The Law for Lawyers Today

The Law for Lawyers Today

Ethics, Professional Responsibility and More

Join ‘em if you can’t beat ‘em? NC considers ethics rule changes to aid Avvo-like services

Posted in Advertising and Solicitation, Fees, Law Practice Management

Stand out from the crowd concept femaleAvvo Legal Services has been meeting with North Carolina bar regulators, resulting in a draft proposal that would amend several legal ethics rules and make it easier for Avvo to operate in the Tar Heel State, according to Prof. Alberto Bernabe, a Chicago law professor who has seen some of the relevant documents, and blogged about them last week.

Ethical problems?

Several state legal ethics opinions have recently found client-referral services using an Avvo-like model to be ethically problematic, including opinions from regulators in Pennsylvania, South Carolina, and my home state, Ohio.  Rule revisions in Florida now pending for approval by the state supreme court there likewise call aspects of the model into some question.

Some of the identified ethical issues raised by Avvo-like referral services, as identified by various ethics opinions are:

  • the company — and non-lawyers — control significant aspects of the attorney-client relationship, including functions that can constitute the practice of law (see Model Rule 5.5(a));
  • the structure can interfere with the lawyer’s exercise of independent legal judgment on behalf of the client (see Model Rule 5.4(c));
  • the way the fees are managed could constitute or invite commingling of clients’ funds and lawyers’ funds (see Model Rule 1.15(a));
  • the fee structure makes it difficult to comply with the duty to refund unearned fees at the end of the representation (see Model Rule 1.16(d));
  • a model where the lawyer is paid only after the representation is concluded makes the fees contingent on the outcome, which can violate the prohibition on contingent fees for certain kinds of cases (see Model Rule 1.5(d));
  • receiving and holding client funds paid in advance may violate the lawyer’s duty to hold those funds in a trust account (see Model Rule 1.15(c));
  • although part of the fee paid by the client and kept by the company may be designated as a “marketing fee,” the fact that such fees are calculated as a percentage of the full fee makes the arrangement likely to be impermissible fee-splitting with a non-lawyer (see Model Rule 5.4(a));
  • the business model can threaten the confidentiality of the lawyer-client relationship (see Model Rule 1.6).

North Carolina considers amendments

In light of these issues, Avvo has tried to allay concerns, including by saying that its model actually comports with ethics rules, and that it is providing advertising that is protected by the First Amendment.  (A recent Georgetown Law Journal article by Prof. Bernabe details Avvo’s arguments.)

According to Prof. Bernabe, North Carolina may now be considering a different regulatory approach:  amending its lawyer conduct rules to “make it acceptable for lawyers to participate in services like Avvo.”

Documents he has seen include a proposal to amend the fee-splitting rule to permit payment of a portion of the lawyer’s fee to an on-line platform if the amount is a reasonable charge for administrative or marketing services and there is no interference with the lawyer’s independent professional judgment.

Another proposed comment amendment would allow lawyers to participate in Avvo-like rating services without fear of being held in violation of the prohibition against giving something of value in exchange for a recommendation of employment.  (See Model Rule 7.2(b).)

Yet another amendment would allow the company to keep the client’s payment until the end of the representation, imposing on the lawyer the obligation of ensuring that such “intermediaries” “adequately protect client funds” — instead of placing such advance payments in the lawyer’s trust account.

Brave New World

Although nothing is certain yet, and the documents that Prof. Bernabe describes are certainly preliminary and might be incomplete, the path that North Carolina appears to be contemplating significantly departs from the road that bar regulators in other jurisdictions have so far taken.  Whether acquiescing to market trends — even ones that seem to be irresistible — is in the true best interest of legal consumers and the legal profession remains to be seen.

Keeping compliance authority responsible: Settlement of suit vs. MoneyGram’s CCO points to lessons

Posted in Uncategorized

Compliance chart with keywords and icons. Flat designOur guest blogger is a Certified Compliance & Ethics Professional (CCEP)®.

Increased scrutiny for Chief Compliance Officers

Compliance officers are facing increasing scrutiny from a variety of regulatory agencies. The Department of Justice and the Securities Exchange Commission have announced their intention to hold companies accountable through the individuals involved.  As a result, many in the compliance industry have stated that the personal risk involved in being a chief compliance officer is becoming deeply concerning.  Such concerns are not unfounded, but people in compliance must also recognize that they hold a unique position of trust, requiring a higher level of responsibility to ensure that risks are recognized and effectively mitigated and that regulations are closely followed.

