Meeting Minutes
Friday, April 17, and Saturday, April 18, 1998
Wilmington, Delaware
Commission Members Present:
Chief Justice E. Norman Veasey, Chair
Lawrence J. Fox
Albert C. Harvey
Geoffrey C. Hazard, Jr.
Judge Patrick E. Higginbotham
W. Loeber Landau
Margaret C. Love
Susan R. Martyn
David T. McLaughlin
Richard E. Mulroy
Lucian T. Pera
Judge Henry Ramsey, Jr.
Laurie D. Zelon
Liaison:
Seth Rosner, Board of Governors
Guests:
John T. Berry, State Bar of Arizona
Samuel Dash, Center for Professional Responsibility Governing Committee
Mark I. Harrison, Association of Professional Responsibility Lawyers
M. Peter Moser, Standing Committee on Ethics and Professional Responsibility
Burnele V. Powell, Center for Professional Responsibility Governing Committee
William P. Smith, III, National Organization of Bar Counsel
Raymond R. Trombadore, Standing Committee on Professional Discipline
Reporters:
Nancy J. Moore
Carl A. Pierce
Staff:
Susan M. Campbell
Jeanne P. Gray
Charlotte K. Stretch
The Commission meeting was held on Friday, April 17, 1998, from 10:00 a.m. to 5:00 p.m, and on Saturday, April 18, 1998, from 9:00 a.m. to 5:00 p.m.
I. Governor's Remarks
The meeting opened with welcoming remarks by Delaware Governor Thomas R. Carper. Gov. Carper gave some background on his state and described initiatives being undertaken to improve the ethical standards of public officials. He and Chief Justice Veasey discussed the absence of partisan politics in the state and the excellent working relationship between the three branches of government.
II. Chair's Report/Upcoming Meetings
The Commission will hold a public hearing on Friday, May 29, from 1:30-3:30 p.m. and meet from 9 a.m. to 5 p.m. on Saturday, May 30. The hearing and meeting will be in conjunction with the 1998 National Conference on Professional Responsibility taking place in Montreal.
During the 1998 ABA Annual Meeting in Toronto, the Commission's Advisory Council will meet Thursday, July 30, beginning at 1 p.m. The Commission will meet from 9 a.m. to 5 p.m. on Friday, July 31, and Saturday, August 1.
The Commission determined that it would meet Sunday, September 27, and Monday, September 28, during the 1998 Conference of Center Committees in Chicago. Sunday's meeting will begin at 11 a.m. and last until 5 p.m.; Monday's meeting will be from 9 a.m. to 5 p.m. The Commission will hold a hearing or otherwise meet with other Center Committees on Saturday, September 26.
The Commission will meet from 9 a.m. to 5 p.m. on Friday, February 5, and Saturday, February 6, at the 1999 ABA Midyear Meeting in Los Angeles.
The Commission will hold a hearing but will not meet at the 1999 National Conference on Professional Responsibility in San Diego, June 3-5. The Commission will have a spring meeting in Wilmington, Delaware, probably early in May.
Chair Veasey reported on ABA President Jerome J. Shestack's response to the letter from Chair of the ABA Standing Committee on Solo and Small Firm Practitioners Dwight L. Smith. Chair Smith was concerned that none of the Commission members are small firm practitioners. President Shestack's response was that he believed the Commission would consider the small-firm perspective in its deliberations, that it was impossible to include all interested groups in the Commission and that the Committee has the opportunity to join the Commission's Advisory Council and comment on its drafts in order to make its views known.
The Commission members held an executive session on Saturday from 9-10 a.m. Chair Veasey reported after the executive session that in order to conduct meetings as efficiently and expeditiously as possible, the Chair will recognize observers only after Commission members have been heard and if time permits. The Commission also decided to develop two electronic mail listservs. One would be only for Commission members, the reporters, the Board of Governors liaison and Commission staff. The second listserv would include members of the Commission's Advisory Council, as well as the members of the first listserv.
III. Approval of Minutes
The minutes of the meeting of January 30-31, 1998, were approved.
