CONCURRING IN GREAT PART; RESPECTFULLY
DISSENTING ON A
FEW IMPORTANT MATTERS
Submitted by: Commissioner Lawrence J. Fox
Joined in as to screening by: Commissioner Susan Martyn
The Ethics 2000 Commission has labored long and hard in redrafting the Model Rules for consideration by the ABA House of Delegates. Served ably by a splendid staff and two erudite, patient and careful Reporters, we bring to the floor of the ABA’s most representative assembly a work-product of which the Commission can be justifiably proud. Rules have been strengthened, language has been recrafted to improve understanding, and difficult new issues have been addressed.
But in the view of this Commissioner the final draft is not good enough. We can do better. Not only that, we must do better.
The role of the ABA in drafting rules of professional conduct is a sacred trust, a trust that we must work very hard to maintain.
The words are not just idle rhetoric. There are those in the profession who would usurp the ABA’s traditional role. The Justice Department has already tried. ( See Ethical Standards for Attorneys for the Government, 28 C.F.R. pt. 77 (1999); Memorandum from Richard Thornburgh, United States Attorney General, to Justice Department Litigators (June 8, 1989) (reprinted in In re Doe, 801 F. Supp. 478, 489-93 (D.N.M. 1992))). The Committee on Rules of Practice and Procedure of the Judicial Conference of the United States is tip-toeing around the edges. ( See Daniel R. Coquillette, Report on Local Rules Regulating Attorney Conduct in the Federal Courts (July 5, 1995), in Working Papers of the Committee on the Rules of Practice and Procedure, Special Studies of Federal Rules Governing Attorney Conduct 3-6 (1997)). And at least one commentator has argued that the ABA be stripped of its model drafting function and be replaced by the Conference of Chief Justices. ( See Andrew L. Kaufman, Who Should Make the Rules Governing Conduct of Lawyers in Federal Matters, 75 Tul. L. Rev. 149 (2000)).
So what we do now is under intense scrutiny. Whether we have proposed rules that are in the best interests – not of lawyers – but of our clients, the system of justice and society are questions everyone will ask.
This is particularly so in the area of client protections – in my view the most important aspect of the rules. Because our process largely excludes clients (the Commission had but one – albeit one extraordinary nonlawyer), in striking the balance between the interests of clients and the interests of lawyers we must be especially conscientious and vigilant. As the Preamble to the Model Rules provides:
The legal profession’s relative autonomy carries with it special responsibilities of self-government. The profession has a responsibility to assure that its regulations are conceived in the public interest and not in furtherance of parochial or self-interested concerns of the bar.
With all due respect to my fellow Commissioners, it is my heartfelt view that it is in this area that the Commission has lapsed. This lapse, to me, is particularly curious because in several respects in addressing the relationship between clients and lawyers, the Commission has come down firmly on behalf of strengthening client protections.
We have proposed that all waivers of conflicts of interest be based on the informed consent of the client and confirmed in writing. We have demanded that all fee agreements with new clients be in writing. We have proposed a rule that would prohibit sex between lawyers and clients. We have rewritten Rule 1.8(a) to require far more safeguards when lawyers engage in business with clients.
Yet these proposals are difficult to reconcile with many others. What the Ethics 2000 Commission has given with one hand, it seems to take with the other. But the Commission is not the final word here. The House of Delegates will debate and vote on these proposals. They do not become Models until the House of Delegates acts.
This dissent is filed, therefore, in the hope that the matters raised here, while they failed to persuade a majority of my fellow Commissioners, will find a more hospitable reception on the floor of the House, be the subject of amendments at that time, and result in successful appeals from my failure of advocacy in the "court" below.
SCREENING (Rule 1.10)
A lawyer has worked on a client matter long and hard. The lawyer gets a job offer from the law firm adverse to the client. The lawyer accepts the offer, resigns the client’s representation and takes the new job.
When that occurs under our present rules, the lawyer’s new firm would be disqualified from continuing the representation of the adverse party, absent client consent to the continued representation. In practice, consent often is conditioned on a screen, which cordons off the transferring lawyer from any participation in the matter. This means that, while the client might regret the loss of the wandering lawyer, that same client makes the judgment whether to worry about the fact that the lawyer who was the recipient of the client’s confidential communications now works elsewhere.
But not any more. If the Ethics 2000 new Rule 1.10 is adopted, contrary to nearly every case on point, the lawyer could switch sides in the same pending matter, abandon the former client, and the client would simply be notified "not to worry, your former lawyer has been screened." The Tennessee Supreme Court recently rejected such a rule and, analogizing to baseball, concluded that the lawyer who switches sides in a pending matter "has not only switched teams, he has switched teams in the middle of the game after learning the signals. That [the lawyer] has been benched by his new team does little to ameliorate the public perception of an unfair game." Clinard v. Blackwood, 2001 Tenn. Lexis 442.
