A former part-time Ohio judge and bankruptcy trustee whose bookkeeper was convicted of stealing funds from his trust account was publicly reprimanded last week for failing to reconcile his trust account monthly and failing to adequately supervise his staff.  The court’s opinion spotlights the potential legal ethics problems that dishonest non-lawyer staff can create.  Below are some ways to steer clear of possible pitfalls.

Employee embezzlement

The respondent was a part-time judge, which allowed him to have a private practice, and he was a bankruptcy trustee for 30 years.  In his bankruptcy practice, the respondent received significant amounts of cash from clients for legal fees and court costs.  The respondent’s long-time bookkeeper recorded the payments in a client ledger, but was found to have regularly converted funds for her own use rather than depositing them in the respondent’s trust account or operating account.

The bookkeeper eventually left the respondent’s office to work elsewhere.  Two years later, in preparing to close his solo practice and merge with another lawyer, the respondent audited his books and discovered money was missing from his accounts.  The state attorney general conducted a forensic audit and determined that over a nine-year period, the bookkeeper had embezzled more than $185,000.  (She was later sentenced to 36 months incarceration.)

Failure to supervise and reconcile

Regularly reconciling the records of funds held on behalf of a client is a best practice, of course.  What is not well-known is that some state versions of Model Rule of Professional Conduct 1.15(a) (“Safekeeping property”) really get down to the nitty-gritty.  Ohio’s version, for instance, specifies that lawyers must perform and retain a  monthly reconciliation.  The ABA/BNA Lawyers’ Manual on Professional Conduct notes that “Most of the jurisdictions … have gone well beyond the [Model Rules’] paradigm and incorporated detailed recordkeeping and accounting requirements.”

The respondent admitted that while the bookkeeper worked for him he reviewed bank statements for his trust account, but never conducted a monthly reconciliation by comparing the client ledgers with the client-trust account registers and bank statements.

In addition, the respondent stipulated that he had failed to adequately supervised the bookkeeper, violating Ohio’s version of Model Rule 5.3 (“Responsibilities regarding non-lawyer assistance”).  Rule 5.3(b), as broadly adopted across the U.S., requires a lawyer with direct supervisory authority over a non-lawyer to make reasonable efforts to ensure that the non-lawyer’s conduct is compatible with the lawyer’s own professional obligations.  The rule requires us to monitor staff so their actions are in line with our own ethics duties; it forecloses any “free pass” for ethics violations just because an unfaithful employee under your direct supervision commits them.

The sanction here — a public reprimand — is the lowest level of discipline available in Ohio.  The court noted that the respondent had deposited $35,000 his own funds to make up the net shortfall in his accounts after it was discovered.  None of his clients lost money as a result of the employee’s theft, and respondent had a clean disciplinary record.

The court noted other disciplinary cases from Ohio and elsewhere, however, where aggravating factors led to stiffer penalties, including suspension from practice.

Tips for staying out of trouble

The court here properly noted that “delegation of work to non-lawyers is essential to the efficient operation of any law office.”  But on the other hand, “delegation of duties cannot be tantamount to the relinquishment of responsibility by the lawyer,” and “supervision is critical in order” to safeguard client interests.

  • If your jurisdiction specifies periodic account reconciliations or other kinds of detailed recordkeeping, it goes without saying that you should comply.  Don’t wait for a post-embezzlement forensic audit.
  • Trust but verify.  Even long-time trusted employees can do bad things under some circumstances.  Be alert for red flags.
  • Don’t stop supervising.  In some of the cases where lawyers received suspensions after employee thefts, they  had completely relinquished control of their office functions to staff, and stayed “oblivious” to potential problems.

Making “reasonable efforts to ensure” that your non-lawyer staff adhere to your own ethics duties takes attention; don’t fall down on the job.

Although I love my home state of Ohio, I have to acknowledge that we are not often in the avant-garde when it comes to legal ethics.  After all, Ohio was one of the last jurisdictions in the Union to adopt the Model Rules of Professional Conduct (2007).  But last week, the Ohio Supreme Court put out for public comment proposed rule amendments that would add the Buckeye State to a small number of progressive jurisdictions — namely, those that permit lawyers to practice temporarily while awaiting approval of their applications to “waive in” to the bar.

