Commission on Evaluation of Rules of Professional Conduct

Meeting Minutes
Friday, July 31, and Saturday August 1, 1998
Toronto, Canada

Commission Members Present:

Liaison:

Seth Rosner, Board of Governors

Guests:

Deborah A. Coleman
M. Peter Moser

Observers:

See attached

Reporters:
Nancy J. Moore
Carl A. Pierce

Staff:

Jeanne P. Gray
Susan M. Campbell
Charlotte K. Stretch

The Commission meeting was held on Friday, July 31, 1998, from 9:00 a.m. to 5:00 p.m, and on Saturday, August 1, 1998, from 9:00 a.m. to 4:00 p.m.

I. Minutes of Previous Meetings

The minutes of the Committee meeting of May 29 - 30 were approved as submitted.

II. Model Rule 1.6

A motion was made and seconded to re-insert the concept of "imminent" into paragraph b(1). In discussion, several members noted the political realities of attempting to remove the concept of "imminent" from the Rule. One observer pointed out that timing is taken into consideration because the lawyer may only disclose information that the lawyer reasonably believes is necessary to prevent death or substantial bodily harm. Another observer suggested that the comment explain that "imminent" means more than just an action about to occur. The Commission agreed that one sentence in the Comment should explain the concept of "imminent." The motion passed unanimously.

A motion was made and seconded to approve the current draft language that does not limit paragraph b(1) to acts by the client. The motion passed with a vote of 7 to 3.

The Commission next looked at the proposed paragraphs b(2) and (3). A motion was made and seconded to link paragraph b(2) to the use of the lawyer's services. The Reporter noted that the primary effect of this paragraph would be on ongoing fraud. At the request of a member, the movant clarified that if the motion is passed, paragraph b(2) will include the concepts of prevention, knowledge, substantial loss to financial interests or property, and the use of the lawyer's services. There was some discussion regarding the reception the amended paragraph would receive in the House of Delegates. The Commission agreed to defer that issue to another time. A member pointed out that under paragraph b(2), the client has the option of avoiding the harm by stopping the conduct. A member questioned what degree of knowledge is required. Other members noted that disclosure is discretionary. An observer added that "may" does not necessarily give unfettered discretion. The motion passed with one dissent.

A motion was made to strike paragraph b(3). One observer argued that the public expects this type of disclosure. A member stated he thought the provision should be eliminated because lawyers owe their clients a duty of confidentiality. One member stated that implicit in the discussion is the concept that there are certain values served by the rule of confidentiality and that there are other values in society that are perhaps more important. Other members agreed that if the lawyer's services have been abused the client no longer deserves the protection of the Rule. A member stated his belief that if the lawyer's services are used, the lawyer may withdraw but may not disclose information to others. Another member indicated that he agreed only with respect to a criminal context. The member responded that what is criminal is not always clear. Several members noted that a lawyer may have civil liability for failure to notify in certain situations. The motion was defeated by a vote of 6 to 4.

A motion was made and seconded to delete paragraph b(5)(iii). The Commission discussed the extent to which paragraph b(5)(iii) is different in its operative effect from paragraph b(3). The Reporter noted that paragraph b(5)(iii) is a little broader because it allows a lawyer to disaffirm anything that the lawyer believes is misleading. A member added that paragraph b(5)(iii) does not have a crime/fraud limitation. A motion was made and seconded to amend the motion to delete paragraphs b(4) and (5). The movant argued that the substance of those paragraphs is covered in the concept of "impliedly authorized" and that the lawyer's obligations are contained in other Rules. The Reporter noted that disclosures or uses that are impliedly authorized can be trumped by client instructions to the contrary. The paragraphs were included to allow the lawyer to act regardless of client instructions. The motion to amend was defeated 6 to 4. The movant of the original motion suggested that the relationship between the two paragraphs needs to be carefully examined. A member suggested that the substance of the paragraph should be covered in Rule 4.1. The movant felt that Rule 1.6 should contain a cross-reference to Rule 4.1 but that the substance should not be moved. He accepted an amendment to his motion that the matter be sent back to the Reporter to examine the relationship between the two paragraphs and determine what, if anything, remains. The motion passed with a vote of 10 to 1. There was a general consensus that paragraph b(5)(iii) would probably be deleted after the review.

