January 20, 2021

Professional Responsibility

Professional Responsibility

The Corporate Counsel and Pro Bono Service
      Robert L. Hill and Thomas J. Calvocoressi, 42(3): 675–96 (May 1987)
This Article briefly examines the history of the delivery of legal services to the indigent in the United States and the corporate lawyer's obligation to provide pro bono service under the ABA Model Code of Professional Responsibility and the ABA Model Rules of Professional Conduct. It also reviews a number of active corporate law department pro bono programs and the role played by the American Bar Association and the American Corporate Counsel Association in encouraging these programs. Finally, it offers solutions to some potential problems corporate counsel might encounter in providing pro bono services.

Lawyers and Leadership
      Brian D. Forrow, 44(4): 1699–1705 (Aug. 1989)

Risks of Violation of Rules of Professional Responsibility by Reason of the Increased Disparity Among the States
      Committee on Counsel Responsibility, 45(3): 1229–39 (May 1990)
This Report points out that, in light of the increasing disparity among the states in standards of professional responsibility and the similar increase in multistate law practice, there is a need to maximize uniformity in those standards, develop clear choice of law rules concerning professional responsibility, and establish rules of comity to minimize conflicts. The Report makes various realistic suggestions aimed at achieving these results.

Employment of Attorneys by Debtors in Possession: A Proposal for Modification of the Existing Attorney Eligibility Provisions of the Bankruptcy Code and the Existing Conflict of Interest Provisions of the Ethical Rules of Professional Responsibility
      Richard L. Epling and Claudia G. Sayre, 47(2): 671–710 (Feb. 1992)
Under the Bankruptcy Code, professionals who are proposed for employment by both trustees and debtors in possession must satisfy virtually the same eligibility test. This Article argues that the Bankruptcy Code should employ different eligibility standards for the employment of professionals by debtors in possession as opposed to trustees and proposes a new eligibility standard for this purpose. Because local ethical codes also affect an attorney's eligibility for representation of a debtor in possession, the Article discusses the necessity of amending the ethical codes to ensure that they permit the implementation of an attorney eligibility standard of national scope in the context of Chapter 11 reorganizations.

OTS vs. Kaye, Scholer: An Assault on the Citadel
      Lawrence J. Fox, 48(4): 1521–42 (Aug. 1993)
The OTS enforcement proceeding against Kaye, Scholer, Fierman, Hays & Handler sent shock waves through the profession raising fundamental questions regarding the ethical obligations of lawyers for regulated clients. The author seeks to demonstrate the significant departures in the OTS positions from the Model Rules of Professional Conduct. Topics addressed include confidentiality, duty of disclosure, when to consider going up the corporate ladder, and conflicts of interest.

Regulatory Expectations Regarding the Conduct of Attorneys in the Enforcement of the Federal Securities Laws: Recent Developments and Lessons for the Future
      James R. Doty, 48(4): 1543–66 (Aug. 1993)
Recent administrative proceedings by federal regulatory agencies against attorneys and law firms have rekindled debate over the extent to which lawyers are themselves the proper subject of administrative investigation and prosecution. The securities bar has for more than a decade engaged in a sustained colloquy, among themselves and federal regulators, regarding the circumstances under which a lawyer's advisory activities may invoke the administrative process. The author, formerly General Counsel of the SEC, addresses the implications of recent SEC administrative proceedings for the law, attorney liability, and the standards that would guide the SEC in the evolving era.

Law Firm Policies and Procedures in an Era of Increasing Responsibilities: Analysis of a Survey of Law Firms
      Stephen R. Volk, Arthur Norman Field, and Joseph T. McLaughlin, 48(4): 1567–82 (Aug. 1993)
This Article analyzes and discusses the results of a survey of policies and procedures of twenty-six of the nation's larger law firms. The survey covers a host of areas ranging from investment policies for lawyers and nonlawyers to training and supervision of attorneys.

Administrative Actions Against Lawyers Before the SEC
      Simon M. Lorne and W. Hardy Callcott, 50(4): 1293–1332 (Aug. 1995)
Since the early 1980s, the SEC has largely avoided bringing administrative proceedings against lawyers. Two recent developments, the passage of the Securities Law Enforcement Remedies Act of 1990 and the Supreme Court's decision in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A ., 511 U.S. 164 (1994), challenge the SEC's ability to maintain this practice of prosecutorial restraint. This Article discusses the situations in which the SEC should bring administrative proceedings against lawyers, the situations in which lawyers' clients have an interest in a zealous representative that should counsel the SEC to challenge attorney misconduct only before an Article III federal judge, and the practical constraints that sometimes may encourage the SEC to consider administrative proceedings to be a preferable forum.

