Making big news this summer was the shut-down of Avvo Legal Services just a few months after it was acquired by Internet Brands.  (A couple of the many reports are here and here.)  Some speculated that the new corporate owner had no stomach to continue to fight for that portion of Avvo’s business model in the face of numerous state ethics opinions that found a wide variety of ethics problems with it.

The flat-fee service that Avvo offered through a network of lawyers required the lawyer to rebate a “marketing” fee to Avvo out of the fee that the lawyer received.  As we’ve pointed out, that raised issues of fee-splitting with non-lawyers; but other aspects of the model also troubled ethics boards.

Does “processing fee” = fee-splitting?

On another front now drawing notice, another on-line legal services provider is contesting charges in California district court that its own business plan violates false advertising and unfair competition statutes, including recently-filed allegations that it supports its business with spurious attorney ratings.

The suit is significant for highlighting that despite the demise of Avvo Legal Services, the ethics issues remain in light of the other players that continue to occupy the same space in the marketplace, and that litigation, not just regulatory action, sometimes results.

The plaintiff in the California federal case is LegalForce RAPC Worldwide, an IP firm.  In an amended complaint filed earlier this month, LegalForce alleges that it competes with defendant UpCounsel Inc. to “provide individuals and small businesses with affordable access to attorneys,” by using technology to match clients with lawyers specialized in corporate, patent and trademark law.

The allegations, which withstood an earlier motion to dismiss, include that UpCounsel’s model features a “processing fee” markup that constitutes impermissible fee-sharing with non-lawyers.

The amended complaint says that UpCounsel tries to attract consumers by promising to provide lawyers in the “Top 5%” of specialized IP and corporate practice niches in cities across the U.S, and that the representation constitutes false advertising, as there is no ranking system that could provide a basis for the claim.

“Reviews” outnumber lawyers, says complaint

In addition, according to the allegations of the amended complaint, UpCounsel falsely advertised superior consumer ratings for the lawyers in its network.  As an example, the plaintiff pointed to the rating given to IP lawyers in Cotati, California:

“Cotati Intellectual Property Lawyers, 5.0 ***** Based on 5450 reviews.”  “It is impossible for Cotati Intellectual Property Lawyers to have 5,450 reviews on UpCounsel,” says the amended complaint, because “Cotati is a small town … with a population of 7,455. There are only 21 attorneys in the city of Cotati licensed to practice law in California, and none of these 21 attorneys are listed on UpCounsel.”

LegalForce alleges that this same pattern of “perfect or near-perfect review scores” based on thousands of purported reviews is duplicated as to lawyers advertised by UpCounsel in other cities, such as Tallahassee and Savannah.

More to come…

The ethics issues regarding on-line legal service providers have not gone away just because Avvo has withdrawn from that market.  As Prof. Alberto Bernabe, a legal ethics professor at John Marshall Law School in Chicago, has pointed out, “Where Avvo left off, someone else will pick up…,” including, most recently, “Text a Lawyer,” an on-line platform where prospective clients can ask lawyers questions via text.

Regulators and litigation parties will surely continue to confront the ethical issues inherent in these platforms, although the ABA’s recently-passed revamp of some of the legal marketing rules in the Model Rules of Professional Conduct fails to address on-line referral providers.

The New York City Bar Association recently found that common forms of third-party litigation funding for law firms violate New York’s Rule 5.4(a), which like the analogous Model Rule, bars fee-splitting with non-lawyers.

In its Opinion 2018-5, the NYCBA’s Professional Ethics Committee advised that “a lawyer may not enter into a financing agreement with a litigation funder, a non-lawyer, under which the lawyer’s future payments to the funder are contingent on the lawyer’s receipt of legal fees or on the amount of legal fees received in one or more specific matters.”  (Left untouched by the opinion are agreements between funders and clients, which do not implicate the fee-splitting issue.)

While ethics opinions are advisory, they can be cited by courts as persuasive authority; and an opinion from the influential NYCBA could help shape the conversation in an area that has been marked by controversy.  As we described earlier this year, two jurisdictions now require some disclosure when third-party funding is part of a case (Wisconsin by statute and the Northern District of California by rule), and the U.S. Chamber of Commerce has favored a change to the Rules of Civil Procedure to require such disclosure.  And as we have also described, some courts still view third-party funding as impermissible under the old doctrines of champerty and maintenance.  Yet, litigation funding is big business, with the U.S. market estimated at $5 billion annually, and growing.

