Commission On Evaluation Of The Rules Of Professional Conduct (Ethics 2000)

Friday, December 11 and Saturday, December 12, 1998
Philadelphia, Pennsylvania

Commission Members Present:

Chief Justice E. Norman Veasey, Chair

Liaison:
Seth Rosner, Board of Governors

Guests:
Stephen J. Csontos, Senior Legislative Counsel, Tax Division, Department of Justice
M. Peter Moser, Chair, Standing Committee on Ethics and Professional Responsibility
Burnele V. Powell, Chair, CPR Coordinating Council

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, December 11, 1998 from 10:00 a.m. to 5:00 p.m., and Saturday, December 12, 1998 from 8:30 a.m. to 4:00 p.m., in Philadelphia, Pennsylvania.

I. Minutes of Previous Meetings

The minutes of the Commission meeting of September 27 - 28, the Reporter Subcommittee conference call of October 1, the Rule 1.10 Subcommittee conference call of October 29, and the Rule 4.2 Subcommittee conference call of November 9 were approved as submitted.

II. Work Plan

The Commission reviewed the proposed work plan that outlines the Commission’s schedule and the order in which topics will be discussed. A member suggested that the summary clarify that the Commission has identified the listed topics for consideration but is not committed to changing each of the listed rules. Suggested changes to the plan were to add Rule 3.8 to Track 2, to designate time in the schedule to specifically address the concerns of solo and small firm lawyers, to continue to address the role of the rules, to add fee sharing and partnership with nonlaywers as issues under Multi-disciplinary partnerships, and to add screens and electronic access to client files as an issue under Technology. The Commission agreed to appoint a subcommittee to work with the Multidisciplinary Practice Commission. The Commission approved the work plan as amended for circulation.

III. Rule 1.6

Professor Pierce noted that reference to using information to the disadvantage of a client was moved back to Rule 1.8 in accordance with the decision made at the last meeting. Another change from the prior draft is the addition of a specific reference to former clients in the rule. The Reporters felt that this would improve the organization of the rules and clarify some different treatment in Rule 1.9(c). As part of this change, Rule 1.9(c)(2) would be deleted so that confidentiality obligations to former clients would be covered in Rule 1.6. This would be consistent with the treatment of this subject in the Model Rules prior to the amendment of Rule 1.9 in 1989. A comment in Rule 1.6 prior to the 1989 amendment stated that confidentiality obligations continue after the representation terminates. Rule 1.9 would still cover conflict of interest and former clients. The Commission approved the reference to former clients in Rule 1.6.

The Commission discussed proposed Rules 1.6(b)(2) and (3) and reviewed a suggestion from the Reporters to combine the two into one provision. The Commission focused on the common understanding of the words "prevention," "mitigation" and "rectification," noting the time dimension or spectrum encompassed by the words. There was some difference of opinion whether ongoing crimes were covered by subparagraph (2) or subparagraph (3). Several members saw a significant difference between preventing future harm and taking action with respect to past harm, and felt that some states may be willing to accept prevention but not the other. The Commission approved proposed Rules 1.6(b)(2) and (3) as drafted.

An observer suggested that paragraph (b) be amended to replace the words "to the extent the lawyer reasonably believes necessary" with the words "to the limited extent necessary." Professor Pierce pointed out that the term "reasonably believes" is used in the rules to provide an objective standard. Other members felt that the adding the word "limited" was redundant and, therefore, confusing. A motion to add the word "limited" to Rule 1.6(b) was defeated 8 to 2.

Comments

A member suggested that Comments [20] and [21] be moved to Rule 5.1. The Commission decided to leave the comments in Rule 1.6 but to also address the issue of supervisory lawyers in the comments to Rule 5.1.

The Commission suggested that the Reporter cross-reference Rule 1.2 in Comment [11] or [12]. The Commission also requested that the Reporter soften the language in Comments [11] and [12] by deleting the references to "victims."

