Professional Responsibility Guide Part 3

F. 1. Limits on Lawyer’s Ability to Render Emergency Legal Assistance Even in an emergency, a lawyer should not act unless he reasonably believes the impaired person has no other lawyer or representative available. When the lawyer acts, he should act only to the extent reasonably necessary to avoid imminent and irreparable harm, and, in this situation, the lawyer owes the same duties to the impaired person as he would with respect to a client, including the duty of confidentiality. Furthermore, the lawyer should take steps to regularize the relationship, or implement other protective solutions, as soon as possible. 2. No Compensation for Emergency Legal Assistance Normally, a lawyer should not seek compensation for emergency actions taken on behalf of an impaired person. AVOIDING CONFLICTS OF INTEREST A lawyer must be careful not to enter into a relationship where there is a potential conflict of interest that is likely to adversely affect his ability to exercise independent and professional judgment. After accepting employment, a lawyer should carefully refrain from acquiring a property right or assuming a position that would tend to make his judgment less protective of the interests of his client unless the client consents. 1. Concurrent Conflicts of Interest Except on the conditions stated in a., below, a lawyer must not represent a client if the representation creates a concurrent conflict of interest. A concurrent conflict of interest exists when: (i) the representation of a client will be directly adverse to the interests of another client; or (ii) there is a significant risk that the representation of a client will be materially limited by the lawyer’s personal interests or by his responsibilities to another client, former client, or third person. [RPC 1.7(a)] a. Client Consent to Concurrent Conflicts Despite a concurrent conflict of interest, a lawyer may undertake a representation if the following four conditions are satisfied: (i) The lawyer reasonably believes that he can competently and diligently represent each affected client, despite the concurrent conflict; (ii) The representation is not prohibited by law (e.g., a state statute prohibits the lawyer from switching from the prosecution side to the defense side of a criminal case); (iii) The representation does not involve the assertion of a claim by one client against another client who is represented by the lawyer in the same case pending before a court or other tribunal; and (iv) Each affected client gives informed consent, confirmed in writing. [RPC 1.7(b)] Note that condition (i), above, creates a “reasonable lawyer” standard— i.e., if a reasonable lawyer looking at the facts would have to advise an affected client not to consent, then the conflict is “unconsentable,” and client consent will not resolve the conflict. [RPC 1.7, comment 14] Note also that the rule requires “informed” consent, which means that each affected client must understand how the conflict could harm her. [RPC 1.7, comment 18] Sometimes a lawyer’s duty of confidentiality to one client prevents him from disclosing information that another client needs in order to understand the conflict of interest. In this situation, the conflict is unconsentable. [RPC 1.7, comment 19] Consent also must be “confirmed in writing,” which means either of two things: (i) the client executes a writing, or (ii) the lawyer promptly records and transmits a confirmatory writing to the client after the client orally consents to the conflict. Under the RPC, a “writing” includes electronic transmissions (e.g., e-mail). [RPC 1.7, comment 20] 1) b. Consent to Future Conflicts Whether a client may effectively consent to conflicts that may arise in the future depends on the test in a., above. Such a waiver is more likely to be valid if it is comprehensive and specific—i.e., the lawyer explains the types of future representations that might arise and the actual and reasonably foreseeable adverse consequences of those representations. Thus, if the client agrees to consent to a particular type of conflict with which the client is already familiar, the consent is likely to be valid. Open-ended, general waivers are likely to be ineffective because it is not reasonably likely that the client will have understood the material risks involved. [RPC 1.7, comment 22] Representation of Multiple Parties in a Single Matter A common issue arises when two or more parties ask a single lawyer to represent them in a matter. The advantages of having a single lawyer are obvious: the cost will probably be lower than having two lawyers, and the single lawyer can present a united front for both clients. The disadvantages are also obvious: the interests of the two clients may be mostly harmonious but partly or potentially in conflict (e.g., one personal injury plaintiff may need money badly and may therefore be anxious to accept a joint settlement offer that the other plaintiff thinks is too low). 