If you have not heard of the Corporate Transparency Act (CTA), now is the time to become familiar. Millions of companies will be affected by its reporting requirements. With the effective date being right around the corner, all lawyers need to be thinking about the CTA. The CTA, which Congress passed as a component of the Anti-Money Laundering Act of 2020, was created to enable the government to prevent, detect, and combat money laundering, the funding of terrorism, and other prohibited activity by requiring certain companies to report their beneficial ownership information to the Financial Crimes Enforcement Network division of the U.S. Department of the Treasury (“FinCEN”). There are still some moving parts with the CTA. For example, the reporting form is not yet available. However, the ethical implications inherent in CTA compliance must be considered now.

Reporting Companies & Beneficial Ownership

Companies that are deemed to be “Reporting Companies” are required to report beneficial ownership to FinCEN. There are two types of ”Reporting Companies”: Domestic Reporting Companies and Foreign Reporting Companies. There are currently twenty-three (23) exceptions that exempt entities that would otherwise be considered a Reporting Company. Lawyers and law firms alike will want to consider whether they intend to assist clients in ascertaining whether the client is a “Reporting Company.”

A beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests. However, the Reporting Company does not have to report an individual as a beneficial owner to FinCEN should that individual fall under one of the five qualifying exceptions to the beneficial owner definition. Similarly, lawyers will want to consider whether they intend to assist clients in determining whether an individual qualifies as a beneficial owner.

Of specific interest to attorneys – the CTA also requires up to two “company applicants” to be identified for entities formed after January 1, 2024.  This may implicate law firms if they are involved in the preparation or filing or formation documents for clients.  The lawyers or paralegals providing those services would have the corresponding obligation under the CTA to register with FinCEN as a company applicant for the client.

Timing & Penalties

If an entity was formed before January 1, 2024, its report must be filed with FinCEN no later than January 1, 2025. Entities that are formed on or after January 1, 2024, have only ninety calendar days to file the report. Companies only have thirty days to report a change. Lawyers who intend to prepare and file CTA reports, monitor for changes in “Beneficial Owners” that would trigger an update, or otherwise dive into CTA related representations, must bear in mind that the CTA includes stiff civil fines and criminal penalties, such as potential imprisonment.  Failure to comply not only impacts clients but can lead to potential penalties for firms and for individual lawyers involved in violating its provisions.

Abundance of Ethical Considerations

The effect of the CTA is far reaching. Many practitioners will feel the impact it has on their practice, but all practitioners should know about it. Lawyers have a duty to stay abreast of changes to the law and the reporting requirements found in the CTA certainly qualify as a change. For example, the CTA likely implicates the provisions you want to include in employment agreements, shareholder agreements, or LLC operating agreements to require beneficial owners to provide the information needed by the entity to comply with the CTA’s reporting requirements.  In addition, due diligence for loans, mergers and acquisitions will likely need to include CTA compliance.   

Lawyers also have a duty to keep their current clients reasonably informed about the representation. While there is no duty to notify former clients, lawyers will want to be diligent in notifying current clients about the CTA. Now is the time to determine if the client is former or current.

Don’t wait until January to determine your firm’s capacity or desire to handle CTA related engagements and how it impacts various practice areas. Limitations on the scope of your representation will need to be clearly communicated with your clients. You will want to evaluate any third-party referrals for CTA filings and corporate formation filings.  If your firm will play a role in corporate formations and filings, you will want to consider who will be responsible for such filings and how to track and update FinCEN registration for those individuals.  Finally, you will want to start thinking of changes in firm policy and procedure that align with your level of involvement in CTA related representations, and ensure all staff are properly trained and supervised to comply accordingly.

Money bag and stacks of cash

Qualified non-lawyer support staff is a key component to the operation of many law firms and law offices across the country. Accordingly, the lawyers in those firms have a great interest in retaining exceptional nonlawyer staff.  But the Ohio Board of Professional Conduct (the “Board”), recently reminded lawyers of the ethical restrictions placed upon them when it comes to financially incentivizing these outstanding employees they seek to retain. Just last month, the Board issued Opinion 2023-11, which concludes that lawyers are prohibited from paying bonuses to nonlawyer staff when exclusively based on the staff member receiving a positive online review. While the opinion was addressed to a specific request regarding online reviews, the Board also explained why other similar arrangements are ethically impermissible.