Out-of-the box AWOX

As background, most U.S. jurisdictions have some form of “admission without examination” process (“AWOX”), to allow lawyers licensed elsewhere, who have a specified number of years of practice under their belts and meet other qualifications, to become licensed without having to take the bar exam.

But the AWOX application process is a bureaucratic one and can be slow, requiring a character-and-fitness assessment, filling out a long form and providing lots of documentation.  In Ohio, the process can take nine months.  (Like gestation of another sort.)

In the meantime, what can the applicant do as far as practicing law?  Most jurisdictions answer “Nothing.”  Without a license in that state, an AWOX applicant essentially has the status of a law clerk during the time that the application is pending.

Restrictive AWOX rules limit the opportunities of migrating lawyers, in an economy that is increasingly borderless in other respects.  For instance, a lawyer who has to move to a new jurisdiction to follow a spouse’s employment can face considerable downtime, even though the lawyer is eligible for AWOX.  The rules also put law firms who want to hire laterals from out of state in a bind, knowing that a candidate might have to put down an existing practice and work (and be billed) as a paralegal while awaiting AWOX.

The ABA has long been a proponent of a model rule that it calls “Practice Pending Admission.”  The proposed rule, promulgated in August 2012, establishes a window of time during which a lawyer who has a license in good standing elsewhere and a designated number of years of experience can practice temporarily in a different state while awaiting admission there.

Select group with progressive rules

Only a very few jurisdictions currently permit any form of practice pending AWOX.  They include the District of Columbia, under Ct. of Appeals R. 49(c)(8) (“Limited Duration Supervision by D.C. Bar Member”) and Missouri, under Sup. Ct. R. 8.06 (“Temporary Practice by Lawyers Applying for Admission to the Missouri Bar”).

Now, Ohio proposes to join this vanguard.  Under proposed amendments to the state supreme court’s bar governance rules, an applicant who is eligible for AWOX and has submitted an AWOX application could apply for permission to practice for 365 days while awaiting processing of the application.

Two of the key requirements under the proposed Ohio rule:  the applicant must submit the AWOX application within 90 days of establishing an office or “systematic presence” in Ohio, and must either “associate with an active Ohio lawyer who is admitted to practice in Ohio” or attest that the applicant will “only practice the law of the jurisdiction in which the applicant is already admitted.”

The Ohio proposal is out for public comment until April 10.

In re Application of Jones

The new Ohio proposal follows the state supreme court’s decision last fall in In re Application of Jones.  The case involved a licensed Kentucky lawyer who moved just across the Ohio River to join the Cincinnati office of the firm she was already practicing with.  Sitting in Cincinnati, she continued to represent her Kentucky litigation clients in Kentucky courts, but when she applied for AWOX under Ohio’s current rules, the Board of Character and Fitness said she had been engaging in the unauthorized practice of law.

The Ohio Supreme Court, though, held that the lawyer was engaging in a permitted form of temporary practice under Ohio’s version of Model Rule 5.5(c)(2), which says that a lawyer can practice in Ohio in connection with proceedings before a tribunal located where the lawyer is authorized to practice, and approved the lawyer’s AWOX application.

That was the right result, and I’m proud to say that my firm spearheaded a group of law firm amici that submitted a brief in the case.

But, arguably, a better and more-direct way to support practice pending admission without examination is via a rule change — and that is what is now under consideration.  Ohio might sometimes lag behind in ethics innovations, but this time it is in the vanguard.

A Washington appellate court recently disqualified a county prosecutor’s entire office from participating in the re-trial of a murder case.  The chief prosecutor had previously represented the defendant while in private practice.  The case shines a light on government lawyers and imputed conflicts of interest.

Election win spells DQ

The county prosecuting attorney, Garth Dano, had worked closely as a “consulting attorney” with the murder defendant’s trial team, and communicated about strategy, the theory of the case, potential witnesses and jury selection.  Dano also had appeared in court with the defendant.  After the guilty verdict, and while the case was on appeal, Dano won election as county prosecuting attorney.