There are many reasons why this proposal should be rejected. First, to a large extent, this is a solution in search of a problem. Current Model Rule 1.9 (b) shields lawyers who have not personally worked on matters at the former law firm from discipline or disqualification. Those who did work on the matter may seek the consent of a former client, including consent conditioned on screening that lawyer from participation in the matter in the new firm. Those who worked on the case and cannot get client consent are likely to be those who have some significant information about a former client. And it is here that courts rightly examine the facts to determine whether confidential information material to the matter normally would have been imparted to the lawyer at the former firm. See e.g., Kassis v. Teacher’s Ins. And Annunity Ass’n, 717 N.E.2d 674 (N.Y. 1999) (although imputation not per se required, information gained by former associate who conducted five depositions and represented the plaintiff in two mediation sessions before joining defense firm was so significant that even effective screening would be "inconsequential" and therefore not effective in avoiding disqualification); Adams v. Aerojet-General Corp., 86 Cal App. 4 th 1324 (2001) (trial court improperly disqualified lawyer without considering nature and extent of lawyer’s involvement with former firm’s earlier representation of opposing party).
Like many things in life, we started down this road to compromising client protections with the best of intentions, permitting the screening of lawyers leaving the government. The argument that won the day, creating this one narrow exception to the normal rule on imputation, was that we wanted to encourage lawyers to work in public service and not be barred from finding employment with those adverse to the government (the most likely firms to be interested in hiring them) when they departed. Moreover, the conclusion was reached that the government uniquely was a different kind of client that might be asked to endure the indignity of having its former lawyers screened in order to encourage the best and the brightest to undertake public service. That exception reflected a noble cause then and it remains one today. But unfortunately that "precedent" is incorrectly relied upon in situations where a lawyer switches sides in the same pending matter. Indeed, courts have rejected the validity of screening for former government lawyers in cases where the lawyer switched sides in a pending case. See e.g., Commonwealth v. Maricle, 10 S.W.3d 117 (Ky. 1999) (defense firm disqualified when lead counsel for the prosecution joined firm which represented criminal defendant, after negotiating employment for more than two months while case was pending.)
Second, in its original draft the Commission allowed screens in substantially related matters but proposed blocking the nonconsensual screening of a side-switching lawyer who had played a significant role in a litigation matter. While this proposal created its own problems – drawing an unwarranted distinction between transactional conflicts and litigation conflicts – at least it recognized the problem of creating effective screens when lawyers switch sides in a pending matter. But, contrary to the vast majority of cases on this issue, the Commission has abandoned this protection for clients whose lawyers have moved to the other side’s law firm, now making screening available to any lawyer regardless of the nature of the matter or the extent of the lawyer’s prior involvement. See, e.g., Kala v. Aluminum Smelting & Refining Company, Inc., 688 N.E. 2d 258 (Ohio 1998) (absent informed consent of both clients, law firm cannot hire and screen lawyer directly involved on the other side of litigation, even where court otherwise recognizes nonconsensual screening in some former client situations).
Third, courts that allow nonconsensual screens but prohibit them in side-switching cases worry about the basic policy behind the former client conflict rule: the significance of the information the migrating lawyer possesses. This explains why the Restatement of the Law Governing Lawyers Section 124 recognizes nonconsensual screening only if "any confidential information communicated to the personally prohibited lawyer is unlikely to be significant in the subsequent matter." The Commission’s proposal travels far beyond any such limitation.
Fourth, the problem of a violation of a screen takes on new proportions in a side-switching case. Rarely if ever will violation of a screen be communicated to the former client whose confidences it is intended to protect. A breach of a screen easily could be inadvertent, and lawyers may hesitate to report it. The problem of monitoring compliance will be compounded in firms where multiple screens have been established for multiple clients in multiple matters, for example, when wholesale screening might be used in a law firm merger. The entire misconduct, if it occurs, occurs in the lawyer’s new practice setting, the law firm on the other side, the law firm the former client already may not trust. We believe that a client whose lawyer joins the other side’s law firm must be allowed to choose whether to accept on faith the effectiveness of screening, especially when there is no way the client would ever be able to determine whether there has been compliance.
