Friday, March 24, and Saturday, March 25, 2000
Commission Members Present:
E. Norman Veasey, Chair
Albert C. Harvey
Patrick E. Higginbotham
W. Loeber Landau
Margaret C. Love
Susan R. Martyn
David T. McLaughlin
Richard E. Mulroy
Lucian T. Pera
Laurie D. Zelon
Burnele V. Powell, Center for Professional Responsibility
Ralph Elliot, Standing Committee on Professional Discipline
Nancy J. Moore
Carl A. Pierce
Jeanne P. Gray
Charlotte K. Stretch
Susan M. Campbell
See list following minutes.
The Commission meeting was held on Friday, March 24, from 11:00 a.m. to 5:00 p.m. and on Saturday, March 25, from 8:30 a.m. to 4:00 p.m. in Chicago, Illinois.
I. Minutes of Previous Meetings
The minutes of the Commission meeting of February 11 - 13 were approved as submitted.
II. Rule 1.15
The Commission reviewed the comments on Rule 1.15. Several comments expressed concern that the change to paragraph (c) may be interpreted to mean that the lawyer would be required to hold funds any time a client had a dispute with a third person over money. The Commission agreed that the claim of a third party had to be to the particular funds being held by the lawyer. The Reporter will clarify this in the Comment.
An observer asked the Commission to clarify that paragraph (c) does not apply when a lawyer acts solely as an escrow agent and is not providing legal services. A member suggested that the Comment state that the law of agency (and not these rules) applies in that situation.
The Commission agreed that the Comment should refer to the Model Financial Recordkeeping Rule but should avoid providing detail that would constitute best practice.
The Commission did not agree with a suggestion to specifically state in the Comment that a lawyer may deposit money in his trust account to cover bank fees in order to avoid an overdraft.
The Commission agreed that the discussion at the end of Comment [2a] regarding lawyers serving as third-party neutrals should be expanded to provide examples and better guidance.
The Commission approved the addition of language incorporating the recent resolution of the Standing Committee on Public Education and suggested that more of the rationale for the addition be added.
The Reporter noted that the reference to legal education was inadvertently deleted and will be restored.
The Commission decided to retain the first sentence of Comment  even though it is redundant because lawyers seem to find it helpful.
After some discussion the Commission decided that Comment  should be deleted. The new Comment appears to add a "business judgement" rule or a "safe harbor" when in fact there would always be a question of whether the lawyer was appropriately exercising professional judgement. The original Comment, which has also been deleted, covered only the issue of non-disclosure under Rule 1.6. The Commission agreed that Comment  addressed the issue appropriately.
The Chair requested that the Reporters and staff review the rules to ensure consistency of style. He added that "shall" and "shall not" should be replaced with "must" and "must not."
V. Rule 1.18
The Commission agreed that a separate rule for prospective clients was necessary in part because of the different treatment of imputation. Several observers felt that courts have been using the label "client" in the absence of any rule on prospective clients and agreed that a new rule was a good idea.
Some who commented were concerned that the proposed rule provides greater protection than is afforded clients in some instances. The Reporter indicated that was certainly not the intent of the rule. She felt that the rule should state a different confidentiality rule -- perhaps limited to attorney-client evidentiary privilege.
A member noted that whether a lawyer can handle a case under the proposed rule depends on the type of confidential information received and how hard the lawyer tried to keep the communication to a minimum. Several members expressed concern over the possibility of lawyers being disqualified due to "sham" consultations; uninvited confidential faxes or emails; or prospective clients who offer significant confidential information despite a lawyer's best efforts to prevent the disclosure.
A member noted that Restatement section 27 does not use the term "consults" but refers instead to a person who "discusses" with the lawyer the possibility of forming a client-lawyer relationship. The Commission agreed that "discuss" was a better term. The Commission also agreed that the Comment should address the problems of unsolicited faxes or emails and the person who keeps talking after the lawyer has asked him to stop.
The Commission agreed that the paragraph on screening should not refer to Rule 1.11. The Comment will explain that the prospective client should be notified in a timely manner of a screen.
Fraud: The Commission felt that the definition of fraud should clearly state that under no circumstances is negligent misrepresentation alone sufficient to constitute fraud. The rule should also refer to the definition of fraud under the law of the jurisdiction (i.e., something must be fraud under state law in order to be covered by the Rule.)