An observer suggested that the Rule should indicate that the lawyer may not disclose information without first giving the client an opportunity to rectify the situation. The Commission agreed that the Comment should include a statement to that effect.

A motion was made and seconded to strike paragraph b(5)(ii). The Commission discussed the need to limit the rule to narrow exceptions where important competing values are at stake. The motion passed by a vote of 10 to 1.

The Commission then discussed paragraph b(4). One member felt that the words "or other law" in the paragraph are not clear. Other members argued that the paragraph was not necessary because disclosure under this paragraph would be impliedly authorized. A member argued that this would be viewed as a lawyer-protection rule. A motion was made and seconded to cover the substance of the Rule in a Comment discussing implied authorization. The motion was defeated by a vote of 7 to 3. The Commission agreed that the words "enable the lawyer to" and "or other law" should be deleted from paragraph b(4). One member pointed out that lawyer hotlines would not be covered under this paragraph. Some members argued that the paragraph was unnecessary, but the Commission decided to include it in part for its educational value.

A member reported that she had received a letter from a member of the Advisory Council suggesting that the Commission review the definition of "information relating to representation of the client." The author of the letter felt that the definition was too broad and should be restricted by incorporating the concept of information "generally known" and the Code terms "confidences and secrets." Another member felt that the definition in Comment [5] was fine. The Commission agreed that the issue had been previously discussed and that the definition should not be restricted.

A member suggested that sub-paragraphs a(1) and (2) be separated into two paragraphs. Another member questioned why use and disclosure should be treated differently. An observer pointed out that the two paragraphs were previously in different rules [paragraph a(2) was previously Rule 1.8(b)] because "use"in Rule 1.8 was more of a conflict of interest rule prohibiting an agent from profiting from information learned in the course of representation. He noted that the Model Rules introduced the concept that there are some things a lawyer can use even if the use profits the lawyer. He added that the paragraph is hard to draft in part because of the broad definition of "information relating to representation of the client."

The Commission discussed whether moving Rule 1.8(b) to Rule 1.6(a) had created confusion rather than clarity. A member suggested that paragraph (a) be changed to read: "A lawyer shall not use or disclose information related to the representation to the disadvantage of the client." This construction would eliminate the term "impliedly authorized." The Commission asked the Reporter to try this approach in the next draft.

A motion was made to approve paragraph (c) as drafted. The motion passed by consensus.

A suggestion was made to consider replacing the term "imminent" with a better formulation such as "reasonably certain," or "substantial likelihood." The Commission requested that the Reporter put these terms in brackets for the next draft.

III. Model Rule 1.7

The Commission discussed whether or not a third subparagraph should be added to the draft Rule 1.7(b). Professor Moore stated that some observers and members have commented that the draft is confusing because both subparagraphs (a) and (b) include language about risk balancing. A member suggested that risk should be covered in subparagraph (a) and that subparagraph (b) contain an objective standard for analyzing the risk. He proposed that the standard be that the lawyer reasonably determines that the conflict will not materially and adversely affect the representation. Another member felt that the objective standard should not be buried in the body of paragraph (b) but should be stated in a new subparagraph in (b). A member proposed that paragraph (b) include language along the following lines: "... client consent will not be effective if:

(1) the lawyer reasonably determines that the conflict of interest is unlikely to materially and adversely affect the representation;

(2) the representation is prohibited by law; or

(3) the representation involves the assertion of a claim by one client against another client represented by the lawyer in the same litigation.

The Commission members all agreed with this formulation. Professor Moore suggested, and the Commission agreed, that she would work on the exact wording of the proposed new subparagraph (b)(1). She reminded the Commission that a prior draft used the language, "... in the circumstances it is unlikely that the lawyer will be able to competently represent once or more of the affected clients." A member suggested the term "adequately represent." The Commission also suggested that the Reporter draft paragraph (b) in the affirmative.

