A look at some of the most important changes to the Rules of Professional Conduct that became effective November 1, 2018
On May 10, 2018, the California Supreme Court approved a comprehensive set of 69 Rules of Professional Conduct (“Rules”) which replaced the 46 existing Rules on November 1, 2018. Major substantive changes to the Rules had not been approved since 1987. The new Rules adopt the numbering scheme of the American Bar Association (“ABA”) Model Rules of Professional Conduct (“Model Rules”) in order for easier comparison between the ABA Model Rules and California’s Rules. However, California has not adopted the ABA Model Rules. (The State Bar has a cross-reference table between the new and old Rules as well as the new Rules and the ABA Model Rules.)
California attorneys have an ethical duty to familiarize themselves with the new Rules. So, sit back, relax and prepare for a scintillating discussion of some highlights of the new Rules (there is no way to cover all of the new Rules in this article).
Blind date (entirely new rules)
There are 27 entirely new rules that are part of the Rules as of their effective date on November 1, 2018. Some are adapted from ABA Model Rules. Some of these rules put into rule version standards that have come into existence through common law. This syllabus has selected a couple of the new rules to highlight, but as stated above, you should get to know each and every new rule.
Rule 1.18 Duties to Prospective Clients
Attorneys often focus on their duties to clients, but attorneys must also think about their duties to prospective clients. But who is a prospective client? Thankfully the new Rule 1.18(a), derived from the ABA Model Rules, expressly defines a prospective client as “A person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from the lawyer in the lawyer’s professional capacity.” The Commission for the Revision of the Rules of Professional Conduct (“Commission”)’s Report and Recommendation for Rule 1.18 (“Report”) states that this Rule is intended to protect both prospective clients and also to “protect current clients from losing the lawyer of their choice.”
Rule 1.18(b)’s requirement that attorneys safeguard confidential information shared by a prospective client is not a new legal theory in California. In fact the definition in Rule 1.18(a) borrows language from California Evidence Code section 951 (which relates to the attorney-client privilege). The duty of confidentiality is much broader than the attorney-client privilege.
Rule 1.18 prohibits an attorney from representing a client with “materially adverse” interests to those of a prospective client in the same or a substantially related matter if the lawyer obtained confidential information from a prospective client. The conflict is imputed to the attorney’s firm. The only way for the attorney to continue the representation in this situation is to obtain the informed consent of both his current client and the prospective client. The attorney’s firm may continue the representation only if the attorney took reasonable measures to avoid exposure to the prospective client’s confidential information, the attorney is screened from the matter, the attorney is given no part of the fee, and the firm promptly notifies the prospective client so that the prospective client may ensure compliance with Rule 1.18. The Commission stated in its Report that there was no “one-size-fits-all” definition of material adversity and that the facts and circumstances of a particular matter must be considered to determine whether there is material adversity.
The client intake process is rife with room for error and conflicts of interest. Attorneys will now need to implement procedures to make sure that they take reasonable measures to avoid exposure to a prospective client’s confidential information.
Tip: If your firm website has a contact form or even has your email address listed, be sure to include caveats about not providing any confidential information. Consider adding a layperson’s definition of confidential information such as “Please do not submit any information that you would not want other members of the public to know.”
Tip: If your firm does not already have a robust conflicts check procedure, consider implementing one so that you may check conflicts before any substantive conversations take place. Schedule meetings or telephone calls with prospective clients only after conflicts have cleared.
Rule 4.3 Communicating with an Unrepresented Person
Rule 4.3 was adopted in an effort to ensure that unrepresented persons are not misled by virtue of their communications with an attorney. (See Comment 1 to Rule 4.3 in endnotes.) When communicating with unrepresented persons on behalf of a client, an attorney cannot state or imply that the attorney is disinterested.
A lawyer must not attempt to obtain privileged or confidential information the lawyer knows or reasonably should know the unrepresented person may not reveal without violating a duty to another or which the lawyer is not otherwise entitled to receive. This portion of the Rule is meant to address, in part, the limitations of how an attorney may obtain evidence. In the Commission’s Report and Recommendation for Rule 4.3, this portion of the Rule was suggested, in part, because even though “the lawyer’s client might have the ability to engage in such conduct is no reason to permit a lawyer to do so; lawyers who are trained advocates should be held to a higher standard of conduct.”
Tip: Friending unrepresented parties on social media platforms is generally considered communicating. An attorney (or an attorney’s staff acting on the attorney’s behalf) may need to explain the purpose of requesting to connect or friend an unrepresented party, including possibly with a statement that the attorney represents a particular client and wants access to the social media of the unrepresented party for purposes of that representation.
Something has changed (changes to existing rules):
Of the 69 Rules that became effective on November 1, 42 are current rules that are receiving a modification (some to a large degree and with others, more minor changes). Note that Rule 1.1, now the very first substantive rule, is “Competence.” In short, if you are not performing your work with competence, you will be in violation of Rule 1.1 and many of the subsequent Rules.