Informed Consent: A member felt that the rule should focus on the client having the necessary information rather than on how the information was communicated. He objected to the inference in the Rule that the lawyer has an affirmative obligation to communicate the information to the client. He felt that if the client already has the relevant information, the lawyer need not communicate anything. He agreed that if the lawyer does not communicate with the client, the lawyer takes the risk that the client did not have the information necessary for informed consent. A member noted that if such a change is made the Comment should remain unchanged in order to provide adequate guidance to lawyers.
Several members felt that this change would take away the whole point of the rule, which does put an obligation on the lawyer to obtain informed consent. A member noted that the proposed definition combines two concepts that should be separated: one is an agreement based on adequate information and the other is the extent to which the lawyer must communicate that information. The Commission agreed by a vote of 6 to 4 that the definition of informed consent should only encompass the former and should read: "Informed consent denotes the agreement to a proposed course of conduct by a person who has reasonably adequate information about the material risks of and reasonably available alternatives to the proposed course of conduct." The Comment should state that explanation and communication are usually necessary.
A member suggested that a discussion of what the lawyer must communicate or what burden the lawyer has to ensure the client has adequate information should be included in Rule 1.4. Another member observed that if the lawyer does have some duty to communicate the duty should not be buried in the Terminology section.
Tribunal: The Commission agreed to add the term "or other body" to the first and second sentences and to review the use of the terms "tribunal," "court," and "court order" throughout the rules.
Writing: The Reporter indicated that the definition will be amended in light of changes to Rule 1.7. She will add a definition for "confirmed in writing," and will delete the last sentence of the definition of "writing" that refers to writings that must be signed. The brackets around the words "or electronic" in the first sentence will be deleted, and the sentence will be amended to read: "denotes a tangible or electronic record of a communication or representation, including..... ." Comment  will also be revised in light of changes to Rule 1.7 with respect to written consent.
The Commission agreed that Rule 1.0 will not be distributed for comment until all of the other rules have been finalized.
VII. Rule 1.5
The comments received were very positive about the change to the introductory phrase in paragraph (a). Many who commented were concerned about the change in paragraph (a)(8), especially the focus on the degree of risk. The Commission agreed that the reference to "fixed or contingent fees" should be deleted.
A commentator noted that the California rule lists additional factors to be considered: informed consent; the relative sophistication of the lawyer and client; and the amount of the fee in proportion to the value of services performed. The Commission felt that paragraph (a)(4) addressed the value of services performed. A member pointed out that "informed consent" is not necessarily appropriate because courts have found that fee negotiations are at arms length.
In response to a suggestion to exempt fees under $1,000 from the writing requirement, the Commission decided that since a receipt is sufficient to constitute a writing, a writing should be required in all cases.
A member asked for research on whether any courts have ruled whether it is unreasonable for lawyers to calculate the amount owed to them under a contingency fee agreement using the gross rather than the net recovery. She suggested that the Comment advise lawyers what the majority rule is on that issue and notify lawyers that there are also other rules or statutes that relate to fees.
The Commission agreed that the exception for current clients at the beginning of paragraph (b) should be based on whether the new matter will be charged on the same basis or rate as the previous matter rather than on whether the lawyer has regularly represented the client.
Based on comments that it was unduly burdensome to require changes in the terms of the engagement to be communicated in writing, the Commission decided the requirement should be limited to a change in the basis or rate of the fee and/or disbursements.
The Commission agreed with the suggestion that the prohibition on contingent fees in family law matters should be amended to permit contingent fees in post-decree matters. The Commission requested additional research to determine whether the ban on contingent fees in family law matters should be lifted entirely.
The Commission approved a suggestion that paragraph (d) on division of fees be amended to permit referral without continued participation by the referring lawyer. Members noted that the current rule is widely breached and the requirement of joint responsibility is largely a fiction. The Comment should state that the referring lawyer has a responsibility to refer the matter to a competent lawyer and must stop any unethical behavior of which he learns. The proposed rule does require that the client consent to the division of fees, which is not required under the current rule. The reference in Comment  to disclosure of the percentage each lawyer receives should be deleted.
The Commission debated how to redraft Comment  because several commentators found it harsh. Several suggestions for amending the Comment included: delete the second and third sentences; mention that the list of factors is not exhaustive; draft a more neutral list; add as a factor the lawyer's knowledge and experience that contributed to the recovery. Several members felt that it was important to include a list of factors. A member observed that the word "ordinarily" in the second sentence probably does not carry the full weight of what is intended. Others noted that it is not clear when the reasonableness of the fee should be determined or what measure should be used if reasonableness is to be tested at the time of collection. A suggestion was made to refer to unforeseen circumstances or to unconscionability. It was also suggested that the Comment refer to other law, such as statutes that may set rates or limits on fees. A member requested some research on this issue.