The proponents of this change to our rules argue that the Courts will take care of the egregious cases by disqualifying the lawyer involved; all we are doing is removing such conduct from discipline, they assert. That argument is unavailing. Our rules should reflect that it is unethical for lawyers to switch sides without client consent. See e.g., Universal City Studios Inc. v. Reimerdes, 98 F.Supp 2d 449 (SDNY 2000) (disqualification motion denied due to tactical abuse, but professional disciplinary bodies are available to police the behavior of counsel). What does it say to the client community when our rules of professional conduct on their face condone such conduct? Moreover, if the rule is changed the courts may well misread this as an indication that they should not disqualify lawyers who side-switch. The change in the rule also will place a burden on the affected client to enforce lawyer loyalty through the expense of a motion, when a rule would mandate lawyer compliance. Moreover, side-switching will undoubtedly occur in non-litigation matters where the disqualification remedy will require the client to institute litigation.
As one commentator has astutely observed, "professional codes serve many valid functions other than providing a basis for discipline. They can identify moral issues, promote moral introspection by lawyers about appropriate conduct, influence judicial standards, and facilitate communication within the bar." Fred Zacharias, The Professional Discipline of Prosecutors, 79 N. Car. L. Rev. 721, 771 (2001). That is certainly the case with a rule that prohibits the imposition of involuntary screens on clients.
One Commissioner has defended screening on the following basis:
The commission dismissed concerns that firms cannot be counted on to administer screens effectively, that former clients will have no ability to police screening arrangements, and that confidences will inevitably be disclosed inadvertently in certain practice settings. But the commission heard no evidence to suggest that these objections have a factual basis in the experience of jurisdictions that permit screening.
The commission’s decision to propose a general screening rule initially seemed a leap of faith. But our confidence mounts that we are doing the right thing. (87 A.B.A.J, 61 (MAY 2001). This language is taken from the Commission’s February 2001 memorandum labeled February 2001 Discussion of Proposals, reprinted in ABA 27 th National Conference on Professional Responsibility Conference Book, 102 (2001)).
But as Professor Kaufman observed, while he wondered yet again ( See note on page 2) whether the ABA could properly lay claim to the role of model drafter for the profession, in the annual Michael Franck lecture in Miami on June 1, 2001:
I am not going to challenge the commission’s leap of faith. Faith-based initiatives have an important status today. But the argument that objections about the effectiveness of screening may be dismissed because the "commission heard no evidence to suggest that the objections have a factual basis" needs closer examination …. Whom did the commission expect to complain – firms that have used screens, either in jurisdictions that permit them or in situations of client consent? Did the commission really expect firms to confess to negligence or worse, with loss of business and lawsuits to follow? Really?
The commission apparently ignored some cases that analyzed screening attempts in Pennsylvania firms in which courts found that screens had in fact leaked – sometimes quite badly. I am of course referring to Maritrans and Steel v. GM. and there is also Lord Jefri v. KPMG from the House of Lords. ( Maritrans v. Pepper, Hamilton & Scheetz, 602 A.2d 1277 (Pa. Sup. Ct. 1992); Steel v. General Motors Corp., 912 F. Supp. 724 (D.N.J. 1995); Prince Jefri Bolkiah v. KPMG, 129 NLJ 16 (1998)).
Thus, we wholeheartedly endorse Professor Kaufman’s astute observation:
But my real objection here is to the notion that the objections to screening are obsolete in our modern world of national and international law practice, that screening has become the desirable norm, and that the burden is on opponents to produce factual evidence that screening is problematic. On that basis, I don’t know why the commission did not provide for screening as a solution to simultaneous representation conflict problems as well as successive representation conflicts problems. Perhaps that is next.
We have no trouble with the use of voluntary screens in pending cases where a lawyer leaves one firm and joins the other. We believe they can be used to good effect when the client is told about the screen, understands the role the departing lawyer played in the client’s matter, knows the identity and character of the firm to which the peripatetic lawyer has migrated, and is asked whether he or she will consent to the screen, with the understanding that everyone will respect the client’s right to decide this important question. But screens should not be imposed on clients, especially when a lawyer switches sides in a pending matter.
THE PROSPECTIVE CLIENT SCREEN (Rule 1.18)
The Commission, in adopting an otherwise excellent new rule governing prospective clients, dramatically limits the protections that are available to prospective clients under the present rules. Today it is the lawyer’s responsibility to limit the amount of information a prospective client shares with the lawyer if the lawyer wants to keep the "coast clear" for taking on an alternative representation in the same matter should this prospective client not ripen into an actual client for the lawyer. See e.g., Poly Software International, Inc. v. Su, 880 F. Supp. 1487 (D. Utah 1995) (lawyer who adequately controlled the initial interview not disqualified).