Dano’s office did not handle the defendant’s appeal, but after the conviction was reversed, two deputy prosecutors from his office were assigned to the case on remand.  Dano recused himself, and had no part in the proceedings on remand, but the defendant moved to disqualify the county prosecuting attorney’s entire office.  The trial court denied the motion, but a divided court of appeals reversed, applying Washington precedent and ethics rules to impute Dano’s personal disqualification to all the lawyers in the office.

“No screening” sufficient

“No amount of screening can be sufficient to fully wall off” Dano, the court of appeals held.  In “unusual circumstances,” said the court, an elected prosecutor’s prior representation of a private client may be “attenuated,” and “brief,” such that no confidential communications were obtained. In that situation, personal disqualification and a screen could be sufficient without imputing the disqualification to the prosecutor’s whole office.  Here, however, citing Washington Supreme Court precedent, Dano’s personal involvement in the same matter was too substantial to qualify for the exception, the court said.

Imputation rules

Two Model Rules (and their state counterparts, which can vary) govern whether a conflict of interest that disqualifies a lawyer is imputed beyond that lawyer to others.

Model Rule 1.10 is the general rule for lawyers practicing together in a “firm,” and provides that a conflict based on a private lawyer’s prior representation at a different firm is imputed to the whole firm, except under specified conditions.  (The conditions mainly involve screening, which is not recognized in all jurisdictions; see the ABA’s 2015 guide, here.  And see Model Rule 1.0(c)‘s definition of “firm,” which includes in-house law departments).

In contrast, Model Rule 1.11 is the special imputation rule for current and former government lawyers.  As comment [2] says, “Because of the special problems raised by imputation within a government agency,” the rule “does not impute” the conflicts of a government lawyer “to other associated government officers or employees, although ordinarily it will be prudent to screen such lawyers.”

You might think that the lack of an imputation rule for government lawyers would have allowed all the county prosecutors except Dano to participate in the remanded murder case, particularly since Dano had been screened from the other prosecutors.  But not so.  The court said that Washington’s then-version of Rule 1.11 simply meant that instead of a sweeping rule of imputation, as in Rule 1.10, government lawyer conflicts must be “assessed more narrowly, according to each lawyer’s individual circumstances.”

In Dano’s situation, the extensive access to privileged communications and work product of the defendant’s trial team spelled a conflict that would be imputed to the prosecutor’s entire office, requiring appointment of a special prosecutor, said the court.

Do we ever take off our “lawyer hats”?

The question has been in the news because of a tweet by Rep. Matt Gaetz, who represents Florida’s first congressional district and is a member of the Florida bar.  Pictured at the right, the tweet was directed at Michael Cohen, President Trump’s former attorney, the night before Cohen testified before Congress for the first time on Feb. 27.

The Florida bar opened an ethics inquiry in response to what a Law360 article termed “several complaints” about the tweet.  Some who tweeted in response to Gaetz viewed his words as a possible obstruction of justice or witness intimidation.  Gaetz later deleted the tweet and apologized, saying he did not mean to threaten anyone.  According to Law360, Gaetz told reporters he was “witness testing,” not witness tampering.

“If rules have been violated, the Florida Bar will vigorously pursue appropriate discipline by the Florida Supreme Court,” a bar spokesperson said in a statement reported by many media outlets. “The Florida Bar takes its responsibility of regulating lawyer conduct very seriously.”  We don’t know if Representative Gaetz violated any laws or ethics rules.  But the situation presents an opportunity to explore some concepts.

“Lawyer conduct”

So when is “lawyer conduct” involved?  As ethics gurus John Dzienkowski and (the late) Ron Rotunda wrote in their Lawyer’s Deskbook, it’s when the conduct “functionally” relates to the capacity to practice.

Some ethics rules specifically target conduct in connection with client representation.  For instance Rule 4-4.4 of the Florida  Rules of Professional Conduct (“Respect for Rights of Third Persons”), which tracks Model Rule 4.4, says that “In representing a client, a lawyer may not use means that have no substantial purpose other than to embarrass, delay, or burden a third person.”

