Disclosing client information on Facebook has gotten yet another lawyer in trouble.  A Massachusetts attorney was publicly reprimanded earlier this month for posting details of a guardianship case on the social media site, in violation of the Bay State’s version of Model Rule 1.6 (“Confidentiality of Information”).  The Board imposed a public reprimand, rejecting an argument that the only people who would have recognized the case from the information posted were the parties themselves.  The case highlights the risk of posting even information you have tried to anonymize.

“Back in the Boston office …”

After representing his client at a hearing in juvenile court, the lawyer (a member of the bar since 1977) posted on his personal Facebook page, which was public and had no privacy setting:

I am back in the Boston office after appearing in Berkshire Juvenile Court in Pittsfield on behalf of a grandmother who was seeking guardianship of her six year old grandson and was opposed by DCF [i.e., Department of Children and Families] yesterday.  Next date — 10/23.

Two people responded to the post.  A Massachusetts lawyer who was a FB friend asked, “What were the grounds for opposing?”  The lawyer answered, “GM [i.e. grandmother] will  not be able to control her daughter, the biological mother, and DCF has concerns.”  The friend responded (sarcastically), “DCF does have a sterling record of controlling children and questionable mothers, after all.”  The lawyer replied, “Indeed.”

A second FB friend, this one a non-lawyer, also responded:  “So what’s the preference … Foster care?  What am I missing here?”  The lawyer answered:

The grandson is in his fourth placement in foster care since his removal from GM’s residence in late July. I will discover what DCF is doing or not doing as to why DCF opposes the GM as guardian.  More to come.

Within a couple months, the lawyer’s client learned from her daughter about the lawyer’s FB post.  She later  complained to him and eventually to disciplinary authorities.

Connecting the dots?

The lower hearing committee recommended dismissing the disciplinary case, concluding that the FB post couldn’t reasonably be linked to the client, and therefore there was no confidentiality violation under Rule 1.6.  But the Board rejected that conclusion, because the post disclosed sufficient information to make it clear to the client’s daughter that the post referred to her mother. That belied the notion that no one could identify the case and learn confidential information from the post.

“Even if there were no evidence that a third party actually recognized the client in the post,” said the Board, “we would still conclude that the respondent had violated Rule 1.6(a).  There is no requirement that a third party actually connect the dots.”  Rather, the Board ruled, it was enough if it were “reasonably likely that a third party could do so.”

This was no mere hypothetical, or “shop talk” among lawyers the Board said.  The lawyer’s FB post did not seek advice from other lawyers, in the Board’s view, or have “any other purpose that would have served his fiduciary duty to his client.”  Rather, he violated the duty to “jealously guard … client secrets.”

The lawyer in this case had apparently practiced for 42 years without any other disciplinary history.  The Board brushed off his lack of previous discipline and said it was entitled to no mitigating weight.  Instead, the Board regarded the lawyer’s long experience as an aggravating factor, since “he should understand the importance of protecting client confidences.”

Be careful out there

Do we need to say it again?  Don’t even get close to talking about the specifics of your clients’ matters on social media.  Even if you try to disguise identities and details, that might not be enough to keep you out of trouble.

After hard-fought proceedings, you’ve finally settled a contentious case on behalf of your client.  The plaintiff’s lawyer has brought suit against your client before, and likely will again:  the lawyer advertises and uses social media aggressively to locate claimants who have the same kind of issue with your client.

Your client asks, “Can’t we include terms in the settlement agreement that would rein in this lawyer?  Maybe raise the settlement amount enough to get her to agree to stop taking these cases?  Or at least, get some language that would stop the blog posts and the TV ads fishing for clients to sue us?”

The answers:  “No — and no.”  A new ethics opinion from Ohio’s Board of Professional Conduct underscores the point.

Restrictions on right to practice

Model Rule 5.6(b), adopted with only minor variations in almost every jurisdiction,* bars you from “participating in making or offering” a settlement agreement that includes a restriction on a lawyer’s right to practice.  The new Ohio ethics opinion expressly extends that prohibition to settlement agreements conditioned on restricting a lawyer’s communication of information “contained in a court record.”

A settlement agreement can certainly bar both sides from disclosing non-public information (such as settlement terms, conditions and amount), and those are common clauses.  But preventing counsel from making a public announcement, or communicating to the media, or advertising about the case using information contained in case documents, violates Rule 5.6, said the Ohio Board.

