NEW DIRECTIONS IN PROFESSIONAL CONDUCT:
THE DEVIL IS IN THE DETAILS
By
Kenneth L. Jorgensen, Director
Minnesota Office of Lawyers Professional Responsibility
William
J. Wernz, Partner
Dorsey & Whitney
Reprinted
from Bench & Bar of Minnesota (September
2005)
Those seeking evidence of
sweeping shifts in the newly amended Rules of Professional Conduct will not
likely find any, but developments over 20 years have given rise to numerous
changes in the details that bear careful attention.
The most extensive
amendments in the 20-year history of the Minnesota Rules of Professional
Conduct will become effective October 1, 2005. The amendments codify two decades of
developments in case law, bar opinion, and treatises dealing with attorney
ethics. This general codification has
produced few marquee changes. General
themes of the amendments include increased deference to the ABA Model Rules and
to the 1st Amendment, and, in reaction to recent scandals in
corporate America, enhanced rights and duties of lawyers to prevent and redress
fraud.
The amendments were
sought in three MSBA petitions, filed in 2003 and 2004. The Court granted the petitions, with a few
significant changes, by order dated June 17, 2005. The full text of the Court’s order and a
red-lined version of the rules and amendments can be found, with other useful
materials, at www.courts.state.mn.us/lprb. This article will discuss the most noteworthy
rule changes.
Since 1903 the ABA has
promulgated model ethics canons, codes, and rules for lawyers. In 1983 the ABA adopted the Model Rules of
Professional Conduct, which became effective in Minnesota, with certain
variations, in 1985. The ABA Ethics 2000
Commission (“E2K”) worked long, hard, and well, to amend the ABA Model Rules in
2002. The Commission took particular
account of the Restatement of the Law Governing Lawyers and of the over 400
Formal Opinions of the ABA Standing Committee on Ethics and Professional
Responsibility. The E2K Commission also
conducted numerous public hearings and received comment from many interested
parties, including the MSBA. The MSBA’s
main petition for rule amendments, filed in September 2003, was based largely
on the E2K model.
The MSBA petitions
were also based on several special-purpose considerations. First, the ABA amended Model Rules 5.5 and
8.5 on the recommendation of its Multi-Jurisdictional Practice (MJP)
Commission. The MJP Commission dealt
with the problem of outdated unauthorized practice of law regulations
obstructing the increasingly multistate needs of clients. Second, the ABA amended Model Rules 1.6
(Confidentiality) and 1.13 (Organization as Client) on the recommendation of
its Corporate Responsibility Commission.
That commission was formed to respond to the ethics issues raised by a
wave of corporate scandals and by the regulations affecting lawyers in the
Sarbanes-Oxley Act and related SEC rules.
Third, the Lawyers Board raised 1st Amendment concerns relating to
Minnesota’s prohibition, in Rule 7.4, against stating or implying that an
attorney is a “specialist,” unless he or she is certified as such. Fourth, in Lennartson v. Anoka-Hennepin Independent School District No. 11,
662 N.W.2d 125 (Minn. 2003), the Minnesota Supreme Court, having rejected
longstanding precedent, asked the bar to consider how lateral hire conflicts of
interests should be treated. Fifth, in In re Panel File No. 99-42, 621 N.W.2d
240 (Minn. 2001), and In re Westby,
639 N.W.2d 358 (Minn. 2002), the Court held that Lawyers Board Opinions were
mere guidelines, without the force of law.
Because many of these opinions had been very useful in preventing
friction between lawyers and clients, it appeared best to incorporate them in
rule amendments.
In
July 2002 an MSBA task force, appointed by then-President Jon Duckstad, began
considering rule amendments. The task
force was expert, industrious, and broadly representative of the bar. The task force adopted several guiding
principles. Its processes were open and
it welcomed comment. The task force
deferred to the ABA Model Rules
-- unless there was “a darn good reason” not to -- because the practice of law
is increasingly multistate and uniformity is therefore more important. The task force gave wide berth to the 1st
Amendment in drafting rules that regulate speech, mindful of cases like Republican
Party of Minnesota v. White, 536 U.S. 765 (2002) (invalidating the
“announce clause” of Minnesota Judicial Canon 5, governing judicial campaign
ethics). The task force sought,
unsuccessfully, to persuade the Court that the Comments to the Rules should be
adopted.