IV. Model Rule 1.7
Proposed Rule 1.7:
(a) Unless all affected clients consent to the representation in accordance with paragraph (b), a lawyer shall not represent a client if the representation involves a conflict of interest. A conflict of interest is involved if the representation of one client will be directly adverse to another client or if there is a significant risk that the representation of one or more clients will be materially limited by
(1) the lawyer's duties to another client or to a former client; or
(2) the lawyer's own interests or duties to a third person.
(b) A lawyer may represent a client if each affected client gives informed consent [in writing] unless the conflict is non-consentable. A conflict is non-consentable if
(1) the representation is prohibited by law;
(2) the representation involves the assertion of a claim by one client against another client represented by the lawyer in the same litigation; or
(3) a disinterested lawyer would conclude that in the circumstances it is unlikely that the lawyer will be able to competently represent one or more of the affected clients.
Professor Moore began the discussion by stating that she agreed with the textual suggestions made by a member of the Commission prior to the meeting. She will therefore replace "is involved" with "exists" in the second sentence of paragraph (a) and delete the text after "unless" in the introductory sentence of paragraph (b).
Paragraph (b)(3)
The Commission first looked at the structure of the proposed rule. One member commented that using the thought process laid out in this draft, a lawyer would secure a client's consent and then determine if it was permissible to ask for the consent. He went on to say that the type of conflict described in paragraph (b)(3) was different from those described in paragraphs (b)(1) and (2). This member felt that paragraph (b)(3) was more of a question that the lawyer has to ask.
An observer stated that paragraph (b)(3) is not useful from a disciplinary standpoint since any lawyer prosecuted under it would be able to produce an expert to testify that a disinterested lawyer would have concluded the representation was proper.
This led to a discussion of whether there should be an objective standard in the Rule. An observer expressed his support for the standard in paragraph (b)(3). This observer believed it to be a restatement of current Model Rule paragraph (b)(1), and he thought the addition of the 'disinterested lawyer' standard put flesh on the rule.
A member wondered how to distinguish between a correctly given informed consent and an instance in which consent was given but the lawyer could not reasonably have asked for it. This rule will be applied in retrospect - after a lawyer has undertaken or continued with an improper representation. The rule must articulate what a lawyer could not have disclosed to the client in order to receive consent yet should have considered in the decision on whether or not the representation was proper. Another member replied that while this theoretical construct is correct, it would be difficult to express in a rule.
A member suggested that there are three categories of representations: a set that involves no significant risk, a set that involves significant risk but is consentable and a set that involves significant risk and is not consentable. A standard to help lawyers determine which type of representation they are involved in is needed, however, this member was not sure that informed consent can carry all the weight of such a decision.
A member said that there is a paradigm of the nonconsentable conflict: a lawyer who sues a client in a matter unrelated to the lawyer's representation of the client. This member suggested discussing some other clearly nonconsentable conflicts, such as assisting in the hostile takeover of one client by another, in the Comment. This member thought the definition of conflicts of interest in the current draft was extremely clear. However, as you move away from the lawyer taking a position directly adverse to a client, the types of conflict enumerated in the definition begin to merge. This member wondered again if it is possible to differentiate between an improperly given informed consent and a nonconsentable conflict and thought paragraph (b)(3) should be eliminated as it does not make a clear distinction between the two.
Professor Moore stated that if paragraph (b)(3) were eliminated, it would be a significant departure from existing law. She reiterated that a bright line cannot be developed for all instances.
Another member said that the Commission had agreed to change Rule 1.7 the minimum amount necessary to clarify it. Therefore, nonconsentable conflicts and lack of informed consent, as categories existing in the current rule, should not be merged. This member felt that nonconsentable conflicts and lack of informed consent were easily distinguishable: a lawyer's representation could fail either because the lawyer did not have a reasonable belief that the representation was proper or because the lawyer failed to get a fully informed consent from the client.
A member expressed a concern that the 'disinterested lawyer' test was buried in paragraph (b)(3) and suggested that it be moved to paragraph (a).
