May 26, 1998
MEMORANDUM TO THE ABA ETHICS 2000 COMMISSION
Re: May 29 Hearing
Ladies and Gentlemen:
I am a member of the Advisory Council, and have registered to testify at the May 29 hearing. I also expect to attend the Commission's meeting on the 30th.
My understanding is that the Commission is now concentrating its efforts on Model Rules 1.6 and 1.7, so I am submitting four attached memoranda proposing amendments to portions of those Rules and Comments[ Editor's note: Proposal 1, Proposal 2, Proposal 3, and Proposal 4]. A fifth attached memorandum deals with Model Rule 1.6 and Model Rule 2.2 (a close relative of Model Rules 1.6 and 1.7)[ Editor's note: Proposal 5].
In the attachments I have frequently cited the 1998 edition of the ALAS Loss Prevention Manual. That entire Manual is in the possession of Becky Stretch. If any Commission member would like to have a copy of that Manual for his or her personal and private use in connection with the work of the Commission, I would be pleased to provide a copy on request. Otherwise, Ms. Stretch can from time to time supply the Commission members with copies of relevant portions of the Manual.
All of my five attached memos contain a brief paragraph comparing my proposals with "current law." Whenever valuable resources such as the Hazard and Hodes Handbook, the Annotated Model Rules, and the Restatement of the Law Governing Lawyers are relevant, those references are already included in the cited portion of the 1998 ALAS Loss Prevention Manual.
As I was preparing the attached proposals, I was reminded once again of two fundamental points ((a) and (b) below) that I, and possibly others, tend to overlook from time to time: in analyzing conflicts of interest our mindset should be deference to the client's interests, and avoidance of situations where the client is forced to take the initiative to look out for its own interests, but
(a) on most conflict issues, we should recognize the legitimate interests of the other client; in many cases the asserted "conflict" causes little or no harm to the allegedly aggrieved client, whereas the targeted lawyer's removal from the scene will cause severe damage to that lawyer's other client; and
(b) many clients are lawyers (individuals or general counsel of the client organization), or sophisticated businesspersons, who have demonstrated that they are quite capable of protecting themselves (i) when they originally discuss and document the terms under which their lawyer will be retained, and (ii) at all times thereafter because of the in terrorem effect of their right and their occasional threats to fire their lawyer for any reason, or no reason, at any time.
A question: When this project is completed, will the Commission, or somebody, publish an analysis of the extent to which post-1983 ABA ethics opinions are no longer "good law" in whole or in part?
I thank the Commission for the opportunity to participate as a member of the Advisory Council in this important project.
Robert E. O'Malley
REOM/ccd
Attachments:
May 26, 1998
MEMORANDUM TO THE ABA ETHICS 2000 COMMISSION
(Proposal No. 1)
Re: Model Rule 1.6 Prevention and Rectification of Client Crimes and Frauds
Ladies and Gentlemen:
Following its illegitimate birth 15 years ago, Model Rule 1.6 has, not surprisingly, become an orphan.
By a wide margin, Rule 1.6 has been rejected more frequently than any other Model Rule as the states have revised their ethics codes in the 1980's and 1990's. See, e.g., the chart at Tab III.F. of the 1998 ALAS Loss Prevention Manual, which shows that 41 states have rejected the Rule 1.6 lipsealing position on prevention of a client's criminal fraud, and 19 states have rejected the Rule's lipsealing position as to rectification of a client's fraud.
Earlier this week, on May 12, The American Law Institute in its Restatement of the Law Governing Lawyers also rejected the Model Rule 1.6 formulation by approving 117A and 117B dealing with prevention of death or bodily injury, and prevention and rectification of client fraud.
The Commission members are as capable as I am of analyzing this controversial "whistle-blowing" issue. We all know that the intellectually dishonest combination of the black letter Rule 1.6 and its "noisy withdrawal" Comments is a disgrace to the legal profession. There is no rational explanation for the 180 difference between Model Rule 3.3 and Model Rule 1.6. I could go on and on. *
So I shall content myself in this memo with simply pointing out (as I have above) the extent to which Model Rule 1.6 is out of touch with the real world in 1998.
