Do You Offer a Groupon to Clients? Would You?

While the legal industry may be in the late majority to adapt technology, perhaps change and adaptation is inevitable even for law firms. And while perhaps not all adaptations are necessary — i.e. not all innovations present an “adapt or die” proposition — some new uses are more curious than others. Like Groupon for lawyers.

Which came first, Groupon asking lawyers if they wanted to place ads or vice versa? We may not know. But the issue of lawyers advertsiing on the service has been considered now by the vigorous, thoughtful individuals at the New York State Bar Association.

Key ethics and risk management issues for lawyers who want to market discounted services with Groupon or similar websites include whether the money paid to the website running the ad is an improper referral fee (RPC 7.2), compliance with other advertising regulations (RPC 7.1. et al), appropriateness of the fee (RPC 1.5), and whether the lawyer can make necessary conflict checks and determine the lawyer’s ability (or not) to perform the work requested competently (RPCs 1.1, 1.10). If the advertising is not misleading or deceptive and makes clear that no lawyer-client
relationship will be formed until the lawyer can check for conflicts and competence to provide the services, these arrangements won’t likely earn you a date with the New York disciplinary authorities.  Unlike a restaurant that delivers a bad meal, however, the lawyer must grant the coupon buyer a full refund if the work requested cannot be provided.  Additional ethics considerations apply (just like the small print on coupons!).

You can find the full text of the NYSB Opinion here.

Anecdotally I have heard many business owners having widely diverging levels of satisfactions with coupon services. Is this just another way for lawyers to attract clients and offer value, or an invitation to an unpleasant experience?

Undercover Investigations and Contact with Represented Parties

A colleague who practices primarily in white collar defense recently approached me with an interesting ethical question.  She told me that her client, a defendant in a criminal case, had been secretly tape recorded by a co-defendant after both had been indicted, and while both were known to be represented by counsel.  In addition to implicating Sixth Amendment concerns, didn’t that violate the ethical rule prohibiting contact with a represented party?  Weren’t both the prosecutor and the co-defendant’s attorney in breach of their ethical obligations?

The answer to that question is fairly straightforward in a literal sense, but very tricky as a practical matter.  Under Model Rule 4.2, “In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.”  Lawyers for the Government have long relied on the “authorized … by law” exception, although the boundaries of what that means are up for debate.  Comment 5 to Model Rule 4.2 explains, “Communications authorized by law may … include investigative activities of lawyers representing governmental entities, directly or through investigative agents, prior to the commencement of criminal or civil enforcement proceedings.”  According to the United States Attorney’s Manual, “Generally, the case law recognizes covert contacts in non-custodial and pre-indictment situations as ‘authorized by law.’”  It seems well-settled that a Government lawyer may secretly record a defendant pre-indictment. 

Post-indictment, however, is a different story.  It is not well-settled that the Government may engage in the same investigative activities as they would prior to the commencement of proceedings.  At least one recent case stands for the proposition that, so long as contact does not violate the Sixth Amendment, it is “authorized by law” and not a violation of the Rules of Professional Conduct.  In United States v. Basciano, 763 F. Supp. 2d 303 (2011), the Eastern District of New York upheld the use of an informant post-indictment on the grounds that the informant sought information from the defendant for other uncharged offenses, and therefore the Sixth Amendment right to counsel had not attached.  But the Model Rules did not intend to countenance such a result.  Comment 5 to Model Rule 4.2 specifically notes, “The fact that a communication does not violate a state or federal constitutional right is insufficient to establish that the communication is permissible under this Rule.”  It seems to me that if “authorized by law” is coextensive with “not unconstitutional,” it will swallow the rule.  There needs to be a better balance between protecting legitimate investigative techniques while still maintaining a high standard of professionalism for Government attorneys. 

And what about the private attorney whose client is contacting – and deceiving – a represented party?  This conduct certainly constitutes a literal violation of Rule 4.2.  The “authorized by law” exception clearly applies only to attorneys for the Government, not to private counsel.  This puts the defense lawyer in quite a bind.  A lawyer who is confronted with that circumstance, and who contiues to represent a client who is deliberately eliciting statements by a represented party, would apparently be left to argue that his conduct is somehow encompassed by the leeway that is afforded the Government.  There is no instance in which the courts have accepted that argument, but, on the other hand, I know of no instance in which an attorney has been disciplined for violating Rule 4.2 by counseling his client to secretly record a co-defendant.  This seems to be a case of all parties “looking the other way.”