An observer thought that the reasonable belief of the lawyer that the representation would not be affected was the most important element of the rule. Lawyers should ask this question of themselves before they ask for their client's consent. He suggested that this standard should be at the beginning of current paragraph (b).
Another observer agreed that this approach made it clear to the lawyer the correct questions to ask about the representation. A member added that this suggestion could be combined with an expanded definition of informed consent.
Another member pointed out that when the lawyer asks the client to consent to the representation, the client is assuming that the lawyer has already determined that the representation is correct. Another member agreed, pointing out that the client's decision whether or not to consent to the representation will be colored by the client's trust of the lawyer. This colored judgment makes an objective standard for nonconsentable conflicts necessary. This member would support including the reasonable lawyer standard in paragraph (b) rather than paragraph (b)(3).
The Commission agreed that an objective standard should be included in the introduction to paragraph (b).
Paragraph (b)(2)
A member expressed her belief that the scope of paragraph (b)(2) should not be limited to litigation and should be expanded to any representation of opposing parties by a lawyer. Another member wondered if the rule could simply state that representing directly adverse clients is nonconsentable. Other members argued that lawyers often represent potentially adverse interests in a non-litigation context.
Paragraph (a)
A member suggested that paragraph (a) contain only the definition of a conflict of interest and that nonconsentable conflicts be discussed only in paragraph (b). This would result in a clearer statement of what a conflict is and also create an all-inclusive objective standard for nonconsentability.
The Commission agreed that paragraph (a) simply be a definition of a conflict and not include any reference to consentability.
A member also suggested that "significant" in paragraph (a) be better defined.
Consent
Professor Moore suggested that informed consent be covered in a new paragraph (c). A member suggested that since informed consent comes up in a number of different rules, the Commission should state the definition in one rule (perhaps Rule 1.4) and refer to that definition when informed consent is discussed in other rules.
A member said that since conflict situations will continually arise in which lawyers will need to seek their clients' consent to continue the representation, a coherent rule needs to be developed to help govern their actions. Sophisticated clients frequently consent to such situations, with no harm to their representation. Another member added that relatively unsophisticated clients may understand their particular situation very clearly and be able to give informed consent.
A member said that the Commission would need to see a proposed definition of informed consent from the reporters before agreeing to include such a provision in the rule. A member stated his belief that the elements of informed consent needed to be made clearer.
A member suggested adding language to the Comment stating that seeking the client's consent presupposes that the lawyer has a reasonable belief the client's representation will not be affected.
Consent in Writing
Professor Moore asked if the client consent should be in writing. A member suggested that a written consent requirement be included in the draft circulated by the Commission so that comments would be received on it.
Another member suggested that written consent only be required if the lawyer and client have not worked together previously. He believed that problems occurred most often at the outset of a client-lawyer relationship.
A member stated her belief that informed consent is an ongoing process in the lawyer-client relationship, not a one-time event. The lawyer has a continuing obligation to provide information to clients about potential conflict situations, but each conversation should not have to be confirmed in writing, only the initial one.
Another member said he would support including obtaining consent in writing in a list of good practice principles but that it was not an appropriate requirement to include in the ethics rules. An observer noted that the writing requirement would act as protection for lawyers, especially if only the initial consultation in the matter was included. It should not be presented as another regulatory burden placed on lawyers.
The Commission agreed by a vote of 8 to 4 that the informed consent should be in writing.
Professor Moore then asked if the consent should be signed by the client; she believed that it should. A member reiterated that the written consent need only be obtained one time - if the conflict does not come up until later in the representation, that is when the written consent should be obtained. Professor Moore replied that in some cases the conflict may arise rather suddenly in an ongoing case and there may not be time to draft a consent document and call the client in for a consultation.
Comments
Professor Moore asked the Commission to consider Comment [18] on Organizational Clients. The Comment was drafted to conform to an opinion of the ABA Standing Committee on Ethics and Professional Responsibility in which a majority of the Committee members stated that a lawyer representing a corporation does not automatically also represent any affiliated corporations. Professor Moore added that an exception is needed for corporate acquisitions that take place during the representation.