For
its efforts, the task force was honored with the 2003 MSBA President’s Award.
The efforts of the task force in drafting the first petition for rule
amendment were followed by the MSBA
Rules of Professional Conduct Committee’s work in drafting the second and third
petitions.
Despite
numerous amendments, there were relatively few controversies. Of the few controversies that did occur, all
but one involved discrete issues involving isolated areas of practice.
§ Comments. The Minnesota Supreme Court has a longstanding
history of not adopting the Comments to its rules of practice and
procedure. Although the Comments were
included with the Court’s order adopting the Rules of Professional Conduct in
1985, an attempt to amend the Comments in 1988 was rejected when the Court
indicated it had never formally adopted the Comments.Ftn 1
Both
the MSBA and the Lawyers Board
urged the Court to adopt the Comments because they were not mere committee
comments but integral to the ABA
Model Rules. An important component of
the E2K amendments was the
significant expansion of the Comments.Ftn 2 Comments to the Rules of Professional Conduct
differ from traditional advisory committee comments in that they contain
substantive guidance on the application of the rules that is often not readily
apparent in the rules themselves. One
example involves the Comment to Rule 4.2 discussed below. Despite these arguments, the Court declined
to adopt the Comments, stating they were included “for convenience and [did]
not reflect court approval.”
§ “Specialists.” Competing proposals were submitted by the MSBA and the Board of Legal
Certification over Rule 7.4(d), which regulates communications about lawyer
specialist certification. The MSBA proposed that an uncertified
lawyer be prohibited from communicating that he or she was a “certified
specialist” unless the communication was accompanied by a disclaimer. In contrast, the Certification Board proposed
that an uncertified lawyer be prohibited from stating or implying he or she was
a “specialist” unless the statement was accompanied by a disclaimer.
The
focus of the dispute centered on whether the prohibition in the rule should be
narrowly drawn due to constitutional concerns and the unavailability of
certification programs in many substantive areas of the law, or whether a
broader prohibition was necessary to prevent uncertified lawyers from
misleading legal consumers about their certified status or lack thereof. The Court resolved the dispute in favor of
the broader rule. Consequently,
communications by uncertified lawyers about their services that state or imply
they are “specialists” must be accompanied by a disclaimer.Ftn 3
§ Subpoenas to Lawyers. Another controversy revolved around Rule
3.8(e), prohibiting prosecutors from subpoenaing lawyers to present evidence
about a client unless a reasonable belief exists that: (1) the information is not protected by privilege;
(2) the evidence is essential to the prosecution; and (3) there is no other
feasible alternative to obtain the information.
The ABA had adopted Rule
3.8(e) in the early 1990s due to perceived abuse of grand jury subpoenas by
East Coast prosecutors. Minnesota,
however, had never adopted the rule.
During the 1990s Rule 3.8(e) was the subject of several lawsuits by the
Justice Department against disciplinary agencies on the basis that it is not an
ethics rule but instead a procedural rule that improperly infringed upon
federal grand jury procedures.
The
MSBA and the criminal defense bar
proposed adopting ABA Rule
3.8(e). The Lawyers Board and local
prosecutors opposed the rule due to constitutional concerns and questioned
whether the rule was necessary because of the absence of subpoena abuse in
Minnesota. The Court adopted the rule
but eliminated the “no other feasible alternative” requirement which had
spawned much of the Justice Department litigation.
§ Conflicts Screening. Opinions also differed over attempts to
change Rule 1.10(b) to facilitate lateral movement between law firms by
associates. The issue arose in response
to the Court’s Lennartson decision in
which the hiring law firm, despite its prompt efforts to screen a new lateral
associate, was disqualified because the associate obtained significant
confidential information when she represented the opposing party during a
single deposition while employed at her former law firm.Ftn 4
Competing proposals by the MSBA
and the Lawyers Board that attempted to enhance the opportunity for lateral
associate movement without jeopardizing client confidentiality were submitted
to the Court in supplemental petitions.