The Board reasoned that an agreement prohibiting a lawyer from using public information interferes with the ability to market legal services in a way otherwise consistent with the Rules of Professional Conduct.  It also interferes with “the public’s unfettered ability to choose lawyers who have the requisite background and experience to assist in pursuing their claims.”  Rule 5.6(b) “prevents settlement agreements from being used to ‘buy off’ plaintiff’s counsel … in exchange for the lawyer foregoing future litigation against the same defendant.”  The Board also mentioned the conflict that such agreements create “between the interests of current clients and those of potential future clients.”

Expansive readings

The ABA Ethics Committee, as well as ethics committees in New York and the District of Columbia, have reached similar expansive conclusions about the reach of Rule 5.6(b).  The ABA Committee particularly disapproved in 2000 of settlement agreements conditioned on not “using” information in later representations against the same opposing party or related parties.  And the D.C. ethics opinion notes that the fact of settlement is usually reflected in public documents, thus making it a rule violation to condition the agreement on non-disclosure of that fact.

Underlying these opinions, as the D.C. ethics committee said, “is the intent to preserve the public’s access to  lawyers who, because of their background and experience, might be the best available talent to represent future litigants in similar cases, perhaps against the same opponent.”

Not a limit on duty of confidentiality

The Ohio opinion, and others, should not be read to alter your duty of confidentiality to your client.  Under Rule 1.6, absent client consent and other narrow exceptions, you already have a duty to keep confidential all information relating to the representation — and that would include otherwise public information, as we’ve noted before.  In contrast, the opinions centering on Rule 5.6(b) are about your ability to offer or accept settlement agreements restricting the right to practice.

Further, as Hofstra Professor Emeritus Roy Simon explains in his treatise on New York ethics law, you can get into ethics trouble even if a court might otherwise enforce the settlement agreement:  “A lawyer who makes or agrees to [a settlement in which a lawyer promises not to represent a client in later disputes with your client] risks professional discipline even if a court later holds that the agreement is enforceable.”

Client ABC’s — and the nuclear option

The restriction against participating in a settlement agreement aimed at reining in opposing counsel is a part of the ethical landscape that clients may not understand — especially when you need to turn down a request to pursue something that would be to the client’s advantage.

This is an issue that certainly merits explanation under Rule 1.4 in order to “permit the client to make informed decisions regarding the representation.”  And you also must “consult with the client about any relevant limitation on the lawyer’s conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.”

The new Ohio opinion cautions that if worst comes to worst, and the client insists that you participate in accepting or offering settlement agreement with an impermissible condition, Rule 1.16(a)(1) requires you to withdraw from representation, in order to avoid violating Rule 5.6.  Hopefully you won’t need to exercise that nuclear option.

* An exception to the nearly-nationwide approach is Virginia’s Rule 5.6(b), which carves out settlement agreement restrictions on a lawyer’s right to practice that are approved by “a tribunal (in such situations as the settlement of mass tort cases) or a governmental entity.”

We’ve written before about the breadth of the duty of confidentiality we owe to our clients, and how it even extends to matters that you think are safe to discuss because they are of “public record.”   (See here and here.)  Now comes the ABA’s latest on the subject of lawyer “public commentary” — Formal Opinion 480 (Mar. 6, 2018).  And it prompts us to be wary of a couple pitfalls when it comes to what we say about clients in online articles, on twitter, at webinars, in podcasts and through traditional print publications — all of which the opinion refers to as “public commentary.”

Duty “extends generally”

All such public commentary, the ABA reminds us, whether on-line or not, must comply with the relevant jurisdiction’s version of Model Rule 1.6.  The rule requires us to maintain the confidentiality of all information relating to the representation of a client, unless that client has given informed consent to the disclosure, the disclosure is impliedly authorized to carry out the representation, or the disclosure is permitted by a specific exception in Rule 1.6(b).

The confidentiality rule, as is frequently said, is much broader than the attorney-client privilege, and includes all information relating to the representation, whatever its source.  Even the identity of the client is usually deemed to be confidential information, the ABA ethics committee notes in this newest, foot-note-heavy opinion.  And, adds the committee, it’s highly unlikely that a disclosure exception (except for consent) would apply when a lawyer engages in this sort of public commentary.