Conflict of Interest Issues
      Task Force on Conflicts of Interest, 50(4): 1381–1426 (Aug. 1995)
Conflicts of interest cause increasing problems for lawyers and their clients, particularly lawyers practicing in large firms and their corporate clients. The Task Force has prepared a Memorandum that addresses a number of the conflict-of-interest issues that are most troublesome in today's law practice. The Memorandum suggests one or more written agreements to be signed by lawyers and their clients to resolve these issues before they arise and contains forms to handle some of the issues and procedures.

Statements of Principles
      Task Force on Lawyer Business Ethics, 51(3): 745–71 (May 1996)
Lawyers and clients must deal with each other on the business arrangements between them. The Statements of Principles address just how and what a client and lawyer should understand between themselves on matters of time charges and charges for disbursements and other costs. The Statements also discuss the ethical aspects of lawyer marketing activities.

Statements of Principles
      Task Force on Lawyer Business Ethics, 51(4): 1303–30 (Aug. 1996)
( Editor's note: Revised and republished from the May 1996 issue of The Business Lawyer. See Statements of Principles, 51 BUS. LAW. 745 (1996)).

Business and Ethics Implications of Alternative Billing Practices: Report on Alternative Billing Arrangements
      Committee on Lawyer Business Ethics, 54(1): 175–207 (Nov. 1998)
The increasing use of alternative billing practices in place of hourly billing adds new dimensions to the attorney- client relationship. In addition to discussing a variety of alternative fee arrangements, this Report also explores issues of professional liability and ethical conduct that may arise in the unique context of these arrangements and proposes clarifications where applicable to the professional standards that address those concerns. The Report provides useful guidance to both law firms and their clients on maximizing the benefits and minimizing the consequences of alternative billing.

The Lawyer as Director of a Client
      The Committee on Lawyer Business Ethics of the ABA Section of Business Law , 57(1): 387 (Nov. 2001)

Legal Ethics, Confidentiality, and the Organizational Client
      Larry P. Scriggins, 58(1): 123–144 (Nov. 2002)
The ethical rules governing lawyers representing organizational clients when the lawyer encounters actual or potential criminal or fraudulent conduct on the part of the client, or those acting for it, are in sharp focus today. Although there is uniformity in some respects, there are significant differences among the existing rules in the states, the Model Rules of Professional Conduct as recommended by the ABA Commission on Evaluation of the Rules of Professional Conduct (the Ethics 2000 Commission), those rules as approved by the ABA House of Delegates, and the recommendations of the ABA Task Force on Corporate Responsibility in its preliminary report dated July 16, 2002 (printed at p. 189). The Sarbanes-Oxley Act enacted on July 30, 2002, directs the Securities and Exchange Commission (SEC) to adopt ethical rules for lawyers representing issuers before it dealing with actions lawyers should take within the organization when there is evidence of financial fraud, and authorizes the SEC to adopt additional rules for that situation. The author discusses the differences among existing rules, the ABA Commission's recommendations, and the recommendations in the preliminary report of the ABA Task Force on Corporate Responsibility currently in the process of review in public hearings. The author suggests that the original recommendations of the Ethics 2000 Commission represent the best choice for the states, that the SEC should adopt rules consistent with those recommendations as to action within the organization, and that the SEC should not promulgate rules that would place lawyers in the position of acting under differing and conflicting standards in the same matter.

Enron and the Corporate Lawyer
      Roger C. Cramton, 58(1): 143–188 (Nov. 2002)
The Enron collapse and other corporate failures, some accompanied by massive fraud, have raised questions concerning a lawyer's responsibilities when the lawyer learns, or has reason to know, that agents of the corporation are engaged in conduct that is unlawful or that is in violation of their fiduciary duty to the corporation. The legal and ethical rules governing a lawyer's responsibility in these troublesome situations are controverted, often ambiguous or discretionary, and sometimes lawyer-protective. This Article summarizes the law governing such matters as the scienter requirement, the duty to make further inquiry when circumstances suggest the possibility of misconduct by corporate agents, and the new requirement included in the Sarbanes-Oxley Act of 2002 that the lawyer "climb the corporate ladder" to the board of directors, if necessary, to prevent or rectify the wrongful conduct. The vexing question of disclosure of confidential information outside the corporation is also considered. The Article closes with recommendations for legislative, regulatory or rule changes that would provide greater guidance to lawyers and more protection to public interests.