New York Decision Erodes Geographic Boundaries Limiting Law Practice

Are geographic boundaries becoming obsolete to practicing lawyers? We at Hinshaw invite you to consider the issue in light of a newly decided case holding that a New York law office requirement is unconstitutional.

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Schoenefeld v. New York, 2011 WL 3957282 (N.D.N.Y., 2011)

Brief Summary

The U.S. District Court for the Northern District of New York struck down a New York statute that required New York-licensed lawyers who reside out-of-state to maintain an in-state office as unconstitutional under the privileges and immunities clause.

Complete Summary

Plaintiff lawyer sought declaratory relief alleging that a New York statute was unconstitutional under the privileges and immunities clause. The law required New York-licensed attorneys who reside outside of New York (but not those who resided in the state) to maintain law offices within the state of New York. The district court held the statute unconstitutional.

The court first held that the practice of law is a fundamental right under the privileges and immunities clause because it has both commercial and noncommercial purposes. The court then held that the statute discriminated against nonresident attorneys because such lawyers, at a minimum, must maintain both a residence in their home state and a law office in New York, whereas an attorney residing and licensed in New York could, for example, operate his or her law practice out of his or her residence. The court held that the law “effectively preclude[d] a number of non-resident attorneys from practicing law in New York” and that it imposed a “significant competitive cost” burden on nonresident attorneys licensed in New York who must maintain a New York office outside their home to practice law. 

Given that the privileges and immunities clause was implicated by the statute, the court analyzed the issue of whether the law’s discriminatory effect had a substantial relationship to a substantial state interest. The court rejected the state’s contention that there existed a substantial state interest here. It also determined that, if any such interest did exist here, the law had no valid substantial relationship to such interest.

The court held that ensuring the availability of attorneys to court proceedings and interested parties was not a substantial state interest because the in-state office requirement did not necessarily ensure the lawyer’s proximity to a given courthouse (e.g., an attorney in New Jersey might be closer to courthouse in New York City than a lawyer in Buffalo). The court then held that the ability of the state Bar and courts to oversee attorney character and fitness was not a substantial state interest here because such oversight is available during and after an attorney’s admission to the Bar regardless of where he or she resides. Finally, the availability of the remedy of attachment against lawyers was not a substantial interest because attorneys could satisfy the in-state office requirement by maintaining an of-counsel relationship with a New York office and such lawyers would have little, if any, property to attach.

Alternatively, the court held that the statute did not bear a substantial relationship to any alleged substantial state interests. The court found that the statute was unnecessary to ensure attorneys’ availability for service of process because the state could impose a less restrictive requirement for appointing an agent for service of process. Similarly, the existence of modern communications and/or local counsel would address issues regarding an out-of-state resident lawyer’s availability for court proceedings.

Significance of Opinion

This decision likely will affect many lawyers by giving out-of-state resident New York-licensed lawyers easier access to practice within the state. More importantly, the decision reflects a proper, growing skepticism for the continuing viability of or justification for laws and court rules that impose archaic geographical border limitations on the practice of law by licensed attorneys.

Are You on Top of Your Social Media Issues?

Last week I was one of the presenters at the American Conference Institute (ACI) seminar in New York on “Social Media, Business, Technology and the Law” — here is a link to the program.  The conference was aimed at providing businesses and lawyers with practical information on regulatory and legal compliance and strategy issues in handling social media.  I will post over the coming weeks on some of the insights gained during the conference.

For today, let’s touch on social media policies.  Does your firm have one?  Does it apply equally and consistently across all your employees and not just your attorneys? Social media policies were widely discussed during the conference.  A few key takeaways:

*Keep your social media polices short and write them in plain language. Longer than a page? Your people will be less likely to read it. Hard to understand because you wrote it like a lawyer instead of a regular human being? Ditto.

*Don’t pat yourself on the back just because you have a social media policy.  Recent polling indicates there is a good chance over half your people do not even realize your firm/company HAS a social media policy.  Training, reinforcement, and consistency matter.