Sharing of legal fees  

As with the Model Rule adopted in most states, lawyers in Ohio  are forbidden from sharing in legal fees with nonlawyers pursuant to Ohio’s Rule 5.4.  The Board clarified that non-lawyers may receive bonuses in several contexts, including retirement and other compensation plans like profit-sharing agreements and annual bonuses tied to the gross fees earned by the specific lawyer they are assigned to during the year.  But the Board concluded that lawyers fall out of bounds when nonlawyers participate in plans that tie the shared profits to specific clients or specific matters.

Structuring bonuses

Turning to Texas and Florida for guidance, the Board suggests that lawyers may permissibly consider the following factors when assessing whether to pay a bonus to nonlawyer staff: (1) revenue, (2) expenses, (3) profit, or (4) the exceptional efforts of a nonlegal staff member. But the Opinion cautions that the Rule may be broken when bonuses are: (1) reliant on the outcome of a case, (2) based on the number of clients worked with, (3) treated as a “commission” or “referral” payment for bringing clients to the firm, (4) solely based on number of hours billed by the nonlegal staff member, or (5) based on the percentage of fees earned on any particular case. The Board explained that a managerial lawyer’s duty to supervise staff under Ohio’s Rule 5.3 requires the lawyer to be aware of when a specific staff member is providing extraordinary service to firm clients. Even so, receiving a positive online review is not necessary in deciding whether a nonlawyer employee is providing excellent service.  Accordingly, the Board concluded that tying a bonus to whether the nonlawyer staff received a positive online review is prohibited as it ties the bonus to a specific client or matter.

Undue influence, intimidation, or overreaching

The Board also addressed the interplay with Ohio’s Rule 7.2(b), which prohibits giving something of value for recommending the lawyer’s services.   While tying a bonus to a positive online review may not necessarily result in a violation of 7.2(b), the potential for undue influence, intimidation, or overreaching certainly exists within that type of bonus structure.  For instance, if the nonlawyer staff notifies the client that their bonus is contingent upon the client posting a positive online review, the client may feel uneasy or pestered to provide the review especially if the request is made repeatedly or during the representation.   The client may also feel forced to leave a positive review for fear that the quality of the representation may suffer if they don’t leave a good review. The Opinion ends with the Board advising lawyers that while “the rules do not exhaust the moral and ethical considerations that should inform a lawyer”, lawyers should avoid bonus structures that cast doubt on whether the lawyer or their nonlawyer staff has exercised undue influence, intimidation, or overreaching to advance his or her own interests.

The ABA Standing Committee on Ethics and Professional Responsibility, (the Committee”) recently issued Formal Opinion 508—which highlights the differences between proper witness preparation and unethical “coaching.” The Opinion also sheds light on how remote platforms have paved the way for easier and less detectable means of improper coaching.

What is allowed?

Discussing testimony with your clients can become necessary to their representation, but a lawyer cannot seek to improperly influence the testimony—and there is no bright line rule to make the distinction.  You must be thorough in your witness preparation or else fall short of your duty of competence. It is always permissible for lawyers to remind their clients to tell the truth during witness preparation. Similarly, it is acceptable practice to remind your client that they are under oath, explain to them that a truthful answer could be “I do not recall,” suggest proper attire, decorum, and demeanor, explain the nature of the testimonial process and purpose of the deposition. It Is likewise proper for the lawyer to provide context for the witness’s testimony, to inquire into the witness’s probable testimony and recollection and even identify other testimony that is expected to be presented and explore the witness’s version of events considering that testimony.

Witness preparation conduct that crosses the ethical line

Interaction with witnesses before and during testimony can both raise ethical issues.  Model Rule 3.4(b) prohibits a lawyer from advising or assisting a witness in giving false testimony (and probably Model Rule 1.2(d) and Model Rule 3.3(a)(3) as well). The Committee points out that encouraging false testimony can occur even if a lawyer does not instruct the witness to lie—such as telling a witness to downplay facts (such as the number of times they met with the lawyer to prepare). Lawyers must be careful when suggesting words to use or avoid, making sure that the taking of such advice does not result in the delivery of false testimony. Likewise, allowing your client to testify to fabricated evidence is an ethical violation.  It is also unethical for lawyers to advise clients or witnesses to disobey a court order regulating discovery or the trial process, offering an unlawful inducement to a witness, or procuring a witness’s absence from a proceeding.

Conduct during witness testimony that crosses the ethical line

Refining witness testimony during trial or deposition can also present ethical considerations. Manipulating testimony that is actually in progress would generally violate Model Rule 8.4(d)—conduct prejudicial to the administration of justice. Model Rule 3.4(c) would also be violated by failing to adhere to a court order restricting coaching behavior.  Many jurisdictions, for example, have specific rules about the content of objections made during a deposition.  “Speaking” or “suggestive” objections go beyond stating the basis for the objection and are suspected of being intended to impede the deposing lawyer’s discovery. Objections should not be used to instruct a witness how respond to the questions. Lawyers must also avoid physically signaling to their witnesses during testimony.