1) Criminal Litigation The Sixth Amendment guarantees every criminal defendant the right to effective assistance of counsel. Because the interests of criminal co-defendants are very likely to diverge, ordinarily a lawyer should not try to defend two people in a criminal case. [RPC 1.7, comment 23] 2) Civil Matters In civil litigation and in nonlitigation matters, one lawyer may represent two parties or clients whose interests are potentially in conflict if, after analyzing the facts and applicable law, the lawyer concludes that she can effectively represent both clients. (If the clients’ positions are already antagonistic, the lawyer generally should not take on the representation.) The lawyer must obtain the clients’ consent as described in a., above. In doing so, the clients must be advised that if litigation arises between them regarding the matter, neither of them can claim the attorney-client privilege for their communications with that lawyer. Therefore, the lawyer should ordinarily make clear to all clients at the outset that whatever one client discloses will be shared with all of the other clients. If the potential conflict eventually ripens into a present conflict, the lawyer must analyze the situation again and re-address the conflict, which may involve repeating the steps in a., above. However, if a reasonable lawyer would have to advise either of the two clients not to consent, the lawyer must withdraw. [RPC 1.7 and comments] The lawyer may continue to represent one consenting client, but only if the client who is dropped provides informed consent, confirmed in writing. [See RPC 1.9(a)] c. Specific Kinds of Conflicts RPC 1.8 augments the foregoing general rule on concurrent conflicts by identifying specific conflict situations. As you will see, some of the situations can be solved by obtaining the affected clients’ informed consents, and others cannot. 1) Ownership or Financial Interest Adverse to Client A lawyer must not enter into a business transaction with a client or knowingly acquire an ownership or other pecuniary interest adverse to a client unless: (i) The transaction and terms under which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client; (ii) The client is informed in writing of the desirability of seeking, and is given a reasonable chance to seek, the advice of independent legal counsel on the transaction; and (iii) The client understands the lawyer’s role in the transaction, including whether the lawyer is representing the client, and the client gives informed consent in a signed writing. [RPC 1.8(a)] a) Exception for Standard Commercial Transactions The prohibition against entering into a business transaction with a client does not apply to standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, such as banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities services. The reason for this exception is that the lawyer has no advantage in dealing with the client in such situations. [RPC 1.8, comment 1] 2) Improper Use of Information Adverse to Client A lawyer must not use information relating to the representation of a client to the disadvantage of the client unless the client gives informed consent, except as permitted or required by the Rules of Professional Conduct. [RPC 1.8(b)] 3) Designating Oneself as a Beneficiary A lawyer must not solicit a substantial gift from a client or prepare an instrument giving the lawyer or a person related to the lawyer any substantial gift from a client, including a testamentary gift, except when the client is related to the donee. [RPC 1.8(c)] For purposes of this rule, “related” means a spouse, child, grandchild, parent, grandparent, or other person with whom the lawyer or client has a close, familial relationship. 4) Literary or Media Rights Based on Representation Prior to the conclusion of representation of a client, a lawyer must not make or negotiate an agreement giving the lawyer literary or media rights to a portrayal or account based, in substantial part, on information relating to the representation. [RPC 1.8(d)] 5) Financial Assistance to Client A lawyer must not provide financial assistance to a client in connection with pending or contemplated litigation, except that: (i) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and (ii) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client. [RPC 1.8(e)] 6) Compensation from Party Other than Client A lawyer must not accept compensation for representing a client from someone other than the client unless: (i) the client gives informed consent, (ii) there is no interference with the lawyer’s independence of professional judgment or with the lawyer-client relationship, and (iii) information relating to the representation of the client is protected as required by RPC 1.6 (relating to confidentiality of information). [RPC 1.8(f)] 7) Aggregate Settlement or Agreement in Multiple Representation A lawyer who represents two or more clients must not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregate agreement as to guilty or no contest pleas, unless each client gives informed consent in a signed writing. The lawyer’s disclosure must explain the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement or agreement. [RPC 1.8(g)] 8) Limiting Liability for Malpractice A lawyer must not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement. [RPC 1.8(h)] 9) Settling Malpractice Claim with Unrepresented Client or Former Client A lawyer must not settle a claim or potential claim for malpractice liability with an unrepresented client or former client without advising that person in writing that independent counsel is desirable and giving that person a reasonable chance to consult with independent counsel. [RPC 1.8(h)] 10) Proprietary Interest in the Cause of Action A lawyer must not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may: (i) acquire a lien authorized by law to secure the lawyer’s fee or expenses, and (ii) contract with a client for a reasonable contingent fee in a civil case. [RPC 1.8(i)] 11) Sexual Relations Between Lawyer and Client A lawyer must not have a sexual relationship with a client. This rule applies even if the relationship is consensual, and even if the client is not harmed. The sole exception to the rule is when the lawyer and client had a consensual sexual relationship before the