A member raised a question about the term "final order" in Comment [19]. As written, the comment implies that the burden would be on the lawyer to pursue something all the way to a "final order" even if the client is not willing to be responsible for the costs involved. The Commission agreed that the comment should convey the idea that if an order will not be appealed, then the lawyer has to comply, and suggested that the Reporters provide a cross-reference to Rule 1.4.

A member suggested deleting the example in Comment [10]. Several members agreed that the example was too extreme. Professor Moore indicated her preference to include the example because it demonstrates a radical change in the proposed rule. The Commission left the decision to the discretion of the Reporters.

IV. Rule 1.8

Rule 1.8(a)

Professor Moore explained that a change was made in the current draft of 1.8(a)(3) to clarify the connection between Rules 1.7 and 1.8, specifically that if a lawyer represents the client in the business transaction, both rules apply. There had been some concern that the prior draft of 1.8(a)(3) was not clear whether the consent required was to the transaction or to the conflict. The Commission felt that the new draft did not eliminate the problem posed in the prior draft. A member suggested returning to the language of the prior draft and revising subparagraph (2) to clarify that a lawyer needs to advise clients of the interests of the lawyer that may be adverse to the client and of the desirability of seeking independent legal counsel on the transaction. There was general agreement with this suggestion.

Rule 1.8(b)

The Commission approved Rule 1.8(b) as drafted.

Rule 1.8(c)

The Commission agreed with the Reporters’ suggestion to combine subparagraphs (c)(1) and (c)(2). The Commission agreed with the inclusion of the bracketed language in Comment [3] but decided not to include the bracketed language in Comment [4].

Rule 1.8(d)

The Commission approved the suggestion of the Reporters that the decision made at the last meeting should be reversed and that the original language of the Model Rule should not be changed. The Commission agreed that the proposed change would not solve the problem it attempts to address and that it creates additional problems. An observer stated his opinion that 1.8(d) matters should be treated the same way as 1.8(a) business transactions even though the transaction would be with a former client. The Commission felt that the issue should be left to developing law.

Rule 1.8(e)

The Commission approved Rule 1.8(e) as drafted.

Rule 1.8(f)

A member suggested that Comments [21] and [22] be eliminated. Professor Moore responded that the change in the Rule regarding direction from third party payors is significant and should be highlighted. The Commission agreed to retain Comments [21] and [22] but suggested several changes, including the deletion of the words "significantly" and "substantially." The Commission agreed that the reference to "informed consent" should remain in Comment [21] and voted 6 to 3 to delete the last sentence of Comment [21].

The Commission agreed that Comment [16] should include a reference to Rule 1.7 and a discussion of "loyalty."

Rule 1.8(g)

The Commission approved Rule 1.8(g) as drafted. Professor Moore pointed out that the issue may be re-examined after the Commission discusses mass torts.

Rule 1.8(h)

A suggestion to amend the rule to permit prospective limitation on malpractice liability if the client is independently represented was rejected by the Commission. Rule 1.8(h) was then approved as drafted. A member suggested that the words "may undermine" in Comment [9] should be changed to "pose a significant risk of undermining."

Rule 1.8(i)

At its previous meeting, the Commission decided to delete Rule 1.8(i) and instead draft language on the issue for inclusion in the comment to Rule 1.7. The Reporters suggested that the Commission reconsider that opinion on the ground that the prohibition ought to be clear and not buried in a comment. The Commission agreed to reinstate Rule 1.8(i) and suggested that appropriate amendments be made to clarify the rule’s relationship with Rule 1.7.

Rule 1.8(j)

A proposal to delete Rule 1.8(j) on the ground that the prohibition makes no sense in a system that allows contingency fees was rejected.

Rule 1.8(k)

The Commission approved the rule as drafted with minor word changes in the comment. Several members voiced their continuing concern about this Rule. One member noted that there should be no exception for pre-existing sexual relationships.