On the other hand, the Preamble to the Florida Rules (and the Model Rules) says “A lawyer’s conduct should conform to the requirements of the law, both in professional service to clients and in the lawyer’s business and personal affairs.”

When a lawyer violates the law, even when it doesn’t involve representing a client, professional discipline can follow.  For instance, under Model Rule 8.4(b), it is professional misconduct to “commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.”  These are characteristics that are relevant to law practice, say the comments, and offenses involving dishonesty or serious interference with the administration of justice, or show the lack of other qualities that make a lawyer “fit,” can justify discipline.

Under state versions of Model Rule 8.4(b), lawyers have been disciplined for everything from tax violations, to drug offenses, to road rage incidents, to fraudulently occupying a rent-controlled apartment.  (Interestingly, regulators in the Sunshine State view compliance with child-support obligations as  being in the same category:  Rule 4-8.4(h) makes it professional misconduct to “willfully refuse” to timely pay court-ordered child support.)

Keeping that lawyer hat on

As one court put it, “Courts possess the power to discipline attorneys for conduct that is both in and out of their profession so as to ensure the public’s right to representation by attorneys who are worthy of trust.”  That is true no matter what hat you happen to be wearing.

Five businesses filed suit earlier this month in a Texas federal district court against Morrison & Foerster, a 1,000+-lawyer mega-firm headquartered in San Francisco.  The case is unremarkable in most ways: on the one hand, former clients who assert wrongdoing in how the law firm handled their matters (including billing improprieties) and a less–than-desirable outcome – and on the other hand, a law firm that says “Don’t believe everything you read in a complaint, the claims are baseless and we will win.”  (MoFo told the ABA Journal last week that “[t]he complaint has no merit” and that the firm “will be vindicated.”)

What is noteworthy is one of the allegations about the firm’s billing.  The plaintiffs claim that the firm’s misdeeds include “block billing.”  By grouping multiple tasks in a single time entry, the plaintiffs allege in the complaint, Morrison & Foerster made it “impossible to determine exactly what tasks were performed and the amount of time allegedly spent for such tasks.”

Ye olde one-line fee bills

At this early stage, the allegations in the complaint remain unproven, and it can’t be known to what extent MoFo may (or may not) have sent invoices that block-billed discrete tasks.  Certainly, in days of yore it was common for law firms to send invoices summarizing the services provided.  (It was also common to see fee bills with one line: “For services rendered…” and then the dollar amount.)  In the 1980s, say, it was certainly easier to dictate a summary of the work done on a matter than it was to break out specific tasks.  (Those of us who were young and tech savvy in those bygone days would use our fancy Dictaphones™, though the senior partners would have their secretaries take dictation on a steno pad.)

Today though, most of us put our daily time charges directly into software that will spit out a list of charges for the month.  Preparing a “summary” of those charges actually requires more work than giving the client a detailed description of how much time was spent daily on what and by whom.  Why ever spend the time summarizing?

But what the plaintiffs in the case against MoFo might be alluding to is the practice of stringing together many short tasks in one running description and assigning a single combined time charge to those discrete tasks.  That can effectively obscure how much time the lawyer spent on each of those tasks – which is something clients now expect to be informed of.

Billing rules of the road

There is no ethics rule that says you may not “block bill” (though many corporate clients today have outside counsel guidelines that prohibit the practice).  But several ethics rules are broadly relevant, including your jurisdiction’s version of Model Rule 1.4(a)(3) (keeping the client reasonably informed about the matter); Model Rule 1.5(b) (communicating the basis of the fees and expenses); and Model Rule 1.5(a) (not charging an unreasonable fee).

ABA Ethics Opinion 93-79 vividly describes a number of billing no-no’s, including: billing more than one client for the same hours; billing time during travel to one client while working on another client’s matters and billing the second client as well; “continuous toil on or overstaffing a project for the purpose of churning out hours;” and marking up expenses, such as meals.  (The latter practice prompted the ABA Ethics Committee to opine colorfully that “[t]he lawyer’s stock in trade is the sale of legal services, not photocopy paper, tuna fish sandwiches, computer time or messenger services.”)