Remote considerations

              Formal Opinion 508 also addresses the fact that remote platforms and other technology provide ample opportunity for lawyers to secretly tell witnesses what to say or signal what not to say during proceedings. With changes in the legal practice, it is not uncommon that a witness, lawyer, and adjudicative officer could be sitting in three different locations during a remote proceeding. Sitting “off camera” makes it relatively easy to signal a witness without being detected. While it is improper for a lawyer to text or otherwise message a witness in the middle of a proceeding, one can see how it is effortlessly accomplished.  Lawyers have a duty to maintain a degree of technological competence. Understanding the risks involved with coaching in remote settings will allow lawyers and adjudicative officers to structure remote proceedings in a way that will help to deter its occurrence and increase detection.

The Committee concludes by suggesting several approaches to systematically address such conduct, though it points out that the approaches are not required under the Model Rules. Suggested methods include skillful cross-examination (questioning the witness as to the extent of any coaching), court orders directing uninterrupted testimony, and inclusion of protocols in remote deposition orders, scheduling orders, and proposed discovery plans. 

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Rule 1.8 addresses conflicts that can arise between a lawyer and client (as opposed conflicts between clients).  Prior to the adoption of Model Rule 1.8 in 1983, the ABA Model Code flatly prohibited agreements limiting liability. DR 6-102(A) provided that “A lawyer shall not attempt to exonerate himself from or limit his ability to his client for his personal malpractice.” This rule was in stark contrast to the rules governing many others, including large accounting firms and lawyers in Europe, who often had agreements limiting their liability to clients for their work on deals alongside American lawyers who could not limit their liability (which raised numerous problems with potential disproportionate liability for deals gone bad). 

Model Rule 1.8 (adopted in 1983) softened the complete ban, adding conditions to make such prospective agreements permissible, yet still protecting client’s best interests in requiring the advice of independent counsel.  The first part of the Rule would then read “A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement…” This amendment put some American lawyers on the same footing as colleagues here and abroad, but it was not widely adopted.

In 2002, the ABA again amended Model Rule 1.8(h), to eliminate the “unless permitted by law” requirement. The drafters supported the deletion by explaining that they were not aware of any such law.  Model Rule 1.8(h)(1) now states that “A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement”.

Today, some states have adopted the revised rule.  And many of the states that have amended their version of Rule 1.8 deviate from the language found in Model Rule 1.8, resulting in varied degrees of permissibility as to whether their lawyers may prospectively limit malpractice liability to clients.   Approximately 28 states have adopted the language in Model Rule 1.8(h)(1) entirely. Seven states have similar language to that of the Model Rule but have added the requirement that such agreement must also be “permitted by law”. Nine states still outright prohibit such prospective agreement. The seven remaining states have language that does not squarely  fit into any of the aforementioned categories. The reasons for wanting to limit your liability in any given situation are likely obvious, but whether or how you should pursue such endeavor is far less clear.  

 Choose your language wisely  

Attorneys licensed in multiple jurisdictions and law firms spanning across multiple states must be keenly aware of any differences in the applicable rules.  Even in jurisdictions that permit lawyers to prospectively limit malpractice liability, lawyers must be careful to stay within the confines of the rules when drafting.  Ohio reminds lawyers that (their) Rule 1.8 allows for the prospective waiver of malpractice claims under certain conditions, but such permissibility does not extend to disciplinary proceedings.  Limiting malpractice claims is not synonymous with limiting the client’s ability to file a disciplinary grievance. Using the wrong language could subject the lawyer to additional rule violations.  Requiring a current or former client to refrain from filing a disciplinary grievance constitutes conduct prejudicial to the administration of justice under Rule 8.4(d) and conduct adversely reflecting on fitness to practice law under Rule 8.4(h).  

In Illinois, the Rules do not permit lawyers to prospectively agree with their legal clients that advice given to such clients in connection with insurance or investment products is not intended to be and should not be deemed legal advice, even if such determination could be reliably made. The Committee opined that such agreement is effectively one that prospectively limiting the lawyer’s liability to the client. Such agreements are prohibited by Rule 1.8 unless the requisite conditions are satisfied.

Wide spectrum of issues

Merely refraining from plugging in prospective agreements into your engagement letters will not ensure Rule 1.8 compliance. Lawyers barred in jurisdictions like DC, where such agreements are forbidden, must still examine less obvious conduct that may constitute a Rule 1.8 violation. For instance, many attorneys sit on boards of various entities.  DC Opinion 382 reminds lawyers that while directors on boards can limit liability to an entity, a director may not do so, if he or she is a lawyer, otherwise it violates the rule. 