lawyer-client relationship began. [RPC 1.8(j)] Even if there was a preexisting consensual relationship, the lawyer should make sure that his ability to represent the client will not be affected by the relationship. [RPC 1.8(j), comment 18] Similarly, a lawyer who represents an organization (either as outside or inside counsel) must not have a sexual relationship with a constituent of the organization who supervises the lawyer’s work or consults the lawyer about the organization’s legal matters. [RPC 1.8(j), comment 19] A conflict caused by a sexual relationship is not imputed to other lawyers in the lawyer’s firm. 2. Conflict of Interest Regarding Former Client A lawyer who formerly represented a client in a matter may not thereafter represent another person in the same or a substantially related matter if that person’s interests are materially adverse to those of the former client, unless the former client gives informed consent, confirmed in writing. [RPC 1.9(a)] Also, a lawyer is prohibited from knowingly representing a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client: (i) whose interests are materially adverse to that person; and (ii) about whom the lawyer had acquired information protected by RPC 1.6 (relating to confidentiality of information) and RPC 1.9(c) (relating to using or revealing information) that is material to the matter, unless the former client gives informed consent, confirmed in writing. [RPC 1.9(b)] a. 3. Using or Revealing Information A lawyer who has formerly represented a client in a matter or whose present or former firm has done so may not thereafter: (i) use information relating to the representation to the disadvantage of the former client, except as permitted or required by the RPC (e.g., relating to confidentiality of information), or when the information has become generally known; or (ii) reveal information relating to the representation except as permitted or required by the RPC. [RPC 1.9(c)] Duties to Prospective Client A prospective client is a person who consults with a lawyer about the possibility of forming a client-lawyer relationship with respect to a matter. [RPC 1.18(a)] The attorney-client privilege protects confidential communications between a lawyer and a prospective client. Also, the ethical duty of confidentiality applies to such consultations. Thus, the lawyer must not reveal or use information learned during the consultations, unless an exception to the duty of confidentiality applies. [RPC 1.18(b)] a. Consultation Whether communications constitute a consultation making a person a prospective client depends on the circumstances. It is likely that a consultation has occurred when: (i) A lawyer, either in person or through advertising, specifically requests or invites the submission of information about a potential representation without clear warnings that limit the lawyer’s obligations; and (ii) A person provides information in response. However, a consultation does not occur when a person provides information to a lawyer in response to an advertisement that merely consists of the lawyer’s biographical information, areas of practice, contact information, or legal information of general interest. Furthermore, someone who contacts the attorney in an effort to disqualify the attorney (i.e., by creating a conflict of interest) is not a prospective client. [RPC 1.18, comment 2] b. Lawyer’s Duty Concerning Conflict of Interest Subject to the exceptions stated in c., below, a lawyer who obtains confidential information during a consultation with a prospective client must not later represent a different person with interests materially adverse to those of the prospective client, in the same or a substantially related matter, if the confidential information could significantly harm the prospective client. [RPC 1.18(c)] This conflict is imputed to others in the lawyer’s firm, but the imputation can be overcome by screening, as stated in c., below. c. How to Overcome a Prospective Client Conflict One way to overcome the conflict described above is to obtain informed consent, confirmed in writing, from both the affected client and the prospective client. [RPC 1.18(d)(1)] A second way to overcome the conflict is to satisfy all of the following conditions: (i) Demonstrate that the lawyer who held consultations with the prospective client took care to avoid exposure to more confidential information than was necessary to determine whether to represent the prospective client; (ii) Demonstrate that the disqualified lawyer is timely screened from any participation in the matter and will not share the fee; and (iii) Give written notice to the prospective client. [RPC 1.18(d)(2)] 4. Problems with Testifying for Client An attorney ordinarily may not represent a client in litigation where the attorney is likely to be a necessary witness. (Note: An attorney may act as advocate in a trial in which another attorney in the attorney’s firm is likely to be called as a witness unless precluded from doing so by the rules relating to conflict of interest.) If an attorney is likely to be a necessary witness, the attorney should refuse employment or, if he has already been retained, should withdraw from the case. There are three recognized exceptions to this prohibition noted below. [RPC 3.7] a. Uncontested Issue If the attorney’s testimony will relate solely to an uncontested issue, representation is not prohibited. Example: In a proceeding concerning an uncontested will, an attorney may testify as to the testamentary capacity of the decedent. 