Fee-splitting problem

Against this backdrop, the Committee considered two arrangements, both of which it found forbidden by the fee-splitting rule:  (1) where the funding to the firm is not secured other than by the lawyer’s fee, “so that it is implicit that the lawyer will pay the funder only if the lawyer receives legal fees in the matter;” and (2) where instead of a fixed amount or interest rate, the amount of the lawyer’s payment to the funder will depend on the amount of the lawyer’s fee.

Rule 5.4(a) (“Professional Independence of a Lawyer”) provides that “a lawyer or law firm shall not share legal fees with a non-lawyer.”  The purpose of the rule, as described in comment 1, is to protect independent legal judgment.  See also Roy Simon & Nicole Hyland, Simon’s New York Rules of Professional Conduct Annotated at 1420 (noting that the rule’s intention is to protect independent legal judgment by removing the incentive for non-lawyers to interfere or pressure lawyers to use improper measures to win cases).

The Committee noted the long-standing nature of the fee-splitting prohibition, and that it has been broadly interpreted to bar many different types of business arrangements in which lawyers agree to make payments to non-lawyers based on the lawyer’s receipt of legal fees, or on the amount of those fees.  A financing arrangement contingent on the receipt of fees or their amount is no different, and is impermissible, said the Committee, “regardless of how the arrangement is worded.”

“Rightly or wrongly,” the Committee said, Rule 5.4(a) “presupposes that when non-lawyers have a stake in legal fees from particular matters, they have an incentive or ability to improperly influence the lawyer.”

Lessons from the case law… and a call to the legislature?

The Committee acknowledged that New York courts have enforced litigation funding contracts against attempts to invalidate the agreements based on public policy grounds, but said that would be expected:  “[L]awyers who violate the Rules cannot ordinarily invoke their own transgressions to avoid contractual obligations.”

And as for the argument that the prohibition on fee-sharing is overbroad?  The Committee recognized that there is room for question there, including whether there might be adequate contractual or other means of preventing litigation funding arrangements from interfering with independent legal judgment.  But “that is a matter to be decided by the state judiciary,” said the Committee.

Funder reaction:  not warm

As described in Law360 (subscription required), the chief investment officer at one major funder, Burford Capital, called the NYCBA’s opinion “flatly wrong.”  The chief investment officer of another funder, Bentham IMF, said it was “going the wrong way.”

Perhaps these reactions are predictable; but the NYCBA’s opinion is only the most recent of a string of advisory opinions from other jurisdictions, such as Maine, Virginia, Nevada and Utah, that point in the same direction.

Stay tuned.  This is a topic with possible ramifications on how new firms are financed, as well as an ongoing debate over the role of the fee-splitting rule in actually protecting clients.

In the movie “Goodfellas,” Robert De Niro famously advises that the two greatest life lessons are “Never rat on your friends, and always keep your mouth shut.”  Those are good rules if you’re in a crime syndicate.  But as most lawyers know, our Rules of Professional Conduct can actually require us to “rat out” our fellow lawyers, under some limited circumstances.  Model Rule 8.3(a), adopted in some version in almost all jurisdictions, says:

“A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.”

Rule 8.3(b) applies the principle to judges.

But do you ever have to, in effect, rat yourself out — self-reporting your own ethical misconduct?

In almost every jurisdiction (my home state of Ohio is an exception), the answer is “No.”  The Model Rule, as incorporated into almost all the state professional conduct rules and the rules of the District of Columbia, deals expressly with reporting the ethical misconduct of “another lawyer.”  Under that language, there is no ethical duty to self-report your own violation of the professional conduct rules.  In some jurisdictions, though, self-reporting might be considered as part of the mitigating factors that can reduce the severity of professional discipline, as a recent Nevada opinion illustrates.