*Make sure your social media policy protects the confidences and secrets of your company/firm while balancing the First Amendment and other relevant employment rights (such as union regulations) of your people.

Got some work to do? You are not alone. Most companies and firms are still trying to come to grips with the need for these policies. Don’t be fooled though — social media and its attendant issues are no fad. Getting up to speed now will avoid some painful catching up down the road.

California Considers Revamp to Rules of Professional Conduct

One of our Hinshaw attorneys in Los Angeles, Renee Choy Ohlendorf, is serving as an ABA Litigation News Associate Editor – in addition to being a legal eagle. Today she reported on significant potential changes to the legal ethics landscape in California.  Her report is reprinted here:

The State Bar of California and the California Supreme Court are considering a major restructuring of the state’s ethics rules. The State Bar recommends that the Rules of Professional Conduct be replaced with 67 new rules based upon the American Bar Association’s Model Rules of Professional Conduct. California is the only state that has not adopted the Model Rules, or a version of them.

The State Bar requests approval of six of the proposed rules in its petition to the California Supreme Court. Those are Rule 1.0 (regarding the purpose and scope of the rules) and Rules 7.1 through 7.5 (regarding advertising). The State Bar limited its initial submission to allow the court to consider the proposal’s logic and organization without being overwhelmed by detailed materials on all 67 proposed rules. The petition includes some dissenting opinions on particular rules.

The State Bar will file the remaining rules after a decision is made by the California Supreme Court on the first set. The court has not announced when it will make its decision.

California’s rules are being revamped now due to “many developments since the last large scale revision of the rules in the 1980s,” explains Robert L. Kehr, Los Angeles, member of the State Bar of California’s Commission for the Revision of the Rules of Professional Conduct. “There was the issuance of the Restatement (Third) of the Law Governing Lawyers, there was the completion of the ABA’s Ethics 2000, which made substantial revisions to the ABA Model Rules, and a number of important case law developments in California,” he says.

Will the Ethics Rules or Their Scope Change?

The proposed changes are organizational and substantive. First, the structure and numbering system of the new rules will now align with the Model Rules, providing a more uniform format of ethical rules across the country. The new organization “will make it much easier for California lawyers who are dealing with out-of-state issues to identify what the local rule is and compare it to the corresponding California rule,” observes Kehr. “And the same is going to be true for out-of-state lawyers who have dealings in California and need to know what the rule is here,” he adds.

Second, the drafters included new rules to clarify issues on which the current Rules of Professional Conduct are silent. Kehr believes that the addition of these rules will eliminate confusion in situations where an issue is addressed by the Model Rules, but not California’s rules.

The new rules, however, may not change the scope of attorneys’ duties. Attorneys’ ethical duties in California derive from case law and statutes, as well as the Rules of Professional Conduct. The drafters attempted to incorporate some of these other sources of authority into the new rules.

Because some of the proposed rules “state explicitly . . . obligations that are not spelled out in California’s current rules, some might view these changes as an expansion of the duties of lawyers,” notes Kehr. “I don’t see these changes as expansions of a lawyer’s duty but as clarifications. For example, proposed Rule 1.4 will govern a lawyer’s obligation to consult with the client. I believe that was always part of California law under the duties of undivided loyalty and competence. But you now can find the duty of consultation only from case law because it isn’t stated in the current California rules. Placing this and other requirements in the rules should make it easier for lawyers to identify proper conduct.”

Departures from the Model Rules

Though California’s proposed rules are styled after the Model Rules, there are significant differences. “California is not going to abandon its entire body of case law simply because of adopting the Model Rules, and the rules proposed to the California Supreme Court strive, in many instances, to retain and conform to California’s existing case law,” observes Gregory R. Hanthorn, Atlanta, cochair of the ABA Section of Litigation’s Ethics and Professionalism Committee.

While stressing that he is not a California lawyer, Hanthorn notes differences in the advertising rules. As an example, he points to Rule 7.1, which prohibits lawyers from making any untrue statement or material misrepresentation of fact or law regarding the availability of legal services. “California is stating at the outset that it is going to continue to have a very high standard for statements of fact,” remarks Hanthorn. “California has included in its advertising rules a detailed list of things that will give rise to a presumption that a lawyer has violated this rule, which some states have not done. Those details should be very helpful to members of the bar,” he adds.

