NEW RULES OF PROFESSIONAL CONDUCT
(Parts I and II)
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. In part two, we considered some of the less controversial, yet nevertheless important changes to the rules. Today in the final installment of this series, we consider some of the entirely new rules adopted by the state Supreme Court.
Imputation of Conflicts of Interest: General Rule
Newe Rule 1.10 represents an important development for California lawyers. New Rule 1.10 sets forth the noncontroversial concept that, subject to certain limited exceptions, the conflicts of interest of an attorney in a law firm may be imputed to all attorneys in the firm: "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by [the conflict of interest] rules."
However, new Rule 1.10 goes further and establishes, for the first time in the rules, an acknowledgment that ethical screens may be effective (in limited circumstances) to cure what would otherwise be an imputed conflict of interest.
Although support exists for the effectiveness of ethical screens in case law, ethical screens are not sanctioned in the current rules. See, e.g., Kirk v. First American Title Insurance Co., 183 Cal. App. 4th 776 (2010). Such cases typically involve disqualification of conflicted counsel. New Rule 1.10 clarifies that the use of ethical screens may mitigate against discipline under the rules (although the circumstances where an ethical screen may be utilized are limited to those specified in the rule). See New Rule 1.10(a).
Duties to Prospective ClientsF
New Rule 1.18 imposes duties upon lawyers relating to consultations with a prospective client -- i.e., a "person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal services or advice from the lawyer in the lawyer's professional capacity." New Rule 1.18(a). In particular, lawyers have the obligation to preserve the confidentiality of information acquired during a consultation prior to the establishment of an attorney-client relationship. Even if no attorney-client relationship is established, under this new rule, a lawyer is prohibited from using or revealing confidential information learned as a result of the consultation.
Although concepts articulated in this new rule are already the law in California and do not establish new standards (see, e.g., California Evidence Code Section 951; Business and Professions Code Section 6068(e)), the commission acknowledged the importance of including these concepts in the rules so as to alert lawyers to this important duty and provide lawyers with guidance through a clearly-articulated disciplinary standard on how to comport themselves during a consultation.
New Rule 1.18 further prohibits a lawyer from representing a client with interests adverse to those of the prospective client in the same or substantially related subject matter, absent informed written consent from the prospective client, if the lawyer has obtained confidential information material to the matter.
The prohibition in this new rule would be imputed to the lawyer's law firm, such that no lawyer at the firm may knowingly undertake or continue representation in such a matter, unless the lawyer is properly screened from participation in the matter.
Truthfulness in Statements to Others
It has long been recognized in California that attorneys may be disciplined for intentionally deceiving a tribunal or opposing counsel, and that attorneys may be civilly liable to a third party for making false statements of material fact on behalf of a client. Further, Section 6106 of the Business and Professions Code provides that attorneys may be disciplined for committing acts involving "moral turpitude, dishonesty or corruption."
New Rule 4.1 prohibits lawyers, in the course of representing a client, from "knowingly" making a "false statement of material fact or law to a third person," or failing to disclose to a third person a material fact necessary to avoid assisting in a client's criminal or fraudulent conduct.
This rule new reflects an important change by expressly including in the rules a disciplinary standard for misrepresentations to third parties where no such disciplinary standard existed. Further, it differs from the legal standard applicable to civil liability for fraudulent representation, because a violation under the new rule does not require proof of reliance or damages.
Dealing with Unrepresented Person
Both the current rules and the new rules contain a version of the No Contact Rule, which prohibits a lawyer from communicating about the subject of a representation with a person represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer. See current Rule 2-100; new Rule 4.2. New Rule 4.3 imposes duties in connection with communications with unrepresented persons.
New Rule 4.3 prohibits a lawyer when communicating on behalf of a client with an unrepresented person from stating or implying that the lawyer is disinterested. If the lawyer knows (or reasonably should know) that the unrepresented person incorrectly believes the lawyer is disinterested in the matter, the lawyer is obligated to make reasonable efforts to correct that misunderstanding. Further, if the lawyer knows (or reasonably should know) that the interests of the unrepresented person are in conflict with the interests of the client, the lawyer must not give legal advice to that person (although the lawyer may advise the person to seek legal counsel). Rule 4.3(a).
