The Rules of Professional Responsibility already outline, in great detail, the ordinary care that lawyers must use in legal work. Applying the existing rules to generative AI would be sufficient to avoid becoming a headline. On the other hand, special care is also required because generative AI tends to produce seemingly authoritative results, even if they are entirely made up. That feature of generative AI, and the fact that the technology is so new and changing so quickly, with few broadly applicable standards or safeguards, all mean that lawyers need to be especially cautious about using it.

State Bar authorities have taken note, issuing ethics guidance on generative AI at an accelerated pace, in part to emphasize that lawyers need to think carefully about how they use this new technology.

In late November last year, The State Bar of California’s Committee on Professional Responsibility and Conduct (“COPRAC”) issued its “Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law” to assist lawyers in navigating their ethical obligations when using generative artificial intelligence. Among other things, this practical guidance identifies how the current Rules apply to the use of generative AI, and highlights several areas where such use could be a potential problem in ways that are not entirely intuitive or expected, even for lawyers familiar with their duties under the Rules.

Other states have followed. In January, for example, the Florida Bar issued its Opinion 24-1, which is apparently the first formal opinion regarding the application of its rules to generative AI. Specifically, the opinion outlines how “lawyers using generative AI must take reasonable precautions to protect the confidentiality of client information, develop policies for the reasonable oversight of generative AI use, ensure fees and costs are reasonable, and comply with applicable ethics and advertising regulations.” Last month, the New York State Bar Association released its Report and Recommendations of the New York State Bar Association Task Force on Artificial Intelligence.

These resources are expressly not the final word on ethics issues related to generative AI. The technology is changing so quickly that any static analysis has to be viewed in context. But COPRAC’s Practical Guidance, while not a formal opinion, is a robust starting point for lawyers interfacing with generative AI.

The post Every Lawyer Should Access Legal Ethics Guidance for Generative AI appeared first on California Attorney Ethics Counsel.

The first step to ensuring proper compliance with CTA is to assess whether your law firm is a reporting company. If so, next calculate the deadline for reporting requirements. Then, assess what information must be reported and under what circumstances the information has to be updated or amended.

Who has new reporting requirements under CTA?

Your firm may need to report information about your firm’s beneficial owners if it is:

• A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe. This generally would include law firms that are limited liability partnerships or professional corporations; or

• A foreign company registered to do business in any U.S. state or Indian tribe by such a filing.

There are exceptions to the definition of reporting company, although they tend to apply only to larger firms (for example, an operating presence at a physical office in the U.S. with gross revenues exceeding $5 million and more than 20 employees) or to companies that already report ownership information to other government agencies.

What are the reporting deadlines under CTA?

The deadline for filing the initial BOI report for reporting companies to report under CTA generally depends on when your firm was formed:

• For firms created or registered before January 1, 2024, the reporting deadline is January 1, 2025;

• For firms created or registered on or after January 1, 2024, and before January 1, 2025, the reporting deadline is 90 calendar days after the firm received actual notice that the registration was effective; and

• For firms created or registered on or after January 1, 2025, the reporting deadline will be 30 calendar days after actual notice that the registration is effective.

A person may be subject to civil and/or criminal penalties for willfully causing a company not to file a required BOI report or to report incomplete or false beneficial ownership information to FinCEN.

What must be reported under CTA?

Reporting companies must report beneficial owners, meaning any individual who, directly or indirectly:

• Exercises substantial control over a reporting requirement; or

• Owns or controls at least 25% of the ownership interests of a reporting company, which may include capital or profits interests.

Reporting companies created on or after January 1, 2024, also must report company applicants, meaning:

• The direct filer of the firm’s registration materials; and

• Any individual who directs or controls the filing action.

This would include lawyers, paralegals, or company staff who actually handle or oversee the filing of the registration materials.

A reporting company must report its full legal name, any trade name, complete current U.S. address or foreign jurisdiction information, and IRS taxpayer identification number or EIN, among other things. Each beneficial owner and company applicant must report similar information as well as provide a passport or other identification number and image, among other details.

What updates or amendments are necessary under CTA?

Beneficial ownership information reporting is not an annual requirement. Unless a company needs to update or correct information, a report only needs to be submitted once.

Many California law firms will be reporting companies under CTA, and each should assess their reporting requirements, applicable deadlines, and what information must be reported. Consult the FinCEN Small Entity Compliance Guide for an overview of the new reporting requirements. Then, consult your legal counsel or advisors to determine your firm’s specific reporting requirements and deadlines.