V. Rule 1.7

The Commission considered a proposal to drop subparagraph (a)(1), the absolute prohibition on representation "directly adverse" to a current client in litigation unrelated to the subject matter of the current client’s representation. Professor Morgan and others have argued that there are numerous cases where such litigation would not be disloyal and would not threaten the vigor of representation of either client. The Commission did not approve the suggested change.

A motion was made and seconded to amend paragraph (b) by moving the reference to informed consent from the beginning of the paragraph to the end following subparagraphs (1) - (3). The movant argued that the amendment clarifies that a lawyer must determine that none of the nonconsentability categories exist before seeking consent from the client. Several members objected to the awkward construction of the proposal. The motion was defeated 7 to 2.

The Commission next considered an alternative to paragraph (b) submitted by the Reporter to address the concern raised by the previous motion. In this alternative, the reference to informed consent would be moved from the beginning of the paragraph to a new subparagraph (4). Professor Moore indicated that she would prefer not to mix nonconsentability with consent as this alternative would do. A motion to adopt the alternative was defeated 6 to 3.

The Commission discussed eliminating paragraph (c) and inserting the word "written" prior to "informed consent" in paragraph (b). Under this proposal, a discussion about the appropriate time to obtain the writing ("at or within a reasonable time after the lawyer obtains the informed consent") would be included in the comment. The Commission liked the idea but decided to leave the rule unchanged until the Reporter has had an opportunity to draft new language.

An observer commented that there is some ambiguity in the term "affected client." He suggested that the rule or comment should clarify that the affected clients are those affected under 1.7(a). The Commission agreed that this should be addressed in the comment.

Comments

The Commission agreed that the word "should" should be changed back to "must" in the second sentence of Comment [1a].

The Commission decided to change the word "generally" back to "economically" in the last sentence of Comment [3]. The Commission also decided to reinstate the stricken language at the end of the second sentence and to replace the word "Thus" at the beginning of the second sentence with the words, "Absent consent a lawyer may not."

The Commission agreed that the second and third sentences of Comment [4] were repetitive and should be deleted.

A member suggested adding an example after the second sentence of Comment [6] to the effect that a lawyer may be asked to represent several individuals with competing economic claims in a related matter. Other members thought the example was too broad. The member will draft an example for consideration at the next meeting.

A member recommended that the term "substantive law" be used in the second sentence of Comment [6a] instead of the term "the law." The member further suggested deleting the last sentence but the Commission favored retaining the sentence as a flag for those states where it is applicable.

Another member felt that the concern expressed in Comment [6] was misstated. He felt that the concern was that the client will be asked to consent to a representation that is not competent and diligent. The Reporter explained that the comment attempts to demonstrate what a client needs to understand. An observer added that the comment should clarify that the last sentence is only one factor to consider.

A member noted that Comments [24] and [25] concern consent and confidentiality and should perhaps be grouped with Comments [8] - [10] on informed consent. The member added that informed consent must, at a minimum, encompass loyalty and confidentiality.

At the request of Professor Moore, the Commission focused on the example provided in Comment [12]. She indicated her preference for an example that clearly demonstrates a nonconsentable conflict. She advised the Commission that Professor Morgan felt that the language in the comment should be less absolute, such as "a lawyer might not be able reasonably to conclude that the representation would be competent and diligent," or "then, ordinarily the lawyer will not be able to conclude." The Commission decided that the example should be one that all agree is nonconsentable so that the less absolute language will not be necessary.

The Commission agreed that the concept of "professional independence" should be included in Comment [17].

A member noted for the record his dismay with Comment [18].

Several members were confused by the underlined language in Comment [18a]. Professor Moore indicated that she would clarify that the language refers specifically to direct adversity conflicts and add a cross-reference to confidentiality.

The Commission agreed with a suggestion in the Reporter’s Observations that the comment say directly that a lawyer may advocate positions that other clients will not like, so long as the lawyer does not represent them on the issue. The Reporter will insert the following sentence after the first sentence of Comment [15]: "The mere fact that advocating a legal position on behalf of one client might create precedent adverse to the interests of a client represented by the lawyer in an unrelated matter does not create a conflict of interest."