Empty Voting and Hidden (Morphable) Ownership: Taxonomy, Implications, and Reforms
     Henry T. C. Hu and Bernard Black, 61(3):1011–1070 (May 2006)
Most American publicly held corporations have a one-share, one-vote structure, in which voting power is proportional to economic ownership. This structure gives shareholders economic incentives to exercise their voting power well and helps to legitimate managers' exercise of authority over property the managers do not own. Berle-Means' "separation of ownership and control" suggests that shareholders face large collective action problems in overseeing managers. Even so, mechanisms rooted in the shareholder vote, including proxy fights and takeover bids, constrain managers from straying too far from the goal of shareholder wealth maximization.

In the past few years, the derivatives revolution, hedge fund growth, and other capital market developments have come to threaten this familiar pattern throughout the world. Both outside investors and corporate insiders can now readily decouple economic ownership of shares from voting rights to those shares. This decoupling—which we call "the new vote buying"—is often hidden from public view and is largely untouched by current law and regulation. Hedge funds, sophisticated and largely unfettered by legal rules or conflicts of interest, have been especially aggressive in decoupling. Sometimes they hold more votes than economic ownership, a pattern we call "empty voting." That is, they may have substantial voting power while having limited, zero, or even negative economic ownership. In the extreme situation of negative economic ownership, the empty voter has an incentive to vote in ways that reduce the company's share price. Sometimes hedge funds hold more economic ownership than votes, though often with "morphable" voting rights—the de facto ability to acquire the votes if needed. We call this "hidden (morphable) ownership" because under current disclosure rules, the economic ownership and (de facto) voting ownership are often not disclosed. Corporate insiders, too, can use new vote buying techniques.

This article analyzes the new vote buying and its corporate governance implications. We propose a taxonomy of the new vote buying that unpacks its functional elements. We discuss the implications of decoupling for control contests and other forms of shareholder oversight, and the circumstances in which decoupling could be beneficial or harmful to corporate governance. We also propose a near-term disclosure-based response and sketch longer-term regulatory possibilities. Our disclosure proposal would simplify and partially integrate five existing, inconsistent share-ownership disclosure regimes, and is worth considering independent of its value with respect to decoupling. In the longer term, other responses may be needed; we briefly discuss possible strategies focused on voting rights, voting architecture, and supply and demand forces in the markets on which the new vote buying relies.

The Tensions, Stresses, and Professional Responsibilities of the Lawyer for the Corporation
     E. Norman Veasey and Christine T. Di Guglielmo, 62(1): 1–36 (Nov. 2006)
The lawyer for the corporation—whether general counsel, subordinate in-house counsel, or outside counsel—faces tensions, stresses, and professional responsibilities that often differ from those of lawyers who represent individuals. The primary reality that must be faced is that this lawyer's client is—or should be—only the corporate entity.

This article is an attempt to highlight some of the issues that corporate counsel, directors, and managers should seek to recognize and understand. The various challenges faced by both in-house and outside lawyers representing corporations include the maintenance of professional independence, dealing with "up-the-ladder" reporting obligations, seeking to serve the client's best interests through persuasive counseling, the separation of legal and business advice, and dealing with internal investigations, to name a few.

Moreover, in the case of general counsel, special tensions arise because he or she has only one client (the general counsel's employer) and answers both to the CEO and to the board of directors. When these two "bosses" have potential differences or conflicts, the tensions placed on the general counsel may be palpable and difficult to manage consistently with the lawyer's ethical duties, advancement of corporate interests, and job security. Most general counsel are up to the task and do not take the difficulties of their challenges for granted. It is also important, in our view, that directors understand corporate counsel's roles and challenges, as well as the value that counsel brings to the board's responsibilities.

We attempt to address questions of how to establish and fulfill counsel's obligation to be independent, when to advise the corporate actors to seek outside counsel, when to go up the ladder and to summon up the courage to do the right thing. Although we have tried to survey as much of the practical learning and the literature as is reasonable for an article, we believe we have only scratched the surface.

Calling All Deal Lawyers—Try Your Hand at Resolving Disputes
     James C. Freund, 62(1): 37–54 (November 2006)
This article is intended as a wake-up call to deal lawyers, inside corporate counsel, and others who negotiate agreements in the commercial world—urging them to become more involved in resolving business disputes by negotiation and, where appropriate, through mediation. The author makes the case that deal lawyers—who too often defer to litigators to handle these matters—ought to apply their problem-solving skills, ability to strike advantageous compromises of tough transactional issues, and negotiating prowess to the resolution of disputes. The article includes a discussion of why settlement usually makes more sense than going to trial, why resolving disputes is so difficult, the reasons that many deal lawyers don't get involved, why they should, early steps to prevent disputes from ending up in litigation, and how mediation can be helpful to reach negotiated solutions.

