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Susan J. Lawshe Re: Proposed Changes to Model Rules 1.2 and 1.8 - Center for Professional Responsibility

May 30, 2000



ABA Ethics 2000 Commission
c/o Ms. Susan Campbell
American Bar Association
541 N. Fairbanks
Chicago, IL 60611

Re: Proposed Changes to Model Rules 1.2 and 1.8

Dear Commissioners:

Thank you for the opportunity to submit written testimony to the Ethics 2000 Commission on proposed changes to the Model Rules of Professional Conduct. The following testimony and attached materials are submitted on behalf of Chubb Executive Risk, a professional liability insurance carrier which provides legal malpractice insurance to law firms of 10 or more attorneys nationwide. As Loss Prevention Counsel, I work closely with Chubb Executive Risk underwriters and claims attorneys to identify developments and trends in malpractice claims against lawyers across the country. Based on our observations of recent claims and law firms practices, we offer the following testimony regarding Model Rules 1.2 and 1.8.

Model Rule 1.2

We agree with the Commission’s goal of clarifying the means by which a lawyer can limit the scope of a representation, and support the proposed changes to Paragraph 1.2(c), which require that the limitation be "reasonable under the circumstances" and that the client give "informed consent." We suggest, however, that the rule be modified to require that the client’s consent to a limitation in the scope of representation be in writing.

In our experience, numerous allegations of attorney malpractice arise out of misunderstandings about the scope of representation. To the extent that the scope of representation is limited, greater protection will be afforded both to clients and to the legal profession if that limitation is recorded in writing. A written limitation will provide clients with a tangible explanation of the limitation and its potential consequences. Given the fact that a limited representation may last many months or even years, a written record of the original agreement can help to protect a client’s rights should a dispute about the scope of representation arise. In addition, such a document will facilitate consultation with another attorney of the client so chooses. Written consent will also provide greater protection for the legal profession, because it well help significantly to limit later allegations by clients that they did not understand or fully appreciate the consequences of the limitation.

While proposed Comment 7 to Rule 1.2 acknowledges that such limitations will "normally" be part of a written fee agreement, we suggest that the most beneficial and protective formulation would be to require written consent by clients to a limitation in the scope of representation.

At a minimum, if the Commission decides not to require written consent, we believe that Comment 7 should be modified to strongly urge lawyers to obtain client consent in writing. Increased communication between lawyers and their clients is an essential element in the reduction of legal malpractice claims, and a written record of those communications will only serve to protect the legal profession and the public.

Model Rule 1.8

As the Commission is undoubtedly aware, the issues of investing in clients and taking client stock in lieu of traditional legal fees are of great concern to law firms across the country. I have received more inquiries from Chubb Executive Risk insureds about this issue than about any other in the past six months. Lawyers are concerned that engaging in these types of business transactions with clients will create conflicts of interest, or the appearance of conflicts. Moreover, law firms which elect to invest in clients or take stock in lieu of fees are concerned about how best to structure their transactions while protecting themselves and their clients.

In response to this widespread concern Chubb Executive Risk published the attached article, "Investing in Clients: The Latest Trend in Conflicts of Interest," in the most recent edition of Lawyer to Lawyer, our risk management publication. Our goal was to educate law firms about the risks attendant to investing in clients, and provide practical risk management advice. I have attached this article to our testimony as an illustration of the type of clarity and guidance lawyers have sought from Chubb Executive Risk in interpreting the current version of Rule 1.8.

We believe the Commission has made great strides in clarifying when and how lawyers can engage in business transactions with their clients. We strongly support the Commission’s proposed revisions to Comments 1, 2, 3 and 3(a), because they provide guidance concerning the applicability of Rule 1.8 and because they stress the overriding fiduciary obligations of lawyers to their clients.

In particular, the requirement in Paragraph 1.8(a)(2) that clients be urged, in writing, to consult with independent counsel is valuable and will provide greater protection for the public. We also support the Commission’s changes to Paragraph 1.8(a)(3) requiring that the client’s written consent "specify whether the lawyer is representing [or otherwise looking out for] the client’s interests in the transaction." The phrase "or otherwise looking out for" is rather imprecise, however, and we believe that substituting "protecting" or "advancing" for that phrase will convey the same concept in a clearer, more readily enforceable manner.

Thank you again for the opportunity to provide testimony regarding the proposed changes to the Model Rules, and for consideration of these comments.



Susan J. Lawshe
Loss Prevention Counsel
Chubb Executive Risk