First individual Chief Compliance Officer held accountable by FinCEN

Earlier this month, the U.S. Treasury Department’s  Financial Crimes Enforcement Network (“FinCEN”) settled its first suit ever filed against an individual compliance officer in the financial industry.  Thomas Haider, the former Chief Compliance Officer for MoneyGram International, Inc., agreed to a three-year injunction barring him from performing compliance functions for any money transmitter.  In addition, Haider will pay a $250,000 penalty.

What did Haider do to become the first financial compliance officer to be assessed a civil monetary penalty? After all, FinCEN had already entered into a deferred prosecution agreement with MoneyGram in 2012, under which MoneyGram forfeited $100 million and agreed to an independent compliance monitor.  In addition, MoneyGram had settled consumer fraud claims with the FTC in 2009 by paying an $18 million penalty.

Willfully blind or reckless?

FinCEN’s announcement of the assessment of a $ 1 million civil penalty against Haider in December 2014 stated that he not only willfully violated the requirement to implement and maintain an effective anti-money laundering (“AML”) program, but he also willfully violated the requirement to report suspicious activity  under the federal Bank Secrecy Act (“BSA”).  Under the BSA, the government does not have to prove knowledge, improper motive or bad purpose to establish that an individual acted willfully.  Rather, it is only necessary to  demonstrate  reckless disregard or willful blindness.

In Haider’s case, he was the chief compliance officer from 2003 through May 23, 2008, and had authority over both the fraud and the AML compliance departments. During this period, despite having been told by MoneyGram’s Fraud Department, as well as outside counsel and consultants of the need to implement certain policies and procedures due to high risks of possible fraud and money laundering activities, Haider failed to:

  • Implement a discipline policy;
  • Terminate high risk agents;
  • File timely suspicious activity reports (“SARs”);
  • Conduct effective audits; and
  • Conduct adequate due diligence.

Considering that under the BSA an individual can be assessed $25,000 for each day for lacking an effective AML program as well as $25,000 a day (up to $100,000) for each failure to file a company SAR, it appears that Haider may have gotten a pretty good deal.  FinCen stated that from approximately January 2004 through May  2008, over 30,000 consumer fraud reports were filed, totaling close to $60 million in losses.  Yet, FinCen determined, Haider “siloed” MoneyGram’s fraud department from the analysts who were  responsible for filing the SARs, effectively negating any chance of proper action – despite multiple guidance sources reiterating the importance of sharing information between departments.

Great power, great responsibility

Bottom line is that those who are given the authority or power must follow through to ensure that policies, procedures and controls are in place, as well as ongoing employee training and independent audits, in order to test whether the compliance program functions commensurate with the risks of the organization.

Ben Parker’s line from the Spiderman movie is appropriate here: “With great power comes great responsibility.” Acting FinCEN director Jamal El-Hindi summed up the responsibility of those in the compliance field: “Compliance professionals occupy unique positions of trust . . . when that trust is broken, it is important that we take action so that reputations of thousands of talented compliance officers are not diminished by any one individual’s outlying egregious actions.”


Virginia simplifies and modernizes lawyer advertising rules; who’s next?

Posted in Advertising and Solicitation

Woman with megaphone and speech bubblesBased on a perceived need to “simplify and modernize” lawyer advertising rules, the Commonwealth of Virginia’s supreme court has adopted a new set of regulations that will make it easier for lawyers there to market their services.  The slimmed-down rule, effective July 1, will consist of a single provision that bars false or misleading communications, plus a revised rule on soliciting clients.

Trimmed-down rules

The new Virginia regulation pares its Rule 7.1 down to two sentences:  one prohibiting “false or misleading” communications about the lawyer or the lawyer’s services; and one defining “false or misleading.”

The changes jettison separate former rules on law firm names and communicating practice specialties, moving those subjects to a few succinct comments in the revised Rule 7.1.

The revised Rule 7.3, on soliciting clients, deletes a former provision that completely barred in-person solicitation of clients in personal injury and wrongful death cases, and now permits all in-person solicitation except when it involves “harassment” and the like, and when the prospective client has informed the lawyer that it’s unwelcome.  The Virginia rule gives lawyers more lee-way than does Model Rule 7.3.