A member stated his opposition to the Comment. He felt it mischaracterized the Ethics Committee opinion, which did not say that the affiliated organization was never the lawyer's client, but that the lawyer had to examine the relationship to determine if the affiliate was a client. The adverse affect of the representation on the client was the determining factor the lawyer should use. The dissent in that opinion argued that such a representation would always have a directly adverse affect on the client. This member also thought the use of alter ego in this draft provided too narrow an exception.
Another member said she like the Comment as drafted and that she felt it correctly characterized the Ethics Committee's opinion on the subject.
A member cautioned against implying that lawyers can solve the conflict by getting rid of their initial client. Lawyers are often eager to drop these clients in favor of a more lucrative representation. He worried about the affect on unsophisticated clients.
Several members felt that the Comment should not attempt to be conclusory on the subject but should suggest modes of analysis lawyers can use when confronted with these situations.
Several reasons given for not including the Comment were: the Commission did not need to take a position on this issue; lawyers could continue to consult ethics opinions and case law; and the issue should be discussed in Rule 1.13.
Others supported a limited Comment that might explain that a wholly-owned subsidiary and its parent are the same for the purposes of this Rule; that a lawyer can represent a subsidiary corporation without necessarily representing the parent; and that normal conflict analysis should be applied to determine if the proposed representation would have an adverse affect on the lawyer's current client.
The Commission voted on whether to include Comment [18] in the Rule. Six members voted against it, five voted for it and two members did not vote.
Professor Moore wondered if it was useful to provide information on how to analyze these conflict situations without providing any guidance on how to resolve the issues. A member suggested that the Comment provide examples of situations when conflict rules should apply. Another member said that the central question in the analysis should be the affect of the representation on the client.
The Commission then looked at Comment [15] on positional conflicts.
Some members were concerned that the Comment seems to be a departure from current law and that it conferred too much power on the client. Other members focused on a client's reasonable expectations in retaining a lawyer.
A member stated his belief that positional conflicts should be addressed in some fashion in the Comment. Another member said one possibility is to return to the less specific Comment in the current Rule. He said that if a lawyer is implicitly vouching for the tenability of a position by presenting it in court that such vouching is inconsistent with the idea that a lawyer can make contradictory arguments without affecting the respective clients. For example, making back-to-back arguments on opposing sides of an issue before a jurisdiction's highest court would certainly impair a lawyer's effectiveness in representing both clients. However, as you move away from that paradigm, it can be difficult to assess how much the opposing arguments will affect the representation. It becomes something of a judgment call.
IV. Rule 2.2
The Commission determined that it would discuss Rule 2.2 at its May meeting.
V. Rule 1.8
Professor Moore began the discussion of Rule 1.8 by reminding the Commission that the language from Rule 1.8(b) has been moved to Rule 1.6. A member suggested that the title of the Rule be Changed from Conflict of Interest: Prohibited Transactions to Conflict of Interest: Specific Applications.
Rule 1.8(a)
RULE 1.8 Conflict of Interest: Special Applications
(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on 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 which can be reasonably understood by the client;
(2) the client is advised [in writing] of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel of the client's choice on the transaction; and
(3) the client consents in writing to the essential terms of the transaction.
An observer suggested that the Rule require clients to seek independent legal advice before being permitted to enter into business transactions with their lawyers. He felt that such a requirement would create a bright-line standard that could be easily followed. He remarked that the cost of a legal consultation should not be so prohibitive that a fledgling company cannot afford it.
A member noted that this draft gives lawyers the ability to accept an interest in the client's business as compensation for the lawyer's services, as long as the requirements of Rule 1.5 are met. Several members expressed the concern that the consultation with the second lawyer might be expensive for the client. A member remarked that such a requirement was paternalistic.
Professor Moore thought that paragraph (1) of the Rule already adequately protects the client and puts an enormous burden on the lawyer.
A member asked if the written consent required in paragraph (3) should document the terms of the lawyer's participation rather than just the essential terms of the transaction. A member said that the consent "to the essential terms of the transaction" required in paragraph (3) could be interpreted more narrowly than the required disclosure to the client in paragraph (1). Professor Moore replied that the language differs because she did not believe the signed client consent needed to include all the information disclosed under paragraph (1). She indicated that she will clarify the language in the next draft.