The post Does Your Law Firm Have New Reporting Requirements under the Corporate Transparency Act? appeared first on California Attorney Ethics Counsel.

Now that you’re paying attention, it is important to understand what qualifies as UPL and the permitted exceptions. Similar to the American Bar Association’s (ABA) Model Rule (MR) 5.5, California’s Rules of Professional Conduct (CRPC), Rule 5.5, addresses UPL. CRPC Rule 5.5(b) mandates that “[a] lawyer who is not admitted to practice law in California shall not: (1) except as authorized by these rules or other law, establish or maintain a resident office or other systematic or continuous presence in California for the practice of law; or (2) hold out to the public or otherwise represent that the lawyer is admitted to practice law in California.  See BASF Legal Ethics Opinion 2021-1 (August 2021) for additional insight and interpretation of California’s UPL rules and laws.

As encouraged by MR 5.5(d), California and other states allow for certain temporary practice exceptions.  One of the exceptions permits out-of-state licensed lawyers to work in California as in-house corporate counsel for a qualifying institution so long as the lawyers are registered with the State Bar of California.  CRPC 5.5, Comment; Cal. Rules of Court 9.46; see MR 5.5(d)(1), Comments 7 & 16. California’s in-house registration requirement is only for out-of-state licensed lawyers, not California-licensed lawyers. Lawyers with a license from outside of the US cannot qualify as in-house counsel in California but may qualify under another temporary practice exception for foreign legal consultants. See Cal. Rules of Court 9.44.

The in-house counsel registration requirements include, but are not limited to, mandating that the lawyer is an active licensee in good standing of the bar of a United States state, jurisdiction, possession, territory, or dependency; a resident of California; abides by all of California’s laws and ethics rules; and practices exclusively for the single qualifying institution (except for pro bono services permitted through eligible legal aid organizations).  Cal. Rules of Court 9.46; In-House Counsel State Bar Rules.  Although lawyers who qualify under this exception do not have to sit for California’s bar exam, they do have to submit to the State Bar’s moral character determination as a part of the registration process.  If the application of moral character is approved and the in-house counsel registration is granted by the Bar, each certified in-house lawyer must renew the registration annually and satisfy California’s Minimum Continuing Legal Education (MCLE) requirements.

The post Be Warned: CA In-House Corporate Counsel Must Register With State Bar appeared first on California Attorney Ethics Counsel.

Law firms are generally aware of the need to clear conflicts in advance of a lawyer’s transition and of a transitioning lawyer’s duty of confidentiality to his or her current and former clients. But what happens when a preliminary exchange of limited information regarding client names and matters “inconclusively” establishes only the “possibility” of a potential conflict?

A law firm in this situation may have invested significant time and resources in considering or courting a lateral hire, and not want to forego the potential hire if there is, in fact, no conflict. Similarly, a conflict may exist, but it may be one that can be dealt with through an ethical wall or screen, and thus not preclude the transition.

California law surrounding conflicts of interest lends itself to such uncertainties since a conflict can exist without the “same matter” being involved. Former client conflicts, for example, can exist if there is a “substantial relationship” between a former client matter of the transitioning lawyer and a client matter of the new firm. Whether there is a substantial relationship between two matters is a fact-specific inquiry. The viability of an ethical wall can also be highly factual. Under California’s Rule 1.10 involving “imputation,” for example, whether a transitioning lawyer can be screened from a former client conflict related to her old firm may depend on whether the lawyer “substantially participated” in the former matter. Rule 1.10(a)(2)(i).

Firms must tread carefully when faced with these types of situations. Additional information beyond the simple exchange of client and matter names may be warranted and may indeed reveal the absence of any conflict or the ability to use an ethical screen to cure a conflict. At the same time, the “potential” for a conflict may exist and, therefore, an increased risk that further information might confirm the existence of a real conflict or the inability to cure a conflict. There is also an increased risk that further disclosure or exchange of information, if not conducted properly, might violate the transitioning lawyer’s duty of confidentiality to the former client and “taint” the new firm with relevant confidential information.

Firms in these situations understandably want to try to minimize the risk that, in the process of vetting a possible conflict or determining whether an ethical wall can be used, they become privy to disqualifying information or create a potential argument (even if not meritorious) that another party might utilize to try and suggest they have obtained such information.