5. b. Nature and Value of Legal Services If an attorney’s testimony will concern only the nature and value of legal services rendered to the client, the attorney will not be prohibited from representing the client. Example: B’s suit against C includes a legitimate cause of action for attorneys’ fees. Attorney X may testify as to the value of the services that he has rendered to B. c. Substantial Hardship If the withdrawal of the attorney for the purpose of testifying would result in substantial hardship to the client (e.g., because of the distinctive value of the attorney or firm to the case), the attorney may continue to represent the client. Example: X represents B in a highly complex case that is in the middle of trial. Defendant C attempts to bribe X. X’s testimony becomes highly relevant to the case at this point, but he cannot withdraw from the case because B would not be able to secure adequate replacement representation on such notice. X should be permitted to testify and to continue to represent B. Conflicts in Corporate Representation A special problem of multiple representation occurs when a lawyer is asked to represent both an entity such as a corporation and its labor force or a corporation and its governing components (i.e., its directors and officers). [RPC 1.13] a. Lawyer Represents Organization A lawyer employed or retained to represent an organization represents the organization acting through its duly authorized constituents. b. Lawyer Must Act in Best Interest of Organization If a lawyer for an organization knows that an officer, employee, or other person associated with the organization is engaged in action, intends to act, or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer must proceed as is reasonably necessary in the best interest of the organization. 1) Duty to Report to Higher Authority in the Organization In the situation described above, the lawyer must ordinarily report the violation to a higher authority in the organization (e.g., a corporation’s president). If necessary, the lawyer must report it to the organization’s highest authority (e.g., a corporation’s outside directors). RPC 1.13(b) does, however, give the lawyer a narrow range of discretion—she need not report a violation to a higher authority if she reasonably believes that the organization’s best interest does not require the violation to be reported. 2) Duty to Report Outside the Organization If the lawyer reports the violation to the organization’s highest authority, but the highest authority fails to take timely, appropriate action, the lawyer may report the relevant information to appropriate persons outside of the organization. This is true even if the information would otherwise be protected by the duty of confidentiality (see V.B.2., infra). [RPC 1.13(c)] However, the lawyer’s authority to report to outsiders applies only if, and to the extent that, the lawyer reasonably believes that reporting is necessary to prevent substantial injury to the organization. The authority to report to outsiders does not apply to a lawyer who is hired by the organization to investigate an alleged violation of law or to defend the organization or its constituents against a claimed violation of law. [RPC 1.13(d)] Example: Attorney A’s corporate client C produces frozen chicken pies. C’s production process creates large quantities of liquid waste, which C is supposed to pump into recycling tanks. C’s manufacturing vice president sometimes orders his workers to dump the waste into a ditch that drains into some neighboring wetlands; the dumping is cheaper and quicker, but it gradually destroys the wetlands in violation of state and federal environmental laws. When A learned about the dumping, she reported it to C’s president and warned him that C will be fined millions of dollars if it gets caught. C’s president ignored A’s warning, so A reported the matter to the highest authority in the company—the audit committee of the board of directors. The audit committee did nothing. If A reasonably believes that the company will be substantially injured if the dumping continues, A may report the relevant information to the appropriate environmental enforcement authority, even if some of that information would otherwise be protected by the duty of confidentiality. [See RPC 1.13(c)] 3) Whistleblower Protection A lawyer who reasonably believes that she has been fired because of actions she took pursuant to RPC 1.13(b) or (c), or who withdraws when circumstances require or permit her to do so, must proceed as she reasonably believes necessary to inform the organization’s highest authority of her firing or withdrawal. [RPC 1.13(e)] c. Explaining Identity of Client In dealing with an organization’s directors, officers, employees, members, shareholders, or other constituents, a lawyer must explain the identity of the client when she knows or reasonably should know that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing. [RPC 1.13(f)] d. Multiple Representation Permissible A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders, or other constituents, subject to the provisions of RPC 1.7 (relating to conflict of interest—disclosure and consent requirements). If the organization’s consent to the dual representation is required, the consent must be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders. [RPC 1.13(g)] e. Securities Lawyer’s Duties Under Sarbanes-Oxley Act In the Sarbanes-Oxley Act of 2002, Congress instructed the Securities and Exchange Commission (“SEC”) to make rules for securities lawyers who discover their clients violating federal or state securities laws or similar laws. The SEC rules [see 17 C.F.R. §§205.1 et seq.] apply to “securities lawyers,” meaning not only lawyers who practice before the SEC, but