Don’t hype the hypo

That brings us to “hypotheticals.”  We all use them — from law profs in class, to lawyers seeking informal practical advice from colleagues at other firms, to gurus of various stripes who use real-life examples at legal CLE seminars.  But, says the ABA committee, beware:  “A violation of Rule 1.6(a) is not avoided by describing public commentary as a ‘hypothetical,’ if there is a reasonable likelihood that a third party may ascertain the identity or situation of the client from the facts.”

For example, in a widely-reported case mentioned in the ABA opinion, an Illinois lawyer got a 60-day suspension in her home jurisdiction for violating  Rule 1.6, when she blogged about her criminal defense clients using either their first names, a derivation of their first names, or their jail ID number.  Reciprocal discipline was imposed in Wisconsin.

In light of the ABA opinion, you’re going to want to make sure that any real-life client situations you describe in  public commentary is so thoroughly disguised that no one can tell that it’s real.  If you’re using social media to educate and engage, there’s arguable benefit in discussing actual situations in a hypothetical way, while being sure to scrub the real facts out.  But as we’ve said before, if you’re just making cocktail party chit-chat, why even go there?  It’s not worth the risk of divulging confidential client information.

Trial publicity statements

The ABA opinion also briefly notes the constraints that Model Rule 3.5 puts on using public commentary to influence the court of public opinion.  The rule prohibits a lawyer from seeking to influence a judge, juror, prospective juror, or other official by means prohibited by law, and cites the case of a Louisiana lawyer disbarred for, among other things, using an internet petition campaign to contest the rulings of a judge presiding over a custody dispute involving her client.  That kind of conduct can also obviously lead to trouble.

All in all, the new opinion is a straightforward application of Rule 1.6 to this age of public commentary; but it is a good wake-up call for those who need one.

Folder searchIn late December, a divided California Supreme Court ruled that legal-fee bills in closed cases aren’t necessarily covered by attorney-client privilege.  Although the case involved a discovery demand  sent to a government entity under the state’s  public records act, some lawyers have questioned (sub. req.) how far the privilege limitations might go.

No “categorical” protection

The case arose out of a public-records request from the ACLU of Southern California to the Los Angeles County Board of Supervisors, seeking legal fee invoices that would reveal law firm billings to the county regarding nine lawsuits, each of which alleged the use of excessive force against inmates in the L.A. County jail system.  The ACLU alleged that the county and its outside lawyers were pursuing “scorched earth” tactics in refusing to settle excessive-force cases, and were using taxpayer dollars to do so.

Three of the cases were closed; the county agreed to produce copies of those legal bills.  But as to the six still-pending suits, the county said that they were exempt from the reach of the public records law under the attorney-client privilege exception, because “the detailed description, timing, and amount of attorney work performed … communicates to the client and discloses attorney strategy, tactics and thought process and analysis.”

On dueling writs of mandate, the intermediate state court of appeals found that the invoices were privileged and exempt from disclosure under the public record act.   In a 4-3 vote, the state supreme court reversed.

The high court rejected “categorical protection” for billing records.  Acknowledging that attorney-client privilege “no doubt holds a special place in the law of our state,” the majority wrote that it still only protects communications “made for the purpose of seeking or delivering the attorney’s legal advice or representations.”

Agreeing with the ACLU, the majority opinion said that “while invoices may convey some very general information about the process through which a client obtains legal advice, their purpose is to ensure proper payment for services rendered, not to seek or deliver that attorney’s legal advice or representation.”  Fee bills, the court said, evoke “an arm’s -length transaction between the parties in the market for professional services” more than they do the “discreet conveyance of facts and advice.”

Information in the “heartland”?

What remains privileged in a fee bill, however, said the court, is information that “lies in the heartland of the attorney-client privilege” — namely everything in an invoice on an active and pending legal matter — even when the information is  conveyed in a document, i.e. the  bill,  that is not “categorically privileged.”

The dissenters said that the majority’s ruling undermines a “pillar of our jurisprudence” by adding a “heretofore hidden meaning” to the state privilege statute, by shielding only communications that relate to the provision of legal consultation, even if they were otherwise transmitted confidentially between lawyer and client.

