June 29, 2000
American Bar Association
Ethics 2000 Commission
c/o Ms. Susan Campbell
541 North Fairbanks Court
Chicago, IL 60611-3314
Re: Proposed Model Rules 1.7, 1.8, 1.9 &1.10
Ladies and Gentlemen:
I write to make two points regarding your current proposed draft. The first is to support the proposal submitted by Peter Moser, Chair of the ABA Standing Committee on Ethics and Professional Responsibility, to amend Rule 1.10 to provide for screening of lateral entrants to a law firm as a cure for a conflict of interest. The second is to reiterate the point I made orally at the Commission's public hearing last August in Toronto that Rule 1.8(h) ought to be amended to permit waiver of future malpractice liability where the client is independently represented and the conduct involved will not violate another of the Model Rules.
The Rules should be Amended to
Provide for Screening of Lateral Entrants
Mr. Moser's proposal, modeled after the provisions of the Washington Rules of Professional Conduct, provides for screening of lateral entrants, with notice to the party that the lawyer previously represented, in lateral transfer situations - i.e., where the moving lawyer seeks to join the firm opposing a client of the lawyer's former firm. This proposal differs from the current draft of the rules in that it would be available to screen even those lawyers that have significant material information relevant to an ongoing controversy, so long as appropriate screening was done in a timely fashion. I support Mr. Moser's proposal for the following reasons.
Formalized Screening Works
I am convinced that formalized screening in "lateral transfer" situations works, whether done by consent, or in government lawyer situations governed by Model Rule 1.11, or in private firm situations in one of the states that permits screening by rule or case precedent. I come from Illinois which, for some nine years, has provided for screening by rule (See Rule 1.10 of the Illinois Rules of Professional Conduct). My anecdotal experience (I speak with many Illinois law firms on ethics matters each year) indicates to me that when a formal screen is erected, pursuant to Rule 1.10 of the Illinois Rules of Professional Conduct, lawyers take their obligations seriously and abide by the screen. More importantly, the Attorney Registration and Disciplinary Commission of the Illinois Supreme Court (the lawyer disciplinary agency in Illinois) agrees.
I have attached as Ex. A to this submission a letter from Mary Robinson, the head of the Illinois ARDC, indicating that the ARDC has had virtually no complaints alleging that Illinois lawyers have violated the provisions of a formal screen constructed pursuant to IRPC 1.10. I believe Lucian Pera will be communicating similar information to you from the Tennessee State Bar Association. Ex. B is a letter containing similar information relating to the Washington State Bar Association. Finally, Ex. C is an article written by Peter Jarvis of the Oregon Bar demonstrating that Oregon, like these other jurisdictions, has had no screening problems during the many years its rule has been in place. (I have been authorized by Mr. Jarvis to send his article, which will soon appear in The Professional Lawyer, to you.) Each of these states has had a screening rule, or court decisions permitting screening in lateral transfer situations, for the better part of this decade. Taken together these submissions indicate that screening works in those states that have adopted it, and will cause no substantial problems, should this commission reverse its stance and adopt a screening measure similar to that proposed by Mr. Moser.
Let me be clear. I am not suggesting that no lawyer has ever breached a screen. Indeed, I am sure that such an occurrence has taken place. Violations of the rules of professional conduct do occur. These letters, however, accord with my anecdotal experience in dealing with lawyers from all over the United States on this ethics matter. That is, when lawyers recognize a conflict or other ethics problems, and adopt a formal solution to that problem a rule-based or consent screen they attempt to follow the procedure set up by their firm's ethics partner. In my view, a far greater problem than breaches of screens is the failure to recognize that a conflict exists requiring a consent and/or the erection of an ethical wall.
Critics of screening sometimes imply that the lack of complaints about breaches of screens comes from lack of knowledge concerning the violations. While it is certainly possible that an occasional undetected violation may occur, the commission should keep in mind that many ethical walls relate to litigation matters where the screened lawyer's former firm represents a party adverse to the lateral's new firm. In such circumstances the lateral's former firm is usually primed to look for evidence of a violation of the screen (e.g., a litigation maneuver suggesting use of confidential information). A violation of a screen could result in serious tactical disadvantage - including disqualification and other sanctions - to the lateral's new firm. It could also lead to reputational harm and disciplinary proceedings. Those are powerful motives to avoid a violation.
Those Commission members who practice in private law firms should ask themselves this question. Surely, your firm has participated in many "consent screens" over the years. Have your partners and associates violated their obligations under those consent screens? I assume not. If your firm has performed in an honest fashion, why assume that others will not? Absent evidence of a type that I have not seen, I believe it is a fair assumption that no substantial public harm will result from adoption of a screening rule similar to that proposed by Mr. Moser. The question remains as to what benefits will result from adoption of a lateral transfer screening rule (since the rule may have the downside of negative perception by some members of the public). I believe the benefits of the rule are substantial.