Less is more…

The new Virginia rules are patterned on the comprehensive proposals offered in 2015 and 2016 by the Association of Professional Responsibility Lawyers, which has urged the ABA to retire most of the Model Rules on lawyer advertising.  The Old Dominion is the first jurisdiction to embrace that approach.

In the ABA/BNA Lawyer’s Manual on Professional Conduct, the chair of the APRL committee that originated the revamp proposal, Mark Tuft, is quoted as saying that reacting to new modes of advertising like Facebook and Snapchat with more regulation is counterproductive.

“Virginia is the first state that has recognized that greater regulation in an effort to respond to advertising in the electronic age is not the way to go,” Tuft told the Lawyers’ Manual.

(For more comment on the Virginia rule reboot, see John Marshall College of Law Professor Alberto Bernabe’s recent blog post:  he questions whether the term “misleading” can be — well, misleading.  And Memphis lawyer Brian Faughn (who’s also an APRL board member) weighs in as well.)

New Model Rules — maybe

In response to the APRL’s proposals, the ABA’s standing Ethics Committee convened a working group to review the call for an advertising rule revamp; the working group plans to make its recommendations to the Ethics Committee next month, according to the Lawyers’ Manual.

The  ABA’s deliberations are at their beginning stages, and it would take some time before any changes made their way into the Model Rules on advertising.  And from there, state supreme courts would need to carry out their own vetting processes before possibly adopting any ABA model into a state’s lawyer conduct rules.

But following Virginia’s example, it is possible that states won’t necessarily wait for the ABA, and instead might consider — or even embrace — the APRL’s approach directly.

Is it good for the profession?

The way we market our legal services is a subject that can generate strong opinions — but however you feel about it, lawyer advertising is here to stay.  (Bates v. State Bar of Arizona, 433 U.S. 350 (1977).)  The public now gets its information about legal services in a multitude of ways that were never dreamed of in 1983, when the ABA promulgated its Model Rules.  The current rules in most jurisdictions are cumbersome and over-complicated, yet do nothing to make lawyer marketing dignified or in keeping with a learned profession.  (For example, how about putting your firm advertising on a condom package? Or calling yourself “The Gorilla“?)  We might as well move toward a streamlined set of regulations that will at least make it easier to communicate with the public about what we have to offer.

One potato, two potato; hot potato brings DQ in Mississippi federal case

Posted in Conflicts, Disqualification

potatoes covered in soil against whiteEven though a Mississippi lawyer’s conflict of interest lasted only one day, that was enough for a U.S. magistrate judge to disqualify him from representing a client adverse to Allstate Insurance Co. on a coverage claim, in a ruling issued last week.  Sending a termination letter to the insurer the day after accepting the new client’s case didn’t help the lawyer.  The judge found that the lawyer’s duty of loyalty required him to turn down the case, in light of the fact that he had pending cases in which he was directly representing Allstate.

Hot potato doctrine

The court recognized that the key issue in the case was whether the lawyer could drop Allstate as a client, turning it into a “former client” for purposes of the conflict-of-interest rules.  If so, then the “more lenient” substantial-relationship test would apply, in which the court looks at whether the new client’s matter is substantially related to the work the lawyer did for the former client.  But if the lawyer takes on the new client and represents it concurrently with the now-adverse existing client without both clients’ consent, then the duty of loyalty under Model Rule 1.7 has been breached.

The “hot potato” doctrine prohibits a lawyer from turning an existing client into a former client by “firing” it in order to accept an engagement adverse to the existing client.  The 1987 case that gave the principle its name is Picker International, Inc. v. Varian Associates, in which the federal district court judge said that “A firm may not drop a client like a hot potato, especially if it is in order to keep happy a far more lucrative client.”

Termination didn’t cure impropriety

In the Mississippi case, the court said that the lawyer’s conduct was understandable:  he hadn’t received any new work from Allstate in over a year; his firm was wrapping up its work on the “handful” of cases it still had, the majority of which were near the end of their life-spans; and the firm planned to end its relationship with the insurer based on the fact that it was not getting new work.

Nonetheless, said the judge, the lawyer and his firm had an attorney-client relationship with Allstate when the lawyer signed a contract to represent the claimant against the insurer, and he couldn’t abandon his existing client by dropping it like a hot potato:  “In withdrawing representation of Allstate to pursue a new, more attractive representation, [the lawyer] violated the duty of loyalty he owed to Allstate.”