While New York similarly prohibits lawyers from prospectively limiting malpractice liability, one New York opinion found that 1.8(h) is not violated simply due to a lawyer advising a client to accept a plea deal that includes waiving an ineffective assistance of counsel claim on appeal.  The basis was that advising the client does not constitute “making an agreement” and the giving of such advice does not make the lawyer a party to such agreement.  Plus, the lawyer could still be sued for malpractice.

What about employment concerns? Georgia opined that in-house lawyers employed by corporations do not violate 1.8(h) by entering into agreements with their employers which hold the lawyer harmless for malpractice committed within the course of his or her employment, if the employer is exercising an informed business judgment in utilizing the “hold harmless” agreement in lieu of malpractice insurance on the advice of counsel and the agreement is permitted by law.  The position of the client as employer and the sophistication of those who employ in-house counsel satisfies the concerns of overreaching. Plus, such agreement does not limit liability to third parties affected by in-house counsel representation. 

How about the structure of the firm? Mississippi opined that changing the form of practice from a professional corporation or general partnership to a “Professional Limited Liability Company” does not equate an agreement to limit liability under M.R.C.P. 1.8(h).

More than meets the eye

Lawyers may falsely see a green light if their state allows for the prospective limitation of malpractice liability. Prospectively limiting malpractice liability is a conflict of interest and compliance requires satisfaction of the Rule 1.8 conditions. Lawyers must be careful in choosing which words should or shouldn’t be used in the agreement. Lawyers in all jurisdictions, including where such agreements are prohibited, must also look beneath the surface of their conduct, and ultimately contemplate whether such conduct indirectly violates Rule 1.8(h).

Multijurisdictional practice can make any lawyer’s head spin, especially for lawyers licensed in multiple jurisdictions. The ABA Standing Committee of Ethics and Professional Responsibility, (the “Committee”) recently issued Formal Opinion 504, which breaks down the choice-of-law rules found in Model Rule 8.5.

Litigation

Model Rule 8.5(b)(1) provides that, for conduct in connection with a matter pending before a tribunal[1], ethics rules of the jurisdiction in which the tribunal sits shall apply.

  • Scenario: State A allows firms to have nonlawyer partners. State B adopted Model Rule 5.4, prohibiting firms from having nonlawyer partners. Lawyer is only admitted in State A. Lawyer’s office is in State A. Lawyer will appear pro hac vice before a State B tribunal. Will ethics rules in State B prevent Lawyer from sharing fees earned on the case with nonlawyer partners?
  • Answer: The ethics rules of the tribunal (State B) would apply to conduct in that tribunal’s matter, including conduct in representing the client in the proceeding and in dealings with the tribunal, opposing counsel, and opposing party. However, law firm structure is not “conduct in connection with a matter pending before a tribunal.” Accordingly, Lawyer would conduct that analysis through Rule 8.5(b)(2), which is discussed in the next section.

Non-litigation

Model Rule 8.5(b)(2) provides that for any other conduct (i.e., not connected with a matter before a tribunal), ethics rules of the jurisdiction where the lawyer’s conduct occurred will govern. However, if the “predominant effect” is in a different jurisdiction than where the conduct occurs, the rules of that jurisdiction apply.  

  • Scenario: Lawyer is admitted and works out of State X, but is also admitted in State Y. Client lives in State X and hires Lawyer to file litigation in State Y. When drafting the fee agreement, which state’s ethics rules apply?
  • Answer: “Securing a fee agreement is “conduct in anticipation of a proceeding not yet pending before a tribunal” and, therefore, Rule 8.5(b)(2) applies.” The predominant effect would be in State X, so State X’s Rule 1.5 governs. 

The Opinion offers factors to determine where the “predominant effect” of the lawyer’s conduct occurs, including: (1) client’s location, residence, and/or principal place of business; (2) where the transaction may occur; (3) which jurisdiction’s substantive law applies to the transaction; (4) location of the lawyer’s principal office; (5) where the lawyer is admitted; (6) location of opposing party and relevant third parties (residence and/or principal place of business); and (7) jurisdiction with greatest interest in the lawyer’s conduct.