Internal Investigations and the Defense of Corporations in the Sarbanes-Oxley Era
     Robert S. Bennett, Alan Kriegel, Carl S. Rauh, and Charles F. Walker, 62(1): 55–88 (Nov. 2006)
Internal investigations long have been an integral part of the successful defense of corporations against charges of misconduct, as well as an important board and management tool for assessing questionable practices. With the heightened standards of conduct and increased exposure created by Sarbanes-Oxley, this essential instrument for safeguarding corporate interests has become even more crucial in identifying and managing risk in the enforcement arena. This article examines from a practitioner's standpoint when and how internal investigations should be conducted in order to protect the corporation in criminal, civil and administrative proceedings. Particular attention is paid to the issues created by a concurrent government investigation and in dealing with employees and former employees in the course of an investigation. The article also addresses the role of the Audit Committee under Sarbanes-Oxley, and the important issue of reporting the findings of the investigation to appropriate corporate officials. The subject of self-reporting by the Company to enforcement authorities is considered as well. In this context, the article explores the SEC's position on crediting self-reporting and cooperation as set forth in the Seaboard report; Department of Justice policy as embodied in the Thompson Memorandum; and the impact of the Federal Sentencing Guidelines for Organizations.

     Jeffrey L. Kwall and Stuart Duhl, 63(4): 1153–1186(August 2008)
Backdating is a much misunderstood and largely unexplored subject. It involves a wide range of conduct, some of which is an integral part of everyday law practice. To the layperson, backdating connotes wrongdoing. The propriety of backdating, however, depends upon its purpose and effect. Every lawyer should be capable of distinguishing legitimate backdating from improper backdating. Unfortunately, the dividing line is often far from clear. Little guidance exists on backdating, notwithstanding its pervasiveness, the complexity of determining its propriety, and the serious consequences of a misjudgment. An in-depth examination of the day-to-day backdating issues that most business lawyers face cannot be found in the literature. This Article begins to fill that void.

This Article explains the different meanings of backdating, explores the reasons why it is difficult to distinguish legitimate backdating from improper backdating, examines the impact of disclosure on the propriety of backdating, and develops an analytical approach to assist business lawyers in wrestling with the difficult situations most will confront in their daily practices. By illuminating the subject, it is hoped that this Article will begin a much-needed dialogue about backdating.

Working Paper: Best Practices for Debtors' Attorneys
      Task Force on Attorney Discipline Best Practices Working Group, Ad Hoc Committee on Bankruptcy Court Structure and the Insolvency Processes, ABA Section of Business Law, 64(1): 79-152 (November 2008)

Business Lawyers as Enterprise Architects
      George W. Dent, Jr., 64(2): 279-328 (February 2009)
What do business lawyers do? To that seemingly simple question there has been no good answer. For twenty-five years the most widely accepted explanation was that offered by Professor Ronald Gilson in his article Value Creation by Business Lawyers: Legal Skills and Asset Pricing in the Yale Law Journal. Examining the work of lawyers in large mergers and acquisitions, Professor Gilson concluded that business lawyers are transaction cost engineers. On that basis, he proposed sweeping changes for the training of business lawyers in law schools.

However, mergers and acquisitions are but one of many tasks handled by business lawyers, and their role in other contexts is quite different. Moreover, the work of business lawyers has changed considerably since 1984. This Article offers a broader and more current analysis of what business lawyers do and concludes that they are more accurately characterized as enterprise architects. The Article then discusses what skills business lawyers need and how law schools can best prepare them for this work.

Statement on Effect of FIN 48 on Audit Response Letters
      Committee on Audit Responses, ABA Section of Business Law, 64(2): 389-394 (February 2009)

Business Successors and the Transpositional Attorney-Client Relationship
      Henry Sill Bryans, 64(4): 1039–1086 (August 2009)
This Article focuses on the potential right of a business successor to assert various elements of a predecessor's attorney-client relationship and the implications to practitioners of a successor's ability to do so. An attorney-client relationship that the courts permit to be asserted by a business successor is referred to in the Article as a "transpositional" relationship. The Article examines in what context a successor may (1) enforce the duty of confidentiality of the predecessor's counsel; (2) assert the predecessor's attorney-client privilege; (3) disqualify the predecessor's counsel under the principles of Model Rule 1.9, or its equivalent, on the ground that such counsel should be viewed as the successor's former counsel for purposes of the Rule; and (4) assert a malpractice claim against the predecessor's counsel based exclusively on services provided to the predecessor. The Article concludes with some general observations about the decisions examined, the need of transactional lawyers to be familiar with the principles that courts have relied on, and transaction provisions that might be used to blunt the surprising, and arguably unfair, results that this line of decisions can sometimes produce.