Game of spuds

The question of when a client becomes a former client under conflict rules can be a nuanced one.  For instance, the hot-potato doctrine may not operate when a conflict is “thrust upon” a law firm as a result of a client merger, the addition or new parties or other circumstance over which the firm has no control.  Then, the firm may be able to choose to avoid disqualification by withdrawing from the representation that creates the conflict.  See, e.g., Sabrix, Inc. v. Carolina Casualty Ins. Co. (D. Ore. 2003) (hot-potato rule did not apply where withdrawal followed another party’s naming of additional defendant that created conflict).  And timing matters, too.  For example, if a firm has a new client in mind for the future, may it terminate an existing relationship in order to prevent a conflict?

Bottom line:  Be careful in working through these conflict issues so you don’t drop the ball — or the potato.

Tech innovation must shape legal practice, ABA Futures Comm’n chair says

Posted in Law Practice Management, Social Media and Internet

Road Sign with THE FUTURE and SkyWhat is the future of legal services in the U.S.?  How should the enormous unmet need for services — to the middle class and to the poor — be met?  Judy Perry Martinez, the Chair of the ABA Commission on the Future of Legal Services, was in Cleveland last week, and discussed the Commission’s 100+ page report and some of its controversial recommendations.  She spoke at the Cleveland Metropolitan Bar Association to members of its ethics committee and other bar leaders. Martinez’ talk was wide ranging.

  • On-line service providers are here to stay:  Entities like Avvo, Rocket Lawyer and LegalZoom now have a presence in some legal market segments, said Martinez, and “they are not going away.”  Lawyers must acknowledge this force, and that “they are no doubt innovating in a way that consumers of justice are paying attention to.”  Like attorney advertising, which was once derided but is now ubiquitous, on-line service delivery platforms are “now part of the ecosystem.”  The challenge is to ensure that these and other technology-driven models meet the standards most critically important to the profession.  The Commission report recommends that state courts adopt the ABA Model Regulatory Objectives for the Provision of Legal Services, so that if and when a court examines on-line or other providers (including lawyers), any regulation is guided by the stated objectives.   These include such core principles as independence of legal judgment, protection of confidential and privileged information and accessible civil remedies for negligence and discipline for misconduct.
  • The public needs more from us:  The Commission’s report details a huge unmet need for legal services.  In some jurisdictions, more than 80 percent of the civil legal needs of low-income people and the majority of middle-income people go unmet — even as new law graduates struggle to find work.  “Our efforts have woefully failed” so far, Martinez said, to meet the goal of providing some form of effective assistance for the essential civil legal needs of all people otherwise unable to afford a lawyer — which is the Commission’s #1 recommendation.
  • We’re trained to be innovation-averse:  Our legal training itself makes lawyers resistant to change, and that threatens to leave us behind.  We are trained to look at the past, and to avoid unnecessary risk.  The traditional service delivery models that we accordingly embrace constrain innovation, and can limit access to justice.  Yet, it is crucial to overcome these barriers.  “If we don’t shape the future, others will,” said Martinez.
  • Despite adverse comment from the rank-and-file, conversation about “ABS” continues:  Permitting non-lawyer ownership stakes in law firms (aka “alternative business structure”) has generated much controversy; it is currently barred in every jurisdiction except the District of Columbia (although in the state of Washington, a very narrow form is encompassed under its Limited License Legal Technician program).  In 2016, the ABA solicited comments on its issue paper on ABS for law firms, including non-lawyer ownership.  Based on a lack of data showing that ABS would benefit the public, and being aware of opposition from some, the ABA recommended continued exploration.  According to Martinez, the issue is continuing as a topic of discussion at bar association and court meetings, and those interested are watching developments in the UK, where ABS is growing.  What should the burden of proof on the issue be, asked Martinez:  that there is “no evidence of harm to the public,” or that there is “evidence of benefit to the public”?

What can be done on the local level?  Martinez said that lawyer education aimed at helping lawyers and judges understand the benefits of applying technological innovations to the access-to-justice problem was front and center, and that every bar association should be incorporating a futures component into its long-range planning.

Bottom line:  we lawyers had better get on board because like it or not, the future is here, and it holds opportunities for the profession and for increased access to justice.