Following the majority’s rule, the dissenters wrote, means that lawyers must explain to their clients that confidential communications that were previously privileged “may be forced into the open by interested parties once the subject litigation has concluded.  If a limiting principle applies to this new rule,” the dissent warned, “it is not perceptible…”

Privilege takeaways

The contents of fee bills have long been subject to attorney-client privilege when they reveal information about strategy, research topics and the like.  As even the majority in this case notes, things like research topics or an uptick in the hours charged can be useful information to litigation opponents.  But as California commentators point out, the case will likely be read as a narrowing of the privilege, and by introducing subjectivity into the test, will possibly encourage discovery forays against the fee bills of opposing counsel.

California lawyer Ellen A. Pansky, quoted in the ABA/BNA Lawyers’ Manual on Professional Conduct, noted that “the case leaves an interesting, unanswered question: What mechanism will courts use to resolve a privilege claim when a party asserts attorney-client privilege to only portions of invoices previously transmitted in a completed prior matter?”  This might be an acute question, because California law seems to be that a court may not compel disclosure of attorney-client communications, even in camera, to rule upon a claim of privilege.

Particularly if you have cases in which California privilege law applies, stay tuned.

StorageYou’re chatting with your pals at the bar association cocktail hour, and talk turns to the indictment just handed down against a former city official.  Someone says, “Hey, didn’t your firm used to represent her?”  “Yes,” you reply, “and a couple years ago, I had a really interesting case involving her.  Maybe I shouldn’t discuss it — but I guess it’s of public record, so….”  And with that, you’re off to the races, discussing your former client’s old case.  Have you done anything wrong, since it’s all “of public record”?

“Publicly available” vs. “generally known”

Model Rule 1.9(c)  says that when you have formerly represented a client in a matter, you shall not thereafter:

(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or

(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

Comment [8] notes that formerly representing a client “does not preclude the lawyer from using generally known information about that client when later representing another client.”

But significantly, just because information might be a matter of “public record,” or “publicly available” in a court filing, does not necessarily mean that it is “generally known” within the meaning of the ethics rules.  That’s the holding of a case decided last month by the Pennsylvania Superior Court, Dougherty v. Pepper Hamilton LLP, et al.

Disloyal use?

The ruling in Dougherty revives a union official’s suit against the Pepper Hamilton firm for breach of fiduciary duty.  The firm had formerly represented the official when he was subpoenaed by a grand jury as part of a federal bribery investigation.  An FBI affidavit was part of that investigation; it was later mistakenly filed on the federal court’s electronic PACER system.  Subsequently, the firm represented the Philadelphia Inquirer in defending a defamation suit by the same official against the newspaper.  In representing the newspaper, Pepper Hamilton used the FBI affidavit.

The official alleged that the firm breached its duty to him by using information from the former representation, including the FBI affidavit.  Pepper Hamilton countered that since the information was “publicly available,” it could not form the basis of a disloyalty claim.

The state court of appeals agreed with the official, reversing the lower court’s grant of summary judgment in favor of the law firm.

Duty of confidentiality not “nullified” by public record

Whether information is “generally known” for purposes of Rule 1.9, said the court, depends on the circumstances.  The court said that publicly-accessible electronic data could be “generally known” if it is easily accessible, such as through public indexes.  But information is not generally known if it would be difficult or expensive to obtain or would require special knowledge.

Quoting opinions from Ohio and West Virginia, the Dougherty court noted that “an attorney is not free to disclose embarrassing or harmful features of client’s life just because they are documented in public records or the attorney learned of them in some other way,” and that “the ethical duty of confidentiality is not nullified by the fact that the information is part of a public record or by the fact that someone else is privy to it.”

There were genuine issues of fact, the court said, about whether the FBI affidavit was actually “generally known,” and these questions were enough to keep the case against the law firm alive.

Your lips are sealed

In all, the safest thing to do at a cocktail party is to keep quiet about information you know as a result of formerly representing a client, even if you think that it is of “public record.”  That’s the best way to steer far clear of any chance of misconduct.  And when it comes to “using” information of a former client on behalf of another client, careful analysis is required before you conclude that the “generally known” exception applies.

Can a lawyer use an advice-of-counsel defense in a disciplinary case?  The Florida Supreme Court last month accepted the defense, adopting a referee’s report in a case spotlighting the issue.