  • Scenario: Lawyer is licensed in State A and B. Lawyer’s office is in State A, which follows Model Rule 1.6. Conversely, State B does not follow Model Rule 1.6 and therefore requires a lawyer to disclose information relating to the representation to the extent the lawyer reasonably believes necessary “to prevent reasonably certain death or substantial bodily harm. State A permits but does not require the revelation of such information. Lawyer is representing Client/Buyer, who lives in State B, with the purchase of State A real estate. Negotiations occurred at Buyer’s place of business in State B. Client/Buyer threatened to seriously physically harm Seller at the next meeting if Seller won’t accept Buyer’s terms. Lawyer reasonably believes Client will act on his threat. 
  • Answer: This matter is not before a tribunal, and therefore Rule 8.5(b)(2) applies. Lawyer must look to the “rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction.” Lawyer must weigh the aforementioned factors. Both States are involved. But ethics rules from State B would likely govern as Client/Buyer resides in State B, the threat was made in State B, and the next meeting where the threat would be carried out would likely occur in State B, as that is where past meetings have been held.  

Safe Harbor

The Committee highlighted the safe-harbor provision in Model Rule 8.5(b)(2).  The last sentence provides “A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.”

Summary

While many states have adopted Model Rule 8.5, others have their own variations.  As the Committee points out, in reference to Massachusetts, variations of the Rule may lead to a different analysis. The ABA provides a state-by state guide simplifying Rule 8.5 distinctions. Be sure to check your jurisdiction(s) and think not just about what you are doing, but also where the predominant effect of your conduct may occur.

[1]  ABA Model Rule 1.0 (m): “Tribunal” denotes a court, an arbitrator in a binding arbitration proceeding or a legislative body, administrative agency or other body acting in an adjudicative capacity. A legislative body, administrative agency or other body acts in an adjudicative capacity when a neutral official, after the presentation of evidence or legal argument by a party or parties, will render a binding legal judgment directly affecting a party’s interests in a particular matter”.

Caution text and sign.

Your client has just been sentenced as a first-time DWI offender earlier this morning. Later in the afternoon, you are in another courthouse. Your same client is facing sentencing for another DWI. The driver’s abstract has not yet been updated to reflect that, based on the morning’s plea, your client is no longer a first-time offender.  You validate the factual inaccuracy to the judge and prosecutor by commenting that the abstract was just run that day.  Technically this is true, but you know it is no longer accurate. You and your client are the only ones in the courtroom that know. You believe it is your job to make sure your client gets the most favorable sentence possible, and you don’t want to be deemed “ineffective.” It works. Your affirmation misleads the court into believing that your client has never been convicted of a DWI, and he is sentenced as a first-time DWI offender – for the second time that day. Are you just zealously advocating for your client by failing to disclose the first DWI, or do your actions violate the rules of ethics? A New Jersey lawyer found himself in this situation and was censured.

Actual knowledge creates duty to correct court’s misinformation  

The lawyer did not believe at the time of the hearing that he had a duty to inform the court or the prosecutor of his client’s DWI conviction earlier that morning based on State v. Kane, 2015 N.J. Super. Unpub. LEXIS 277 (App. Div. Feb. 17, 2015). In Kane, the Appellate Division rejected the argument that a defense attorney was unethical in failing to disclose a newly enacted statute that his client’s conduct violated, in addition to the driving offense for which he was entering his plea. The court found that it was the prosecutor’s responsibility to have been aware of the statute’s potential applicability.   

New Jersey’s Disciplinary Review Board (“DRB”) found that Kane was inapplicable.  Kane dealt with constructive knowledge and legal facts, but this case addressed the lawyer’s actual knowledge and candor concerning material and operative facts. The duty of candor toward a tribunal created a duty to correct the court’s misundertsanding to avoid deceiving the court into imposing an improper sentence.

The DRB instead pointed to In re Seelig, 180 N.J. 234 (2004), where the Court found an attorney violated Rule 3.3(a)(5) by failing to reveal to the court that the person involved in his client’s automobile accident had died, hoping the court would accept his client’s plea to motor vehicle offenses and precluding the indictable changes based on double jeopardy. The DRB found that “The Court observed that RPC 3.3(a)(5) “compel[s] a lawyer to act affirmatively against his or her client’s interests even when the primary responsibility for informing the court does not (or may not) lie with the lawyer.” Seelig, 180 N.J. at 253. Moreover, RPC 3.3(a)(5) “impose[s] a duty to disclose in order to prevent errors in decision making by a tribunal that [. . .] has been misled because it lacks information about material facts.” Ibid.”

Misrepresentation is not a permissible litigation tactic

The DRB found that the lawyer’s breach of his duty of candor leading to the court’s improper sentencing and his dishonesty in responding to the court was conduct prejudicial to the administration of the justice system, violating Rules 8.4(c), 8.4(d), and 3.3(a)(5) of the Rules of Professional Conduct. The DRB further found that the lawyer failed to understand that “misrepresentation cannot serve as a permissible litigation tactic, even when carried out in the name of zealous advocacy.”

