her own money
in her trust account as a cushion is now codified in Rule 1.15(b) which says
that a lawyer “may deposit her own funds in the trust account for the sole
purpose of paying service charges on the account, but only in an amount
necessary for that purpose.” The better
practice is to make arrangements with your bank to have bank charges on your
trust account debited from your operating account.
The new Rule 1.15(c) states clearly what the
Court has ruled repeatedly in disciplinary opinions – that
unearned fees must be deposited into the client trust account and can only be
withdrawn when earned. This also applies
to costs advanced by the client. Such
costs have to be deposited into your trust account and can only be withdrawn
when the cost is actually incurred.
Since the Rules of Professional conduct were
originally adopted, lawyers have been prohibited from disbursing funds from a
trust account before those funds were collected. This means that a settlement check, a loan
check, or any other instrument that you receive on behalf of a client must be
deposited into and credited to your trust account prior to your issuance of
checks paying out those funds. With the
adoption of the new version of Rule 1.15, the Court has established limited
circumstances in which you can disburse funds prior to confirming that those
funds have been credited to your account.
You can treat as collected funds upon deposit: cash, verified and
documented electronic fund transfers (wires), properly endorsed government
checks, checks drawn by a bank (such as cashier’s checks and certified checks),
and “other deposits treated by the depository bank as equivalent to cash” (Rule
1.15(f)). The rule does not allow you to
treat an ordinary check as collected funds unless it is $5,000 or less and you
have a reasonable and prudent belief that it will be collected promptly. The Court declined to include insurance
company checks in the collected funds exceptions.
It is never a good idea to pass out checks until
the deposit has cleared the bank even if permitted by this new rule. If you are going to disburse funds before
they have been collected under the limited exceptions in Rule 1.15(f), you need
to keep two things in mind. First, you
have to deposit the funds before you issue the checks. The new rule doesn’t change this. Even if you are allowed to treat cash or an
instrument that is equivalent to cash as collected funds, you cannot do so
until you have made the deposit. Second,
if you take the chance and issue checks under one of the collected funds
exceptions and the funds are not collected for whatever reason, you have to
make those checks good by depositing your own money in the account within five
working days.
And that brings us to the provision in the
revised rules that is likely be the most overlooked by
practitioners. As of
But I never took his case…. Lawyers now have an
answer to the common question of when a prospect becomes a client to the extent
ethical obligations kick in. Rule 1.18
is a brand new provision that sets forth the circumstances under which the
duties of confidentiality and conflict avoidance are owed to a person who
consults with you but does not retain you.
If you discuss the possibility of forming a lawyer-client relationship
with someone and there is a reasonable expectation that you are likely to form
that relationship, that person becomes a “prospective client.” You may not use or reveal information learned
in the consultation even if the prospective client does not ultimately become
your client (unless permitted under other provisions of the rules). In addition, you cannot undertake to
represent another client in the same or substantially related matter if that
client’s interests are materially adverse to a prospective client if you have
received “disqualifying information” in the consultation with the prospective
client. Disqualifying information is
information that could be significantly harmful to the prospective client in
connection with the case. This conflict
can be waived by the client and prospective client with informed consent,
confirmed in writing. Your firm is also
prevented from undertaking or continuing to represent the client unless (1) you
reasonably tried to avoid obtaining more information than was necessary to
decide whether or not to represent the prospective client, (2) you are timely
screened and do not share in the fee, and (3) you give prompt, written notice
to the prospective client of your firm’s representation of the other client.
Sure, my firm has a website, but we don’t
advertise… There are several changes to the advertising
rules that every lawyer needs to review.
Keep in mind that “advertising” is not just limited to TV commercials
and yellow pages ads, and never has been.
The advertising rules found in Rule 7.2 apply to all written or recorded
communication that advertises the lawyer’s services, not just public
media. With the rule revisions,
“electronic” communication is specifically included.
You are responsible for reviewing all such communications
prior to dissemination to ensure compliance with the ethics rules (Rule
7.2(b)). You can’t blame it on the phone
book publisher or the website designer.
If your website refers to your “expertise” and you are not a certified
specialist in your field, you are in violation of Rule 7.4(b). If your website contains statements from your
clients about how satisfied they are with your services, you are in violation
of Rule 7.1(d). Note that when the new
rules go into effect on October 1, all testimonials, not just those that
concern the quality of your services or the results obtained, will be
prohibited. Additionally, nicknames,
monikers, and trade names that imply an ability to obtain results in a matter
will not be allowed (Rule 7.1(e)).
In addition to your duty to review advertising
communications to ensure ethical compliance, you will now be required to file a
copy of every advertisement or communication with the Commission on Lawyer
Conduct within ten days of dissemination with a $50.00 filing fee. The exception to this requirement is an
advertisement or communication that contains only “directory” information and
is not disseminated through the public media.
According to Comment 5, directory information includes “the name of the
lawyer or law firm, a lawyer’s job title, jurisdictions in which the lawyer is
admitted to practice, the lawyer’s mailing and electronic addressed, and the
lawyer’s telephone and facsimile numbers.
Generally, this exception to the filing requirement will include most
business cards, letterhead, basic telephone directory listings, law directories
… and office signage.” Advertisements
must now also include the office address of the lawyer responsible for it, not
just the name of that lawyer (Rule 7.2(d)).
In addition to expanding the definition of
advertising to electronic communication, several other changes update the rules
to reflect advances in technology. For
example, real-time electronic communication is now included in the limitations
on direct contact with prospective clients.