What if? Ohio board issues succession-planning guide for lawyers

Posted in Competence, Law Practice Management

Last WillWhat if you suddenly became disabled and couldn’t handle your law practice?  Or, if you were to die, who would deal with your pending matters?  Who has the password for your computer?  Who knows where you bank?  The Ohio Board of Professional Conduct last week published an ethics guide titled “Succession Planning” that addresses these issues, and it’s worthwhile reading if you practice on your own or in a small firm, in any jurisdiction.

Trendlines point to need for planning

Two trends are converging that underscore the topic of succession preparedness:  the predominance of solo and small firms, and the graying of the profession.

  • The ABA reports that in 2005, 63% of all private practitioners were in firms of fewer than five people.  And 49% practiced on their own.  (Seventy-five percent of U.S. lawyers were in private practice in 2005.)
  • And we are not getting any younger — in fact, the opposite.  The median age of lawyers in 2005 was 49; 13% were over 65 years old.  And recent trends are going to increase the proportion of older lawyers:  total J.D. enrollment between 2011-12 and 2013-14 decreased by 12%, or by more than 17,000 students.  First-year law school enrollment decreased by 29% between 2010 and 2016, and for the 2016-17 school year it remained flat over the previous year.

Be prepared

The Ohio ethics guide notes that “failing to plan for the unexpected can result in harm to clients and in confusion and hardship for the lawyer’s family, staff and professional colleagues.”

Every state’s lawyer conduct rules has some version of Model Rule 1.1 and 1.3, dealing with competence and diligence, and the Ohio guide notes that while having a succession plan is not mandated by the Ohio rules, having a plan “can be viewed as a continuation of a lawyer’s duty of competent and diligent representation.”

Some jurisdictions go further.  As of June 2015, the ABA reported that several specifically addressed succession planning in their conduct rules, registration rules or in comments.  (A state-by-state chart is here.)  For instance, Florida requires the designation of an “inventory attorney,” who can agree to take action in the event of a lawyer’s death or disability.  Indiana provides as part of its annual registration process for permissive designation of an “attorney surrogate.”  South Carolina’s Rule 1.19, “Succession Planning,” says that lawyers “should prepare written succession plans” in anticipation of their death or disability.

What to do & who can help?  

The Ohio guide points to several components of a succession plan, which will help avoid the burden on your family and possible prejudice to your clients if the unexpected happens:

  • a written agreement with a designated successor lawyer;
  • information on the status and location of open and closed client files;
  • details regarding trust accounts, operating accounts and client ledgers;
  • location of log-in and password information for office computers, mobile devices, e-mail, voicemail, billing and calendaring systems, online banking, etc.;
  • location of accounts payable and receivable information;
  • information on leases, insurance, key vendors and other details needed to wind up a law practice, if needed.

Here in Ohio, two city bar associations have specific programs and resources.  My hometown bar, the Cleveland Metropolitan Bar Association, has a “What-If Preparedness” program, with a site that links to a wealth of material, including forms.  The Columbus Bar Association has a program called the “Advance Succession Registry.”  Details are here.  The ABA likewise has resources and links, including to jurisdiction-specific materials.

Think about the unthinkable

Thinking about death and disability is never easy — for lawyers or anyone else.  But coming to grips with these topics and taking action can put your mind at ease that you have protected your clients and minimized a possible future burden on those you love.  That’s worth doing, no matter how difficult.

Privilege for communications with PR firms: recent case spotlights risk

Posted in Privilege, Work-product


Thinking of using a public relations firm to help manage a corporate crisis?  Divergent interpretations of the privilege rules have led to differing legal opinions on whether communications between a PR firm and the company or defense counsel are privileged.  A California state court of appeals decided last month that such communications were not privileged, illustrating the privilege risk that can arise in communications with PR firms.

No California exception available

Behunin v. Superior Court involved an unsuccessful real estate investment deal.  “As part of a plan to induce the Schwabs to settle” the resulting lawsuit, Behunin’s lawyers hired a public relations firm to create a website linking the Schwabs and their Indonesian investments to the family of former Indonesian dictator Suharto.

In Schwab’s suit against Behunin for libel and slander, he sought to discover communications among Behunin, his counsel and the PR firm about the creation of the website.

The court of appeals, denying a writ of mandamus, concluded that although California law may extend privilege to some communications with a PR consultant, privilege did not apply here:  Behunin failed to prove that communications with the PR firm were reasonably necessary for his lawyer to represent him in the underlying case.