Zeal or no zeal?

Each jurisdiction has their own take on when ethical boundaries are crossed in the name of zealous representation. While ABA Model Rule 1.3, titled “Diligence,” itself imposes no duty of “zealous representation,” Comment [1] to ABA Model Rule 1.3 still, in part, provides that “A lawyer must also act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client’s behalf.” Some jurisdictions have started removing any requirement to act with zeal from their rules of professional conduct.  Ohio, for example,  removed the requirement to act “with zeal in advocacy upon the client’s behalf,” from its Comment [1], reasoning that “[z]ealous advocacy is often invoked as an excuse for unprofessional behavior.“ Likewise, New Jersey’s Rule 1.3 simply provides that “[a] lawyer shall act with reasonable diligence and promptness in representing a client.” The word “zeal” does not appear. Conversely, Georgia’s Comment [1] still requires a lawyer to act with zeal in advocacy on the client’s behalf, although this would not suggest that Georgia lawyers may engage in conduct that is misleading to a tribunal.

Regardless of where your jurisdiction falls on the spectrum, always keep in mind that your desire to zealously represent your client should not come at the sake of violating your other ethical duties—particularly your duty of candor toward the tribunal.

Legal marriage concept

Joint representations can present a host of ethical issues for lawyers to navigate including what to do with the clients’ file upon termination of the representation. The NYSBA’s Committee on Professional Ethics recently issued Opinion 1249 which explains that in a joint representation, the presumption is that the lawyer will share confidential information received from one client with the other co-client(s).  That presumption, however, does not extend to confidential information the lawyer received from a client prior to the start of the joint representation.  In general, when the joint representation terminates, the clients are entitled to receive copies of the confidential information exchanged with the lawyer during the joint representation but are not entitled to confidential information shared by one client prior to inception of the joint representation.    

A joint engagement       

The inquiry in the Opinion came from a lawyer whose longtime client requested the lawyer then also represent his Wife in their joint estate planning matters. The lawyer agreed and had them sign a joint engagement letter that included language explaining that, because the representation was a joint representation, no communication that either co-client had with the lawyer could be kept confidential from the other co-client.

Later, amidst the couple’s then impending divorce, the Husband terminated the representation.  He requested copies of all documents in the file, which would necessarily include the lawyer’s communications the Wife, as well as documents the Wife had provided. The Wife then also requested the copies of the file—which would include the lawyer’s communications the Husband and any documents he had provided. 

Should the lawyer turn over the file as requested?

New York Rules of Professional Conduct 1.15(c)(4) and 1.16(e) require lawyers to promptly deliver any property to which the client is entitled. The Committee previously opined that a presumption exists that lawyers will share material information disclosed by one co-client to the other in joint representations. The Committee had also opined that lawyers in a joint representation must share all material information relating to the representation with the co-clients, absent the co-clients consenting to an alternative agreement. The Husband and Wife in this inquiry did consent to disclosure – in the joint engagement letter. Accordingly, the Wife’s communications and documents in the file was to be turned over to the Husband.

But as to the Husband, the file produced to the Wife should only include communications and documents from the period after the joint representation commenced.  There is no presumption of sharing regarding communications made or documents provided by the Husband prior to the joint representation. The Committee opined that the presumption should not apply retroactively to separate and discrete information obtained from one client (in this instance, the Husband), who was not a co-client at the time of the communication.  Disclosing that information would be a violation of Rule 1.6 of the New York Rules of Professional Conduct, as the Husband did not consent to the disclosure of that confidential information. This is consistent with Ethics Opinion 970, insofar as “good cause” refusal to turn over certain documents in a client file exists where the document is the confidential information of another who has not given consent to disclosure.  

Takeaway

Lawyers may wish to undertake joint representations for a host of reasons, but these types of arrangements can create a wide range of ethical questions. As the inquiry in Opinion 1249 illustrates, circumstances amongst joint clients can change and there may be confusion about what to do with the file upon termination. It is crucial to include in your joint engagement letter which types of communications will be disclosed to each co-client, including how conflicts could arise, and what would happen in the event of a dispute between the co-clients. Your client needs to know what they are signing up for before they agree to a joint engagement—and so do you.  Before agreeing to take on any type of joint representation, you must familiarize yourself with how your jurisdiction views confidentiality in the joint representation context.