also lawyers who advise clients about documents that will be filed with the SEC or who advise clients about whether information must be filed with the SEC. 1) Securities Lawyer’s Duty to Report to Chief Legal Officer If a securities lawyer becomes aware of credible evidence that her client is materially violating a federal or state securities law, she must report the evidence to her client’s chief legal officer (“CLO”). The same reporting duty applies to credible evidence that one of her client’s personnel has breached a fiduciary duty under federal or state law or has committed a “similar material violation” of federal or state law. 2) CLO’s Duty to Investigate and Obtain “Appropriate Response” from Client The CLO must investigate the situation to find out whether a violation occurred. If the CLO concludes that no violation occurred, he must report that conclusion to the securities lawyer. If the CLO concludes that a violation did occur, is occurring, or is about to occur, the CLO must take all reasonable steps to get the client to make an “appropriate response.” Roughly stated, that means that the client must stop or remedy the violation and make sure that it does not happen again. The CLO must report those results to the securities lawyer. 3) Securities Lawyer’s Duty If CLO Fails to Obtain “Appropriate Response” If the securities lawyer believes that the CLO did not achieve an appropriate response from the client, the securities lawyer must then report the evidence to one of the following: (i) the client’s entire board of directors, (ii) the audit committee of the board, or (iii) a committee made up of outside directors (directors who are not beholden to the client). Notice that the Sarbanes-Oxley reporting rule is mandatory, unlike RPC 1.13, which gives the lawyer some discretion about whether to report a violation to a higher authority in the organization. 4) Securities Lawyer May Alert the SEC The Sarbanes-Oxley rules permit, but do not require, the securities lawyer to reveal to the SEC, without the client’s consent, any confidential information that is reasonably necessary: (i) to stop the client from committing a violation that will cause substantial financial injury to the client or its investors; (ii) to rectify such a financial injury if the lawyer’s services were used to further the violation; or (iii) to prevent the client from committing or suborning perjury in an SEC matter or lying in any matter within the jurisdiction of any branch of the federal government. A securities lawyer who acts in accordance with the Sarbanes-Oxley rules cannot be held civilly liable for doing so and cannot be disciplined under any inconsistent state rule. [See 17 C.F.R. §§205.6(c), 205.7] 5) Protection for Securities Lawyer’s Job If a securities lawyer is fired for doing what the Sarbanes-Oxley rules require, she may report the firing to the client’s board of directors (thus setting up the client for an expensive wrongful termination suit). 6. 7. Imputation of Conflicts a. Prohibition of One Lawyer Imputed to Entire Firm While lawyers are associated in a firm, none of them may knowingly represent a client when any one of them practicing alone would be prohibited from doing so by RPC 1.7 (relating to conflict of interest with current client) or RPC 1.9 (relating to conflict of interest duties owed to former clients), unless: (i) the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm; or (ii) the disqualified lawyer is timely screened from any participation in the matter (i.e., does not discuss the case with others at the firm, does not have access to case files), the disqualified lawyer is apportioned no part of the fee from the matter (but receiving a previously established salary is allowed), and the former client is given notice. [RPC 1.10(a)] b. Effect of Lawyer’s Termination with Firm When a lawyer has terminated an association with a firm, the firm is not prohibited from thereafter representing a person with interests materially adverse to those of a client represented by the formerly associated lawyer and not currently represented by the firm unless: (i) the matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and (ii) any lawyer remaining in the firm has information protected by RPC 1.6 (relating to confidentiality) and RPC 1.9(c) (relating to using or revealing information pertaining to the representation) that is material to the matter. [RPC 1.10(b)] c. Waiver of Imputed Disqualification A disqualification may be waived by the affected client. [RPC 1.10(c)] Successive Government and Private Employment a. Prior Public Legal Employment May Create Conflict of Interest Except as otherwise expressly permitted by law, a lawyer who formerly worked as a public officer or government employee must not represent a private client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee, unless the appropriate government agency gives informed consent, confirmed in writing, to the representation. Also, the lawyer is subject to RPC 1.9(c) (relating to using or revealing information relating to the representation of a former client). For purposes of this rule, a “matter” is one that involves a specific party or parties. Thus, researching or drafting legislation is not a “matter” giving rise to a conflict. [RPC 1.11(a), (e)] b. Lawyer’s Conflict of Interest Not Necessarily Imputed to Firm No lawyer in a firm with which the former government lawyer is associated may knowingly undertake or continue representation in a matter in which the lawyer participated personally and substantially as a public officer or employee unless: (i) The disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and