Benefits from Adoption of a
Lateral-Transfer Screening Rule
There are two primary benefits from a lateral-transfer screening rule. The first, and most obvious, is that job opportunity and mobility is increased for many lawyers, including younger lawyers, who may have worked on a matter, but then have an opportunity to obtain employment from the law firm representing an opposing party. Currently, the lawyer must go through the employment process, come to a semi-final arrangement with the prospective new firm, and then seek a consent from his current firm's client. That process is required even though the lateral only spent a small portion of her time working on the matter (as long as she had significant information about it). If the consent is denied, she is placed in a very difficult position. She is denied employment at the new firm, but is now in harm's way at her old firm because her firm now knows that she attempted to leave and join a competitor. That occurrence, and the possibility of similar occurrences, combine to make the lateral hiring process more difficult than it ought to be, for all parties concerned. This is particularly true in cities where there are a limited number of firms that do certain kinds of work.
Second, on occasion, lack of a screening rule deprives a client of counsel of its choice. Suppose a lateral previously worked on a transactional matter (at her former firm) for A, adverse to B represented by inside counsel. Lawyer moves from Firm 1 to Firm 2. A dispute results and A, represented by Firm 1 sues B. Firm 2 is asked by B, an existing client, to defend the lawsuit. Absent a screening rule, Firm 2 must decline, depriving B of counsel of its choice. A screening rule, implemented at the first opportunity by Firm 2, avoids that result.
If the Commission Declines to Adopt Mr. Moser's
Proposed Amendment, it should Consider Presenting that Proposal to the
House of Delegates as an Alternative Formulation
If a majority of the Commission rejects screening, the existence or non-existence of a screening provision in the Draft Model Rules is an appropriate situation for articulation of a minority position. Some of the issues considered by the Commission in adopting proposed Model Rules are technical in nature and may not be well understood by practicing lawyers who are not specialists in application of the ethics rules. That is not the case with screening. Many lawyers are familiar with the use of consent screens, or screens used under Rule 1.11 to allow government lawyers to join a firm opposing the government. They have an adequate basis to adopt an informed opinion on this issue. Members of the House of Delegates can understand and appreciate the issue here is public perception and the chance of dishonest or stupid conduct on the part of lawyers who have committed to a screen a sufficient detriment to the public welfare to justify the restraint that is imposed by Rule 1.10's imputation provisions on the rights of lawyers to freely change employment and clients to select counsel of their choice. If the Commission rejects screening, it should put the question to the House of Delegates by promulgating Mr. Moser's proposal as an alternative formulation.
The Commission should Amend Rule 1.8 (h) to Permit a Lawyer to
Limit Future Malpractice Liability where the Client is
Independently Represented and the Conduct Involved does not
Violate Other Provisions of These Rules
In one of the drafts circulated last fall, a provision appeared which would have amended Rule 1.8(h) to permit a lawyer to limit future malpractice liability if the client was independently represented by other counsel (I believe proposal was drafted by Professor Morgan). That was essentially the same proposal that I made to the Commission, orally, at its public hearing in Toronto last August. Unfortunately, in my view, the Commission rejected Professor Morgan's proposal. I believe the Commission should reconsider.
Let me be clear. I do not propose allowing a client to waive liability arising from conduct that would constitute an independent violation of the rules, e.g., assisting a client in fraudulent or illegal conduct violative of Rule 1.2(d), or violative of court orders under Rule 3.4. There are, however circumstances where a sophisticated client represented by independent counsel (e.g., a corporation represented by in-house counsel) wants to go forward with a risky transaction and is willing to waive its future claims for malpractice (it cannot, of course, waive a third party's claims). A good example might be proceeding on a new and novel transaction to try to take advantage of a perceived "loophole" in the federal tax laws. If a sophisticated client waives liability in such circumstances the waiver should be valid, whether or not new management or the client changes its mind (after suffering an adverse result in tax court) and sues the lawyer for malpractice.
Where truly independent counsel is involved there is simply no valid reason not to adopt Professor Morgan's proposed amendment. The comments to Rule 1.8(h) may be used to protect against abuse of the "independent counsel" provision.
The views expressed in this letter are my own, and do not necessarily set forth the viewpoint of any of my colleagues at ALAS. I thank you for your consideration of these views.
Brian J. Redding
Vice President and
Associate Loss Prevention Counsel