Section 952 of California’s evidence code codifies exceptions to the usual rule that disclosing a lawyer-client communication to a third person destroys the privilege. But the Behunin court bluntly said in this case that “There is no ‘public relations privilege’ in California,” and that no exception to the general rule applied to the PR firm’s involvement in generating negative publicity that “would help get the Schwabs to the settlement table.”

  • Behunin did not provide evidence proving that the communications among the lawyer, the PR consultant and himself were reasonably necessary to assist the lawyer in representing him, the court ruled.  Rather than being able to show that the lawyer and consultant were involved together in “developing, discussing, or assisting in executing a legal strategy,” it appeared that the lawyer only acted as a liaison in hiring the PR firm.
  • Nor, said the court, was the PR consultant the functional equivalent of the client’s employee (a status which could potentially raise the privilege shield).  There was no detailed factual showing that the consultant was responsible for a key corporate job, had a close working relationship with the company’s principals on critical matters, and had information that no one else at the company possessed.

Differing opinions on PR firms

The application of privilege and work-product principles has generated opinions that have extended the privilege to communications among lawyers, clients and PR firms.  See King Drug Co. v. Cephalon, Inc. (E.D. Pa. 2013) (privilege applied; consultants preparing business and marketing plans were the client’s “functional equivalent”).  Other opinions are to the contrary.  See Kirby Pemberton v. Republic Services, Inc. (E.D. Mo. 2015) (no privilege; no Missouri authority extends privilege to public relations consultants, and privilege should be narrowly construed); McNamee v. Clemens (E.D.N.Y. 2013) (no privilege; PR firm only provided standard services not necessary in order to provide legal advice, and therefore disclosing documents to firm resulted in waiver).

Takeaway – caution required

Managing the media can be an important part of managing a corporate crisis.  Creating and preserving privilege in this setting demands caution, and involves a nuanced analysis that can be both fact-specific and jurisdiction-specific.

  • Stephen Williger, of Thompson Hine’s Cleveland office,  will present the keynote address, “Legal Aspects of Corporate Crisis Management,” at the 2017 Continuity Insights Management Conference in Denver, April 24-26.  He will speak on the legal aspects of pre-crisis planning, mitigation, remediation, and recovery.  Conference program   Registration

Corporate ethics compliance – challenges and benefits for both U.S. and global companies

Posted in In-house Counsel, Law Practice Management

Business Ethics Concept with icons* Our guest blogger is a Certified Compliance & Ethics Professional (CCEP)® in Thompson Hine’s Dayton, Ohio office.

A growing list of businesses are eager to promote a strong culture of ethical corporate compliance, and lawyers should be ready to get on board by developing knowledge and skills to address this need.

Companies devoting resources to ethics

I recently participated as the Ethicist in Residence  for Xavier University’s International Business Ethics Program.  In addition to being a guest panelist regarding international trade compliance issues at the University Cergy-Pontoise’s School of Law in France,  I traveled in London and Paris to learn more about how corporate giants like L’Oreal and BP tackle compliance and ethics on a daily basis.

My trip was eye-opening.  I visited the London-based Institute of Business Ethics,  had dinner with Michael Woodford, the former CEO/President of Olympus (and whistleblower exposing corruption at the company in 2011).  I also spoke with Robert Bond, a legal expert on data privacy in the UK.

Bottom line from all of these events?  Ethics and compliance are increasingly important to today’s businesses, as evidenced by the growing number of programs and resources that companies are putting in place.  As a result, lawyers need to be prepared to weigh not only compliance concerns but also ethical considerations in doing business.

Legislative pressure

First, companies are focusing more on compliance and ethics because of increasing legislation and pressures.  France recently enacted the Sapin II Law, which aligns French anticorruption law with aspects of U.S. and UK corruption enforcement.  Sapin II was prompted by  concerns of political leaders who believed that increased trade globalization was contributing to corruption and undermining economic interests.

The Organization for Economic Co-operation and Development has criticized France in the past for lagging behind other countries in its corruption enforcement efforts.  Unlike the U.S., France has never convicted a company for bribing foreign officials, despite the fact that those same companies often found themselves subject to investigation or prosecution abroad for such conduct.  Now, French companies are looking to U.S. companies and legal counsel for tips on how to comply with the new law.