An observer said that in New Jersey such agreements are presumed to be invalid and a lawyer seeking to enforce one must show that it was fair and reasonable and overcome the presumption of invalidity. He also had concerns about the expense of a second consultation for the client. He suggested that this could be better covered in the Comment than the Rule.
A member referred to a Section of Business Law comment stating that bonuses paid to lawyers are not the same as business deals for purposes of the Rules. He suggested adding a statement to this effect to the Comment to Rule 1.5.
Rule 1.8(c)
(c) A lawyer shall not accept a substantial gift from a client, including a testamentary gift, except that:
(1) a lawyer may accept a gift when the lawyer is a relative or when the client, before making the gift, has been encouraged and given a reasonable opportunity to seek independent legal counsel; and
(2) a lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any such substantial gift, except where the client is related to the donee.
A member commented on the use of "substantial" in paragraph (2). She said that case law generally prohibits any gift and that "substantial" was added by the drafters of the Restatement of the Law Governing Lawyers. An observer wondered about the purpose of the Rule. Professor Moore replied that under current case law there is a presumption of undue influence when a client makes a gift to a lawyer.
A member suggested adding language stating that accepting a gift of nominal value was permissible. The Commission agreed with this suggestion.
Professor Pierce suggested a structural change so that the Rule would begin, "A lawyer shall not:" followed by subparagraphs laying out the Rule.
A member suggested a change in the language to, "A lawyer shall not induce or solicit." This received general approval from the Commission.
A member said that gifts should be distinguished from bonus payments and suggested that this be dealt with in Rule 1.5.
Another member thought the list of the 'natural objects of bounty' in paragraph (2) was too limited. A suggestion was made to consult the Model Code of Judicial Conduct provision on accepting gifts, which has a more inclusive list of relatives.
Rule 1.8(d)
Professor Moore made minimal changes to this Rule. It was approved as drafted.
Rule 1.8(e)
(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and
(2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.
A member opened the discussion by saying that she supported allowing lawyers to make charitable gifts of living expenses to indigent clients, as allowed by the California professional responsibility rules. Professor Moore said that calling such gifts litigation expenses can open up the door to having all clients expect to receive living expenses.
A member expressed his view that the current Rule protects lawyers from having to pay clients' living expenses.
A member said that while there are a few instances where lawyers have been disciplined for providing charitable aid to clients, the 'truly charitable' standard used in the Comment does not seem useful in preventing non-charitable payments of expenses. An observer commented that charitable assistance to clients should come from sources other than the lawyer.
A member said that drafting the Rule either way involves making a political choice. It may depend on how strong the plaintiffs' bar is in a particular state.
An observer stated that it is very rare for disciplinary agencies to prosecute lawyers who make charitable gifts to their clients. He said in this case the cure, allowing such gifts under the Rules, may be worse than the disease.
The Commission voted 7 to 5 to have no mention of charitable gifts in the Comment.
Another member was troubled by the Commission's decision to have no Comment on the issue. She wondered why some states allow such gifts; they must be solving an existing problem in those jurisdictions. Staff will research why such a rule was created in some states, notably California and Minnesota. They will also research how the rules have been used in these states and if there have been abuses.
Rule 1.8(j)
Professor Moore made minimal changes to this Rule. It was approved as drafted.
Rule 1.8(h)
(h) A lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice. A lawyer shall not settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith.
A member remarked that the Comment clarifies why the change in the Rule is necessary. It was suggested that the Rule be redrafted so that it began, "A lawyer shall not:" followed by subparagraphs laying out the Rule.
A member suggested that a fairness standard be added to the Rule. A member suggested that the standard on seeking independent legal representation regarding the agreement should be the same as that in Rule 1.8(a). Another member noted that in malpractice suits, former clients are represented by other counsel.
Rule 1.8(i)
The Commission agreed that the provisions of this Rule should be moved to the Comment on Rule 1.7. They also agreed there should be an informed consent provision.