Under the Commission’s proposed Rule 1.18, even if the lawyer learns a great deal of prospective client confidential information, the lawyer need not worry, though certainly the client should. That lawyer’s law firm will be able to take on any adverse representation in the same or a substantially related matter, so long as the original recipients of the confidential information are screened, a screen that will be imposed on the prospective client who will, like the client of the side-switching lawyer, be forced to accept the screen on faith. (The Commission also provides in a comment to Rule 1.10 that it is permissible to impose an involuntary screen as to paralegals, summer associates and secretaries who have "switched sides." Again the former client is asked to accept on "faith" the notion that these individuals, who may be privy to the most sensitive information, will not disclose what they know. The touchstone in all cases should be access to material information of the former client. See e.g., Zimmerman v. Mahaska Bottling Co., 19 P. 3d 784 (Kan. 2001) (no screen allowed for secretary who overheard conversations about the same matter at former law firm); In re American Home Products Corp., 985 S.W. 2d 68 (Tex. 1998) (disqualification required where law firm assigned legal assistant to work on the same case she had previously researched for the other side)).
CONFIDENTIALITY (Rule 1.6)
Confidentiality is the second leg of the tripod of core values that support our professional ethic. We say we are committed to the confidentiality of our clients because, without it, we are deeply concerned – for good reason – that our clients will not share with us their innermost secrets and will – again for good reason – view their lawyers with suspicion and distrust. To maintain the sanctity of the lawyer-client relationship, the exceptions to confidentiality crafted into our rules must be as narrowly drawn as possible.
This the present rules do. Life, serious bodily harm, candor to the tribunal and a lawyer’s defending herself against claims are the only exceptions we maintain.
But now, if the Ethics 2000 proposal is adopted, whole new categories of disclosure will be possible. In order to prevent, mitigate or rectify a client fraud in which the lawyer’s services have been employed, confidentiality will now be grist for the disclosure mill.
The proponents of this proposal argue lawyer services should not be misused in this way. But what they fail to recognize is that the proposed rule both starts from a false premise and at the same time creates more likelihood for lawyers to be held liable than if the rule were permitted to remain as it is.
The false premise is that when a lawyer is dealing with client fraud it will be apparent on its face. It is so easy to say the words "when a lawyer uncovers fraud, she should be able to disclose it." But fraud does not appear that way save in the rarest of cases. Facts are ambiguous, hindsight is 20-20 and the ability of a lawyer to identify a good fraud is at a very low order of magnitude. That’s why it’s called fraud.
The liability-creating effect will occur when lawyers, who no longer will
have the shield of Rule 1.6's prohibition on disclosure of confidential information to explain a failure to disclose where client fraud was involved, become additional defendants in litigation wherein it will be argued that they knew or should have known about their client's fraud and
therefore should have taken steps to save the victims of the fraud. All the restrictive language in the proposed comment to those Rule 1.6 amendments to the effect that the permission to disclose granted by the rule should not be converted into a duty will not protect lawyers in this unenviable position.
Most important, however, is the injection into the client-lawyer relationship of this "opportunity" for whistle blowing, an opportunity that may be exercised too often because of the concerns counsel may have if counsel guesses wrong. The client-lawyer relationship is fragile enough; this additional impediment to trust should not be added to the mix. Its effect on full disclosure by client to lawyer – the essential purpose of having a rule governing confidentiality in the first place – is incalculable. For certain, if this rule is adopted, lawyers will have far fewer opportunities than they enjoy today to remonstrate with their clients to do the right thing.
The proponents of this change to the Rule argue that the present Rule has been followed by fewer jurisdictions than those that have adopted some version of a rule permitting disclosure of client fraud. To which I have two responses. First, there are some issues where counting heads is not enough. The principles are too important here to abandon them on a straw poll. Second, where lawyers have this opportunity to whistle-blow on their clients, they are apparently not doing so because lawyers as individuals recognize the importance of confidentiality. Therefore I ask why create an exception on which lawyers are unlikely to act, but which will undoubtedly increase the likelihood of lawyer liability?
PROTECTION OF REPRESENTED PERSONS (Rule 4.2)
One of the most important protections embodied in the Model Rules is the right of our clients, once they retain us, to be free of any contacts by opposing counsel. Any change in this rule must be viewed with great suspicion because the protections offered by this rule are both fragile and have been so often under attack. In my view the Ethics 2000 Commission proposes a potentially very dangerous idea by adding the words "or court order" to the language of exemption from the prohibitions of the rule ("Unless authorized by law or court order"). This mischievous invitation to seek recourse from the courts – an opportunity that is presumably available as to any rule, but is stated, in haec verba, only in this proposed new Rule 4.2 – could well have an effect that the supporters of Rule 4.2 would find quite compromising of the Rule’s important protections for the represented.