Stayed suspensions for trust fund misconduct

In the Nevada case, two lawyers got one-year fully-stayed suspensions after their employee improperly used more than $1 million in client trust account funds to pay firm business expenses.  As described in the state supreme court’s opinion, the two lawyers admitted they violated Nevada’s version of Model Rule 5.3, by failing to properly supervise a non-lawyer assistant, and they agreed to the sanction.  The lawyers were not aware of the non-lawyer’s actions.  And, strikingly, “Within fifteen minutes of discovering the non-lawyer assistant’s improper trust fund transfers,” they “self-reported to the State Bar.”  In accepting the proposed discipline, the supreme court noted the lawyers’ “full and free disclosure to disciplinary authority.”  It also helped that the lawyers immediately hired a forensic accountant for an audit, and began repaying the trust account shortfall out of earned fees.

… And you might have to self-report crimes and/or other discipline

The general rule excusing you from ratting on yourself is turned upside down in many places, however, when it comes to self-reporting discipline that is imposed on you by a court (for instance a federal court) or by a disciplinary authority in another jurisdiction.  In those cases, many jurisdictions require you to bring the matter to the attention of your home state’s disciplinary body.  It’s not the misconduct itself, but the fact of disciplinary action emanating from somewhere besides your home jurisdiction’s highest court that triggers this kind of self-reporting duty.

You also might have a duty to self-report if you are charged with or convicted of a crime.  If (heaven forbid) you find yourself in that situation, you should get advice about what your jurisdiction requires of you, including any mandatory time frames on self-reporting.

Carve-out for lawyer assistance programs

Last, a PSA:  If you are struggling with a mental health problem, or with substance abuse, be aware that the lawyer assistance program that every jurisdiction has is very likely exempted from reporting to disciplinary authorities misconduct that its staff lawyers learn of in the course of helping you.  Check your own state’s version of Model Rule 8.3(c), but those I’m aware of have some form of the Model Rule’s carve-out:   “This Rule does not require disclosure of information otherwise protected by Rule 1.6 or information gained by a lawyer or judge while participating in an approved lawyers assistance program.”

Here in Ohio, our lawyer assistance program advises that no disciplinary problem is ever made worse by seeking help.

In an unusual application of the lawyer-witness rule, a district court recently held that the rule would not prevent an assistant state attorney general from being on an open phone line along with the court and other party representatives during the execution of a death-row inmate — even though the assistant AG might have to testify as a fact witness during the execution.

Open phone line

The inmate, Robert Van Hook, was scheduled to be executed in Ohio for a 1985 murder.  He and many other inmates had challenged Ohio’s lethal injection execution protocol on Constitutional grounds.  He requested that an open phone line be maintained through the course of his execution, and that his attorney, the Ohio assistant AG on the case, and the court be on the line, so that his attorney could move for a temporary restraining order to halt the execution mid-stream if it began to go wrong.

Some executions by lethal injection, including in Ohio, have had serious problems in being carried out.  (See here, here and here, for example.)

Lawyer-as-witness issue?

The Ohio Attorney General objected to the inmate’s request, because if the inmate’s lawyer moved for a stay or TRO during the execution, “an Assistant Attorney General may be placed in the difficult position of becoming a fact witness in order to rebut allegations made by Plaintiffs” in the ensuing telephone hearing from the death house.  This would create a conflict of interest under Ohio ‘s version of Model Rule 3.7, the Attorney General said, that would require recusal of one or more lawyers.  Because of the limited number of assistant AG’s familiar with the case, recusal would hamper the ongoing litigation over Ohio’s execution protocol, he noted.

The magistrate judge rejected the AG’s argument.  Ohio Rule 3.7(a)(3) (like the Model Rule) provides that “a lawyer shall not act as an advocate at a trial in which the lawyer is likely to be a necessary witness unless … the disqualification of the lawyer would work substantial hardship on the client.”

A main justification for the bar against acting as a lawyer and a witness in the same cause is confusion for the trier of fact in taking account of these dual roles.  But, the judge said, there was little risk of confusing the court under the likely circumstances here.  And any possible confusion was outweighed by the substantial hardship to the defendants that would result if the court were to bar testimony from the assistant AG with intimate knowledge of the case, and who was observing the execution, the judge held.  Therefore, the open phone line plan would not be impeded by the possibility of disqualification under the lawyer-as-witness rule.