VIII. Rule 5.5
The Reporter indicated that this draft was well-received at the recent conference at Fordham University on multijurisdictional practice. She said that the current trend in the bar is to create more safe harbors. She pointed out that paragraph (b)(2)(ii) is intended to allow a lawyer to represent an established client from the lawyer's jurisdiction in a matter in another jurisdiction.
A member asked for clarification of paragraph (b)(2)(i), which covers corporate counsel. He thought it should specify that a lawyer can represent subsidiary companies if the parent company is a client. Another member said that this could be problematical, depending on how much of the subsidiary was owned by the parent. He felt it was too fine a point to be covered in the Rule. The member asking for clarification asked that the issue be discussed in a Comment.
A member suggested that the last sentence of Comment  be revised along the lines of, "This Rule does not address whether conduct not specifically covered in paragraph (b) constitutes the unauthorized practice of law."
A member asked that a term other than "perfunctory" be used in Comment .
A member asked that "to the poor" be deleted from the example in Comment .
A member said that the proposal by the Section of Business Law went too far in the direction of national practice. The Commission deferred consideration of the Section's proposal until the rule is circulated and additional comments are received.
IX. Rule 6.1
The Commission reviewed its decision to circulate this rule for comment with the bracketed options of mandatory and voluntary reflected in the title. Several members noted that reflecting the options in the title and not otherwise in the text was confusing. In addition, a member suggested adding mandatory reporting as a third option.
The Commission voted 5 to 4 to circulate a memorandum inviting comment on the three possible choices to provoke debate on this issue. No changes or options will be incorporated into a draft rule; rather, the memorandum will describe the Commission's interest in receiving comments on the rule.
X. Rule 4.4
In response to a suggestion from one of the commentators to add "knowingly" in paragraph (a), the Commission appointed a subcommittee to review the scienter requirements throughout the rules. Loeber Landau will chair the subcommittee.
The comments on paragraph (b) were overwhelmingly negative. Commentators suggested it was extremely difficult to distinguish between proper and improper requests. The Commission agreed that the paragraph as written covered considerably more than was intended and voted to delete the paragraph. The Commission agreed with the suggestion of a commentator to add a sentence at the end of Comment  stating that protected legal rights include the right to protection against unwarranted intrusions into privileged relationships, thus leaving to further development a determination of which intrusions are proper.
Paragraph (c) received mixed reviews from the commentators. Some suggested the rule was not clear as to what happens if you are not sure the documents were sent inadvertently. The Reporter noted that Comment , at line 32, addresses documents that were wrongfully obtained. The Commission felt that "wrongfully obtained" may be too narrow and should be expanded to give more guidance about when the rule does not apply. Some commentators felt the rule should be more specific about who sent the fax (e.g., "opposing parties"). The Reporter felt that such an addition would cause confusion over who was an "opposing party," especially in a transactional setting. The Commission agreed that no change should be made in paragraph (c).
The Reporter noted that paragraph (a) and Comment  address a number of situations that are not covered in paragraph (c). The Commission agreed that Comment  should mention that applicable laws in the jurisdiction may address the use of documents obtained.
The Commission agreed to delete "as a matter of professional courtesy" from Comment . The Comment will be amended to state that applicable law may require a lawyer to return a document unread. It will also point out that where a lawyer is not otherwise required to return the document, the decision to voluntarily return it is a matter of professional judgement ordinarily reserved to the lawyer.
The Commission suggested that if the term "document" appears in any other rules the definition should be moved to Rule 1.0.
XI. Rules 5.1 - 5.3
On behalf of the Standing Committee on Professional Discipline, Ralph Elliot urged the Commission to include discipline of law firms in the Model Rules, not as a substitute for but in addition to discipline of individual lawyers. Mr. Elliot suggested that amendments could be made to Rules 5.1 through 5.7 and possibly to 8.4. Some members noted that an objection in the past to this change was that the addition of law firm discipline would dilute individual responsibility. In addition, the Commission has received conflicting opinions from disciplinary counsel regarding the need for this change.
The Commission agreed that law firm discipline would be appropriate for failures to act (such as a failure to have a conflicts-checking system) but not for misconduct involving scienter or for vicarious responsibility. The Commission voted unanimously to add law firm discipline to Rules 5.1(a) and 5.3(a). The Commission also approved the first alternative proposal on page 2 of the Reporter's Observations: A partner in a law firm, or a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm [subject to such managerial authority] conform to the Rules of Professional Conduct. The Commission suggested that the Comments elaborate on what constitutes reasonable efforts by different lawyers in the firm (e.g., those to whom responsibility has been delegated and those who may legitimately rely on others with managerial responsibility.)