When faced with the “possibility” or “uncertainty” of a transition-related conflict, a firm should consider retaining “conflict counsel” to assist in any further assessment of whether an actual conflict exists and/or whether an ethical screen can be appropriately implemented. Conflicts counsel cannot invade the transitioning lawyer’s duty of confidentiality to a former client. But counsel with experience in conflict analysis can ask questions of the transitioning lawyer that do not require disclosure of confidential information that can help facilitate a more accurate determination of whether an actual conflict exists or whether an ethical screen can be used. That discourse can take place between conflict counsel and the transitioning lawyer without the direct involvement of the new law firm. This can help decrease the risk that the new firm is actually exposed to confidential information and weaken any tactical effort to try and disqualify the new firm based on the exchange of information during the vetting process.

Andrew Dilworth
Partner
O’Rielly & Roche LLP
drew@oriellyroche.com

The post Using “Conflict Counsel” In Vetting Lateral Transitions appeared first on California Attorney Ethics Counsel.

Many lawyers around the country who may not have appreciated the overreaching impact of the current UPL and MJP laws and rules are now likely more familiar with them than they care to be in the wake of the Covid 19 pandemic.  Lawyers were among the more than 30 million Americans who decided to permanently relocate during the pandemic; however, some did so without knowing or even considering that a lawyer’s non-temporary presence in certain jurisdictions where they are not licensed could be considered the unauthorized practice of law, even if the lawyer has no intention of ever advising on the law of that jurisdiction.  This is troubling because a UPL violation will not only impact one’s law license but carries the potential for criminal penalties in all fifty states.  To the extent relocated lawyers didn’t personally grasp the seriousness of their decision to reside outside of the state’s borders where they are licensed, their law firm, company, and/or liability insurer very likely clued them in while scrambling to manage the risk.  Of course, it is best to reach out to an ethics lawyer for assistance if you are struggling to untangle the diverging chaos defining UPL across the various jurisdictions.

The ABA and many state and local bar associations, including in California, have published legal ethics opinions on this topic in an effort to provide some guidance to lawyers on the application and risks of the UPL and MJP laws and rules in certain jurisdictions.  Unfortunately, as helpful as some of these opinions are and as logical as they may be, ethics opinions are only advisory.  The rules and laws themselves must be changed and, hopefully, integrated across the country. With today’s affordable mobility and constant technological advancements, the change is long overdue.

APRL’s proposed replacement for Model Rule 5.5 permits a lawyer admitted in any United States jurisdiction to practice law and represent willing clients in another jurisdiction where the lawyer is not licensed without regard to the geographic location of the lawyer or the client, without regard to the forum where the services are to be provided, and without regard to which jurisdiction’s rules apply at a given moment in time, so long as the client is notified where the lawyer is licensed and the lawyer is competent under Rule 1.1 no matter where or what kind of legal services are provided.  This is a major departure from the current Model Rule 5.5 and UPL rules used by most states.  At the same time, APRL’s suggested Rule 5.5 would still preserve judicial authority in each state to regulate who appears in state courts.  It also ensures that lawyers will be subject to discipline in both their state of licensure and wherever they practice. The proposed rule also addresses practice in the US by foreign lawyers.

APRL’s goal is to encourage the ABA to change its Model Rule 5.5 in line with the proposal.  Once the Model Rule is revised, it will be up to each jurisdiction to decide whether to implement the updated Model Rule 5.5 or some version thereof.  The majority of the states generally adopt changes made to the Model Rules; however, it is not a guarantee.  Timing of any such changes is also hard to estimate.  Each state certainly does not have to wait for the ABA to revise Model Rule 5.5 before updating its own rule. However, whatever the ABA does or doesn’t do typically sets the tone for the rest of the country.

As a member of APRL’s Future of Lawyering Committee and one of the drafters of the proposed replacement rule and accompanying report, I am hopeful that the ABA and each independent jurisdiction will use APRL’s proposal to facilitate this much-anticipated, much-needed overhaul of Rule 5.5.  Despite lawyers being at the forefront of change by way of assisting industries, governments, professions, companies, and individuals outside of the legal industry to keep up with the times and perhaps even stay ahead of the curve, the legal profession itself lags behind in many respects.  The current unauthorized practice of law rule is just one of the many areas within our profession that need immediate attention.  Perhaps following through with this particular change may just inspire updates to other antiquated laws, rules, procedures, and ways of thinking within our industry that are also in desperate need of reform.

Kendra Basner
Partner
O’Rielly & Roche LLP
kendra@oriellyroche.com

The post The National Push to Change UPL Rule 5.5 Has Begun appeared first on California Attorney Ethics Counsel.

In Long Beach Unified School District v. Santa Catalina Island Company and City of Avalon, C.D. Cal., Case No. 2:19-cv-01139, a law firm for the City of Avalon was disqualified after it allegedly engaged in over 7,000 hours of litigation activity and extensive discovery involving the exchange of over 100,000 documents and fifteen expert reports. The action involves a dispute between the Long Beach Unified School District and the City of Avalon regarding cleanup costs for contamination at the Avalon School campus, property owned by the District.