Proposed Rule 1.8(k)
(k) A lawyer shall not have sexual relations with a current client unless a consensual sexual relationship existed between them when the lawyer-client relationship commenced. For purposes of this paragraph:
(1) 'Sexual relations' means sexual intercourse or any other intentional touching of the intimate parts of a person or causing the person to touch the intimate parts of the lawyer.
(2) If the client is an organization, any individual who oversees the representation and gives instructions to the lawyer on behalf of the organization is deemed to be the client. In-house attorneys while representing governmental or corporate entities are governed by Rule 1.7 rather than by this rule with respect to sexual relations with other employees of the entity they represent.
(3) This paragraph does not prohibit a lawyer from engaging in sexual relations with a client of the lawyer's firm provided that the lawyer has no involvement in the performance of the legal work for the client.
The Commission discussed whether a rule on sexual relations with clients was needed. There was some disagreement about the extent to which clients are vulnerable and need protection.
An observer said that this Rule is not needed. He said that disciplinary agencies are currently able to prosecute the cases brought to them by using Rule 1.7 and that the existence of such a rule would not help clients to file a grievance. He thought the problems created by having such a Rule would outweigh the benefits. A member pointed out the difficulty in proving undue influence.
Other members thought it was important to state, either in the black letter or the Comment, that such relationships are prohibited. A member suggested placing the prohibition in Rule 8.4.
Some members suggested that this Rule be made part of the Comment to Rule 1.7. Professor Moore asked how the consentability and disclosure components of Rule 1.7 would affect this Rule if it were moved.
A member said that the exception for in-house counsel should be removed. Another expressed a concern with the current draft because it gives approval to representation when a relationship already exists. A member thought a definition of sexual relations was not needed.
An observer said that disciplinary rules do not change behavior. He thought only relationships that had an adverse effect on the representation of the client should be prohibited. He questioned the extent to which a sexual relationship affects the representation.
The Commission voted 8 to 5 to have a rule of some kind on lawyer-client sexual relationships.
Rule 1.8(g)
Professor Moore made minimal changes to this Rule. It was approved as drafted.
Rule 1.8(f)
(f) A lawyer shall not accept compensation or direction from one other than the client except as permitted in paragraphs (1) and (2).
(1)A lawyer shall not represent a client when someone other than the client will wholly or partly compensate the lawyer for the representation, unless
(a) the lawyer reasonably believes the representation will not be adversely affected;
(b) the client gives informed consent; and
(c) information relating to representation of a client is protected as required by Rule 1.6.
(2) A lawyer shall not permit someone other than the client to direct the representation, unless
(a) the direction is reasonable in scope and character and reasonably reflects obligations borne by the person directing the lawyer;
(b) the lawyer reasonably believes that the representation will not be adversely affected by the direction; and
(c) the client gives informed consent.
It was agreed that Professor Moore will redraft the Rule so that it began, "A lawyer shall not:" followed by subparagraphs laying out the Rule.
A member was unclear on the difference between paragraphs 2(a) and (b). It was explained that paragraph (2)(a) is an objective standard to determine the reasonableness of the third-party's involvement and that paragraph (2)(b) is the lawyer's assessment of the third-party involvement. The member suggested adding confidentiality concerns to paragraph (2). She also suggested that paragraphs (2)(a), (b) and (c) be collapsed into a three-part standard that includes reasonableness, informed consent and protection of confidentiality. She also thought whether there is payment or direction by the third-party should be a determining factor in the application of the Rule. A member said that the text should clarify what would constitute interference on the part of the third party.
Another member said that the current standard is interference with the lawyer's independent professional judgment. He wondered if this draft was an attempt to change that standard. Professor Moore replied that the standard was drafted to allow lawyers to take direction from third-party payors that is reasonable in scope and character. The objective test of the direction would be whether or not it is harmful to the client. The member felt that the lawyer's independent professional judgment should determine what is harmful to the client.