Blocking and tackling

When a client alleges misconduct against a lawyer or firm, the burden of proof is on the client.  But what we know about the tendencies of juries suggests that any lawyer should want to be in the best position possible to justify his or her fee if it is ever called into question.  We’re not playing football here – less blocking is better.

Last week the media was abuzz with the allegations made against the National Enquirer by Jeff Bezos, the founder of Amazon and the owner of The Washington Post. The details in Bezos’ blog post about his ongoing dispute with the Enquirer and its publisher David Pecker are sensationalistic to say the least: the world’s richest man being allegedly blackmailed by people working for Pecker (a long-time friend and supporter of President Trump), with threats to publish “compromising” photos of Bezos unless he backed off his investigation of the tabloid. Here is some reporting on the story.

Part of the interest arises because Bezos alleges that the threat was delivered, in part, by an attorney working for the Enquirer. A Law360 article on the situation says “Bezos’ published account of how a general counsel and others at the American Media Inc.-owned paper allegedly tried to blackmail him does appear to describe a violation of state and federal statutes, ethics and white collar specialists said.”

While there may be a debate as to whether these were just hard negotiations or discussions that crossed the line into blackmail, it at least appears that the lawyers involved might have allowed themselves to get close to the line, even if not over it.

Zeal … or trouble

When zealously representing your clients, it can be easy to forget that zeal cannot be the basis for doing things that break the law or undermine the legal system. For example:

  • In some states, threatening to file criminal charges against a potential defendant in order to obtain a civil settlement is treated as extortion, including when the threat is made by counsel attempting to recoup stolen assets. An ABA Litigation article on the general subject is here.
  • As the New York statute does, many states make it a crime to compel a person “by means of instilling in him or her a fear” that if a demand is not met the threatener will “expose a secret or publicize an asserted fact, whether true or false, tending to subject some person to hatred, contempt or ridicule.”
  • Obstruction of justice in the course of representing a client was the undoing of some of the lawyers involved in Watergate.  (See here for a take on Watergate’s legal ethics legacy by John Dean and our partner Jim Robenalt.)
  • Lawyers have faced ethics charges for going too far in public statements about their clients’ cases, in violation of the many different state versions of Model Rule 3.6 (“Trial Publicity”).
  • It can be an ethical violation under Model Rule 3.3(a)(2) if you fail to make a court aware of binding precedent that is directly adverse to your client’s position.

Knowing where zeal ends and unlawful or unethical conduct begins is the best way to keep yourself (and your client) out of trouble. And don’t let an echo-chamber do you in. Getting a reality check from someone not involved in the situation can sometimes help avoid problems. Remember, under Model Rule 1.6(b)(4), you are permitted to reveal information relating to the client’s representation to the extent you reasonably believe necessary to secure advice about your compliance with the Rules of Professional Conduct, opening the way for getting good ethics advice.

Going abroad?  Think that “national counsel” is going to take care of anything that comes up when you’re gone?  Get swamped when you return and take “several weeks” to wade through the e-mail that piled up in your absence?  If you’re local counsel, that might be a recipe for disaster — for your client — as the Seventh Circuit Court of Appeals held recently.

What we have here is a failure to communicate

After the plaintiff filed a trademark infringement case, the Wisconsin district court’s docket shows that just a month later the parties reached a deal and jointly moved to file a consent order resolving the dispute.  But about four months after that, the plaintiff was back in court, moving for a contempt order and asserting that the defendant had violated the consent order.

Here’s where things began to go south, according to the appeals court opinion:  The defendant’s local Milwaukee counsel received notice of the contempt motion, via the electronic docketing system (presumably PACER).  When the lawyer failed to respond, the district court scheduled a hearing.  No one showed up on behalf of the defendant.  The district court then granted the plaintiff’s motion, holding the lawyer in contempt, requiring his client to pay the plaintiff’s fees and costs, and ordering the lawyer to explain his unresponsiveness.

As the court of appeals wrote, that order “caught [the lawyer’s] attention.”  Local counsel explained that he had been “traveling internationally” when the plaintiff filed its motion for contempt, and even though he returned five days before his client’s response to that motion was due (and 26 days before the scheduled hearing), “it took him several weeks to catch up on his email.”  He saw the court’s notices only after “all response dates had passed.”

