The American Bar Association’s Standing Committee on Ethics and Professional Responsibility and Standing Committee on Professional Regulation proposed amendments to ABA Model Rule of Professional Conduct 1.16 and its comments regarding a lawyer declining or terminating representation. The ABA House of Delegates subsequently passed Revised Resolution 100 adopting the proposed amendments.
The resolution explains that lawyers must “inquire into and assess the facts and circumstances of each representation to determine whether” they can accept or continue representation. The resolution’s clarifying language seeks to stem corruption and help lawyers avoid unwitting involvement in unlawful conduct.
The impetus for the resolution was lawyers’ unknowing involvement in, or failure to recognize warning signs relating to, “a client’s use of a lawyer’s services to facilitate possible money laundering and terrorist financing activities,” the Ethics Committee and Regulation Committee report. For example, consider a scenario where a client requests “a lawyer to hold money in a client trust account…to fund another transaction.” Thereafter, the client asks the lawyer to return the money “because the ‘transaction’ has fallen apart.” In doing so, the lawyer laundered money through their client trust account.
Unquestionably, it is unethical and illegal for a lawyer to knowingly facilitate a client’s illegal or fraudulent conduct. The resolution clarifies that it is likewise unethical for a lawyer to ignore indicators that a client likely intends to engage in such conduct—like a client’s dubious request for a lawyer to temporarily hold money in a client trust account pending an unspecified “transaction.”
The resolution revises Rule 1.16 and its comments to clarify lawyers’ ethical obligation to identify and respond to “red flags” regarding a client’s proposed actions. Specifically, the resolution clarifies that “[a] lawyer shall inquire into and assess the facts and circumstances of each representation to determine whether the lawyer may accept or continue the representation.”
The resolution also requires lawyers to decline or terminate representation if a client insists on using the lawyer’s services to commit a crime or fraud despite the lawyer advising the client on the ethical limitations of doing so. Finally, it permits a lawyer to withdraw from a representation if the client insists on using the lawyer’s services to perpetuate what the lawyer “reasonably believes” to be a crime or fraud.
The resolution clarifies an implicit obligation in the existing Model Rules: Lawyers must “inquire about and assess the facts and circumstances relating to a matter” to determine whether they can accept or continue to represent a client. For example, Rule 1.1 already requires lawyers to inquire about and analyze “the factual and legal elements of the problem” to provide competent representation. And Rule 1.4 requires lawyers to consult with clients about “‘any relevant limitation on the lawyer’s conduct’ arising from their client’s expectation of assistance” that would violate the Model Rules or the law. The resolution amending Rule 1.16 therefore “make[s] explicit that which is already implicit,” the Ethics Committee and Regulation Committee state.
While the resolution prioritizes the laudable goal of stemming corruption and otherwise unlawful conduct, ABA Section Leaders observe that the resolution is not without its drawbacks. “Lawyers may be more hesitant to represent clients from certain countries because of the perceived additional burden the amendment poses—thus denying legal representation to an already underrepresented class of potential clients,” notes Jeanne M. Huey, Dallas, TX, cochair of the Litigation Section’s Ethics & Professionalism Committee. Additionally, “the amendment may disproportionately affect solo and small firms which typically do not have the resources to run extensive background and other checks that may now be necessary to remain compliant with the rules,” adds Huey.
Lack of clarity also raises concerns. “The resolution creates potential ethical liabilities based on ambiguous terms and does not address the real problem of money laundering,” cautions John S. Austin, Raleigh, NC, cochair of the Section’s Ethics & Professionalism Committee. “But many states put their own spin on the ABA Model Rules and do not adopt them verbatim, so there is an opportunity for lawyers to lobby for changes or refinements to the rule to address any vagueness concerns when the amendment is proposed in their state of licensure,” Huey adds.
While it is uncertain whether state bar associations will adopt the resolution as drafted, litigators should nevertheless be prepared for it. “Lawyers should already have procedures in place to monitor for conflicts throughout every representation, but the amended Rule provides additional incentive to do so now. Existing procedures should be modified to trigger the relevant inquiries required under the amended Rule,” urges Huey.