With respect to the section of the Comment titled Special Considerations in Joint Representation a member asked about conflicts arising in the middle of a joint representation. Professor Moore explained that Comment [2] applies to any conflict situation and that a comment in Rule 1.9 also addresses obligations to former clients.

The Commission agreed to add the bracketed word "typically" in both sentences in Comment [16a]. A member suggested that the Comment specifically mention that if a lawyer is an unnamed member of a class, the lawyer can still represent defendants. Another member observed that the heading of this section of the Comment might be changed to be more reflective of the substance of Comments [13] - [16a].

The Commission agreed with a suggestion to delete the word "ordinarily" in Comment [25].

VI. Informed Consent

Professor Moore explained that the use of the term "reasonably adequate" is intended to convey that the standard is objective and not subjective. A suggestion was made to delete "and explanation" on the ground that "explanation" may be subsumed in "information" and that it will often be the case that no explanation is needed. The Reporters felt that it is more typically the case that explanation is required and that the rule should emphasize the more routine case. The Commission agreed that the term "explanation" should remain in the rule and that the comment would explain that explanation may not be necessary in every case. The Commission decided that the definition of "informed consent" should be located in Rule 1.4.

VII. Rule 4.2

Mr. Moser reported that he and Mr. Jeffress from the Ethics Committee met with Professor Hazard, Chair of the Ethics 2000 Subcommittee on Rule 4.2, to discuss the possibility of reaching an agreement on a joint draft from the two committees. The three reviewed a draft prepared by Mr. Jeffress and agreed to present it to the Commission for consideration. Just prior to the Commission’s meeting, the Ethics Committee approved the joint draft.

Members voiced concerns and questions regarding the proposed joint draft, including: why the issue of supervising a criminal investigation, which is covered in paragraph (b) of the joint draft, was placed in the text of the rule while other equally important issues were not; why there should be a special rule for prosecutors in this area; whether the proposed change would be acceptable to the Justice Department; whether it is appropriate to redraft the rule if the change would only be to codify existing case law; and whether the proposed paragraph (b) is an accurate reflection of current case law.

Members disagreed on the effect of the passage of the McDade Amendment on the need for action by the ABA. A member pointed out that one impetus for a close review of Rule 4.2 is the desire on the part of the Conference of Chief Justices to resolve important state law issues related to this rule.

In order to focus more clearly on the difficult issues, the Commission felt that it needed to have additional research on how the critical words in Rule 4.2 have been interpreted by the courts.

A motion was made and seconded to adopt paragraph (a) without the inclusion of the words "or court order." Several members noted that regardless of the vote on this motion, the Commission would still need further research on the interpretation of the words "authorized by law." The motion was defeated 8 to 2. Chief Justice Veasey abstained. The Commission agreed that the Reporters should draft a comment explaining "court order." Several members felt that Comment [3] in the joint draft was too broad and that the Reporters should review the case law for a more specific standard.

A motion was made and seconded to strike paragraph (b) of the joint draft and to move the issue to the comment. One member felt that paragraph (b) was a good attempt to codify the law but he thought that the paragraph should specifically mention undercover and pre-indictment investigations. Another member commented that the paragraph is broader than current law in that it applies after indictment and is more narrow than current law in its treatment of pre-indictment investigations. She suggested a return to the word "party" to clarify that the rule applies when a controversy is joined. She pointed out that at the time of the change from the word "party" to "person" the Ethics Committee declared that there was no substantive significance to the change. A motion was made and seconded to table the current motion to strike paragraph (b). The motion passed 7 to 2.

The Commission agreed that it would be helpful if the Ethics Committee circulates a draft for discussion and agreed to encourage public comment on the Ethics Committee proposal.

Chief Justice Veasey indicated that he will report to the Conference of Chief Justices that the Ethics Committee and Ethics 2000 are continuing to work in good faith on Rule 4.2.