A member moved to delete the words "in the same litigation" from the end of subparagraph (b)(2) of the current draft. He suggested that there is a pre-litigation period of time when this subparagraph should be in operation. Another member responded that the proposed new subparagraph (b)(1) helps to clarify the lawyer's decision-making process. The motion failed for lack of a second. It was moved and seconded that the term "adversary proceeding" be substituted for "litigation." A member felt that introducing the notion of adversary was helpful in signaling the purpose of the Rule. Other members were concerned about broadening the coverage of the Rule. The Commission generally liked the idea and asked the Reporter to work on it. The motion was withdrawn.

An observer asked if it was the Commission's intention to make no changes to the current caselaw and understanding of conflicts of interest. The Commission agreed that was their intent.

Another observer cautioned the Commission not to expand the category of nonconsentable conflicts when it drafts the new paragraph (b)(1).

A member proposed that Rule 1.7(c) be changed to require consent in writing regardless of when the conflict arises. The current draft only requires a writing if the conflict arises at the outset of the representation. Another member suggested using language similar to the language in Rule 1.5: "before or within a reasonable time after the conflict arises." The Commission unanimously agreed to this proposal.

A member suggested that Rule 1.7(a) be structured slightly differently to highlight the separate concepts of "directly adverse" and "materially limited." Professor Moore noted that the reason for the two categories under "materially limited" is that the two might be treated differently for purposes of imputation. The Commission agreed to defer making a decision on this issue.

IV. Model Rule 1.8

It was moved and seconded to delete 1.8(k) and move the substance of the subparagraph to the Comment. Some members argued that jurisdictions have been able to prosecute inappropriate behavior without a specific rule on sex with clients. An observer responded the purpose of the rule is due to the nature of fiduciary/dependent relationships and the possibility of exploitation. He further argued that while harm does not always result in every case of sex with a client, the situation involves a built-in conflict of interest. A member agreed that the prohibition should apply regardless of consent. He felt it was important for the Commission to make a statement on this subject. The motion was defeated by a vote of 4 to 3.

A motion was made and seconded to adopt the proposed black letter formulation of Rule 1.8.

The original motion to adopt the proposed black letter draft of Rule 1.8, as amended, passed unanimously.

V. Model Rule 1.10

1. Imputation of Personal Interest Conflicts

   The Reporter pointed out that the proposed draft is a major departure from the current rule in that it eliminates the per se imputation of personal-interest conflicts. A member wondered if the lawyer would still have a duty to inform the client of the conflict. He thought that all conflicts should be imputed unless the lawyer reasonably believes there would be no effect on the representation.

   A member discussed the position taken on imputation in two opinions of the ABA Standing Committee on Ethics and Professional Responsibility. The Committee determined that the current Rule was not being followed because the broad scope of imputation led to impractical results. The opinions therefore carved out an exception to imputation for certain personal-interest conflicts. Another member pointed out that in one of the opinions the Committee determined that the client should be informed of the conflict.

   A member suggested adding another category of conflicts to Rule 1.7 - a personal relationship between the lawyer's client and another lawyer in the firm that is known to the lawyer and could reasonably be believed to have an adverse affect on the representation. Substantial property interests of another lawyer in the firm would also fall into this category. The question would then be to what extent a lawyer would have to disclose this information to the client and seek consent.

   This proposal was discussed. One member did not think a new category of conflicts was being articulated but that the same categories continue to exist - some should be imputed and some should not. His complaint with the current draft is that it starts with the presumption that presonal interest conflicts will not be imputed. He felt that the presumption should be they are imputed. A member felt that the two views were only slightly different perceptions of the issue. He felt that the Commission could set up criteria for analyzing these conflicts. He stated that the important distinction is whether the rule prevents the firm from taking the representation or provides that the client can decide not to consent.

   The imputation of a lawyer's strong ideological beliefs to others in the firm was discussed. There was general agreement that ideological beliefs should not be imputed.

   The Reporter gave several examples of personal-interest conflicts that a lawyer might prefer not to reveal to others in the firm. She argued that these conflicts should not be imputed since, if no one else in the firm knows about them, they cannot influence any representations. A member added that there is a range of personal-interest conflicts that clients do not want or need to be informed of. Others disagreed.

   A member held up as an example the three-part conflict standard used by other fiduciary professions: some engagements can be accepted, some are barred and some are left to the discretion of the client. He pointed out a difficulty of imputing all personal-interest conflicts - lawyers often have a variety of business and social ties, which can lead to a variety of potential conflicts. Another member said that his interpretation of the current rule was that imputation barred all of these representations. He believes the rule should be liberalized, but the trade-off should be that clients are informed of the conflict.