California’s proposed rules also appear to diverge from the Model Rules on client confidentiality. “California’s version of Rule 1.6(b), (d), and (e) continues to limit strictly the circumstances under which a lawyer is required (as opposed to allowed) to go to the authorities or mental health personnel or to others with respect to information that comes from a client, at least from its disciplinary side,” notes Hanthorn.

Additionally, California’s rules are distinct on imputation of conflicts, Hanthorn says. “California does not allow, and the new rules do not propose to allow, what is sometimes called unilateral screening,” he explains. “California did not adopt Model Rule 1.10(a)(2), which would allow a law firm to put a screen in place, and even absent client consent have the screen be enough to prevent a disqualifying conflict. California’s proposed Rules 1.8.11 and 1.10 recognize the imputation of conflicts so that if Lawyer A leaves Firm A to go to Firm B, and there is something that Lawyer A cannot do now because of prior work, now Firm B also has the same conflict.” He suggests that “law firms that are looking at lawyers moving need to be very, very careful to identify those types of situations in advance and make sure that they discuss them with clients and seek waivers when appropriate, as provided by California’s proposed Rule 1.7(b).”

ABA Provides Guidance for Ethical and Legal Duties When Employer’s Lawyer Obtains Employee’s E-mails With the Employee’s Lawyer

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

American Bar Association Formal Opinion 11-460: Duty When Lawyer Receives Copies of Third Party’s E-mail Communications With Counsel (August 4, 2011)

Hinshaw’s legal ethics and risk management team has analyzed a new formal opinion from the ABA that impacts lawyers on both sides of the long evolving employee email issue.

Brief Summary

The American Bar Association (ABA) issued a formal opinion that provides guidance to corporate and outside corporate counsel who represent an employer that obtain e-mails between an employee and the employee’s lawyer from the employee’s workplace computer. The ABA Model Rules of Professional Conduct contain no independent mandate for disclosure but both the model rules and external law may impose duties of disclosure or confidentiality, depending on the jurisdiction and the circumstances.

Complete Summary

The ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 11-460, addressing the duties of a lawyer who represents an employer that obtains e-mails between an employee and the employee’s lawyer from the employee’s workplace computer. The formal opinion concluded that the ABA Model Rules of Professional Conduct contain no independent mandate for disclosure, but both the model rules and external law may impose duties of disclosure or confidentiality, depending on the jurisdiction and the circumstances.

The formal opinion reaffirmed the principle from prior ABA formal opinions (06-440 and 06-442) that model rule 4.4(b), which provides for prompt notification of documents “inadvertently sent,” does not apply by its terms in other contexts, including here where the employer is posited to have copied the documents from an employee’s workplace computer. In so doing, the formal opinion acknowledges that certain jurisdictions (most notably the New Jersey, and its Supreme Court’s decision in Stengart v. Loving Care Agency, Inc., 990 A.2d 650 (N.J. 2010)), have concluded that the local equivalent of model rule 4.4(b) or its underlying principles do in fact require disclosure in this or analogous contexts.

The formal opinion further expressly recognizes that a court’s supervisory authority, rules of civil procedure and discovery, or statutory or case law in a particular jurisdiction also may require notice or return of the e-mails and that a failure to abide by those requirements may, in turn, give rise to sanctions or an attorney disciplinary violation. The formal opinion points out that if the lawyer’s legal duty of notice is unclear, then the very fact of possession of the e-mails may be the employer’s own “client confidential information” that the employer’s lawyer may be required to protect from disclosure unless the lawyer reasonably believes disclosure is necessary to comply with the law, pursuant to model rule 1.6 (pertaining to protection and authorized disclosure of client confidential information). The formal opinion also cautions that in many instances the decision as to how to handle the e-mails must or should be made with a well-informed employer client, who can evaluate and decide among various options, including court review, disclosure or nondisclosure.