A member suggested that the Comment refer to the definition of firm in Rule 1.0 and the fact that government agencies are included in that definition.
The Commission then voted to insert the words law firm in the middle of the second line of Rules 5.1(a) and 5.3(a) after .. together with other lawyers possesses comparable managerial authority in a firm, to emphasize that individual responsibility is still of primary importance.
In response to a comment that Comment  in both Rules 5.1 and 5.3 is too rigid, the Commission approved amending the Comments along the lines suggested by the District of Columbia Bar. The Reporter will further revise the Comments to avoid the use of the word reasonably twice in the first sentence.
The Commission approved a new Comment stating: The additional duties imposed by this Rule on managing and supervisory lawyers do not alter the basic duty of each lawyer in a firm to personally abide by the Rules of Professional Conduct. See Rule 5.2(a).
The Commission declined to add a Comment addressing when a lawyer ratifies the conduct of a nonlawyer. The Commission decided to let the definition evolve through case law.
XII. Rule 1.6
The Commission discussed whether to combine paragraphs (b)(2) and (b)(3). Several members felt that by compressing the paragraphs it was not clear that a lawyer can act before the crime or fraud occurs. The Commission voted to separate the two paragraphs and return them to the wording in the public discussion draft. The Comment should refer to the definition of fraud in Rule 1.0.
The Commission reviewed the changes in paragraphs (b)(6) and (c). A member felt that the change seemed to abandon any requirement that the lawyer resist disclosure. The Reporter observed that the Comment does discuss resisting in terms of when it is reasonable necessary to comply. Another member pointed out that the Kutak proposal was where disclosure by the lawyer is required by law. The Commission voted unanimously to adopt the Kutak proposal.
A member suggested that the second sentence of Comment  be revised by deleting the words but a presumption should exist against such a supersession.
The Commission then discussed whether the provision regarding compliance with court orders should remain in proposed paragraph (b)(6). The Commission agreed that paragraph (b)(6) should be deleted and that paragraph (c) should be revised to read . . . where disclosure by the lawyer is required by law or court order. The Comment should explain when it is necessary for the lawyer to comply (e.g., discretion ends at the point where the law has finally spoken). The Commission agreed that references to specific rules should not be included in the black letter text. The Comment should explain which rules are applicable.
One member felt that by making this change the notion has been lost that the lawyer is protected when the lawyer reasonably believes disclosure is required but is wrong. The Commission felt that this issue should be addressed with other issues related to scienter.
The Commission felt that it was not necessary to include any reference to tribunal in the black letter text. The Commission will review all rules relating to tribunals at another meeting.
In response to a question, the Reporter noted that it is not necessary to refer to Rule 1.14 because that rule merely refers to the implied authority in Rule 1.6 and does not create a new disclosure obligation.
XIII. Rule 1.7
The Commission voted to change the title of the rule from the proposed Concurrent Conflicts of Interest: General Rule to Conflicts of Interest: Current Clients and to change the caption of Rule 1.8 to Conflicts of Interest: Current Clients: Specific Rules.
The Commission agreed to continue its discussion of Rule 1.7 at its next meeting.
XIV. Rule 1.8
The Commission agreed to delete the bracketed language in paragraph (a)(3) otherwise looking out for ....
A member felt that a new Comment should explain more fully the relationship between Rules 1.8(l) and 1.10.
The Commission agreed with a suggestion that Comment  refer to Rule 1.7(a)(2) rather than just to Rule 1.7.
William T. Barker, American Insurance Association
James D. Biernat, San Francisco Bar Association
David Caylor, International Municipal Lawyers Association
Dane S. Ciolino, Lousiana State Bar Association
Steve Csontos, Department of Justice
Mary M. Devlin, Standing Committee on Professional Discipline
William M. Dickson, Chicago Bar Association
Terrence Franklin, Section of Real Property, Probate and Trust Law
Noel Hensley, Southwestern Legal Foundation
George A. Kuhlman, Standing Committee on Ethics and Professional Responsibility
Joseph R. Lundy, Attorneys' Liability Assurance Society
Jim Moliterno, William & Mary Law School
Brian Redding, Attorneys' Liability Assurance Society
Sylvan Siegler, Section of Tax Law
Nancy Slonim, ABA Media Relations Department
Frank Tighe, Chicago Bar Association
Jonathan Weiss, Legal Services for the Elderly