   The Reporter said that entitling clients to know about every potential conflict was harmful to the public. It could discourage firms from hiring certain lawyers or taking on certain clients. A member said that a firm should have no duty to disclose a conflict if it was not severe enough to merit disqualification. Another member said that a middle ground should be developed. Guidelines on what type of conflicts should be disclosed should be created. She felt there was no need to disclose conflicts of a personal nature that could have no impact on the representation. Another member thought that a disclosure requirement gave the firm an unduly intrusive role.

   An observer said that a disclosure requirement would be impossible for a disciplinary body to enforce. The disclosure would have to be in writing to be enforceable, and lawyers would be unlikely to make any disclosures.

   A member said that language should be developed for Rule 1.7 that distinguishes between an interest of another lawyer in a firm that would impact on a representation and an interest that would not. The Reporter agreed and will include a cross-reference in Rule 1.10. A member suggested that Rule 1.4 would also be implicated.

   A member noted that under the current rule, a conflict is imputed only if other lawyers in the firm know of it. The issues that should be clear in a new rule are when a lawyer should have to disclose a potential conflict and which conflicts should be nonconsentable. She thinks it should be clear that although there is no imputation under Rule 1.10, some personal-interest conflicts are nonconsentable.

   A member pointed out several issues she thought had been raised by the discussion. First was that if all personal-interest conflicts are imputed, too many firms are disqualified. Second was that letting the firm make the decision on disclosure gives too much power to the firm. Third was screening, which can be used to prevent disqualification but will not work unless conflicts are disclosed. She wondered how incentives to disclose can be built into the rules so that screens can be implemented.

2. Definition of Law Firm

   The Reporter then asked for comments on the structure of the rule. The definition of a law firm, which she believes should be expanded, is currently in the comment. She wondered if it should be added to the black letter. A member suggested that the definition be placed in the black letter and that the definition from the Restatement of the Law Governing Lawyers be used. He suggested that issues relating to public lawyers be dealt with separately. Several members agreed that it was necessary to clarify the definition of a law firm.

   A member suggested that, rather than the current distinction between public and private lawyers, the European model be followed, with a distinction between "one-client" offices, such as a government agency, and multi-client offices, such as legal services.

   Another member agreed and said there should be no imputation to units of the same agency screened from each other. He thought such a rule might even be applied to corporate families if they are operationally distinct.

   The Reporter said that the current state of case law is that departments of an agency can be treated as separate offices if effective screening is in place. A member said the ABA has applicable criminal defense and legal aid standards and offered to send copies to the Reporter.

   A member asked why, if it is possible for public defender agencies to set up separate "offices" by using screening, should it not be possible for corporate families or private firms to do likewise? The Reporter replied that there is so precedent for such a division and that public defender offices have different financial incentives. A member said that clear direction needs to be given to legal aid offices, government agencies and corporate legal departments. The Commission should not be deterred from giving them useful advice by the fact that private firms may try to take advantage of a rule change.

   A member related how California is attempting to deal with budget constraints yet also provide conflict-free public defenders. Each county has its own public defender office, while appellate services are provided on a state-wide level. One county has two separate public defender offices to deal with multiple defendants.

   A member said that the rules should encourage other states to follow California's example. If the rule changes, screens will replace separate offices. The arguments that public agencies have specific needs and are uniquely able to draw a bright line standard were originally made on behalf of screening but soon spilled over into private practice. A member suggested that instead of asking legal aid agencies to split into two separate offices, the rule could set out specific circumstances in which imputation will occur.

   The Commission voted, 5-4, to include more of the definition of a law firm in the black letter. One member asked for the definition to occupy a place somewhere in the middle of the rule and for the definition in the Terminology section to be expanded. The Reporter noted that the definition in the comment to the current rule contradicts the definition in the Terminology section.

   The Reporter cited a law-review article referred to her Reporter's Observations. The article's thesis is that separating legal-aid offices does not harm the client, so the representation is in fact conflict-free. Another member said that the current definition of a firm is shared economic interests, which should be viewed from the lawyer's standpoint, not the client's. She also pointed out that, due to decreased funding, it seems impractical to suggest that legal services agencies split their offices.