Significance of Opinion

The formal opinion provides useful guidance with respect to a lawyer’s ethical obligations when an employer-client has copied an employee’s potentially privileged e-mails from a work computer. The underlying law concerning notice and return varies among the state and federal jurisdictions and may be very fact-specific. If a jurisdiction adopts the ABA’s view that the model rules contain no independent duty of notice and return (and not all jurisdictions do accept that view even for their state’s parallel rules, as manifest by the New Jersey Supreme Court’s Stengart decision), then as a practical matter the underlying substantive law regarding notice and return in any jurisdiction ultimately will drive whether there may be any concomitant ethical duty. The formal opinion also provides an important reminder that in certain circumstances the lawyer will have important ethical duties to the employer-client that must be taken into account as well.

Oregon: Conduct Prejudicial to the Administration of Justice

In many bar discipline cases, I see allegations that the lawyer engaged in “conduct prejudicial to the administration of justice.” It is sometimes a difficult rule to apply and an even harder rule to explain.  In Oregon, RPC 8.4(a)(4) simply provides that it is professional misconduct to:

[E]ngage in conduct that is prejudicial to the administration of justice.

The Oregon Supreme Court previously explained that, to establish a violation of RPC 8.4(a)(4), the Bar must prove that:

(1) the lawyer engaged in ‘conduct,’ that is, the lawyer did something that he or she should not have done or failed to do something that the lawyer should have done; (2) the conduct occurred during the ‘administration of justice,’ that is, during the course of a judicial proceeding or another proceeding that was analogous to a judicial proceeding; and (3) the lawyer’s conduct resulted in ‘prejudice,’ either to the functioning of the proceeding or to a party’s substantive interests in the proceeding.

In re Skagen, 342 Or 183, 213, 149 P3d 1171 (2006) (under identically worded former DR 1-102(A)(4)) (cited with approval by In re Hartfield, 349 Or 108, 239 P3d 992 (2010).

In In re Lawrence, 350 Or 480, 256 P3d 1070 (June 30, 2011), the Oregon Supreme Court recently provided clarification regarding the scope of RPC 8.4(a)(4). In Lawrence, the Bar alleged that the lawyer engaged in conduct prejudicial to the administration of justice by releasing a partial transcript of a juvenile hearing to the press without court consent (in violation of ORS419A.255(1) and (3)). The trial panel found the violation and suspended the lawyer for 60 days.

On appeal, the Court found no violation, dismissed the complaint, and stated that the release of the partial transcript did not violate the rule because the released transcript contained information already presented in open court and reported by the press, the lawyer released the transcript with the support of his client, the juvenile, the lawyer maintained the confidentiality of the victims of the juvenile’s alleged sexual abuse, and the two victims who testified at the juvenile hearing supported the release of the partial transcript.

The Court noted:

The Bar appears, instead, to take the position that virtually any violation of a statute, rule, or court order that occurs during the course of a court proceeding and relates to the conduct or any procedural aspect of that proceeding necessarily is prejudicial to the administration of justice. The Bar asserts, in effect, that “substantial potential” harm is implicit in the accused’s conduct. Our cases, however, require proof by clear and convincing evidence that an accused’s conduct in a specific judicial proceeding caused actual or potential harm to the administration of justice and, when only one wrongful act is charged, that actual or potential harm must be “substantial.” Kluge, 335 Or. at 345, 66 P.3d 492; Haws, 310 Or. at 748, 801 P.2d 818. Here, the Bar’s evidence did not prove that substantial harm resulted or could have resulted from the accused’s conduct.

Lawrence, 350 Or at 489.  Thus, the Court rejected a per se rule and confirmed that the Bar must also prove by clear and convincing evidence that any alleged actual or potential harm is substantial.

Lawyers Are Too Smart to Be Scammed . . .Right?

Wrong. Even though you might think, especially after years of spam emails and general publicity over the Internet (and even through bar associations), lawyers should know better. Stories continue about how lawyers and firms have been taken for large sums of money by increasingly sophisticated cons.  The consequences may not be just loss of money for the lawyer(s) involved, but potentially bar discipline and legal malpractice claims too.

We are not talking about the “Nigerian Prince” scam either. The tactics can be much more sophisticated and the manner in which they play out can surprise lawyers who think they are able to prevent any harm from occurring.