The magistrate judge also held that the purpose of the open phone line — a possible post-lethal-injection motion for injunctive relief — was not “futile.”  The court said that Van Hook had the right to challenge his execution as cruel and unusual, and “he does not lose that right once the injection begins….”

Van Hook’s execution proceeded without incident on July 25.

Confession:  I’m a lawyer who’s married to a lawyer.  If that’s your situation too, then you know some of the challenges — how life at home falls apart when you both have trials scheduled; the strain on the budget in those early days when you’re paying off two sets of law school loans; playing rock-paper-scissors to decide who takes the sick kid to the office with them.

More than pillow talk

Now, from my home state of Ohio’s Board of Professional Conduct, comes a reminder about another challenge:  keeping your client’s confidential information confidential when you’re in a two-lawyer household.  There is always the temptation to talk shop, to discuss at the dinner table details of exciting work you’re doing, or even to give your spouse a leg up by sharing some work product you’ve created for your client.

It’s that last one that got two lawyers in trouble, according to the complaint filed by the Buckeye State’s Office of Disciplinary Counsel.  Two lawyers, both of whom practiced in the same area of law, first met at a trade association conference.  One had been admitted in 2001, and the other in 2010.  They dated (or “began a personal relationship,” as the complaint says), moved in together, and became engaged to be married.  They continued to practice at separate firms.

As the complaint alleges, after the lawyers moved in together, they began exchanging information relating to their clients, but without authority to do so.  More than a dozen times, said the complaint, one lawyer would forward to the other an e-mail from her client that requested a legal document — a contract, a waiver, or an opinion.  The other lawyer would respond by forwarding an e-mail with his client that attached that type of document.  The lawyers apparently didn’t scrub or redact the e-mails or the documents — rather, the exchanges revealed the identity of the clients and confidential communications that they had with their respective lawyers.

The complaint suggests that the lawyers were simply sharing the information and documents to help each other out at work.  “More often than not,” alleged the complaint, one of the lawyers “ultimately completed” the other lawyer’s work “relative to her particular client.”

The lawyer’s disclosures, over the course of nearly two years, were discovered by their respective law firms.

Discipline by consent

The result of the disciplinary complaint:  the lawyers each consented to discipline, acknowledging violations of Ohio’s version of Model Rule 1.6(a) (lawyer shall not reveal information relating to the representation of a client) and Ohio’s unique catch-all Rule 8.4(h) (lawyer shall not engage in “other conduct” that adversely reflects on lawyer’s fitness to practice law).

The lawyers also each agreed to a six-month suspension — but fully stayed on condition of no further misconduct.  The relatively light penalty is partly based on the finding that no clients were harmed.

The Board adopted the disciplinary panel’s recommendation in June — but the case is not over yet.  The Board’s recommendation now goes to the state supreme court, which can accept, or reject and modify it.

Avoiding temptation

It’s human nature to want to give professional help to your nearest and dearest when you can.  But there’s no question that sharing unredacted client documents and communications without consent can violate the duty of confidentiality — which is very broad, and extends to all information relating to the representation.  It’s hard to see how or why a client would ever consent to the kind of sharing that went on here.

My friend Brian Faughnan has an interesting take on this case, over at his blog — namely that lawyers who overshare believe the risk of getting found out is quite low because of the marital privilege.  He cautions, however, that in this digital age, things have a way of coming to light even without a spouse voluntarily providing information.

Bottom line:  Even the kind of casual sharing that falls into the category of shop talk between co-habiting lawyers can be ethically improper.  It’s hard to avoid that kind of temptation, but the necessity of doing so comes with the territory when your spouse or partner is not only a bed-fellow but a fellow member of the bar.

 

A Washington lawyer was disbarred last month by the state supreme court in a disciplinary case with an interesting array of issues:  the heavy penalties for using trust account money to “rob Peter to pay Paul;” the danger of treating the representation of a relative too casually; “compassion fatigue” as a potential mitigating factor in lawyer discipline; and the application of the Constitutional protection against double jeopardy in the disciplinary setting.