The lawyer in the case personally guaranteed a loan for his own business venture. Unable to repay the loan, and facing hard-hitting collection methods from his creditor, he filed a Chapter 7 bankruptcy petition.   His failure to disclose a potential bonus from his law firm, arising from nearly $10 million dollars in legal fees, cost the seasoned lawyer years of litigation before he was finally exonerated of ethical misconduct.

Disclose or not? 

The lawyer was required to submit certain bankruptcy schedules to the bankruptcy court prior to discharge.  While his salary and past bonuses were sure predictors of future income, he was unsure of the exact amount that he would receive from the nearly $10 million dollars in fees he generated for his firm and whether the bonus should be disclosed on the schedules.

The lawyer relied on his bankruptcy attorney’s advice and did not disclose the discretionary bonus.  The bankruptcy court denied the discharge based on the failure to disclose the bonus.  The Florida district court later affirmed and referred the matter to the Florida Bar.

Disbarment recommendation

The formal disciplinary complaint alleged that the lawyer purposely failed to disclose the bonus in the sworn schedules, in violation of Florida’s version of Model Rule 3.3(a) (“Candor Toward the Tribunal”) and 8.4(c) (barring dishonesty, fraud, deceit and misrepresentation), among other rule violations, and sought his disbarment.

The lawyer’s defenses included his reliance on his bankruptcy attorney’s advice that he was not required to disclose the potential discretionary bonus.  The initial disciplinary panel recommended an 18-month suspension, but the Florida Supreme Court remanded and ordered reconsideration of the advice of counsel defense.

At the rehearing, the lawyer provided evidence that he did not have even a basic understanding of bankruptcy law and completely relied on his bankruptcy attorney.  His bankruptcy attorney likewise testified that “although Respondent is an experienced civil litigation attorney, he was a bab[e] in the woods when it came to bankruptcy law.”  Evidence showed his bankruptcy attorney’s advice was unambiguous— that the lawyer did not have to disclose the discretionary bonus on the sworn schedules as the bonus would have been the property of the law firm until the firm awarded him the bonus.

Exoneration based on advice of counsel

Ultimately, the Florida Supreme Court exonerated the lawyer of ethical misconduct, adopting the hearing referee’s finding that there was no clear and convincing evidence that the lawyer submitted the schedules with the intent to mislead the trustee and creditors, and no evidence that he did not act in good faith reliance on his attorney’s advice.  Rather, the lawyer was found to have reasonably relied on his attorney’s advice.

Takeaways

We have considered the advice of counsel defense before, when an Illinois attorney asserted the defense after he failed to disclose to a court the fact that his client had died 8 months before the start of settlement negotiations.  There, the court rejected the defense where the lawyer asserted that his law partners had advised him that his ethical duty of confidentiality barred him from disclosing the death, although the court gave the circumstances mitigating weight.

The difference is that the Florida lawyer was held to have reasonably relied on advice of counsel in a substantive area of law he was totally ignorant of, while lawyers (like the Illinois lawyer above) are presumed to know the legal ethics rules. Thus, the Florida lawyer’s defense was exonerating, rather than mitigating. You cannot simply pass on the responsibility of knowing your ethical duties by seeking the advice of counsel; however, reliance on that advice could certainly be a mitigating factor.

Although the distinction may seem small, it could be the difference between being found guilty of misconduct or avoiding being disciplined altogether.

“Pervasive incivility” was part of a package of wrongdoing that resulted in disbarment for a D.C.-area lawyer last month.  The case sheds light on the potential, and very real, downsides when lawyers depart from professional conduct ideals.

Client authority lacking

The lawyer was admitted in Maryland and D.C., as well as Virginia, and his troubles arose from representing a plaintiff in a Fair Debt Collections Practices Act action in Virginia federal district court.  According to the Maryland grievance commission’s petition, the lawyer entered into an agreed disposition in which his Virginia license was revoked; the Maryland Court of Appeals then imposed the same discipline in August.  Law.com recently had the story here (subs. req.).

What got the lawyer into such hot water that he was disbarred in both jurisdictions?  Litigation misconduct with an add-on of unprofessionalism.

According to the lawyer’s stipulations in the Virginia disciplinary case, he filed the FDCPA suit on behalf of the client against two lawyers for American Express, who were trying to collect the client’s past-due AmEx account.  The lawyer later stipulated that he had prepared the FDCPA complaint without consulting with his client.  He also admitted that he failed to convey an offer to the client that would have settled the case because “it did not include sufficient attorneys’ fees for [the lawyer’s] benefit.”