VIII. Guidelines for Comments

The Commission briefly reviewed the proposed guidelines for comments. The Commission was generally of the opinion that it should not attempt to impose a grid of uniformity on the comment drafting. Professor Moore pointed out that while the guidelines clearly prohibit any expansion of the black-letter rules, there has been a suggestion that the comment may be used to limit the scope of a rule, particularly if the black-letter itself cannot be clearly limited. An example of this type of limitation can be found in Comment [6] to Rule 1.10. Further discussion of this issue was deferred.

IX. Administrative Matters

Ms. Stretch pointed out that Rules 1.6, 1.7, and 1.8 will be widely distributed for comment after this meeting. The Commission agreed that the rules should be accompanied by a cover memorandum explaining the Commission’s process and the development of the three rules. Professor Moore and Ms. Stretch will work on the cover memoranda.

The Commission decided that it would schedule an additional meeting in 1999, probably in December.

X. Rule 1.10

The Commission agreed that the proposed rule was well drafted and approved of the approach on the definition of "law firm." As noted above in the discussion of guidelines for drafting comments, this draft attempts to solve the difficulty in drafting a clear black-letter rule by using the comment to explain limits on the rule. A member observed that Comment [6] seems to be inconsistent with the black-letter and should be deleted. The Commission agreed that the comment should not describe limitations on the rule.

Two members disagreed on whether all personal interest conflicts need to be disclosed to clients and whether client consent is always required. Another member stated that he thought there was consensus that not all personal interest conflicts should be imputed and that there was support for this position in case law. Professor Moore pointed out that the issue rarely comes up outside of ethics opinions which do support that position. A member suggested that as an ethical matter, disclosure should only be required if there is a significant risk that the personal interest conflict will materially limit the representation. By a vote of 5 to 2, the Commission agreed with this approach and suggested using language similar to Rule 1.7.

Eight Commission members agreed that all Rule 1.8 conflicts should be imputed. Rule 1.8(i) was not part of the discussion pending a final decision on how that rule will be treated. One member argued that Rule 1.8 conflicts should be treated in the same way as Rule 1.7 conflicts, as outlined above. The Commission asked the Reporters to draft alternative proposals.

An observer raised an issue regarding lawyers who are personally prohibited from working on a matter because of work done prior to becoming a lawyer. He suggested that such conflicts should not be imputed. The Commission agreed to consider the issue at its February meeting.

The Commission also discussed whether to include the elements of a good screen for guidance when voluntary screens are permitted. A suggestion was made to address the elements of a screen in Rule 1.11, where nonconsensual screening is permitted, with a cross-reference in the Rule 1.10 comment. This will be addressed in further detail at the Commission’s next meeting.

XI. Rule 1.9

The Commission began by discussing the relationship between Rules 1.9 and 1.11 and whether Rule 1.9 applies to former government lawyers. Under Rule 1.9, no screening would be allowed without the government’s consent. Under Rule 1.11, the former government lawyer can always be screened without regard to the basis of the disqualification. One member noted the difference in the definition of "matter" in the two rules. Commission voted 6 to 2 to state in the comment to Rule 1.9 that former government lawyers are dealt with in Rule 1.11, with the exception of 1.9(c) which the Commission previously decided to move to Rule 1.6.

A concern was raised regarding the application of Rule 1.9 to current government lawyers. Under Rule 1.9, a former client can consent to a conflict while consent is not required under Rule 1.11. The Commission felt that modifications to Rule 1.11 may be sufficient to handle this concern and agreed to review those modifications before concluding that Rule 1.9 does not apply to current government lawyers. The suggestion was made to review the D.C. Bar’s version of Rule 1.9 which applies to current government lawyers and permits representation with consent of the former private client.

Professor Pierce observed that the organization and content of the comment to Rule 1.9 should be revised. He noted the illogical organization of the comment, the irrelevance of some comments (e.g., Comments [4] and [5] regarding legal history), the use of the term "material adversity" with no explanation, and the incomplete definition of "substantial relationship."