Ultimately the Court declined to accept either proposal and instead
adopted existing Minnesota Rule 1.10(b).
§ Confidentiality. Amendments to Rule 1.6(b)
have increased the
number of circumstances in which a lawyer may (but not must) disclose
confidential client information from six to ten. Several of these apparent changes are codifications
of existing practice and law, e.g.,
Rule 1.6(b)(3) allows disclosures “impliedly authorized in order to carry out
the representation” and Rule 1.6(b)(7) allows disclosures necessary for a
lawyer “to secure legal advice about the lawyer’s compliance with these
rules.” Another ostensible exception to
confidentiality in Rule 1.6(b)(2) actually retains the “confidences and
secrets” categories of prior law, allowing disclosures that are not detrimental
and do not waive privilege.
Rule
1.6 has also been amended to increase a lawyer’s ability to prevent or rectify
crimes and frauds. In Minnesota, this
change is incremental, because for nearly 20 years Minnesota Rule 1.6(b)(4) has
allowed lawyers to rectify fraud in which their services had been misused. The ABA,
in contrast, consistently declined to permit such disclosures, until corporate
scandals and federal legislation changed the landscape.
§ Organization
as Client. Disclosure of misconduct is also central to Rule 1.13,
“Organization as Client.” Rule 1.13(b)
requires that a lawyer for an organization (whether public corporation or
government agency or small association) must report up the ladder --
within the organization -- insider wrongdoing that is likely to substantially
injure the corporation, unless the lawyer reasonably believes such reporting
will not serve the organization’s best interests. A related question -- When may the
lawyer report corporate misconduct outside the organization? -- was answered
more broadly by the ABA than by
Minnesota. Minnesota applies the general
confidentiality standard of Rule 1.6, but ABA
Model Rule 1.13(c) permits disclosure “whether or not Rule 1.6 permits such
disclosure, but only if and to the extent the lawyer reasonably believes
necessary to prevent substantial injury to the organization.” Another amendment relating to disclosure of
misconduct, found in Rule 1.13(d), requires that a lawyer who withdraws or has
been discharged for reporting misconduct must inform the organization’s
highest authority.
§ Litigation. Requirements for “candor to the tribunal” have been
enhanced by amendments to Rule 3.3.
Rule 3.3 generally provides that lawyers must prevent and
disclose certain falsehoods to the tribunal.
Rule 3.3(a)(1) now requires lawyers to correct their own material
misstatements of law or fact. Rule
3.3(a)(3) provides that a lawyer must correct not only the client’s false
statements, but also those of a “witness called by the lawyer,” both on direct
and cross-examination. The same rule
requires that defense counsel must offer evidence from a criminal
defendant that the lawyer reasonably believes (but does not actually know) is
false. These obligations exist until
“conclusion of the proceeding.”
Rule 4.2. Comment [7] to Rule
4.2, governing communications with persons affiliated with represented
entities, was extensively amended by the ABA. Although the Court has declined to adopt the
Comments en bloc, it has nonetheless taken Rule 4.2 Comments to be
decisive. See e.g., State of
Minnesota v. Miller, 600 N.W.2d 457, 467 (Minn. 1999) (“the Comments to mrpc 4.2 establish that this
relationship [general manager] falls within the protection of the Rule”).
The
amended Comments should eliminate confusion over the reference in the prior
Comment to an employee “whose statement may constitute an admission on the part
of the organization.” Local federal
courts have interpreted “admission” to extend the protection of Rule 4.2 to
virtually all employees.Ftn 5
The Director’s Office and the majority of other courts have rejected this
interpretation of “admission.” The ABA and the Court resolved this
controversy by deleting “admission.”
There is no basis remaining in Rule 4.2 or its Comments for extending
their protection to a large number of employees.