Are Corporate Officers Advised About Fiduciary Duties?
      Lyman Johnson and Dennis Garvis, 64(4): 1105–1128 (August 2009)
This Article reports the results of an empirical study of whether and how in-house corporate counsel advise corporate officers about fiduciary duties. The fiduciary duties of officers long have been neglected by courts, scholars, and lawyers, even though executives play a central role in corporate success and failure. The study's findings, organized by type of company (public or private), size, and attorney position, show several interesting patterns in advice-giving practices. For example, fewer than half of all respondents provided advice to officers below the senior-most rank. The results raise the possibility that, unlike directors who may overestimate their liability exposure, certain shortcomings in giving advice to officers may cause them to underestimate personal liability exposure and engage in more risky behavior than is desirable for the company itself. The Article also offers recommendations for improved practices in advising officers about their duties.

General Counsel Buffeted by Compliance Demands and Client Pressures May Face Personal Peril
     E. Norman Veasey and Christine T. Di Guglielmo,68(1): 57 - 80 (November 2012)
In the "New Reality" of the world of corporate general counsel, the challenges and tensions thrust upon one holding that office have intensified exponentially. Not only does the general counsel uniquely straddle the world of business and law in giving advice to the management and directors of her client (the corporation) but also she may find herself personally in the crosshairs of regulators, prosecutors, and litigants. So, as the rhetoric and real pressures increase to target the general counsel, she must have and use the skills, balance, independence, and courage to be simultaneously the persuasive counselor for her corporate client while being attuned to the need for self-preservation. The lessons from the past targeting of general counsel and other in-house lawyers are ominous. But the quintessential general counsel, acting as both persuasive counselor and a leader in setting the corporation's ethical tone, will do the right thing and thus be prepared to deal with these challenges and tensions.

The Promise of Unfavorable Research: Ramifications of Regulations Separating Research and Investment Banking for IPO Issuers and Investors
     Benjamin J. Catalano; 72(1): 31-60 (Winter 2016/2017)
The trend in Securities and Exchange Commission and Financial Industry Regulatory Authority rulemaking and enforcement to insulate research from investment banking influence has led to the removal of research analysts from the underwriting process with adverse consequences for new issuers and their investors. The approach conflicts with the congressional objective under the Jumpstart Our Business Startups (JOBS) Act to incorporate research fully in public offerings for emerging growth companies, which now comprise the vast majority of IPO issuers. Faced with these competing objectives, broker-dealers should have written policies and procedures that are carefully crafted to service their underwriting and investor clients appropriately and to take advantage of the JOBS Act privileges with respect to research.

Development of Legal Opinion Practice as Reflected in The Business Lawyer
     Sylvia Fung Chin, Arthur Norman Field, Donald W. Glazer, and Stanley Keller, 75(3): 2041-2052 (Summer 2020)
As reflected in the reports published over the years in The Business Lawyer, third-party legal opinion practice has developed significantly during The Business Lawyer’s seventy-five years. That development was prompted by a seminal article on legal opinions published in 1973 in The Business Lawyer. Since then, The Business Lawyer has published numerous reports on legal opinion practice by the ABA Business Law Section’s Legal Opinions Committee and other bar groups, as well as many articles on legal opinions. Four participants in the development of legal opinion practice describe that development in this article and predict what might be expected going forward.

The ABA Statement on Audit Responses: A Framework that Has Stood the Test of Time
     Alan J. Wilson, Stanley Keller, Randall D. McClanahan, Noël J. Para, James J. Rosenhauer, and Thomas W. White, Audit Responses Committee, ABA Business Law Section, 75(3): 2085-2102 (Summer 2020)
This article summarizes key developments in the preparation of audit response letters concerning loss contingencies since the American Bar Association Statement of Policy Regarding Lawyers’ Responses to Auditors’ Requests for Information was published in 1976. These developments illustrate both the utility of the framework set forth in the ABA Statement and the responsiveness of the American Bar Association through the Business Law Section Audit Responses Committee (and predecessor committees) to issues arising under the ABA Statement and changes in accounting and auditing standards and practice.