In the unfortunate event that Model Rule 1.6 remains substantially as is, the noisy withdrawal Comments thereunder (paragraphs [15] and [16]) should be amended so that those paragraphs apply not only to a threatened client fraud, but also to a completed client fraud in which the lawyer's work product was used. The revised paragraphs would read as follows (new text is shaded):
" Withdrawal
"[15] If the lawyer's services will be used by the client in materially furthering a course of criminal or fraudulent conduct, the lawyer must withdraw, as stated in Rule 1.16(a)(1). If the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent, or if the client has used the lawyer's services to perpetrate a crime or a fraud, the lawyer may (but is not required to) withdraw, as stated in Rule 1.16(b)(1) and (2).
"[16] After withdrawal under either Rule 1.16(a)(1) or Rule 1.16(b)(1) or (2), the lawyer is required to refrain from making disclosure of the client's confidences, except as otherwise provided in Rule 1.6. Neither this Rule nor Rule 1.8(b) nor Rule 1.16(d) prevents the lawyer from giving notice of the fact of withdrawal, and the lawyer may also withdraw or disaffirm any opinion, document, affirmation, or the like that contains a material misrepresentation by the lawyer that the lawyer reasonably believes has been or will be relied upon by others to their detriment."
Comparison with current law: Interestingly, only a small handful of states have included the noisy withdrawal Comments under their versions of Rule 1.6, because so many of them (as indicated above) have addressed the issue straightforwardly in their black letter Rule. Of the few jurisdictions that included some form of the noisy withdrawal Comments, only the District of Columbia (at my request) explicitly made them applicable to a completed client fraud. I should note that the foregoing proposal with respect to paragraphs [15] and [16] is intended to reverse one of the conclusions in ABA Formal Opinion 92-366. That Opinion held (quite correctly, consistent with the literal language of the Comments) that the Comments did not apply in the case of a completed client fraud.
I thank the Commission for its consideration of this proposal.
Robert E. O'Malley
REOM/ccd
May 26, 1998
MEMORANDUM TO THE ABA ETHICS 2000 COMMISSION
Re: Proposed Amendments to Model Rules 1.6 and 1.10(a) Regarding
the Lateral Lawyer/Imputed Disqualification Issue in a Case
Where the "Taint" Resulted Solely From the Lawyer's Previous
Work as a Non-Lawyer (Summer Associate, Paralegal, Etc.)
Ladies and Gentlemen:
Here is the problem: Law Student Smith after his second year in law school worked as a summer associate at Firm A. He was deeply involved albeit at the low level of a summer associate in a major litigation matter in which Firm A's opposing counsel was Firm B. After graduation and admission to the Bar, Smith (now a lawyer subject to the Rules) joined Firm B as a full-fledged associate. Assume that Smith himself is disqualified personally from any involvement in that ongoing litigation matter at Firm B because of Rule 1.9(b). Is Smith's personal disqualification imputed to the entire Firm B under Rule 1.10(a)?
The literal, and unintended, effect of the combination of Rules 1.9(b) and 1.10(a) is that Smith's personal disqualification is imputed to the entire Firm B. So Firm B is subject to disqualification from that major litigation matter on the day Smith walks in its door, unless Firm A's client consents to let Firm B continue based on assurances that Smith will be screened.
Seven years ago I asked the ABA Ethics Committee for an opinion on this precise point. The Committee concluded to its dismay that it could not provide an intellectually honest opinion achieving the result that all sensible people want, namely, that Smith's personal disqualification (acquired while he was a lowly summer associate at Firm A) should not be imputed to the entire Firm B. The Committee decided to issue no opinion.
The District of Columbia is the only jurisdiction in the country that (at my request) has explicitly addressed this issue in its Rules. The combination of D.C. Rules 1.6 and 1.10(b) provides for no imputation in this case.
I propose the same result under the Model Rules. That can be achieved by first amending Rule 1.6 to add a new paragraph (c) as follows:
"(c) The obligation of a lawyer under paragraph (a) also applies to all information protected by that paragraph acquired by the lawyer, prior to becoming a licensed lawyer, while employed as an assistant to another lawyer."