Map of the United States

Anyone who takes or defends depositions in Ohio will want to be familiar with Opinion 2022-13, issued by The Ohio Board of Professional Conduct (“the Board”). The Opinion will be of particular interest to out-of-state lawyers who want to take depositions in Ohio but are concerned about engaging in the unauthorized practice of law.

Taking or defending a deposition is the practice of law – Duh!

The Opinion makes clear one thing that should have been obvious—taking or defending a deposition is the practice of law in Ohio. Handling a deposition cannot be delegated to nonlawyers (including paralegals), even if the lawyer supervises the nonlawyer during the deposition. A nonlawyer doing so engages in the unauthorized practice of law in violation of O.R.C. 4705.07 and Ohio Sup. Ct. R. Gov’t Bar VII (31)(J). Of equal significance, a lawyer who instructs a nonlawyer to take a deposition, formulates questions to be used in the deposition, or instructs the nonlawyer to represent a deponent at a deposition is assisting in the unauthorized practice of law, in violation of Prof.Cond.R. 5.5(a).

Ohio’s temporary practice exception explained

The Opinion explains the application of several temporary practice exceptions found in Ohio’s version of Prof.Cond.R. 5.5(c), which is similar to those found in most jurisdictions. Pursuant to these exceptions, lawyers licensed and regularly practicing in jurisdictions outside Ohio may take or defend Ohio depositions in certain limited circumstances.

Association with Ohio lawyer

An out-of-state lawyer can take or defend a deposition in Ohio so long as they associate with an Ohio lawyer who meaningfully participates and takes responsibility for the matter. While the Ohio lawyer does not have to attend the deposition, they should be available remotely to provide any necessary assistance.

Reasonably related to a pending or potential proceeding

Out-of-state lawyers can also take or defend depositions in Ohio in matters reasonably related to a pending or potential proceeding in a tribunal, either in Ohio or another jurisdiction, so long as they are admitted in the state where the matter is pending or have been admitted pro hac vice or reasonably expect to be so authorized. Subordinate lawyers associated with the out-of-state lawyer, who do not expect to appear before the tribunal, may also take or defend a deposition related to that pending or potential proceeding, as they are permitted by rule to assist in such matters.

Services arising out of or reasonably related to the lawyer’s practice in his or her home jurisdiction

Where services arise out of or are reasonably related to the jurisdiction in which a lawyer is licensed, an out-of-state lawyer is permitted to conduct or defend a deposition in Ohio that is related to an arbitration, mediation, or other alternative dispute resolution process, for which pro hac vice admission is not required, or alternatively is related to an investigation, negotiation, or other nonlitigation activity in Ohio.

Different state, different rules

The Board concluded that Ohio lawyers may take or defend a deposition in a state outside Ohio in which the lawyer is not licensed, if permitted by that state. The Opinion references American Bar Association, Variations of the ABA Model Rules of Professional Conduct. A quick look at the Variations serves as a strong reminder that you must look not only at what your home state has to say, but also into the requirements found in the rules and regulations of the state in which you seek to take or defend the deposition.

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On Monday, the Supreme Court dismissed the writ of certiorari as improvidently granted in In re Grand Jury, a case that had potentially significant consequences for federal common law attorney-client privilege. Oral argument in the case was heard on January 9, 2023. The case hinged on which test should be used to determine whether the federal common law attorney-client privilege applied to dual purpose communications, that is, communications which contain both legal and non-legal advice. Many legal and business organizations supported a decision that would have broadened the privilege to include dual purpose topics, as long as seeking legal advice was one purpose for the communication.

The Court’s decision leaves in place a Ninth Circuit decision holding that the attorney-client privilege did not apply where the primary purpose of the documents was not legal but involved tax return preparation. The In re Grand Jury decision held that the privilege protects documents only where the primary purpose of the communication is legal, and that if the nonlegal purpose of the advice is found to outweigh the legal purpose, then the communication is not privileged and is subject to disclosure.

The Justices, who seemed skeptical at oral argument of counsel’s arguments that the Ninth Circuit’s formulation was unworkable, difficult to administer or marked a shift in the way courts currently analyze privilege claims, let the In re Grand Jury decision stand. While the legal and business organizations submitting amicus briefs hoped for clear guidance and a broader scope of the privilege, the formulation of the test to analyze attorney-client privilege claims in federal courts in the D.C. Circuit, Ninth Circuit and Seventh Circuit, which appear to differ in some respects, will continue to be the law in those courts.