An observer whose practice is entirely dedicated to disqualification matters agreed that there is a need to define "substantial relationship." The Commission asked the Reporters to consider whether the definition should be in the text or the comment and to draft something for the next meeting. The observer noted that Rule 1.9 is used primarily in a disqualification context, not in a disciplinary context. He stated that most disqualification motions are from former clients and are based on vicarious disqualification.

The observer further suggested that the reference to "access to information" in Comment [6] is at odds with the statement in subparagraph (b)(2) that only actual acquisition of information protected by Rules 1.6 and 1.9(c) will result in personal prohibition and therefore imputation of the conflict to the new firm. He questioned the wisdom of imputing all Rule 1.9 conflicts because he felt that the underlying presumption that the lawyer has confidential information is not accurate. The Commission agreed that the Reporters should consider revisions to the comment to clarify the way in which former client conflicts are handled in situations involving transient lawyers.

The observer was also concerned that Comment [12], which appears to require explicit waivers, will adversely affect the ability of firms to resist tactically motivated disqualification motions on the ground that the former client did not act promptly to protect its interests. The Commission suggested that the Reporters draft a new sentence in Comment [12] referring to the effect, in a disqualification context, of a failure to object even when the client has not explicitly consented to the representation.

A question was raised whether the informed consent obtained under Rules 1.9 through 1.12 ought to be in writing. Several members commented that a writing is not needed in these rules because the lawyer does not have an ongoing relationship with a former client.

XII. Rule 1.11

Professor Moore noted that the draft of Rule 1.11 expands the scienter requirement so that it now reads, "knows or reasonably should know." A member asked how concurrent conflicts for government lawyers are handled (e.g., a part-time corporation counsel or part-time prosecutor). Another member indicated that concurrent conflicts are covered by Rule 1.7. Professor Moore indicated that the Reporters will draft a comment on concurrent conflicts.

A member questioned whether the standard in subparagraph (c)(1), "information that is material to the matter," is meant to be different from the standard in Rule 1.9. She suggested that both rules use the term "substantially related."

A member suggested that Rule 1.11(c) should prohibit only government representation that is adverse to the former client and should allow for the former client’s consent. The Commission asked the Reporters to redraft Rule 1.11(c) to track Rule 1.9.

The Commission agreed that it should include in the comment a better definition of an effective screen. The Commission was in general agreement that the description of screens should be fairly general and should appear in the comment. It should point out that the timing of screens is critical. One member felt strongly that the comment should indicate that the key to any screen is the conduct of the people involved more than the procedures that are implemented.

A member pointed out that the D.C. Bar rejected Rule 1.9(b) because it is confusing. She noted that the paragraph purports to protect third parties. Another member responded that the paragraph is not a problem because it is not imputed and that it is a useful reminder to lawyers.

XIII. House of Delegates

The Commission did not have sufficient time to fully study the Report and Recommendation from the Standing Committee on Professional Discipline regarding Model Rule 5.1. The Chair will write to the Discipline Committee and other Committees in the Center to suggest that the Committees coordinate with the Commission and the Ethics Committee regarding any suggestions for modifications to the Model Rules.

XIV. Executive Session

The Commission met briefly in executive session to discuss budget issues.

Respectfully submitted,

 Charlotte K. Stretch
Susan Campbell

MEETING OBSERVERS

Lewis Becker, Villanova Law School
David Caylor, International Municipal Lawyers Association
Robert Cummins, ABA Section of Litigation
Richard Flamm, Alameda County Bar Association
John M. Gardner, National Association of Bond Lawyers
Noel Hensley, Southwestern Legal Foundation
Stephen C. Krane, New York State Bar Association
Eleanor Myers, Temple Law School
Robert E. O’Malley, Attorneys’ Liability Assurance Society
George W. Overton, Chicago Bar Association
Phyllis M. Rubinstein, ABA Section of Real Property, Probate and Trust Law
Thomas G. Wilkinson, Pennsylvania Bar Association