Like in-person and telephone contacts, such direct communication is
prohibited unless it is directed towards another lawyer or a family member,
close friend, or former client of the lawyer (Rule 7.3(a)). Another example is email or other electronic
solicitations. These communications are
treated just like solicitation letters or recorded telephone messages (Rule
7.3(b)). All of the limitations and
special requirements apply, such as the filing requirement (7.3(c)), the
required disclaimers (7.3(d)), and disclosure of certain information (7.3(g)
& (i)).
By the way, the filing fee for solicitations under Rule 7.3 is now
$50.00. If you are sending out
solicitation letters or emails and you aren’t familiar with Rule 7.3, take a
few moments and read it.
Other tidbits you need to know:
Client authority. A lawyer must now not
only abide by her clients’ decisions to accept an offer of settlement,
but also to make an offer of settlement (Rule 1.2(a)).
Scope of Representation. A lawyer may only limit
the scope of a representation if it is reasonable under the circumstances and
the client gives informed consent (Rule 1.2(c)). Also, the scope of the representation must be
communicated to the client before or within a reasonable time after commencing
the representation (Rule 1.5(b)).
Client expenses. A lawyer must now not only ensure that her fee
is reasonable, but also that the amount of expenses be reasonable (Rule
1.5(a)). The expenses for which the
client will be responsible must be communicated to the client at the outset in
addition to the fee (Rule 1.5(b)).
Contingent fee agreements must now include a clear statement of any
expenses the client will be expected to pay (Rule 1.5(c)).
Limiting your caseload. According to the comments to Rule 1.3, a
lawyer must control her work load so that she can handle each client matter
competently (Comment 2).
Planning for disability
or death. The comments also encourage lawyers and firms
to prepare a plan that designates a colleague to review client files, notify
clients, and determine whether any immediate protective action is required in
the event of a lawyer’s disability or death (Rule 1.3 Comment 5). In certain circumstances, such a plan is
required by the lawyer’s duty of diligence.
Don’t have sex with a client. In case you had not already gotten the
message from the case law, Rule 1.8(m) says that you may not have sexual
relations with a client who is vulnerable or subject to your control or undue
influence, when the relationship could have a harmful or prejudicial effect on
the client’s interests, or when the relationship could adversely effect your
representation of the client. (Even if
you think you pass this test, don’t have sex with your client.)
Client funds are not collateral. A lawyer may not use or pledge client money
or property to obtain credit or other personal benefit for herself or anyone
else other than the client (Rule 1.15(g)).
New rules for third
party neutrals. The revisions include a new
Rule 2.4 involving duties of mediators and arbitrators. If you serve in either capacity, you need to
read this rule and its comments carefully.
Communication with
jurors. The case law regarding contact with jurors
has now been codified at Rule 3.5(c).
You obviously can’t communicate with jurors until after they have been
discharged. Even then, you can’t
communicate with a juror if such communication is prohibited by other law or
court order, if the juror has indicated to you a desire not to communicate, or
if your communication involves misrepresentation, coercion, duress, or
harassment.
Special responsibilities
of a prosecutor. In addition to special duties already set
forth in Rule 3.8, prosecutors are now required to refrain from making comments
outside of court that are substantially likely to heighten public condemnation
of a defendant. In addition, prosecutors
must take reasonable care to prevent nonlawyers
assisting them from making such statements.
There is an exception for statements that are necessary to inform the
public of the nature and extent of the prosecutor’s action and statements that
serve a legitimate law enforcement purpose.
Inadvertent disclosure. If you receive a document in a case that you
know or should know was sent to you by accident, you are required to notify the
sender (Rule 4.4(b)). This puts the
burden on the sender to take what ever action is necessary to retrieve the
document or protect it from further disclosure.
The Court stopped short of requiring that you refrain from reading or
using the document, that you return the document to the sender, or that you
follow the sender’s instructions regarding the document. You should carefully consider the circumstances
before deciding what to do with the document, with the principles of competent
and diligent representation and professionalism to guide you.
Threatening to file a
grievance. It has never been a good idea to threaten an
adversary that you will pursue professional discipline in order to gain an
advantage in a civil matter. The Court
has now added a prohibition on such threats to Rule 4.5 which already
prohibited threats of criminal charges.
It is important to note that there is case law that says that a lawyer
who wrongfully threatens a civil action solely to gain advantage in a criminal
matter also violates this rule.
Supervisory
responsibilities of lawyer/managers. Lawyers
who possess managerial authority that is comparable to a law firm partner are
now specifically included in the provisions of Rules 5.1 and 5.3, regarding
supervision of lawyers and nonlawyers,
respectively. It doesn’t matter what your title is or the nature of your
organization. If you are the boss, you
are on the hook.
Multijurisdictional practice, law related
services, and choice of law provisions. This is
an article in and of itself. Every
lawyer who works with out-of-state counsel, holds dual licensure, represents multijurisdictional companies, engages in business ventures
other than the practice of law, or deals with cases that impact or are impacted
by more than one state needs to read the new provisions in Rules 5.5, 5.7, and
8.5 very carefully.
Again, this article is not an exhaustive review
of all of the changes to the Rules of Professional Conduct. Every practicing lawyer should read the rules
in their entirety to ensure compliance.
It is also a good idea to attend a continuing education seminar that
will focus on the rule changes. The
South Carolina Women Lawyers Association will dedicate part of the annual CLE
this fall to discussion of Ethics 2000 and its practical implications.