After rejecting the offer without the client’s authority, the lawyer then made a counter-demand — also without authority — that he characterized as his “standard demand,” since he “simply had no time to do customized demands in such cases.”

The client later testified at his deposition in the FDCPA case that he had no further interest in pursuing the litigation against the AmEx lawyers, and admitted that the suit was unjustified, since he had no legal injury.  At the conclusion of the deposition, he fired his lawyer and settled with the defendant-AmEx lawyers.

The misconduct formed the primary basis for stipulations that the lawyer had violated Virginia’s versions of Model Rules 1.2 (scope of authority between client and lawyer); 1.4 (communication), 3.1 (meritorious claims and defenses) and 4.1 (truthfulness in statements to others).  The Maryland court of appeals identified its own versions of the same rules.

“Unreasonable, bordering on the malicious”

Against this background, the Maryland and Virginia authorities also noted the lawyer’s lack of professionalism.  The parties stipulated that in his pursuit of the client’s FDCPA action, the lawyer threatened to bring bar complaints against both the defendant-AmEx lawyers, and their counsel.  He also  opposed counsel’s pro hac vice admission without a good faith basis.

In addition, the lawyer engaged in “pervasive incivility” in the Virginia disciplinary case itself, said the disciplinary board, including “disrespectful conduct toward the tribunal” and “threatening outbursts both inside and outside the courtroom.”  The district court magistrate judge in the underlying FDCPA case said that the lawyer’s conduct toward the defendant-AmEx lawyers and their counsel was “unreasonable, bordering on the malicious,” and that his “apparent distaste for his opponents spawned a host of unnecessary motions” that increased the litigation’s cost and wasted the court’s time.

The district  court, adopting the magistrate’s recommendation, ordered the lawyer to pay more than $84,000 in attorneys’ fees and costs incurred by the AmEx lawyers — this on top of the license revocations in the two jurisdictions.

Professionalism pointers

The Rules of Professional Conduct in your jurisdiction constitute a “floor.”  That is, if you conform your conduct to those Rules, you should not be disciplined for ethical misconduct.  But in addition, there is the matter of acting professionally.  Here, the outcome involved both rule violations and a lack of professionalism.  Even if you have “distaste” for your opposing counsel, as the lawyer here apparently did, if you let it affect your judgment to the extent of making threats, filing frivolous motions, disrespecting the court and having “outbursts,” your license and your pocketbook might both be at risk.

Ethics authorities in New York and Georgia recently issued opposing opinions on whether lawyers can represent clients in navigating what Justice Clarence Thomas last month called the “half-in, half-out regime” related to both recreational and medical marijuana, “a contradictory and unstable state of affairs” that “conceals traps for the unwary.”  The issue, which we have commented on before here and here, is of course that cannabis remains illegal under federal law, while numerous states have liberalized their approaches to the drug.

Expanding counseling opportunities in NY

On July 8, 2021, following New York’s enactment of legislation legalizing recreational cannabis for adults, the New York State Bar Association gave attorneys the green light to counsel clients in the recreational marijuana industry. Similar to its prior opinions in 2014 and 2019 (post here) approving of attorneys counseling clients in the medical cannabis industry, the NYSBA focused on the federal government’s almost non-existent enforcement of marijuana laws in states that have legalized either medical or general adult-use marijuana.

Rule 1.2(d) of the New York Rules of Professional Conduct, like the analogous Model Rule, prohibits lawyers from assisting clients in illegal conduct.  The NYSBA found that the federal enforcement policy created a “highly unusual and unique circumstance” and that the prohibition in Rule 1.2 was not intended to “preclude lawyers from counseling or assisting conduct that is legal under state law or to provide assistance that is necessary to implement state law and to effectuate current federal policy.”

The NYSBA further opined that lawyers may use state-legal marijuana and, so long as they otherwise comply with Rules 1.7 (conflicts) and 1.8(a) (business transactions with clients), they may accept equity ownership in a cannabis business as payment for legal services.

Not peachy in the Peach State?