Rule 1.15 Safekeeping Funds and Property of Clients and Other Persons
There is no easier way to wind up in front of the State Bar than to mishandle a client’s money. Under the current Rules (Rule 4-100) attorneys have a robust set of duties and prohibitions related to handling of client money, but the new Rule 1.15 has some important changes of which attorneys must be aware.
Rule 1.15(a) states, “All funds received or held by a lawyer or law firm for the benefit of a client, or other person to whom the lawyer owes a contractual, statutory, or other legal duty, including advances for fees, costs and expenses, shall be deposited in one or more identifiable bank accounts labeled ‘Trust Account’ or words of similar import, maintained in the State of California, or, with written consent of the client, in any other jurisdiction where there is a substantial relationship between the client or the client’s business and the other jurisdiction.”
This portion of Rule 1.15 is of paramount importance because it not only governs monies received by an attorney after the Rule is implemented, but it requires that attorneys take certain steps with respect to monies that are being held as of the effective date. Prior to the implementation of Rule 1.15, attorneys were not required to place advance fees into a Client Trust Account (“CTA”). Now, not only are attorneys required to place advance fee deposits into a CTA, attorneys also have to determine what advance fee deposits it has received in the past that may have been placed into an operating account, trace these funds, and deposit them into a CTA.
This portion of the rule does not apply to “true retainers.” True retainers are defined in new Rule 1.5(d) as, “A lawyer may make an agreement for, charge, or collect a fee that is denominated as ‘earned on receipt’ or ‘non-refundable,’ or in similar terms, “only if the fee is a true retainer and the client agrees in writing after disclosure that the client will not be entitled to a refund of all or part of the fee charged. A true retainer is a fee that a client pays to a lawyer to ensure the lawyer’s availability to the client during a specified period or on a specified matter, but not to any extent as compensation for legal services performed or to be performed.” As stated above, a true retainer requires informed written consent by the client in order to be compliant with the Rules.
Flat fees do not have to be deposited into a CTA if an attorney complies with certain requirements. A flat fee is defined by new Rule 1.5(e) as, “A flat fee is a fixed amount that constitutes complete payment for the performance of described services regardless of the amount of work ultimately involved, and which may be paid in whole or in part in advance of the lawyer providing those services.” Under new Rule 1.15, in order for the attorney to not place a flat fee in a CTA, the attorney must disclose, in writing, to the client: (i) that the client has a right to require that the flat fee be deposited in an identified trust account until the fee is earned and (ii) that the client is entitled to a refund of any amount of the fee that has not been earned in the event the representation is terminated or the services for which the fee has been paid are not completed. If the flat fee is more than $1,000, the client must give written informed consent for the attorney to place the flat fee anywhere other than a CTA.
Some Rules touch an attorney’s practice regularly, like Rule 1.15 (Safekeeping Funds and Property of Clients and Other Persons), and require that an attorney not only be familiar with the Rule, but that the attorney understands the nuances and changes that became part of the new Rules on November 1. Although attorneys can always consult an ethics attorney or call the State Bar’s Ethics hotline, some ethical pitfalls can happen just from picking up a call from a prospective client (see new Rule 1.18) and attorneys need to be armed and ready to deal with everyday situations that trigger the application of the new Rules.
This article was originally published as part of the CAALA VEGAS 2018 syllabus materials. The New Rules of Professional Conduct became effective on November 1, 2018.
Ken Feldman is a partner in the Los Angeles office of Lewis Brisbois and is national chair of the firm’s Legal Malpractice Defense Department. He graduated from Loyola Law School in 1987 and was admitted to practice that same year, after obtaining a degree in Business finance from California State University Northridge in 1984. Mr. Feldman is a certified specialist in legal malpractice law by the California State Bar, Board of Legal Specialization and is vice-chair of the California State Bar Legal Malpractice Law Advisory Commission. Mr. Feldman is the author of the California Legal Malpractice & Malicious Prosecution Liability Handbook, now in its 7th edition. He was a trustee of the Los Angeles County Bar Association from 2015-2017, and has been a long-time member of the Executive Committee of the LACBA litigation section. Mr. Feldman is the Co-Chair of the Lawyer Defense Committee of the Association of Southern California Defense Counsel, and has several published appellate decisions favoring lawyers to his credit.
Jessica Beckwith is a partner in the Los Angeles and Phoenix offices of Lewis Brisbois and a member of the Real Estate & Environmental Practice as well as the Professional Liability Practice. Ms. Beckwith’s practice is focused on environmental law and attorney regulation and ethics. She also worked for over two years at the State Bar of California, Office of Chief Trial Counsel, as both Deputy and Senior Trial Counsel, representing the State Bar of California and the Committee of Bar Examiners. In that role, she tried a number of cases before the State Bar Court of California. She also managed and directed State Bar investigators in conducting their investigations into disciplinary violations.
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