Globalization shines a light on ethics

Second, companies are increasing resources for compliance and ethics due to expanding multi-jurisdictional cooperation on a global basis to enforce anti-corruption efforts and hold wrong-doers accountable.  Examples include Operation Car Wash in Brazil, as well as the VimpelCom enforcement action, which coordinated efforts among the United States, Sweden, Switzerland, Norway, the British Virgin Islands, Caymans, Bermuda, Ireland, Estonia, Spain, Latvia, the United Arab Emirates and others.  Thus, not only are companies faced with more legislation, there is also increased international cooperation to coordinate investigations and to detect wrongdoing across national boundaries.

Attracting and retaining talent

Third, companies see value in increasing their compliance and ethics programs to attract and retain talent.  During a briefing to the Xavier University International Business Ethics Program participants, BP expressed that by refusing to bow to  cultural pressures of corruption, the company has been able to attract employees who would prefer to work for a fair and ethical organization.

L’Oreal representatives also commented that they are able to retain talent through efforts such as their Ethics Day, Ethics Café, and other ethics-focused programs throughout the year.  L’Oreal was recently named 2017’s Most Ethical Company by the Ethisphere Institute, winning the annual honor for the eighth time.  Unlike companies that lump compliance and ethics together, L’Oreal created a separate Ethics Department.  It was one of the first companies to appoint a Chief Ethics Officer, in 2007.


It is important for lawyers to understand that compliance is not just obeying this or that specific regulation.  Helping clients to create  a Code of Conduct or overall compliance program requires more than knowledge of certain regulations.  Further, ethical considerations must be built-in.  Just because something is legal does not make it ethical (and vice versa).  It is becoming vital for lawyers – both law departments and outside counsel — to understand not only the law, but also the ethical considerations involved.

Whatever an organization’s goals in creating a culture of ethical responsibility, lawyers must be able to respond, based on our own responsibilities under the Rules of Professional Conduct and with our  clients’ business perspectives in mind.

Client choice, communication are “paramount” when firm dissolves, says D.C. ethics opinion

Posted in Law firm break-ups

With teamwork, anything is possibleDissolving a law firm is a process, not an event, the D.C. Bar Legal Ethics Committee said in a new opinion released earlier this month, and some ethical obligations continue even after dissolution.  “The paramount” principle, said the committee, is to “continue to competently, zealously and diligently represent and communicate with the clients during the dissolution process.”

Answering the three W’s

The opinion addresses the situation where the firm dissolves or will do so in the reasonably foreseeable future, and it answers many of the “who,” “what” and “when” questions that can arise.  Here are some of them:

  • Who should get notice of the upcoming dissolution?  All clients, even those with inactive matters and files that have  been closed less than five years.  If the firm is holding intrinsically valuable client property (wills, stock certificates), the client should be notified no matter how long the file has been closed.  Relevant third parties, such as opposing counsel and tribunals, should also get notice.
  • Who should give the notice?  Joint notice by all firm members is “preferred.”  But if the firm’s lawyers cannot agree on the form or the terms of that notice, the lawyer with the most significant contact should give notice.  Only if this is not practicable should lawyers give unilateral notice to the clients.
  • When should notice be issued?  There is no bright line.  Notice must be timely, and at least give time for the clients to make an informed decision about their future representation, to hire other counsel, and for papers and property to be returned (including any refunds owed).
  • What should be communicated?  The notice can’t contain false or misleading statements, and should provide the clients with options:   to choose representation by any member of the dissolving firm; by any other lawyer; or by any other firm.  The notice may not restrict any lawyer’s right to practice, which is barred by D.C.’s adoption of Model Rule 5.6.
  • What if the client doesn’t respond?  The notice should provide that if the client fails to respond by choosing one of the options, the client is deemed to remain a client of the lawyer who has been primarily responsible for providing legal services to the client.  The D.C. Committee recognized that identifying that lawyer can be difficult; it did not deal with the issue of the potentially open-ended time-frame for the “responsible” lawyer’s duties to the unresponsive client, or what happens if the lawyer is headed to a firm where she would have a conflict in continuing to represent the unresponsive client.
  • What files must the firm return to the client?  D.C. law permits lawyers to assert and enforce retaining liens for unpaid fees against client property — but they are “strongly disfavored” under a 1994 ethics opinion.  Rather, even when asserting such a lien, the lawyer can retain only the lawyer’s own work that the client hasn’t paid for, and then only if the client can pay and if withholding that portion of the file will not irreparably harm the client’s interests.  For files in electronic form, the lawyer must comply with a client’s reasonable request to convert electronic records to paper form, absent some agreement to the contrary.  The client ordinarily must bear conversion costs.