The action was filed in February 2019. The City’s counsel was retained in 2012 (roughly seven years before the filing of the action). Counsel’s prior representation of the District, which created the allegedly disqualifying conflict, occurred between 2006 and 2007. The motion for disqualification was filed in January 2022, roughly three months before the trial was originally scheduled to take place and approximately five months after the City had obtained partial summary judgment on four of the District’s five claims.

In evaluating the City’s claim of “unreasonably delay,” the Court noted that a party opposing a motion for disqualification may defeat such motion by offering prima facie “evidence of unreasonable delay in bringing the motion, causing prejudice to the present client ….” Order at 12, citing Metro-Goldwyn-Mayer, Inc. v. Tracinda Corp., 43 Cal.Rptr.2d 327, 336-337 (1995).  The Court emphasized, however, that “delay alone will not necessarily result in the denial of a disqualification motion; the ensuing prejudice caused by the delay must be extreme.” Order at 12, citing Zador Corp. v. Kwan, 37 Cal.Rptr.2d 754, 764 (1995). The test in California, as articulated by the Court in its Order, provides that once a prima facie showing of unreasonable delay and extreme prejudice has been made by the non-movant, the burden shifts back to the party seeking disqualification to “justify” the delay. Order at 12.

Non-exclusive factors considered in assessing reasonableness include (1) the stage of litigation at which the motion is made; and (2) the complexity of the case. Order at 12, citing Liberty Nat’l Enters., L.P. v. Chicago Title Ins. Co., 123 Cal.Rptr.3d 498, 486-88 (2011). The Court concluded that the “stage of litigation” did not favor a finding of unreasonableness, emphasizing that a reassignment order issued after the filing of the disqualification motion had vacated the trial date, which had yet to be reset. The Court further noted that it was unlikely the trial would be rescheduled for sooner than approximately five months out, “giving the City several months to find new counsel capable of defending the litigation effectively.” Order at 13. The Court also found that the “complexity of the case” did not favor a finding of unreasonableness. The Court acknowledged that the claims originally brought by the District involved several environmental issues, the exchange of over 100,000 documents, and several expert reports, but found that the City’s successful summary judgment motion had “significantly narrowed” the claims, with only a portion of one of the original five claims remaining. Order at 13-14.

In addressing whether the City would suffer “extreme prejudice” as a result of the delay, the Court noted the “interest and right of a nonmoving client to the lawyer of its choice.” Order at 14, citing Liberty, 123 Cal.Rptr.3d at 505. It further acknowledged that the firm had originally been retained in 2012, had represented the City for many years, had acquired a “deep knowledge” of the case, and had success with the case concerning the motion for partial summary judgment. Order at 14. However, the Court again emphasized that no trial date was currently set, stating that the City would have “several months to find new counsel capable of defending [the] litigation effectively” and such counsel “will doubtless have enough additional time to ‘come up-to-speed.” Id.

Finally, the Court considered whether, even assuming the City and its counsel had presented prima facie evidence of unreasonable delay and extreme prejudice, the District had met its burden of “justifying” the delay. The City argued that the District had been aware of facts underlying the potential conflict of interest since 2012. In support of this argument, the City noted that the District had produced documents in 2019 and 2020 showing correspondence between the District and the City’s counsel back in 2006 and 2007 (the time of defense counsel’s prior representation of the District). Additionally, a declarant on behalf of the District acknowledged she was aware of the firm’s prior representation but thought that it was a “non-issue” and did not pose a conflict of interest at the time.

Despite these facts, the Court rejected the contention that such information was sufficient to put the District on “inquiry notice” of a conflict of interest and “start the clock” with regard to calculating delay. The Court explained that under California law, delay in filing a motion to disqualify “is calculated from the date the moving party actually perceives the conflict, not the date it first obtains the facts from which an inference of conflict could be drawn.” Order at 15.

The Court distinguished situations in which counsel for a moving party is on notice of a potential conflict, finding that the only individuals with the District who would have been on inquiry notice dating back to 2012 were “non-attorneys .”Order at 15, n. 8. The Court also found relevant the City’s argument that the document productions in 2019 and 2020 (which included correspondence between the District and defense counsel from 2006 and 2007) were “primarily the work of litigation support contractors” and that privilege reviews by the District’s counsel were not triggered during the document reviews as no lawyers from defense counsel’s firm were on the list of the District’s counsel. Id.