A member said that he has relied on the current language regarding a lawyer's independent judgement many times in his practice. It gives him some leverage in discussions with insurance companies that do not want to follow his advice on an aspect of a representation. Professor Moore referred to a discussion by the Advisers to the Restatement of the Law Governing Lawyers. If a deposition would be of marginal benefit to the insured's defense, can the insurance company decide not to spend the money to take it? The member replied that he did not think the insurance company should have authority under the Rules to always refuse to take the deposition. In such instances, he can generally work out a compromise with the insurer. He added that these are not new issues and he felt the current Rule dealt with them adequately.
A member said that he did not agree with the Restatement language on this issue and that he liked the current Rule. Insurance companies that will not pay for depositions or whatever other steps the lawyer believes need to be taken in the representation are facing a bad-faith lawsuit by the insured.
A member said he did not believe the current Rule needs to be changed. He believed the solution to the problem - a lawyer negotiating a compromise with the third-party payor - would be the same no matter what the language of the Rule was.
A member said that the language in the draft Comment should be clarified so that it did not rely so heavily on the Restatement. Professor Moore wondered if the new standard would be that direction was permissible if it did not impinge on the lawyer's independent professional judgment. An observer said that the third-party payor cannot direct the representation but can only offer suggestions.
The Commission determined that it would not change the existing Rule but that third-party payor issues would be dealt with in the Comment.
Professor Moore said that she was concerned about not dealing with informed consent and nonconsentability in the black-letter rule. The Commission agreed that the standards on informed consent and nonconsentability developed elsewhere in the Rules would also be used in this Rule.
A member said that the current Rule is an objective standard on this issue and that "interference," the current standard, is a stronger term than "direction." The Commission agreed that the Comment should state that the Rule is an objective standard, using language such as, "A disinterested lawyer must find that professional judgment ..."
VI. Rule 1.6
The Commission decided that the title of the Rule should not be changed.
Comments
The Commission discussed proposed Comments [3] - [6] regarding information relating to representation of a client. Several members felt that the proposed Comments were too broad. A member suggested that the Comment needed to explain the current standard better and to get across to practicing lawyers that this is not just privileged information. She thought that the current "whatever its source" seems to get this across.
There was discussion about the need to have a clear statement about the distinction between privilege and confidentiality. The Commission agreed that the Comment [5] of the current Model Rules could be placed earlier. A member suggested that the Comment say that it is not expanding or contracting the scope but trying to explain. The Commission agreed to replace the proposed Comments [3] - [6] with a slightly expanded version of the current Comment [5].
The Commission next discussed the two choices for proposed Comment [10]. The Commission agreed that there should be no more than a brief statement to the effect that there is no imputation in Rule 1.6.
Professor Pierce asked the Commission to review Comments [15] - [17]. A member suggested that everything about communication should be in one place (he would prefer in 1.4). Professor Pierce noted that he and Professor Moore are working on a definition of informed consent. Another member pointed out that lawyers need to worry about whether consent is impliedly authorized if information would disadvantage the client or significantly advantage the lawyer. She suggested that the last sentence of [16] be moved up to the end of the language in the current Comment [7] and that the rest of [16] be deleted.
The Commission agreed that the discussion on multiple clients should be expanded and placed in a separate Comment. One member noted that this area is a problem.
A member suggested that the discussion of organizational clients should be in Rule 1.13.
Rule 1.6(b)(2) & (b)(3)
(b) Unless the client gives informed consent, or the disclosure or use is permitted by paragraph (c) or required by paragraph (d), a lawyer shall not
(1) reveal information relating to the representation of a client, except for disclosures that are impliedly authorized in order to carry out the representation; or
(2) use such information to the disadvantage of a client; or
(3) use such information for the advantage of the lawyer or another person, unless the information is generally known.
The Commission agreed with the inclusion of 1.6(b)(2), which was previously 1.8(b).
The Commission discussed the need for paragraph (b)(3). Some members were concerned that a lawyer could take advantage of the exception in the wrong way. Others felt that the issue should be discussed as part of loyalty or fiduciary duty. The Commission agreed that not everything that is public is generally known. A member noted that there is often a difference of opinion regarding disadvantage to client; she recommended that the Comment say if there is any reasonable question of disadvantage, the lawyer must ask. The Commission agreed to delete (b)(3) and to mention this in the Comment with a cross reference to Rule 8.4.
