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special / Legal Ethics

The uncontroversial, but important new rules [Rules 1.4, 1.7, 1.13 & 3.3]

NEW RULES OF PROFESSIONAL CONDUCT

On May 10, the California Supreme Court adopted the first major overhaul of the Rules of Professional Conduct in three decades. On November 1, these 69 approved rules will replace the 46 Rules of Professional Conduct that currently govern the conduct of all attorneys in California. Several of the new rules implement important changes to the current rules or impose new obligations in California. Every California attorney should be aware of these changes, as failure to comply with the rules may result in discipline, including being disbarred from the practice of law. See new Rule 8.5(a). Failure to comply in a litigation matter may also result in disqualification from a matter.

In part one of this three-part series, we discussed some of the more controversial rules adopted by the court. Today in part two, we will look at some of the less controversial, yet nevertheless important changes that every California lawyer should know. In part three, we will consider certain entirely new rules adopted by the state Supreme Court.

Communication with Clients

Current Rule 3-500 articulates a broad requirement likely intuitive to most practitioners: Lawyers must keep their clients "reasonably informed about significant developments relating to the representation." But the current rule provides little guidance as to precisely what and how much information lawyers must share.

New Rule 1.4 is generally consistent with current Rule 3-500 but it adds clarifying language from the corresponding Model Rule that has been adopted by most other states. This language is intended to enhance public protection by more clearly stating a lawyer's obligations to clients with regard to communication.

New Rule 1.4 requires that lawyers promptly inform their clients of any decision or circumstance with respect to which disclosure or the client's informed consent is required by the rules, and advise the client of any relevant limitation on the lawyer's conduct when the lawyer knows the client expects assistance that may not be permitted under the rules. As a result, lawyers must not only inform clients as to what they will do, they must also advise clients as to what they cannot do.

New Rule 1.4 provides that a lawyer must explain matters to the extent reasonably necessary for clients to make informed decisions regarding the representation, and also requires that a lawyer reasonably consult with the client about the means employed to accomplish the client's objectives. Combined, these obligations help to ensure that the client understands the information conveyed and empower the client to be an active participant in the matter.

Conflicts of Interest: Current Clients

Current Rule 3-310 governs conflicts of interest among current clients. The provisions of this current rule are viewed as taking a "checklist" approach to identifying conflicts because they describe discrete situations that might arise in representations that trigger a duty to provide written disclosure to a client or obtain a client's informed written consent in order to continue the representation. For example, these situations include a representation where a lawyer has a relationship with a party or witness in the case, or where a lawyer has a financial interest in the subject matter of the representation.

New Rule 1.7 replaces the current "checklist" approach with generalized standards that follow the Model Rules approach to current client conflicts. Under this new approach, the inquiry for assessing whether a conflict is present is to simply ask whether there is either direct adversity "to another current client in the same or a separate matter" or "a significant risk that the lawyer's representation of a current client will be materially limited by the lawyer's responsibilities to or relationships with another client, a former client, or by the lawyer's own interests."

As is the case under current Rule 3-310, new Rule 1.7 provides that, if such a conflict of interest exists, the lawyer shall not proceed with the conflicted representation without informed written consent from each affected client.

Organization as Client

Both new Rule 1.13 and current Rule 3-600 make clear that, in representing an organization, it is the organization itself -- and not its directors, officers, employees or other constituents -- that is the client of the lawyer. As an entity, the organization can only act through its authorized officers, employees and other individuals, and such individuals are not the client even though the lawyer may take direction from such persons. New Rule 1.13, however, makes the following substantive changes to current Rule 3-600:

First, current Rule 3-600 permits a lawyer to refer a matter to a higher authority within the organization under certain circumstances, including when the lawyer becomes aware that a constituent of the organization is acting, or intends to act, in a manner that either may be a violation of law imputable to the organization or is likely to result in substantial injury to the organization. (Such an action by the lawyer is often referred to as "reporting up the corporate ladder.") New Rule 1.13 mandates reporting up in certain circumstances. This mandate is consistent with the ABA Model Rule and the rules of many other states, but it diverges from current Rule 3-600 which permits, but does not require, a lawyer to take such action. (New Rule 1.13 carries forward the requirement in current Rule 3-600 that a lawyer must maintain his or her duty of confidentiality when taking action pursuant to the rule. In particular, it is important to note that, while lawyers may be permitted or obligated to report misconduct up the corporate ladder, they are generally precluded by their duty of confidentiality from "reporting out" such misconduct, e.g., to a regulatory body or prosecutor.)

Second, while the circumstances which trigger reporting up the corporate ladder under current Rule 3-600 are based on the lawyer's actual knowledge, a lawyer's duty to report under new Rule 1.13 will be triggered by two separate scienter standards: (1) a subjective standard that would require actual knowledge by the lawyer that a constituent is acting, intends to act, or refuses to act; and (2) an objective standard that asks whether the lawyer knows or reasonably should know that the constituent's actions would be (a) a violation of either a legal duty to the organization or law reasonably imputable to the organization, and (b) likely to result in substantial injury to the organization.

Third, unlike current Rule 3-600 which permits a lawyer to take corrective action if there is either a violation of law or likely to be substantial injury to the organization, new Rule 1.13 requires that both be present before a lawyer's duty to report up the corporate ladder is triggered.

Fourth, under new Rule 1.13, a lawyer will be required to notify the highest authority in the organization if the lawyer has been discharged or forced to withdraw as a result of his or her reporting up obligation. No such notification is required by current Rule 3-600.

Candor Toward the Tribunal

Similar to current Rule 5-200, new Rule 3.3 will prohibit a lawyer from knowingly making a false statement of fact or law to a tribunal (or failing to correct such a material statement previously made by the lawyer); or failing to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel, or knowingly misquoting to a tribunal the language of a book, statute, decision or other authority; or offering evidence that the lawyer knows to be false.

However, while current Rule 5-200 does not specify the duration of the lawyer's obligation, new Rule 3.3 expressly provides that the foregoing duties of candor to a tribunal continue to the conclusion of the proceeding. Interestingly, the version of Rule 3.3 proposed last year by the State Bar provided that such duties would continue to "the conclusion of the proceeding or the representation, whichever comes first." There was some dissension among the members of the Commission for the Revision of the Rules of Professional Conduct with this formulation (which deviates from the corresponding ABA Model Rule), in that it would allow lawyers to circumvent their duties by simply withdrawing from the representation.

The Supreme Court, in approving Rule 3.3, rejected this possibility. As a result, under new Rule 3.3 it is clear that the duty of candor toward a tribunal continues to the conclusion of the proceeding, even if the lawyer's representation has terminated prior to such time.

In part three, we will consider some of the entirely new rules adopted by the state Supreme Court.

#291

Ben Armistead


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