The defendant’s request for reconsideration of the contempt order also pointed to what the appeals court called a “communication breakdown between local counsel and the company’s national trademark counsel.”  Local counsel believed national counsel would be “attending to any ongoing needs in the case; national counsel apparently had a different understanding,” the court wrote.

“Deadlines matter”

The result of this mess-up?  The district court found the local counsel in contempt, and after a line-by-line analysis of the plaintiff’s attorney fees and costs for the entire case — not just the contempt proceedings — sanctioned the defendant to the tune of almost $35,000.  The Seventh Circuit easily upheld those rulings, characterizing the whole situation as “unfortunate and avoidable.”

“Deadlines matter,” wrote the court, and certainly after the district court provided a second chance to the defendant by noticing a hearing, the lower court’s reaction in issuing its contempt order was not an abuse of discretion.  Nor did the defendant’s good faith provide any immunity from sanction, the appeals court said.

And the big take-away:  “Nor, of course, can communication breakdowns serve to exempt outside counsel … from compliance with the rules, or from the penalties for failing to do so.”

Beware local counsel duties — and check your e-mail

We’ve written before about local counsel duties. and a New York City Bar ethics opinion that is a helpful cautionary road map on local counsel duties.  The bottom line is that you don’t get any free pass for being “merely” local counsel.  The extent of local counsel’s role in any particular matter should be expressly set out in a carefully-considered engagement letter with the client.  If you think that “national counsel” is going to monitor a case or a docket after some certain end point, you should additionally clarify that understanding, something the court here said would have helped.

And, hey — Model Rule 1.1 (“Competence”) and Model Rule 1.3 (“Diligence”) mean that we can’t just totally put down our practices when we go on vacation.  That was true even in the days before e-mail and PACER, when someone “back at the ranch” would be monitoring our postal mail.  Now, the available technology means there is little excuse for not being aware of court filings in real time.

As for clearing up the inevitable post-vacation backlog of e-mails, the laundry from the trip might have to wait — but that’s okay, isn’t it?

The Ohio Supreme Court is continuing its trend of suspending lawyers who violate the disciplinary rule on sex with clients, and has again rejected arguments that pointed to the consensual nature of the relationship.  In a recent opinion involving sex between criminal defense counsel and his client, the court characterized the lower disciplinary Board’s analysis as “blaming the victim,” and increased the penalty above what the Board recommended.  The lawyer will serve a six-month suspension, with 18 months stayed on multiple conditions.

Hot tub trespass

The lawyer had previously represented “J.B.’s” boyfriend.  When J.B. was charged with felony theft, the lawyer agreed to represent her.  According to the opinion, the next day the lawyer and J.B. had drinks at a restaurant, discussed her case, had sex in the lawyer’s car in the parking lot, and engaged in sexual activity at least seven more times over the next four months, including trespassing into a neighbor’s yard to use a hot tub.

After rumors about the relationship began to spread, the lawyer falsely denied them to the judge presiding over J.B.’s criminal case.  In the meantime, the lawyer had filed a petition to run for prosecuting attorney.  After that, the county sheriff’s office began investigating the lawyer, and J.B. agreed to disclose the true nature of her relationship with the lawyer in exchange for a reduced sentence on her felonies.

Eventually, as part of a plea agreement on charges against him, including sexual battery, and criminal trespassing, the lawyer withdrew his candidacy for prosecutor and was sentenced to two years of community control and a fine.

Consent just doesn’t matter

The lawyer stipulated to violating Ohio’s version of Model Rule 1.8(j), which prohibits “sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.”  (The Ohio version refers to “sexual activity” with a client.”)

As the sanction for the lawyer’s misconduct, the Board of Professional Conduct recommended a two-year suspension with the entire two years stayed.  In the Board’s view, “not only was there no harm to the client, but the client leveraged her relationship with [the lawyer] to get a better plea deal,” and the lawyer had already suffered by his arrest, indictment, spending two nights in jail and being forced to withdraw from the prosecutor’s race — all stemming “from [the lawyer’s] consensual sexual relationship with his client.”