Comment
[7] was also amended to provide that, instead of protecting every employee with
“managerial responsibility,” only one “who supervises, directs or regularly
consults with the organization’s lawyer concerning the matter” and one who “has
the authority to obligate the organization with respect to the matter” are
protected. For large organizations,
these amendments will allow many more employees to be contacted by adverse
counsel. (Insofar as fewer employees are
covered by Rule 4.2, more are covered by Rule 4.3, “Dealing With Unrepresented
Person.”) Comment [7] also restates the
position taken in Minnesota and most other states that former employees are not
covered by Rule 4.2.
Rule 4.4. Following the ABA Model Rule, Rule 4.4 now provides, “A lawyer who receives
a document relating to the representation of the lawyer’s client and knows or
reasonably should know that the document was inadvertently sent shall promptly
notify the sender.” Comment [2]
clarifies that whether an inadvertently received document can be used or must
be returned is a matter of law beyond the scope of the ethics rules. Previously, the ABA Commission on Ethics and Professional Responsibility, in
Formal Op. 94-382 (1994), had taken the position that the receiving lawyer
should both notify and obey the sender’s instructions as to return or
destruction of the inadvertently sent document.Ftn 6
§ Conflicts. The most important amendment to the conflicts rules
(Rules 1.7 -- 1.12) requires that conflicts waivers be “confirmed in
writing.” Although the rules (except
1.8(a)) do not require that conflict disclosures be in writing or that the
client(s) sign conflict waivers, obviously the best practice will be not merely
to confirm consents in writing, but to make disclosures in writing and obtain a
client’s signature or email assent.
Rule
1.18, “Duties to Prospective Client,” is a new rule. It provides that a lawyer who has met with a
prospective client is disqualified from adverse representation on a
substantially related matter if the lawyer received significant confidential
information. Rule 1.18 also disqualifies
the lawyer’s firm, unless there is informed consent or the lawyer takes three
steps: avoiding learning unnecessary
confidential information; being screened from the adverse matter and fee; and
giving prompt written notice to the prospective client.
The
amended conflict rules also employ a new, defined term for waivers, namely
“informed consent.” This term is defined
by Rule 1.0(f) to require the lawyer to communicate “adequate information and
explanation about the material risks of and reasonably available alternatives
to the proposed course of conduct.”
The
vastly expanded Comments to the conflict rules will be extremely important, even
without Court adoption, because they will influence disciplinary and civil
standards. For example, Comment 22 to
Rule 1.7 suggests that prospective waivers by sophisticated clients will likely
be enforceable. This Comment led the ABA to withdraw Formal Opinion 93-372
and issue Formal Opinion 05-436, which espouses enforceability of prospective
waivers especially where the client has independent counsel, as corporate
clients often will.
Other
important comments to Rule 1.7 include Comment 34 (affiliates of corporate
clients are presumed not to be identified with the client for conflicts
purposes) and Comments 29--33, “Special Considerations in Common
Representation.” Comment 7 states that a
lawyer who represents A may not, without informed consents, represent B in a
transaction with A, even though the subjects of the transaction and the
representation of A are wholly unrelated.
§ Multijurisdictional Practice. Rule 5.5, governing the ethics dimension of
unauthorized practice, was substantially revised based upon the ABA mjp Commission recommendations
designed to facilitate temporary
cross-border practice. Lawyer not
licensed in Minnesota are still prohibited from establishing an office or
having a systematic continuous presence in Minnesota for the practice of
law. Lawyers not admitted similarly
cannot advertise or otherwise hold out to the public that they are admitted to
practice in Minnesota.
The
most significant amendments define circumstances under which lawyers not
admitted in Minnesota can temporarily practice in the state.Ftn 7
These circumstances include associating with a Minnesota lawyer or
providing services related to a pending or potential Minnesota proceeding if
the non-Minnesota lawyer (or a person the lawyer is assisting) is admitted pro hac vice or reasonably expects to be
admitted pro hac vice.
Authorized
temporary practice also includes services that arise out of or are reasonably
related to the non-Minnesota lawyer’s practice in his or her own state,
provided the services do not require pro
hac vice admission in Minnesota.
Examples include when officers of a multinational corporation survey
business sites and seek the services of their lawyer to assess the merits of
each. Another example is where the
services draw upon the lawyer’s expertise developed by representing clients in
matters involving a particular body of federal, uniform, foreign or
international law.