   The Reporter then turned to the definition of "associated with a firm." A member said that it would be useful to have a note in the comment stating that there is no imputation between lawyers associated with each other who work in different firms (as in a joint defense).

3. Prospective Clients

The Reporter next broached the subject of prospective clients. The Washington, D.C., rules have no imputation for prospective clients. The Restatement allows screening of the affected lawyer. A member said that lawyers should be encouraged to clear conflicts before taking on a representation. If they do not, they have to accept the consequences. He did think a rule easing imputation regarding prospective clients would make "beauty contests" - where several firms bid for a prospective client's legal work - easier.

A member wondered about the burden of imputation in these circumstances on small firms. It is possible for a client to pour out their entire story in an initial interview without the lawyer meaning for them to do so. A member suggested a rule on prospective clients which would include a provision stating that a firm cannot be disqualified based on a preliminary consultation designed to check conflicts. The nature of what could be discussed in such a consultation would be defined narrowly in terms of client and matter. The question of imputation would remain if the information revealed went beyond that narrow scope - should screening then be allowed?

The Reporter said that the standard for screening in such a case could be the same as in Rule 1.9 on former clients. A member said that the Restatement had had difficulties drafting a rule along those lines.

4. Screening

A member said that if screening was allowed, a definition would have to be included. Another member said he did not believe screening could mitigate the harm it seeks to prevent, which is a leak by the lawyer with confidential information.

A member said that the rule should discuss the obligations of screened lawyers and others in the firm. Another member added that the integrity of the firm and its attention to its obligations are also crucial.

Another member said that the rule on screens should address the issue of timing. Many screens are set up after the leak has occurred. The rule should be clear that there will be imputation if the screen is not set up soon enough.

The Reporter asked under what circumstances the Commission would like to allow screening. In most states, screening is permitted in any type of case, but the Restatement has a narrower scope. A member said that either screening should be allowed with no limits, or it should not be allowed at all. He favored a rule that only looked at the fact question of whether a screen was effective. Another member added that there should be disclosure to the client and that screening could not be permitted where a lawyer in the firm was a party to the matter.

A member suggested that even if the Commission determines not to approve screening, that some language be provided on effective screens to give states guidance.

VI. Model Rule 4.2

Chair Deborah Coleman and Incoming Chair Peter Moser of the Standing Committee on Ethics and Professional Responsibility joined the meeting to discuss coordination of efforts to revise Rule 4.2. The groups decided to exchange memoranda at the end of the current meetings and to have a small group meet to reconcile differences. The two groups would then meet together in September. It is anticipated that a joint draft will be circulated for comment by February 1999 and will be submitted to the House of Delegates for a vote in August 1999.

The Commission then discussed the overall approach to revising Rule 4.2, especially whether to make changes in the Rule text or the Comment. Arguments for making some changes to the Rule included the need to clarify the standard that is being enforced and not bury it in the Comment; acknowledging the very real and pervasive issues with respect to government investigations, corporate employees, and criminal accused who wish to speak with the government; the fact that the Kutak Committee did not fully consider the intricacies involved in this Rule; and the fact that it is appropriate to address the peculiarities of corporate clients or government lawyers in the Rules.

Arguments for making changes only to the Comment included the fact that all of the questions raised about the Rule implicate questions of representation or of authorization by law or court order and are therefore covered in the existing Rule; and the fact that it is possible to be responsive to the Department of Justice under the present Rule because case law clarifies the operation of the Rule.

Several members agreed that under the current Rule and the draft, if a lawyer is uncertain about a particular contact, he may seek permission from a court. They pointed out that seeking judicial approval in those situations is wholly appropriate and provides a safe harbor. One member added that the unilateral right to make decisions regarding contacts is what the bar is complaining about.

An observer pointed out that there are numerous questions from Assistant United States Attorneys regarding the operation of this Rule. A member commented that it places a large burden on the Department of Justice to have to seek court approval whenever an AUSA has a question. Other members replied that the problem of "inconvenience" is not persuasive. The necessity of dealing with an ethical dilemma is not diminished by having a large volume of them.