The Supreme Court strongly rejected this whole line of reasoning, along with the Board’s recommended sanction.  The Board’s approach, said the court, “essentially blamed the victim, J.B., for the negative consequences that [the lawyer] experienced resulting from his own decision to engage in sexual relations with a vulnerable client.”  (Emphasis in original.)

The court wrote that without a sexual relationship that pre-dates the client relationship, “seeking or having sex with a client is a per se violation,” and “the fact that a client appears to have consented does not mitigate the attorney’s misconduct or provide a defense against a violation.”

Instead, the court termed a sexual relationship with a client as “inherently and insidiously harmful,” categorizing this case as the “most disturbing” variety” — where “a lawyer has had sex with a client while defending the client against criminal charges … or has accepted sex in lieu of fees.”

The court imposed a two-year suspension with only 18 months stayed, along with multiple conditions — including taking and passing the MPRE, completing 12 hours of ethics CLE, and serving a two-year period of monitored probation.

Continuing trend

This case is one in a line of disciplinary opinions in which the Ohio Supreme Court has emphasized the power imbalance between the lawyer and client, and rejected the argument that the client’s consent to the sexual activity somehow ameliorates the ethical misconduct.  We’ve written before about one of these cases, in which the court found the lawyer not to be “remorseful” because he continued to argue that his sexual relationships with multiple clients were “consensual,” even while acknowledging it was wrong.  Several other such cases are cited in the opinion involving J.B.  It will be interesting to see how this court’s disciplinary stance on sex with clients continues to evolve.

Has your client ever suggested paying for your services via donations from a Kickstarter campaign, or a GoFundMe page?  The District of Columbia Bar recently considered such donation-based crowdfunding, and greenlighted the basic concept — but noted that the ethical implications vary depending on the lawyer’s level of involvement in the crowdfunding effort.

Other people’s money

Not many opinions have yet addressed the ethics of third-party funding of legal services using social media — but the phenomenon appears widespread.  A search for the term “legal” on the GoFundMe site, for instance, brings up thousands of results from all over the country, many referring to “legal defense fund,” or “legal fund.”

The D.C. opinion deals only with “donation-based funding,” and not “equity-based funding,” in which an investor contributes funds in exchange for a stake in the potential recovery.  (We’ve discussed equity-based third-party funding here, here and here.)

The opinion notes that the term “crowdfunding” and the use of social media to raise money for legal fees  may be relatively new, but “payment by third parties for another’s legal representation is not” new.  So it’s no stretch to conclude that the Rules of Professional Conduct “apply to a lawyer’s receipt and disposition of all funds received in connection with a client representation, regardless of their source.”

Client-directed crowdfunding

When the lawyer is not involved in the actual fundraising, but simply receives the funds raised by the client’s social media efforts, the opinion finds nothing unethical — but notes the following potential issues:

  • be aware of any increased risk of fraud, money laundering or other criminal activity in connection with the exchange of crowdfund-generated fees, and take reasonable precautions to avoid unwittingly engaging in or assisting illegal conduct;
  • consider counseling the client about avoiding the disclosure of confidential information to third parties as part of the fundraising effort — whether on-line or in person;
  • discuss with the client whether the use of crowdfunding is the best choice, as Model Rule 2.1 permits advice that refers not only to law but to “moral, economic social” and other factors that may be relevant.

Crowdfunding by lawyers

The D.C. bar also outlined the ethics obligations where a lawyer steps in and “assists” in,  “undertakes or exerts control” over the crowdfunding effort — and not surprisingly, these obligations are the ones that also apply generally, namely:

  • getting informed consent before accepting compensation from third parties for the client’s legal fees,  not letting the donors interfere with the lawyer’s legal judgment, and protecting the confidentiality of the information relating to the representation (Model Rule 1.8(f));
  • memorializing the crowdfunding arrangement through a fee agreement with the client, preferably in writing — including eliminating confusion about issues like “who gets any excess crowdfunds?” and “who is responsible for paying fees if crowdfunding falls short?”;
  • treating crowdfunds collected by the lawyer as advance fees, placing them in trust as required by D.C. Rule 1.15, and drawing on them only as earned;
  • returning unearned crowdfunds to the client at the conclusion of a representation, recognizing that unlike a contingent fee, the lawyer has not incurred any risk of non-payment, and therefore it would “be unethical … to claim unearned crowdfunds” after the matter is over.