The NYSBA’s opinion comes on the heels of the Supreme Court of Georgia taking the exact opposite position in its June 21, 2021 order denying a motion to amend Rule 1.2(d) of the Georgia Rules of Professional Conduct.  The State Bar of Georgia had sought to amend Rule 1.2 to allow lawyers to assist clients in state-legal cannabis business, including the growth, manufacture, and sale of low-THC oil, which Georgia legalized in 2015.

In denying the motion, the Supreme Court of Georgia relied on the federal illegality of cannabis and held that passage of state laws permitting and regulating conduct that is still a federal crime does not change the long-standing prohibition against  “counseling and assisting clients in the commission of criminal acts.”  The court also noted that the requested amendment to Rule 1.2 would not necessarily be limited to state-legal low-THC oil, but “might well apply to a wide range of conduct constituting a crime under federal law that simply has no corollary state criminal sanctions,” perhaps hinting that it might leave the door open to a more-focused amendment.

 Balancing act for lawyers

While Georgia’s position appears to be in the minority, the opposing opinions demonstrate the cannabis balancing act that state ethics authorities have tried to perform. While a few states, including Oklahoma, South Dakota, and Mississippi, have not allowed an exception to Rule 1.2 to enable attorneys to advise cannabis clients, others have taken positions similar to New York’s, either through advisory ethics opinions or formal amendments to their state ethics rules. For example, Alaska, Colorado, Hawaii, Pennsylvania, Ohio, Oregon and others have amended Rule 1.2 to allow attorneys to counsel clients in state-legal conduct, including state-legal marijuana business.  (The International Cannabis Bar Association has a chart with an overview of jurisdictions and their approaches here.)

If you are considering counseling a cannabis client, you should be familiar with the relevant jurisdiction’s position on cannabis and Rule 1.2. Unsurprisingly, many commentators note that lawyers are simply ignoring ethics opinions that prohibit advising cannabis clients and some expect that will be the case in Georgia as well. That seems risky.  While it is unclear whether lawyers have yet faced disciplinary consequences for violating state ethics rules related to cannabis clients or will in the future, this is a continually developing area that requires caution.

Two recent developments in states accounting for a hefty percentage of U.S. lawyers spotlight the profession’s move toward technology-based practice models that are untethered from physical offices.

In New York, the state senate last month unanimously passed a bill that would remove the requirement — dating to 1909 — that New York-licensed lawyers residing outside New York keep a physical office in the state.  And in Florida, the state supreme court gave final approval to an ethics opinion permitting out-of-state lawyers to carry out their practices remotely from Florida.

Repeal of “an antiquated law”

In the Empire State, during a decade of litigation aimed at undoing the physical-office requirement on Constitutional grounds, the state’s high court in 2015 interpreted § 470 of the Judiciary Law as requiring lawyers licensed in New York but not residing there to nonetheless maintain a brick-and-mortar office in New York.  On May 12, the state senate overwhelmingly approved a bill that would repeal § 470.

The New York State Bar Association has strongly backed the repeal bill, citing the “antiquated” nature of the physical-office requirement, according to a report in Law360 (sub. req.).  The bar group has argued that the old requirement reduces access to legal services (especially in rural areas), and imposes unnecessary expense on lawyers.  About 25 percent of state bar members live outside New York, according to the association.

The physical-office requirement was long claimed to be justified by the need to ensure service of process on New York lawyers.  But the state bar association’s working group on the issue said that was no longer true.  And it found that “the requirement of a physical office is often onerous to non-resident attorneys, [while] there is no nondiscriminatory basis for imposing that burden.”

Following its approval by the state senate, the bill now will be considered by the state assembly, where it has already advanced out of that body’s judiciary committee.

Sunshine in the Sunshine State

As we reported last August, the Florida State Bar Standing Committee on the Unlicensed Practice of Law released a preliminary advisory opinion that considered whether a New Jersey IP lawyer could work for his New Jersey clients from the bedroom of his Florida home.  The committee said that those facts “quite simply, do not implicate the unlicensed practice of law in Florida.  Petitioner is not practicing Florida law or providing legal services for Florida residents.  Nor is he or his law firm holding out to the public as having a Florida presence.”