Rob Peter, pay Paul

The lawyer was a sole practitioner with a personal injury practice.  Alerted to overdrafts in his client trust account, disciplinary counsel investigated and found numerous irregularities:

  • The lawyer transferred trust account money to his operating and personal accounts when they were overdrawn or short of funds, in the process converting more than $10,000 to his own use.
  • He also failed to pay several clients the full amounts of settlements they were entitled to, and made misrepresentations to them in the process.
  • The lawyer shuffled money in and out of the trust account, using funds properly belonging to one client to pay settlement amounts owed to others.

Misusing and misappropriating client funds in these kinds of ways is the most serious ethics breach in the rule-book, and the court found violations of Washington’s versions of Model Rule 1.15 (Safekeeping Property) and Rule 8.4(c) (dishonesty, fraud, deceit and misrepresentation).  In Washington, as in many jurisdictions, the presumptive penalty is disbarment.

All in the family

Additional counts of the disciplinary complaint involved the lawyer’s representation of his nephew in a car accident case.  There was no fee agreement, but the lawyer eventually settled the case for $90,000 and took a $20,000 fee.  Later, however, after a change in Washington law, the tortfeasor’s insurer sent the lawyer more than $17,000 as an additional settlement payment.  The lawyer failed to notify the nephew, signed his nephew’s name on the check and eventually disbursed it to his office account, using it to pay bills.

The lawyer testified that his sister — the client’s mother — authorized him to negotiate the check, and that the nephew’s drug problem made it inappropriate to give the additional settlement money to him.  The sister had power of attorney over her son at one point, but it had expired long before the lawyer distributed the additional settlement funds to himself without the client’s knowledge or permission.

The court found that in addition to violating the trust account rules and converting the funds dishonestly, the lawyer violated the state’s version of Model Rule 1.4 (Communication).

“Compassion fatigue”?

The lawyer argued that the disciplinary board, which unanimously recommended disbarment, should have considered his emotional problems as a mitigating factor.  In the same year that he committed the charged misconduct, he had lost three personal injury trials in a row.  A psychiatrist testified at the disciplinary hearing that these losses and the lawyer’s over-identification with his clients led to “compassion fatigue,” a syndrome in which people in the helping professions become ill themselves as a result of working with traumatized populations.

The lawyer’s expert witness said that symptoms of “compassion fatigue” can include becoming “jaded,” and mentally disassociating from daily life, and that it had caused the lawyer to become careless and to avoid the stress of dealing with his bookkeeping.

The court accepted the concept of “compassion fatigue” as a potential mitigating factor.  Under Washington law, the mitigating factor of emotional problems requires merely some connection between the asserted problem and the misconduct; the court found that the psychiatrist’s expert testimony established that connection at least as to  some of the lawyer’s misconduct.

Nonetheless, the court said, under the totality of the circumstances, the lawyer’s emotional problems carried “little weight.”  “Compassion fatigue” did not actually cause the lawyer to forge his nephew’s signature, or convert client funds, the court said; and he testified that he was still aware of his ethical obligations.

In order to justify mitigation where the presumptive sanction is disbarment, the court noted, the circumstances must be “extraordinary.”  Here, they were not, and the failure to preserve the integrity of his clients’ funds led the court to rule that the lawyer’s emotional troubles could not reduce the sanction.

Double jeopardy and lawyer discipline

Last, the lawyer argued that being charged with multiple rule violations stemming from single instances of misconduct meant that he was being punished more than once for the same conduct, in violation of the Constitutional protection against double jeopardy.

This was an issue of first impression in Washington.  However, numerous jurisdictions have considered whether the double jeopardy clause is implicated in lawyer disciplinary proceedings, and answered “No,” and the Washington Supreme Court was persuaded by these holdings.  The weight of authority is that the sanctions for professional misconduct — reproval (or admonishment or reprimand), suspension or disbarment — are not criminal sanctions (which consist of fines or incarceration).  Thus, disciplinary sanctions are not “punishment” for purpose of the double jeopardy clause, the court held.

As the legal market continues to change, attorneys face more challenges when it comes to client relations. While the trend has been for clients to slash attorney’s fees by hiring third party auditors to review bills, or to aggressively seek discounts on fees, ethical considerations, and now the United States Court of Appeals for the 10th Circuit, make it clear that overbilling clients cannot be a solution for legal revenue woes.