A Canadian malpractice carrier in Ontario, LawPro, has developed an excellent list of resources to help lawyers detect and prevent themselves and their firms from falling victim to such scams. You can access the resources here.

Even if you think you know it all, or are too smart to be conned, it is worth a refresher. I will explain why further in future posts.

When Can Law Firms Screen to Avoid Disqualifications?

While many are aware of the concept of screening, especially in light of recent action by many states and the ABA in this regard, fewer are aware how actually to use screening effectively. Correct use can not only obviate potential disqualifications, but also bar complaints, fee disgorgements, and legal malpractice claims.

Over the next few months I will post from time to time on this topic from a law firm practice management perspective and in relation to important rules and decisions on the issue. Today focuses on California (with lessons for all of course).

Before 2010 it was not clear when, if ever, a conflicted lawyer could be screened in California for purposes of avoiding disqualification. In the last few months California lawyers  received  the first substantive discussion on the issue of screening by a California federal court since Kirk v. First American Title Ins. Co., 183 Cal. App. 4th 776 (2010) (which found a screen appropriately used by class action defendant firm although one the firm lawyer had, prior to joining the firm, received confidential information from plaintiffs’ class counsel).

After Kirk, California declined to adopt a screening rule in a proposed version of Model Rule 1.10, choosing instead to let screening issues be resolved through case law.

In Openwave Systems, Inc. v. Myriad France S.A.S., Slip Copy, 2011 WL 1225978 (N.D. Cal. 2011) U.S. District Court for the Northern District of California applied Kirk and denied a motion to disqualify because, inter alia, the conflicted lawyer had been effectively screened.

The case is notable 1) because federal courts are not technically bound to apply state law on the issue of disqualification, and 2) unlike Kirk, the situation involved a more standard former-client conflict that arose from a lawyer switching firms.

More on this case, and this topic, to follow.

Back to the Future? Even Non-ABA Accredited Grads Can Sit for Minnesota Bar

The Minnesota Law Blog recently reported on the Minnesota Supreme Court’s decision last week to change its admission rules. The new rules will allow licensed attorneys from other states to sit for the Minnesota bar exam. But that’s not all.  The ruling also covers attorneys who graduated from non-American Bar Association accredited law schools. Will lawyers once again be able to “read the law” without going to law school as Abraham Lincoln did?

Some have celebrated the decision as a harbinger of more affordable attorney rates. And it is not the first decision of its kind: Minnesota’s new rule mirrors one adopted by the Wisconsin Supreme Court in 1998.

Is this really a good idea? While access to legal assistance is certainly a need that goes unmet for many throughout our country, and should be addressed, was this truly the court’s goal? If it was, this does not seem to be the best way to achieve it. As one commentator to the story observed, you can “flood the market” with rotten fruit and that will drive down the price of fruit, but will not improve the quality of fruit available to the consumer, especially when it is difficult for the consumer to determine who is qualified and who is not. In an era where many talk about the practice of law having been changed forever by market forces and technology, this is not the kind of change many were thinking about.

You do not have to look far to hear about law students suing their law schools claiming fraudulent inducement, Time Magazine writes about how prospective students are finally deciding that law school is overrated, and any number of commentators discussing the oversupply of lawyers. The bar exam itself is a minimal competency exam at best. Does it not make sense to increase competency standards, improve lawyer quality, avoid a glut of lawyers, and find other solutions to the under-served population? Will this decision lead to lesser qualified lawyers, increased ethics or even malpractice complaints?

To be fair, there may be some students who will benefit the practice and their communities who cannot win a spot at an ABA accredited school, but if they cannot even accomplish that first step, can we say a legal career is really their best calling? And especially in this market, is it even fair to tempt such individuals to gamble money and years just to try?

Beyond that, what does the court decision tell us about cross border practice? Multi-jurisdiction practice is a hot-button issue in many parts of the country, and is being pressed increasingly by large multi-national firms who would like to see their lawyers move seamlessly across borders to ply their trade.  Will Minnesota’s decision loosen the resistance to the MJP movement? Will California, which has allowed graduates from non-accredited California (not other states’) schools sit for the bar, be forced to change?  Will law schools move to the Internet and will we see some future lawyers claim “I am a Phoenix“?