Now, the state supreme court has given final approval to the opinion, which gives official sanction to non-Florida-licensed snow birds and others who want to sojourn in the Sunshine State and continue to service their non-Florida clients.  The now-official opinion raises thse guardrails:

  • you can’t establish a “place of business or office” in Florida (your porch, den, etc. doesn’t count);
  • your work must be solely for your regular (non-Florida) clients, on matters that don’t pertain to “Florida law;” and
  • you can’t “hav[e] or [creat[e] a public presence or profile in Florida as an attorney.”

Work-from-anywhere

The work-from-anywhere concept was already percolating in the form of “virtual law offices” when the COVID-19 pandemic arrived and accelerated the acceptance of new practice models using remote technology to reach clients, courts and each other.  The trend is likely to persist, with more developments like the recent ones in New York and Florida, so stay tuned — literally.

Remember your first days in law school, when you were introduced to a whole Black’s Law Dictionary-worth of exotic legalese?  Words like “estop,” “arguendo” and “gravamen”?  (If you’re like us, you’ve spent your post-school days learning how to avoid this jargon and write plain English; but we digress.)  Remember “escheatment”?  The term of course refers to the process by which, after a specified dormancy period, unclaimed property eventually can become the state’s property.

All U.S. jurisdictions have some form of escheatment statute.  Effective earlier this month, our home-state of Ohio tweaked its unclaimed-funds law to clarify its application to unclaimed client funds that lawyers hold, and to direct those funds to a legal assistance foundation aimed at increasing access to justice.  The Buckeye State’s statutory change is a good opportunity to brush up on ethics duties regarding client property that lawyers hold — including if we are unable to return it to the client.

Safekeeping client property

Model Rule 1.15, “Safekeeping Property,” has been adopted in some form in all U.S. jurisdictions.  The rule emphasizes our role as a fiduciary in safekeeping all forms of client property that come into our possession and codifies the prohibition against commingling funds belonging to the client with our own funds.  Typically (and subject to some exceptions), this calls for holding in a trust account (“IOLTA’s” or “IOTA’s”) money such as pre-paid fees, retainers, flat fees paid in advance and pre-distribution settlement funds.

But what to do with money that remains in a lawyer trust account for more than the dormancy period specified by a state’s unclaimed-funds statute?  It may be that you have settlement funds that can’t be distributed because you’ve lost contact with the client.  Or you may receive a refund of court fees that a business client is entitled to — but the business has been dissolved without leaving a successor.

Such situations are rare (most jurisdictions specify that IOLTA’s are for holding funds only over a short term), but they do happen.

Here’s a clue:  You and/or your firm don’t become the owners of the unclaimed funds.  Rather, after the applicable dormancy period, the funds escheat to the state.  Your jurisdiction might also have record-keeping and reporting requirements relating to both lawyer trust accounts and unclaimed funds — either in ethics rules, bar governance regulations or by statute.

Buckeye State provisions

Ohio lawyers have always been under a statutory duty to report and remit unclaimed funds to the state department of commerce.  The new provision creates a new statutory category, however, called “attorney unclaimed funds,” defined as unclaimed funds in IOLTA’s, nondirected escrow accounts (IOTA’s) and residual settlement funds.

The new provision requires lawyers to report and to remit all such unclaimed funds, which the commerce department can then direct to the Ohio Access to Justice Foundation.  The foundation can use unclaimed funds to provide financial assistance to legal aid societies and enhance access to justice by underserved legal services consumers.

The new Ohio law does not affect an owner’s ability to make claims on the funds; under current law, all holders, including lawyers, are protected from any claims by an owner after the holder remits the funds as unclaimed.  Therefore, if a client were to come forward later, the Ohio lawyer would be immune, and the client would be required to file a claim with the state’s division of unclaimed funds.

Ohio’s foundation is the largest funder of civil legal aid in Ohio, and like many such state organizations, depends on income generated from court filing fees and IOLTA and IOTA streams. Due to the pandemic, both sources have been significantly diminished in 2020-21 as interest rates fell and case filings declined.

Oregon initiated a similar amendment to its unclaimed funds statute in 2010, and it may become a trend.

Takeaways

Unclaimed fund statutes help lawyers by letting them “clear the books” of unclaimed funds after the dormancy period, usually with indemnification against later claims by the owners.  But as always, the devil is in the details, and you should check your jurisdiction’s requirements for safekeeping client property, as well as specific unclaimed fund laws.  More jurisdictions in the future may adopt Ohio’s approach in order to increase revenue to beleaguered legal assistance foundations.