Another member noted that issues of who to contact are quite fact specific. She suggested that by amending this Rule we may be trying to do something for the Department of Justice that they need to do for themselves. She questioned why we should change the Rule in order to help them try to understand their ethical obligations when we would not do that for other entities.

Comments

The Commission turned to a review of the Comments. Several members made the general observation that the Comments should be cut back considerably. The Commission agreed to review the substance of the Comments and to send individual editing suggestions directly to the Reporter.

Comment [1]

The Commission approved the substance of Comment [1].

Comment [2]

A member felt that the Comment significantly expanded the definition of the protected group by including any person who retains counsel. She felt that DR 7-104 included a notion of adverseness. One member responded that adverseness is not required. Another felt that the term "matter" covered things besides litigation. Another member added that Comment [1] states that the Rule covers persons who have chosen to be represented by counsel. The Commission approved the substance of Comment [2].

Comment [3]

The Commission discussed whether the term "matter" should be defined in either the terminology section of the Rule or the text of Rule 4.2. One member noted that "matter" is defined in the text of Rules 1.11 and 1.12. Other members felt that it was futile to try to define "matter" and that this Comment is too long. The Commission suggested that this Comment be substantially revised.

Comment [5]

An observer questioned why Comment [5] refers only to "undercover" investigative contacts. She noted that if undercover contacts are permissible then other more overt contacts would be also. She also felt that the Comment should refer to "civil and criminal" enforcement. A motion was made and seconded to change the second sentence to read: "Nor does this Rule prohibit a lawyer from providing advice to agents in connection with their investigative contacts with a person known to be represented by counsel in the matter under investigation." The motion passed unanimously.

Several members indicated that the words "script the communication" in the first sentence are not clear.

Comment [8]

A member pointed out that the language regarding admissions in the current Comment [4], which is replaced by this Comment, needs revision because it has been ignored by the courts as too broad. A member noted that the Comment has serval ambiguous statements and needs revision. Several members suggested that when the Comment is revised, the substance of it should be moved to the Rule text. The Commission asked the Reporter to prepare the draft both ways.

Comment [9]

Two members suggested that this Comment was unnecessary.

Comment [10]

A member felt that this Comment should be deleted. Another member thought that class actions should be addressed.

Comment [11]

An observer stated that Comment [11] includes an ambiguous statement about communications authorized by "constitutional" law. Several members felt that the definition of "authorized by law" should be left to the courts. A member noted that the Comment merely repeats the Rule and is unnecessary. A motion was made, seconded, and passed unanimously to delete Comment [11].

Comment [14]

Members disagreed on the need for this Comment.

VIII. Preliminary Discussions

The Commission agreed to review the Reporters' discussion questions for new rules to be discussed and to put their comments on the listserv.

The Commission tentatively decided to abandon attempts to include a "best practice" section in the Rules in light of comments made at the Advisory Council meeting. Discussion of "best practice" in a separate document remains a possibility.

Respectfully Submitted

Charlotte K. Stretch

Special Counsel

MEETING OBSERVERS

July 31 - August 1, 1998

George W. Bermant, Section of Business Law
Samuel L. Bufford, Los Angeles County Bar Association
David Caylor, International Municipal Lawyers Association
Robert A. Creamer, Attorneys' Liability Assurance Society
Samuel Dash, Center for Professional Responsibility Governing Committee
Robert F. Drinan, Standing Committee on Professionalism
Mark I. Harrison, Association of Professional Responsibility Lawyers
Lawrence K. Hellman, Oklahoma City University
Noel M. Hensley, Southwestern Legal Foundation
Leslie W. Jacobs, Section of Antitrust Law
Thomas D. Morgan, Section of Administrative Law and Regulatory Practice
Robert E. O'Malley, Attorneys' Liability Assurance Society
George W. Overton, Chicago Bar Association
Burnele V. Powell, Center for Professional Responsibility Governing Committee
Brian J. Redding, Attorneys' Liability Assurance Society
M. Catherine Richardson, Standing Committee on Legal Aid and Indigent Defendants
William P. Smith, III, National Organization of Bar Counsel
Deborah S. Smolover, U.S. Department of Justice
Raymond R. Trombadore, Standing Committee on Professional Discipline
David L. Walther, Section of Family Law