Two
differences exist between Minnesota Rule 5.5 and the ABA Model Rule. First,
a reciprocity exemption in 5.5(a) exempts Minnesota lawyers from being
disciplined in Minnesota for their unauthorized practice in another
jurisdiction if the same conduct is permitted in Minnesota under Rule 5.5 for
lawyers not admitted in this state.Ftn 8
A
second difference is that unlike the Model Rule, Minnesota Rule 5.5(d) does not
authorize house counsel employed by a corporation or organization to practice
law on behalf of the organization without first being admitted to practice in
Minnesota. The basis for this
distinction was that lawyers who establish a continuous presence in Minnesota
should not be exempted from bar admission requirements. In conjunction with this proposal, the
Minnesota Rules for Admission to the Bar were amended to facilitate the
admission of house counsel employed in Minnesota but admitted elsewhere. Rule 10, Rules for Admission to the Bar, now
provides for relaxed eligibility requirements for lawyers admitted elsewhere to
be admitted to the Minnesota bar as House Counsel. The House Counsel license authorizes the
lawyer to practice law in Minnesota solely on behalf of an organization as long
as the lawyer continues to be employed by the organization.
§ Law Practice Issues. Until 2001, the formal
opinions of the Lawyers Board were considered to have authority nearly
equivalent to that of the Rules of Professional Conduct they interpreted. Violations of Lawyers Board opinions were
treated like rule violations and were frequently cited in private discipline
cases as well as the Court’s public discipline opinions. The Court’s decision in Panel File No. 99-42 not only changed but clarified the authority
of Lawyers Board opinions:
Because [the lawyer] was
admonished solely for violating a Board opinion and Board opinions do not have
the force and effect of [rules of professional conduct] we reverse the Board
Panel’s affirmance of the admonition.Ftn 9
Over
the years, Lawyers Board opinions became reliable authority for recurring
practice issues not explicitly dealt with in the Rules. For example, Opinion No. 13 relating to
return of client files interpreted or clarified the files, papers and property
that a client is entitled to receive upon termination of representation.Ftn 10 Greater clarity about entitlement to file
documents diminished the number of related ethics complaints and established
ground rules for lawyer-client disputes over files. The value of Lawyers Board opinions caused
the MSBA to propose specific
Rules of Professional Conduct incorporating the standards of the several
opinions.
Opinion No. 13, Return of
Client Files. Opinion No. 13’s definitions of client files,
papers and property are now contained in Rule 1.16(e). In all representations
clients are entitled to receive all documents and property delivered to the
lawyer as well as documents and items for which the client has paid the
lawyer.
In
pending litigation representations,
clients are also entitled to litigation-related documents that have been served
or filed as well as costs and expense items (e.g., depositions, expert opinions and statements, business
records, witness statements) regardless of whether the client has paid for the
lawyer’s services or reimbursed the lawyer.
A
different definition applies to nonlitigation or transactional
representations. A client who has not
paid for the lawyer’s services is not entitled to unexecuted transactional documents
such as estate plans, title opinions, articles of incorporation, contracts,
partnership agreements, or any other unexecuted legal document that does not
otherwise have legal effect.
Copy
charges are also covered. Although
reasonable charges for reproducing files can be assessed if the client has
agreed in writing to such a charge, a lawyer may not condition the return of
client files, papers and property upon payment of the copy costs or the
lawyer’s outstanding fees.Ftn 11
Opinion No. 15, Advance Fee
Payments and Availability or Nonrefundable Retainers. Advance fees and
“availability” or nonrefundable retainers are now covered by Rules 1.5(b) and
Rule 1.15(c). All agreements for advance
payment of nonrefundable or availability retainers must be reasonable in amount
and communicated in a writing signed by the client. In addition, advance fee payments from
clients must be deposited into a trust account and withdrawn as earned unless
the lawyer and the client have entered into a written agreement to the
contrary.