In a recent opinion, the Tenth Circuit left a law firm with a legal bill of its own when the Court ruled that the firm’s malpractice insurer was entitled to recover its expenses from defending an overbilling malpractice claim not covered under the firm’s policy.

What happened?

In 2012, the Colorado Attorney General’s Office began investigating attorney Michael P. Medved for allegedly overbilling clients, and later filed suit against him.  Additionally, Medved was facing a class action suit from former clients relating to the same allegations. Medved reached out to his firm’s malpractice insurance provider, Evanston Insurance Company, for representation in both matters.  At the time, Medved’s firm had a malpractice policy that covered “wrongful acts by reason of professional services.” Evanston agreed to defend Medved subject to a reservation of rights. Both cases resulted in relatively quick settlements.

Evanston later sued Medved seeking reimbursement for legal fees and costs incurred, arguing that the malpractice policy did not cover claims related to overbilling because overbilling was not a “wrongful act by reason of professional services.”

The 10th Circuit Court of Appeals agreed, reasoning that:  “The alleged wrongful act (overbilling) lacked the required connection to professional services rather than the claim itself, and the ‘by reason of’ phrase does not create a connection between the wrongful act and the professional services . . .”

Medved argued that Evanston’s failure to properly reserve its right to challenge the representation should estop Evanston’s claims, but the Court of Appeals quickly dismissed this argument, finding that Medved had failed to show prejudice.

Ethical considerations

Model Rule 1.5 prohibits a lawyer from collecting unreasonable fees or an unreasonable amount of expenses from a client. While this rule seems pretty simple on its face, there is no bright-line test to determine what is, or is not, reasonable. Given there is no bright-line rule, the ABA Model Rules provide eight factors you should consider when determining the reasonableness of a fee.

All jurisdictions have adopted some version of Rule 1.5.  Clients and courts have been paying more attention to attorneys’ billing practices; the Tenth Circuit’s ruling here points to the risk of not being able to rely on malpractice insurance to cover the cost of defending against overbilling claims.

The Tenth Circuit ruling also shines a light on the importance of heading off billing problems with clients before they start.  Communicating with clients about fees is more important than ever, and it’s also part of your duty under your jurisdiction’s version of Model Rule 1.4 (Communication). Thoughtful communication with the client throughout the course of a matter is the best practice.  However, the more transparently you communicate with clients about your fees and billing practices on the front end, the less likely it is that you’ll have to defend against an action based on overbilling on the back end.

*Imokhai Okolo is a rising second-year law student at the University of Akron School of Law where he serves as an Assistant Editor on the Akron Law Review, member of the Akron Law Trial team, Vice President of the Akron Black Law Students Association, and Student Director of the Driver License Restoration Clinic.

Do you toil in the pressure cooker of a firm, but dream of going in-house? Many lawyers have that goal.  But the churn works in the other direction, too, with in-house lawyers migrating to firms or solo practice.  When they do, they can face conflict of interest issues leading to disqualification, as a former in-house lawyer for Rolls-Royce discovered earlier this year.

A luxury ride

Donald Little was in-house counsel for Rolls-Royce for more than 10 years.  A couple years after he left, he represented Rolls-Royce as outside counsel in a suit by Davis S.R. Aviation, defending against allegations that Rolls-Royce made false statements about airplane engine parts in order to prevent Davis from selling engines on the open market. That case settled.

Then, in 2016, a different plaintiff filed suit against Rolls-Royce under the False Claims Act, but based on the same constellation of facts as Davis, centering on the alleged use of defective parts in a U.S. Air Force aircraft.  The qui tam plaintiff alleged that Rolls-Royce improperly used the parts, resulting in a crash, and that it submitted false documents and invoices for payment to the air force.

Little became one of the lawyers for the qui tam plaintiff in the False Claims Act case.

Rolls-Royce moved to disqualify Little, as well as to dismiss the case. The magistrate judge recommended disqualification and dismissal, and the U.S. district court for the Western District of Texas overruled the plaintiff’s objections and accepted the recommendation.

The rubber meets the road

In its opinion, the district court noted that the magistrate judge had “expressed disbelief at Little’s insistence that he should not be disqualified” in light of his prior work for Rolls-Royce, in a matter substantially related to the qui tam suit.