Mental health

Lawyers face tremendous professional stress in the best of times between long hours, deadlines, and the adversarial nature of the work itself. The landmark 2016 report, The Prevalence of Substance Use and Other Mental Health Concerns Among American Attorneys[1], showed that attorneys experience problematic drinking at a rate much higher than other populations and are reluctant to seek help for substance abuse, depression, anxiety, and stress and do not seek out help because of concerns regarding privacy or confidentiality. For many, their stressors were exacerbated by the COVID-19 pandemic and the demands of remote practice. Failure to seek out that help causes many problems, including disciplinary violations when mental health impacts a lawyer’s performance.

While disciplinary authorities generally take mental health issues into account and often consider them a proper basis for mitigating sanctions, such problems are not a defense to disciplinary charges, as the West Virginia Supreme Court of Appeals recently concluded. In that matter, the court addressed complaints against a lawyer whose mental impairment was deemed to have impacted his client representation. While finding that the impairment was a mitigating factor, the court concluded that the impairment would not shield the lawyer from meaningful sanctions and imposed an active two-year suspension for the misconduct.

Lack of communication and diligence

As is typical for lawyers with impairments, the lawyer at issue failed to communicate with numerous clients regarding their cases. He was found to have committed over 50 violations. Violations of his duty to provide competent representation, communicate, and act with diligence were found in almost every instance of misconduct.

In one case, he failed to notify his clients that the opposing party had filed a counterclaim and never responded to the counterclaim. Opposing counsel requested the court dismiss the clients’ claims because of the lawyer’s repeated failure to obey court orders or rules of discovery. The lawyer never responded to the motion—and the court dismissed the claims.

Another client learned that opposing counsel filed a motion to dismiss for the lawyer’s failure to prosecute. When the client attempted to contact the lawyer, he would not respond. The court ordered the lawyer to respond, and when he failed to do so, the court dismissed the client’s lawsuit.

Yet another client retained the lawyer to defend her in a contract dispute. She asked the lawyer to file a counterclaim. He never did. He failed to present to the client the opposing party’s settlement offer prior to its expiration. The jury ended up awarding the opposing party thousands of dollars. Despite the lawyer’s promise to appeal, he never did.

Meaningful sanction

The lawyer presented evidence at the hearing that he was diagnosed with an adjustment disorder, which his mental health counselor attributed to stress and other emotional struggles. The social worker involved testified that due to the disorder, the lawyer “developed the capacity to avoid [and] became less productive.”

The Hearing Panel Subcommittee (HPS) recommended the lawyer be suspended for two years, but that the suspension be stayed. However, the Office of Disciplinary Counsel objected to the stay of the suspension. Ultimately, the court found the social worker never determined the lawyer was unable to understand the consequences of his actions and that the lawyer therefore acted knowingly when he disregarded the authority of the lower courts and his clients’ interests. The court made clear that when the Rules of Professional Conduct are violated, lawyers can inflict more than just monetary harm—of which malpractice settlements alone cannot cure.

The court found that the lawyer’s mental impairment was a substantial contributing factor in his misconduct. The court found due to that and other mitigating factors, the lawyer’s sanction was reduced to an active two-year suspension. The court found that without imposing significant consequences, this type of misconduct would not be deterred in the future nor would confidence in the profession be reestablished.

The dissent

Justice Wooten concluded that the penalty was “draconian” in his Dissenting Opinion, predicting that imposing such sanction on a solo practitioner would be the death penalty for his career. The dissent rejected the majority’s finding that the lawyer was motivated by greed—pointing to evidence that the lawyer was motivated by a depression that “caused him to ignore his duties to his clients and then stick his head in the sand as things fell apart.” The dissent would have made three months of the two-year suspension active, with the rest to be stayed on supervised probation.

Action steps

This lawyer is certainly not alone in his struggle—especially with depression rates remaining high for lawyers. When a lawyer thinks they have an issue, they should address it, as mental health issues can impact competent representation, the ability to act with diligence, and the ability to effectively communicate. Once the damage is done, it can be hard for a client to be made whole, so addressing a problem before it affects any client is key to maintaining compliance with our ethical duties. When clients are hurt and lawyers lose their ability to practice law, there are no winners. If you are showing signs of experiencing mental health issues, don’t ignore them. And undoubtedly, as we have pointed out before, lawyers should be compassionate and look for signs a colleague needs help rather than just watching from a distance. A Directory of Lawyer Assistance Programs by state can be found here. There are plenty of options for lawyers and effective treatment does not include a one-size-fits-all approach. Fortunately, strides are being made when it comes to the view of mental health in our profession.

[1] Krill PR, Johnson R, Albert L. The Prevalence of Substance Use and Other Mental Health Concerns Among American Attorneys. J Addict Med. 2016 Jan-Feb;10(1):46-52.