Rule 1.6(c)(1) & (c)(2)
(c) Unless prohibited by other law, a lawyer may reveal information relating to the representation of a client as permitted by Rules ___, ___, and ___ or to the extent that, the lawyer reasonably believes, after reasonable inquiry, that the disclosure of such information is necessary
(1) to prevent loss of life, or serious illness or bodily harm, or criminal sexual abuse, that the lawyer believes, after reasonable inquiry, is likely to be suffered by a person; or
(2) to prevent or rectify what the lawyer [knows] [has reason to believe] to be the wrongful imprisonment of a person; or
Several Commission members expressed concerns with paragraph (c)(2), including: the difficulty in determining what is 'wrongful'; the effect on lawyer/client confidentiality; the harm to the client if disclosure is made; and the degree of certainty the lawyer must have before disclosure should be made under the proposed Rule.
Looking at paragraph (c)(1), some members felt that adding 'criminal sexual abuse' would make it necessary to add other things; others felt that 'criminal sexual abuse' would be included under 'serious bodily harm.' Professor Pierce noted that the Restatement says that 'serious bodily harm' includes life-threatening illness and child sexual abuse.
A member expressed his concern about ranking all of the various types of harm and injustice.
The Commission voted to eliminate criminal sexual abuse. One member was opposed.
The Commission then voted to add "imminent" in paragraph (c)(1). One member was opposed. He asked how consequences can be imminent before a person acts. He pointed out that the death penalty could be far from imminent. Professor Pierce advised the Commission that the most recent Restatement draft has replaced the concept of 'imminent' with 'reasonably certain.' Staff will provide information on the latest Restatement draft at the next meeting.
The Commission voted to delete paragraph (c)(2). One member was opposed.
The Commission voted to change the language back to "imminent death or substantial bodily harm" in paragraph (c)(1).
The Commission then discussed whether the act had to be by the client and whether the act had to be criminal. The Restatement includes an act by anyone and does not require the act to be criminal.
Several members agreed that this area represents the essence of the tug between confidentiality and the public. The public would not appreciate a "rough justice" standard here. (i.e., by differentiating between acts by client and acts by others.) Another member argued that if there is some subset of noncriminal actions that can cause imminent death or serious bodily harm, then they should be included in the rule. Others agreed, saying that this is a widely criticized rule.
Rule 1.6(c)(3) & (c)(4)
(3) to prevent substantial injury to the financial or property interests of a person [or a class of similarly situated persons] if the lawyer reasonably believes, after reasonable inquiry, that there is a significant likelihood that such injury will result from past, continuing, or intended conduct of the client [or a third person] that the lawyer knows is criminal or fraudulent.
(4) to rectify or mitigate substantial injury to the financial or property interests of a person [or a class of similarly situated persons] that the lawyer [knows] [has reason to believe] has been caused by the criminal or fraudulent conduct of the client in a matter in which [the lawyer represented the client] [the lawyer's services were utilized by the client in furtherance of the crime or fraud]; or
Some members felt that paragraph (c)(3) creates a duty to 3rd parties to reveal information that may prevent financial harm. Others felt that the exception should only cover situations in which the lawyer's services were used.
The Commission was unable to conclude its discussion of Rule 1.6. Chair Veasey requested that Commission members provide their individual comments to Professor Pierce at the end of the meeting.
VII. Rule 4.2
The Commission discussed the need to accommodate the legitimate concerns of the Department of Justice while making minimal changes to the current Model Rule. Some members felt that the proposals to date have gone further than necessary. Several members noted that the opinion of the Standing Committee on Ethics and Professional Responsibility covers the three major areas that have been cited as the concerns of the DOJ.
The Commission was concerned about the ability of the ABA to respond to the Conference of Chief Justices in time for the June 1 deadline. The Chair indicated that he will discuss the ABA's response with President Shestack, and he asked the Reporter to prepare a draft for the next meeting based on the comments of the Commission.
Respectfully Submitted
Susan Campbell
Charlotte Stretch