Other
fee-related changes require contingent fee agreements to disclose whether the
client will be responsible for litigation costs and expenses when the client is
not the prevailing partyFtn 12
and all agreements to divide fees between lawyers from separate law firms must
be confirmed in writing with the client.Ftn 13
Opinion No. 9, Trust Account
Books and Records. Lawyers must certify annually on their attorney
registration renewal that they maintain trust account books and records in
compliance with Rule 1.15. Historically,
the books and records have been identified and described in Opinion No. 9. Rule 1.15(i) now authorizes the Lawyers Board
to annually publish the required trust account books and records. It is anticipated the Lawyers Board will
publish Opinion No. 9.
Opinion No. 12, Trust
Account Signatories. The requirement that all trust account checks or other
disbursements be signed or authorized by at least one lawyer associated with
the law firm is now incorporated in Rule 1.15(j).
Opinion No. 5, Fee
Arbitration Awards. Although participation in
the fee arbitration programs sponsored by the local bar associations is
voluntary, it has long been professional misconduct for a lawyer to refuse to
honor a fee arbitration award after agreeing to arbitrate the dispute. This standard of conduct now appears in Rule
8.4(i).Ftn 14
In
addition to the variations discussed above, there are a number -- much smaller
than in the past -- of Minnesota variations from the ABA Model Rules. Some
of the variations are retentions of Minnesota rules. These include: 1.8(e)(3) (guaranteeing loan reasonably
needed to enable client to withstand litigation delay that would put
substantial pressure on client to settle case because of financial hardship
rather than merits); 5.4(a)(2) (paying estate for deceased lawyer's services);
5.4(d)(2) (nonlawyer with governance authority under Minnesota Professional
Firms Act); 5.8 , previously numbered as 5.7, and covering employment of
disbarred, suspended, or involuntarily inactive lawyers; and 8.4(g) and (h)
(prohibiting harassment and discrimination).
In
some cases, Minnesota drafting appeared superior to the ABA’s. For example,
Model Rule 1.8(c) provides an exception to the general prohibition on drafting
an estate plan for the benefit of the drafting lawyer or his or her family,
namely allowing drafting for the benefit of both family members and others
“with whom the lawyer or the client maintains a close, familial
relationship.” The problem with this
exception is that the drafting lawyer/beneficiary will claim such a nebulous
relationship even with those who are being exploited, and proof of the absence
of such a relationship will be very difficult.
Other rules that use Minnesota drafting include mrpc 1.8(k) (sex with client), 1.17 (sale of a law practice),
3.5 (ex parte communications with judge
or juror), and 8.3(c) (exemption from required disclosure of attorney
misconduct learned during participation in lawyer assistance program).
Periodic
reevaluation of professional standards is important for self-regulating
professions. The integrity of any ethics
standard demands consideration of societal changes. The comprehensive changes to the Rules are
intended to fulfill these purposes by promoting greater uniformity of legal
ethics rules among jurisdictions and responding to problems relating to recent
corporate scandals, while at the same time preserving Minnesota’s variations
from the Model Rules that over time have proven beneficial to the bar and the
public.
4 Lennartson
v. Anoka-Hennepin Independent School Dist,
662 N.W.2d 125 (Minn. 2003).
5 Paulson v. Plainfield Trucking, Inc., 210 F.R.D. 654 (D.
Minn. 2002); Midwest Motor Sports, Inc. v. Arctic Cat
Sales, Inc., 347 F. 3d 693, 2003
U.S. App. lexis 21188 (8th Cir.
10/20/03). By Local Rule 83.6(d)(2), the U.S. District Court in Minnesota adopts
the Minnesota Rules of Professional Conduct, “except as otherwise provided by
specific rules of this Court.”
6 For a fuller treatment of this issue, see Kenneth L. Jorgensen, “Ethics Advisory
Opinions,” Bench & Bar of Minnesota 60:7(August 2003) p. 12 ff
9 In re
Panel File No. 99-42, 621 N.W.2d 240, 242
(Minn. 2001).
10 See Rule 1.16(d) which obligates lawyers to
surrender papers and property to which the client is entitled to receive upon
termination of representation.
12 Rule 1.5(c).
13 Rule 1.5(e).