Fee-splitting issues?

In contrast to the donation-based crowdfunding the D.C. opinion discusses, investment-based third-party funding can arguably raise the issue of splitting fees with non-lawyers.  That might be so even under D.C.’s version of Model Rule 5.4, which permits some forms of fee-splitting — but only with “nonlawyer professionals [who] work with lawyers in the delivery of legal services,” such as “psychologists or psychiatric social workers [who] work with family law practitioners.”  See id. cmt. [7].

Prof. Alberto Bernabe, at John Marshall Law School, has a 2016 article on the fee-splitting issue, linked here, and a post on the D.C. ethics opinion over at the Professional Responsibility Blog.

If you’re admitted to handle a case PHV, mind your P’s and Q’s.

Translation:  Pro hac vice admission to practice before a court outside the state where you’re licensed requires attention to a range of ethics duties, and running afoul of them can have bad consequences.  Two recent cases spotlight some of the issues.

We’re looking at you….

A Louisiana lawyer was admitted pro hac vice to represent a client in the Western District of North Carolina.  On the application, he certified that he had never been subject to a formal suspension or public discipline in Louisiana.  Whoops.  In 2014, the lawyer had been suspended in the Bayou State for neglecting a client matter and mishandling a client trust account, but the suspension was deferred pending successful completion of a two-year probation.

The lawyer argued that his certification on the PHV application was not a material misrepresentation.  Maybe not technically — but the district court in North Carolina was not buying it.  The lawyer’s missteps in his home state didn’t automatically disqualify from appearing in North Carolina, said the court.  But he was required to explain his disciplinary history.  The lawyer’s argument that he had to disclose only an actual interruption in his ability to practice was “manifestly not credible,” the court found.  Even making the argument demonstrated his lack of candor, the court noted.

The outcome:  revocation of the lawyer’s permission to represent his client in the case.

Lesson:  Your state has a version of Model Rule 3.3 (Candor toward the Tribunal), Model Rule 5.5 (Multi-jurisdictional Practice) and Model Rule 8.4(c) (dishonesty, misrepresentation).  Don’t try to shave the corner of the plate when you’re applying for PHV admission.  Explain anything that even arguably needs explaining.  Don’t try to justify a failure to disclose with an over-technical reading of the  requirements.  A court might not look kindly on that strategy.

Hand-flapping and harassment

An Ohio lawyer admitted pro hac vice before the Delaware Chancery Court was representing the defendants.  Things went awry when the lawyer deposed one of the plaintiff’s witnesses, and based on misconduct at the deposition, the court granted the lawyer’s own motion to withdraw his PHV admission.

From its review of the deposition transcript and video, the court noted that the lawyer

  • raised his hand and made yapping gestures toward plaintiff’s counsel while plaintiff’s counsel was speaking;
  • repeatedly interrupted plaintiff’s counsel and referred to him as “Egregious Steve,” and the “sovereign of Delaware”;
  • harassed the deponent with personal questions; and
  • called the deponent and plaintiff’s counsel “idiots.

For this conduct, which it called “not only rude, but tactically so,” the court granted the motion to withdraw, and also referred the matter to Delaware disciplinary counsel, along with imposing attorneys’ fees on the lawyer and his firm.

Lesson:  Be professional and dignified at all times, but especially when you are in someone else’s bailiwick.  As the court said, the lawyer was appearing in Delaware “as a courtesy extended to him to practice pro hac vice.”  Delaware, like many other jurisdictions, has a professionalism code, in addition to its Rules of Professional  Conduct.  The Delaware code stresses “civility,” respectfulness, “emotional self-control,” and refraining from “scorn and superiority in words or demeanor,” and is binding on those appearing pro hac vice, the court said.

The take-home from these two cases is obvious.  When you’re specially admitted before a court, any professional or ethical misconduct carries with it the added potential risk of being tossed from the case, with clear downsides for your client, as well as for you.  Mind those P’s and Q’s, and stay out of PHV trouble.