The Texas version of Model Rule 1.9 (Duties to Former Clients) is codified in Rule 1.09(a) of the Texas Disciplinary Rules of Professional Conduct.  Like the Model Rule, the Texas version bars representation adverse to a former client in the same or a substantially related matter, except with the former client’s consent.

In the view of the magistrate judge and the district court, this was a no-brainer: it was “a clear violation” of the conflict rules for Little to represent the plaintiff adverse to Rolls-Royce in the qui tam action, because it was substantially related to his prior work in-house for Rolls-Royce, and to the Davis case, in which Little had represented Rolls-Royce as outside counsel.

In-house counsel take heed

Migrating from a berth as in-house counsel to being outside counsel raises former-client conflict issues that you – and your new employer – must be aware of.  As the Association of Corporate Counsel has pointed out, all the ethics rules apply with equal force to in-house counsel.  Even lateral moves, from a company law department to the same post with a competitor can raise some thorny former-client conflict issues.  See Dynamic 3D Geosolutions LLC v. Schlumberger Ltd. (Schlumberger N.V.), 837 F.3d 1280 (Fed. Cir. 2016) (affirming disqualification of plaintiff’s in-house counsel and outside counsel in patent infringement case; plaintiff’s in-house counsel was defendant’s previous deputy GC).  Be aware, and you can avoid the risk of disqualification.

* Joy A. Wilson is a rising second-year law student at the University of Illinois College of Law where she is a finalist on the university negotiations team and client counseling team and an event coordinator for the Black Law Student Association and Sports and Entertainment Law Society.

So, you’ve just met with a potential client and the opportunity to take a fascinating case or close a major deal is at your front door. The catch? The client wants to pay for your services in Bitcoin.  Do you accept? Can you accept?

The do’s and the can’s

If you’re licensed in Nebraska the answer is yes! With some caveats, of course. Late last year, Nebraska’s Lawyer Advisory Committee became the first authority to opine on the legal ethics implications of digital currencies. Ethics Advisory Opinion 17-03 allows attorneys to receive and accept digital currency as payment for legal services. However, in order to ensure attorneys aren’t charging unreasonable fees, the Committee advised that the currency must immediately be converted to U.S. dollars upon receipt. Digital currency can also be accepted from third-party payers so long as there is no interference with the attorney’s independent relationship with the client. And, attorneys can hold digital currency in trust or escrow for clients and third parties as long as it is held separately from the attorney’s property, with reasonable safeguards.

Why Bitcoin?

An advantage to accepting Bitcoin (or other digital currency) as payment is that there are no transfer fees. Unlike payment by credit card, wire, or check, and foreign currency conversion for international transactions, Bitcoin is transferred from client to attorney directly, with no fee attached. Other advantages are instant transactions, no bank acting as middleman in the transaction, and the shared digital ledger book that tracks all Bitcoin transfers, which prevents counterfeiting.

How does Bitcoin work?

Bitcoin is an open-source program existing on a decentralized peer-to-peer network on the internet. Anyone can access Bitcoin, and it is stored in a digital wallet. There is a public key, consisting of numbers and letters constituting the “address” to which the Bitcoin is sent, and a private key that the sender uses to authorize the transfer of Bitcoin from one digital wallet to another. These transfers are managed and tracked in the leger book.

The value of Bitcoin fluctuates (wildly).  As of July 3, one was worth $6,624, but it has been worth almost $20,000.  Bitcoin can be transferred in pieces; the smallest, a Satoshi, is one hundred millionth of a Bitcoin.

Some ethical considerations

Given Bitcoin’s ever-changing value, there is a chance that a Bitcoin that was worth the fair value of the legal services you provided last week may today be worth three times as much.  To the Nebraska Committee, that raises the prohibition against unreasonable fees, under its version of Model Rule 1.5(a). The Committee tried to address this concern by mandating that Bitcoin be converted to U.S. dollars upon receipt.

Not everyone agrees. The late ethics guru Ronald Rotunda, for instance, thought that there is no legal ethics issue in not immediately converting digital currency into dollars. He argued that all forms of currency can rise and fall in value against the U.S. dollar, and that deciding in light of that risk to accept a legal fee in Euros, for instance, is a business decision for the lawyer to make, not an ethics issue.