PROSPECTIVE WAIVERS (Rule 1.7)
The Commission has concluded, in a proposed Comment  to Rule 1.7, that a lawyer can ask for a prospective waiver from an "experienced" client of a future conflict of interest and that, because the client is experienced, such a prospective waiver could turn out to be fully enforceable despite its lack of specificity.
This proposal is deeply flawed and should be rejected. First, there is nothing about experienced clients that would help them make an informed judgment about entering into such a prospective waiver, even if they are represented by independent counsel. Neither experience nor legal training permits these individuals – whether it is the client or the client’s other lawyer – to be clairvoyant. At the time the waiver is sought no one knows (a) where the new representation will go; (b) how many years later the law firm will seek to enforce the prospective waiver; (c) what confidential information will have been shared with the lawyer by the time the prospective waiver is sought to be enforced; (d) on whose behalf the conflicting representation will be brought; and (e) the nature of the conflicting representation – something as benign as representing a borrower from a bank or as malignant as a treble damage antitrust claim. The only thing experienced clients will know is they don’t know anything. And those experienced clients who are also represented by lawyers still won’t know anymore. Moreover, the very notion that we are going to litigate whether clients are sufficiently experienced to be skewered with this rule is an appalling prospect.
Second, it has been argued that if clients don’t like these prospective waivers they can simply reject them. There are several answers to this response. If the prospective waiver is presented to an ongoing client of the firm on the occasion of a new engagement, the client may not be comfortable with the idea of switching law firms after developing a relationship that might even include something as surprising as the client liking its lawyers. More important perhaps, if one law firm is permitted to demand these prospective waivers it will not be long before all firms feel compelled to do so, as those firms who choose to demand prospective waivers reap the economic rewards of doing so. Finally, the unseemliness is in the asking; there are some things lawyers should not even request of their clients.
Third, the prospective waiver will mean that instead of law firms asking themselves whether they face a conflict of interest that might prevent them from taking on a new representation, they will now be engaged in discussions animated by such unethical considerations as which client – the old or the new – offers the law firm the better representation or the more lucrative opportunity and how likely is it that if the firm takes on this new representation, empowered by the ancient prospective waiver, that the old client will fire the law firm.
Fourth, this is the first time we have concluded that while we have minimum standards in our rules for loyalty to clients, those minimum standards can be waived by a certain category of clients. One can anticipate from this terrible precedent a wholesale campaign to develop one set of rules for the experienced and one for the inexperienced, creating a whole category of rules whose protections will be watered down as to those experienced clients. Why not ask clients to waive the protections of confidentiality to protect lawyers from potential liability? Why not let the lawyer on the other side contact represented persons, otherwise a violation of Rule 4.2, if the represented person is experienced? Why not put into the retention letter that the client waives its right to object to an unreasonable fee or to assert a claim for professional malpractice? The list could go on and on, but the point is that this one stealth comment carries the seed for a significant undermining of the rules and one more giant step toward the elimination of imputation. Indeed, once a firm manages to get prospective waivers from all of its clients, it will never have to consult Rule 1.10 again!
CONFLICTS OF INTEREST IN THE CORPORATE FAMILY (Rule 1.7)
One of the issues that has bedeviled the profession is the question whether a lawyer, under certain circumstances, should be free to take a position directly adverse to a 100% subsidiary, parent or affiliate of the lawyer’s client. ABA Formal Opinion 95-390 defined the issue, when a badly split committee decided that there were certain circumstances in which this was alright. This view has been criticized by the corporate client community, which asserts that an integrated enterprise cares not one whit where its losses occur. For those are part of a corporate family, where the "hit" to the bottom line originates is irrelevant. Any loss within the family injures the entire enterprise. More important, the big clients have figured out how to protect themselves from a lawyer who would undertake such a representation, leaving only the smaller, less sophisticated enterprises really subject to this exception to our rules on loyalty. Nonetheless, Ethics 2000, in a comment to Rule 1.7, has adopted the majority opinion. Whatever can be said of the merits of the fine debating points, this is not a client-friendly approach to conflicts of interest.
The members of the Ethics 2000 Commission are conscientious judges, lawyers and one distinguished lay person. They have grappled with an enormous number of difficult issues. Our debates have been animated by good will. Yet the proposed relaxation of client protections is something our profession must resist. The rules of the marketplace are always tempting. They yield profits and alleviate inconveniences. But they come at a price, a price I submit that could be as costly as our ability as a profession to set our own rules. Only when client interests come first can we demonstrate the selflessness that makes self-regulation possible.
Lawrence J. Fox