Then, to close the circle, Rule 1.10(a) would be amended by adding at the end thereof the following:
"This paragraph (a) shall not apply, however, if the personally prohibited lawyer participated in a previous representation, or acquired information protected by Rule 1.6, under the circumstances described in paragraph (c) of Rule 1.6."
Comparison with current law: There is only one case on this precise issue: Actel Corp. v. Quicklogic, 1996 U.S. Dist. LEXIS 11816, 1996 WL 297045 (N.D. Cal. 1996). In Actel the court disqualified the entire firm, but indicated that screening might have cured the conflict. The firm had not attempted to screen the former summer associate. See also the 1998 ALAS Loss Prevention Manual, Tab II, section 4.1.1., p. 47.
I thank the Commission for its consideration of this proposal.
Robert E. O'Malley
REOM/ccd
May 26, 1998
MEMORANDUM TO THE ABA ETHICS 2000 COMMISSION
Re: Proposed Amendment to Model Rule 1.7
Regarding the "Thrust Upon" Conflict
Ladies and Gentlemen:
In applying the "directly adverse" prohibition under Rule 1.7(a), this is a vexing problem: a representation of Client A that was clearly proper at its beginning suddenly becomes impermissible because a conflict with current Client B unexpectedly occurs as the result of, say, a merger or acquisition, the later appearance of additional parties in litigation, etc. Almost always that unforeseeable conflict is "thrust upon" the lawyer because of some action by current Client B over which the lawyer has no control, whereupon Client B promptly asserts the alleged conflict in support of its claim that the lawyer must cease representing Client A.
That scenario is complicated by (and ultimately can become quite unfair to lawyer's Client A because of) the "hot potato" rule, which prevents the lawyer from dropping Client B in order to continue the representation of Client A. Therefore, I propose an additional paragraph (c) under Rule 1.7, which is a slight improvement on a similar new paragraph in the District of Columbia Rules of Professional Conduct.
My proposed paragraph in substance provides that the lawyer who suddenly has a conflict that was not reasonably foreseeable thrust upon him/her may continue in the representation without consent of the now-adverse client(s), provided that Rule 1.7(a)(1) is satisfied: "The lawyer reasonably believes the [continued] representation [of Client A] will not adversely affect the relationship with the other client" (i.e., Client B).
My proposed additional paragraph (c) under Rule 1.7 is as follows:
"(c) If a conflict of interest not reasonably foreseeable at the outset of a representation arises under paragraph (a) of this Rule after that representation has commenced, and is not consented to by the adverse client(s), the lawyer need not withdraw from that representation provided the requirement of subparagraph (1) of paragraph (a) of this Rule is satisfied as to the adverse client(s)."
Comparison with current law: Existing case law on this point is sparse and confusing. Two cases approve a variation of the approach suggested in this proposal: the lawyer was permitted to continue the challenged representation, and was permitted to resign from the representation of the client moving for disqualification, based on the court's belief that the harm to the first client as a result of the lawyer's abrupt disqualification from the matter would be greater than the harm to the other client caused by the lawyer's resignation on whatever matter was then pending for that client. See 1998 ALAS Loss Prevention Manual, Tab II, section 2.6, pp. 17-18.
I thank the Commission for its consideration of this proposal.
Robert E. O'Malley
REOM/ccd
May 26, 1998
MEMORANDUM TO THE ABA ETHICS 2000 COMMISSION
Re: For Purposes of Model Rule 1.7, in Class Action Litigation
Who Are the Clients and Who Are the Direct Adversaries?
Ladies and Gentlemen:
In order to bring some logical clarity to this confusing issue, I propose a new Comment [10] under Rule 1.7 as follows:
"[10] When a lawyer acts as counsel for a plaintiff class (whether before or after class certification), the clients for purposes of applying this Rule are the named class representatives, not any of the unnamed or potential members of the plaintiff class. Conversely, when a lawyer acts as counsel for defendant(s) in a class action suit (whether before or after class certification), the parties who are "directly adverse" for purposes of applying this Rule are the named class representatives, not any of the unnamed or potential members of the plaintiff class."