New Rule 4.3 also prohibits a lawyer when communicating on behalf of a client with an unrepresented person from seeking to obtain privileged or other confidential information that the lawyer knows (or reasonably should know) the person is precluded from revealing without violating a duty to someone else or which the lawyer is not entitled to receive. Rule 4.3(b).
As stated in Comment  to the rule, this new rule is intended to protect unrepresentated persons from being misled in communications with a lawyer who is acting on behalf of a client.
Duties Concerning Inadvertently Transmitted Writings
No rule existed that addressed a lawyer's duties to third persons when presented with inadvertent disclosure of privileged materials. New Rule 4.4 provides: "Where it is reasonably apparent to a lawyer who receives a writing relating to a lawyer's representation of a client that the writing was inadvertently sent or produced, and the lawyer knows or reasonably should know that the writing is privileged or subject to the work product doctrine, the lawyer shall: (a) refrain from examining the writing any more than is necessary to determine that it is privileged or subject to the work product doctrine, and (b) promptly notify the sender."
While new Rule 4.4 is consistent with California case law (see, e.g., Rico v. Mitsubishi, 42 Cal. 4th 807, 817 (2007)), the commission concluded that adopting this new rule would help protect the public and the administration of justice, as well as inform attorneys of their ethical obligations. Consistent with such case law, Comment  to the new rule provides the lawyer with the following options when a lawyer determines the rule applies to a transmitted writing: "the lawyer should return the writing to the sender, seek to reach agreement with the sender regarding the disposition of the writing, or seek guidance from a tribunal."
Responsibilities of Managerial & Supervisory Lawyers, of a Subordinate Lawyer and Regarding Nonlawyer Assistants
The only reference to a lawyer's duty to supervise subordinates is contained in a comment to current Rule 3-110 (Failing to Act Competently): "The duties set forth in rule 3-110 include the duty to supervise the work of subordinate attorney and non-attorney employees or agents." New Rules 5.1, 5.2 and 5.3 detail what that duty to supervise requires.
New Rule 5.1 provides that lawyers who manage law firms, both individually and collectively, "shall make reasonable efforts to assure that all lawyers in the firm comply" with the rules. New Rule 5.1 also requires lawyers who supervise other lawyers, whether or not a member or an employee of the same law firm, to make similar "reasonable efforts to ensure compliance by the lawyer supervised." A lawyer will be vicariously responsible for another lawyer's violation of the rules if "(1) the lawyer orders or, with knowledge of the relevant facts and of the specific conduct, ratifies the conduct involved; or (2) the lawyer, individually or together with other lawyers, possesses managerial authority in the law firm in which the other lawyer practices, or has direct supervisory authority over the other lawyer, whether or not a member or employee of the same law firm, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action."
Consistent with case law in California (see, e.g., Jay v. Mahaffey, 218 Cal. App. 4th 1522 (2013); In re Aguilar, 34 Cal. 4th 386 (2004)), new Rule 5.2 makes it clear that, notwithstanding the vicarious responsibility imposed on a managing or supervising lawyer by new Rule 5.1, a subordinate lawyer has an independent duty to comply with the rules. The comment to the new rule further provides that "[i]f the subordinate lawyer believes that the supervisor's proposed resolution of the question of professional duty would result in a violation of these rules or the State Bar Act, the subordinate is obligated to communicate his or her professional judgment regarding the matter to the supervisory lawyer."
New Rule 5.3 holds lawyers similarly responsible for non-lawyer employees. Managerial and supervisory lawyers must make reasonable efforts to ensure that the conduct of the nonlawyers they supervise is compatible with the professional obligations of the lawyer.
The above changes and additions to the Rules of Professional Conduct have been approved the California Supreme Court. These rules, as well as the rest of the 69 new rules, will become effective on November 1, at which time all attorneys in California will be subject to the new rules.