Another potential issue is that since Bitcoin is not legal tender, the IRS classifies it as property. One commentator has noted that this makes accepting a Bitcoin payment similar to bartering for legal services, “like the country lawyer accepting a bushel of apples for drafting a will.” You should check  ethics opinions in your jurisdiction to determine any restrictions on bartering for legal services before agreeing to accept Bitcoin as payment. (We’ve written about bartering for your legal services here.)

A further issue is how to hold digital currency in a client trust account. The Nebraska Committee advised that if the payment is intended to be a retainer to be drawn on as fees are earned in the future, it must be converted to U.S. dollars immediately.  That certainly avoids the risk that the client’s retainer will go down in value; but it also precludes any upside gain that could benefit the client.  These circumstances might call for some client decision-making — and that makes them a subject that you have a duty to communicate about with your client, under Rule 1.4(b).

The Takeaway

Payment in Bitcoin and other digital currencies can be a very cool and convenient alternative fee method that you can offer clients. Just be sure to consider all of the ethical implications before accepting this form of payment.

* Jasmine C. Taylor is a rising third-year law student at Cleveland-Marshall College of Law in Cleveland, Ohio. She is currently a Sergeant in the Ohio Army National Guard, 1-137th Aviation Regiment.

Four quick takes on social media pratfalls by judges, lawyers and others — just from the last few weeks.  Don’t let these happen to you!

  • A Kentucky state court judge posted a comment on a pending murder case on her “official” Facebook page:  “This murder suspect was RELEASED FROM JAIL just hours after killing a man and confessing to police.”  The judge agreed to a public reprimand, for violating judicial ethics rules, including refraining from public comments that could affect the outcome of pending cases.
  • Another judge was sued last month in federal district court because he allegedly scrutinized his secretary’s Facebook posts, called her into his office to express his disapproval of her politics-related posts, and eventually fired her two weeks after she posted criticism of President Trump’s immigration policies, and those of some Texas politicians.  The secretary had worked for the court for 14 years.
  • You’ve undoubtedly seen the rant of a New York City lawyer against Spanish-speaking staff in a restaurant.  His profanity-laced tirade was captured on a cell-phone (of course), and went viral.  His apology on Twitter was called “too little, too late” by a United States congress member, who filed a formal complaint with the attorney discipline system, as reported by the ABA Journal.  According to CNN, he was kicked out of his office space, too.
  • Last, a grand juror is awaiting sentencing after pleading guilty to sending a Facebook message disclosing a Florida federal grand jury indictment to the girlfriend of the man charged.  Grand jury proceedings are secret; the grand juror warned the girlfriend that the man had been set up by a snitch, and later sent her photos of the indictment.

Facebook and LinkedIn and Twitter (oh my)

Social media is great — we are bombarded with messages about the benefits for us as lawyers in credentialing and marketing ourselves (love to blog!) and educating the public on legal issues.  And lots of lawyers and judges use it successfully.  The downside, of course, is that it’s so easy to use these tools, that we can get careless and make missteps.  And when we do, social media is also there to show our gaffe to (potentially) millions.

Interestingly, there are lots of stories about Facebook follies — but anecdotally, it would seem that fewer lawyers use it for professional purposes than LinkedIn, for instance.  A recent ABA Journal “question of the week” asked if lawyers planned to de-activate their Facebook accounts in light of the flap over FB’s disclosure of information to Cambridge Analytica, a data-mining company.  While not a scientific poll, the responses seemed to show that respondents weren’t very much into using FB professionally anyway.

The ABA’s 2017 Legal Technology Report suggests a similar conclusion.  Less than 40% of firms (of all sizes) reported having Facebook accounts.  (In contrast, 75% of respondents said they had an individual LinkedIn profile.)

Of course, the watchword here is to be sensible and cautious.  Speed kills:  slow down, and think before you click.  Don’t do anything on social media you wouldn’t want millions to see — because they might.  And of course, check your local rules and ethics opinions.  By now, there is lots of such guidance about friending judges, social media as advertising, pretexting to gather data on opposing parties, not disclosing client information and other issues.