Dissolving a firm that includes non-lawyers

Unique to D.C. practice is the issue of dissolving a firm that includes lawyers and non-lawyers in partnership — a form of practice permitted there under D.C. Rule 5.4(b).  The rule permits lawyers to practice in firms where non-lawyers hold a financial interest or managerial authority, and carry out “professional services which assist the organization in providing legal services to clients.”  Because the rule says that the non-lawyers in such a firm have the same ethical duties as the lawyers, the duties as to the dissolving firm would apply equally to the non-lawyer partners of such a firm, said the D.C. Committee.

Former Uber program to “greyball” riders draws attention to ethics rules

Posted in In-house Counsel, Social Media and Internet

Taxi Ride Share Transportation AppThis is a good one for the law school legal ethics class I’m teaching this semester:  If a company’s lawyer approves a policy that may be legal in itself, but the lawyer knows that the company will use it to evade the law, has the lawyer violated ethics rules?

An analogous question arose last week when the New York Times reported that Uber Technologies Inc. used specially-developed software in order to avoid law enforcement stings in cities where Uber’s ride-sharing operation was facing local government opposition.

Within a few days of the report, Uber announced that it had halted the practice, called “greyballing,” which had been used in the U.S. and overseas.  Uber said that the practice was part of its broader efforts to halt all rider conduct that violates its terms of use.

However, the situation still provides a setting in which to consider Model Rule 1.2(d) and your ethics obligations if a client seeks your help in conduct that may be deemed to be pushing the legal envelope.

“Greyballing” a potential rider

As reported by the Times, starting in 2014, Uber apparently put policies in place in cities like Boston, Portland, Oregon and Las Vegas to identify users Uber thought might be city investigators or inspectors who were arranging for rides in order to conduct stings on operations that law enforcement officials questioned as violating city regulations.

After facing initial opposition in many cities where gaps in local regulations made it easy to launch its services, Uber eventually reached agreements with cities so that it could operate lawfully.

But before that point, as the Times described it, “law enforcement officials in some cities … impounded vehicles or issued tickets to UberX drivers, with Uber generally picking up those costs on the drivers’ behalf.  The company has estimated thousands of dollars in lost revenue for every vehicle impounded and ticket received,” the Times said.

To avoid these costs, Uber would try to identify law enforcement officers and keep them out of its drivers’ cars — “greyballing” them.  The digital techniques Uber used to do that included reviewing credit card information to see whether the card was linked to some official institution (e.g., a police credit union), drawing a “geofence” around government offices, and not picking up anyone seeking a ride from there, and searching social media profiles to identify people who seemed to be linked to law enforcement.

When someone who had been “greyballed” did successfully hail an Uber, the company could call the driver in order to end the ride.

What should counsel consider?

Model Rule 1.2(d) bars counseling a client to engage in criminal or fraudulent conduct, or assisting the client in doing so.  But was Uber’s “greyballing” program used for unlawful ends?  If not, there is no legal ethics issue to discuss.  And we certainly do not know what Uber’s legal team considered in advising Uber about the program.

Rule 1.2(d) of course permits discussing with the client “the legal consequences of any proposed course of conduct” and assisting the client in making “a good faith effort to determine the validity, scope, meaning or application of the law.”  A lawyer who conforms to that standard is on good ground.

Likewise, comment [9] notes the difference between opining about consequences and “assisting” in unlawful conduct.  And the “fact that a client uses advice in a course of action that is criminal or fraudulent” does not of itself “make a lawyer a party to the course of action.”  “Presenting an analysis of legal aspects of questionable conduct” is OK; but “recommending the means by which a crime or fraud might be committed with impunity” is not.

Be careful out there…

If you are in a grey area (no pun intended!), where it may be unclear whether you are counseling your client about the bounds of the law or whether you are possibly assisting with improper conduct, it pays to be careful, and to consider getting an outside view about your possible actions.  Check your jurisdiction’s version of Model Rule 1.6(b)(4), which permits you to disclose a client’s confidential information as reasonably necessary in order to obtain legal advice about your compliance with the ethics rules.