Comparison with current law: This proposal is consistent with the sparse existing authorities. See 1998 ALAS Loss Prevention Manual, Tab II, section 2.2.5., pp. 11-12.
It might be helpful to note in a new Comment under Rule 1.7 that, following certification of a class, unnamed class members might well be considered clients of class counsel for some purposes (e.g., Rule 4.2), and that class counsel may owe the normal fiduciary duties to all unnamed members of the class. The narrow point covered by the foregoing proposed new Comment [10] is that unnamed class members are not considered to be clients or adversaries for purposes of applying the conflict of interest provisions of Rule 1.7.
I thank the Commission for its consideration of this proposal.
Robert E. O'Malley
REOM/ccd
May 26, 1998
MEMORANDUM TO THE ABA ETHICS 2000 COMMISSION
Re: Rule 2.2 (and 1.6)
Ladies and Gentlemen:
Model Rule 2.2, a noble innovation in 1983, has proved to be a disappointment, to put it mildly. The principal flaws in the Rule are: (i) it is mis-positioned; (ii) it is mis-titled; (iii) it does not adequately flag the critically important "joint confidences" principle; and (iv) in the case where one (or more) of the joint clients has withdrawn from the group and obtained separate counsel, it fails to permit the withdrawing client(s) to consent to continued representation by the lawyer of the remaining members of the original client group.
Therefore, I propose that: (i) the Rule be repositioned so that it immediately follows Rule 1.7; (ii) the Rule be retitled as "Joint Representation of Multiple Clients Lawyer As Intermediary"; (iii) the Rule be amended to provide for consent to continued representation by the lawyer; and (iv) the Comments under Rules 1.6 and 2.2 be amended to address the "joint confidences" issue.
The point about consent to continued representation can be easily handled by adding at the end of paragraph (c): "unless each client no longer represented by the lawyer has consented after consultation to the continued representation by the lawyer of the other client(s)."
As to the "joint confidences" principle, the problem is that Rules 1.6 and 2.2 do not adequately alert lawyers and clients to the dangerous implications of that principle. I propose an additional Comment paragraph to be numbered [15] under Rule 1.6 as follows:
"[15] See Comment [6] under Rule 2.2 with respect to disclosures in the context of a joint representation."
Then the existing unsatisfactory Comment paragraph [6] under Rule 2.2 should be amended as follows (new text is shaded):
"Confidentiality and Privilege
"[6] A particularly important factor in determining the appropriateness of intermediation is the effect on client-lawyer confidentiality and the attorney-client privilege. In a common representation, the lawyer is still required both to keep each client adequately informed and to maintain confidentiality of information relating to the representations. See Rules 1.4(b) and 1.6. Complying with both requirements while acting as intermediary requires a delicate balance. If the balance cannot be maintained, the common representation is improper. With regard to the attorney-client privilege, the prevailing rule is that as between and among commonly represented clients the privilege does not attach. Hence, it must be assumed that if litigation eventuates between the clients, the privilege will not protect any such communications, and the clients should be so advised. With regard to the obligation of confidentiality, the better view is that as between and among commonly represented clients the lawyer has no obligation to maintain the confidences of one of the clients if the information is relevant in the representation of the other client(s), and if it is the type of information that the lawyer would be obliged to disclose to the other client(s) under Rule 1.4(b), and the clients should be so advised. Of course, as between the client group and the rest of the third-party world, the attorney-client privilege and the lawyer's obligation of confidentiality remain in full force and effect."
Comparison with current law: This proposal with respect to "joint confidences" reflects the majority view of the existing authorities. See 1998 ALAS Loss Prevention Manual, Tab II, section 3.5, pp. 39-41; Annotated Model Rules of Professional Conduct (3rd Ed. 1996), pp. 278-79; and Restatement of the Law Governing Lawyers Proposed Final Draft No. 1 (3/29/96), 112, Comment l.
I thank the Commission for its consideration of this proposal.
Robert E. O'Malley
REOM/ccd