According to the District, it was only in October 2021, when it conducted a review of its allegedly privileged documents regarding a document subpoena served by the City on a third party, that its current counsel realized an attorney-client relationship concerning the school had previously existed between defense counsel and the District. The Court found that once “perceived,” the District “immediately attempted to remedy the issue” by alerting defense counsel of the conflict. Order at 16. After more than a month of correspondence and three meet and confer sessions, the parties were unable to resolve the matter. The District then filed its disqualification motion “less than three months after it first ‘actually perceived’ of the conflict.” Id. The Court emphasized that “[c]ourts have regularly found that such a delay is neither inexcusable nor sufficient to deny the disqualification motion.” Id.

Claims of “unreasonable delay” remain an important defense to disqualification motions. But delay in and of itself is unlikely to be enough. The decision in Long Beach Unified School District v. Santa Catalina Island Company and City of Avalon is a reminder of the fact-specific nature of the multi-faceted analysis employed by courts in analyzing such a defense, which includes:

• Can a prima facie case of “unreasonable delay” be made;
• How does the “stage of the litigation” affect the reasonableness of the delay;
• How does the “complexity of the case” affect the reasonableness of the delay;
• Can the non-moving party meet the burden of establishing “extreme prejudice” from the delay;
• If a prima facie case of unreasonable delay is established and the burden is shifted to the movant, can the movant establish a “reasonable justification” for the delay;
• Who on the movant’s side knew or was on notice of the potential conflict, and how “sophisticated” were the individuals with such knowledge or notice;
• How quickly after “perceiving” the potential conflict did the movant take action to address it.

Lawyers in California facing a disqualification motion should have their counsel consider these non-exclusive factors in assessing, weighing, and presenting a defense of unreasonable delay. Doing so will help maximize the prospect of asserting a successful defense.

Andrew Dilworth
Partner
O’Rielly & Roche LLP
drew@oriellyroche.com

The post California Disqualification Decision and Claims of “Unreasonable Delay” appeared first on California Attorney Ethics Counsel.

How so?  Well-developed and drafted firm agreements can ensure that the firm and its attorneys meet their ethical obligations in critical areas, including:

• Succession planning: leaving your firm without a workable succession plan places your clients’ interests at risk, potentially violating multiple Rules of Professional Conduct;
• Impaired attorneys and competence: your firm’s governing documents will dictate how and when you handle the increasingly serious issue of attorney impairment, which implicates your duties of competence and many other applicable Rules.
• Attorney mobility: firm agreements can ensure that the firm and its attorneys meet their ethical obligations when an attorney leaves the firm, whether voluntarily or otherwise.
• Dissolution: dissolving a firm involves virtually all of the Rules of Professional Conduct, including the duty of competence, the duty of loyalty, duties regarding termination of representation, and confidentiality. Having a plan in your firm’s agreement will ensure you meet these obligations.

Updated partnership agreements and other firm governing documents and provisions are a good way to meet, and in some circumstances may be required to meet, the firm’s legal ethics obligations.

The post Legal Ethics and Your Law Firm Partnership Agreement appeared first on California Attorney Ethics Counsel.

Remote Practice – BASF Opinion 2021-1 (August 2021)  

Remote practice has become a hot topic across the country as a result of the Covid-19 pandemic.  Some jurisdictions have eased restrictions around lawyers working where they’re not licensed during the pandemic.  See, i.e. D.C. Ethics Opinion 24-20 (March 23, 2020).  Arizona, Minnesota, North Carolina, New Hampshire and Ohio have updated their rules to provide specific permissions for remote practice by out-of-state licensed lawyers.  See Ariz. R. Prof’l Conduct 5.5(d); Minnesota R. Prof’l Conduct 5.5(d); N.H.R. Prof’l Conduct 5.5(d)(3); N.C. R. Prof’l Conduct 5.5(d); and Ohio R. Prof’l Conduct 5.5(d)(4).  Michigan and New York presently have similar rule amendments being considered for adoption. See MI Proposed Amendment to MRPC 5.5 (April 24, 2021); Proposed Amendments to NY Court of Appeals Part 523 (November 5, 2021).  A flurry of ethics opinions from around the country have also addressed this issue. See ABA Formal Opinion 495 (2020); FL Opinion 2019-4 (May 20, 2021); Pennsylvania & Philadelphia Bar Assocs. Joint Formal Op. 2021-100 (March 2, 2021); Utah Ethics Advisory Committee Opinion No. 19-03 (May 14, 2019); and NJ Joint Opinion 742 (10/6/21).

This summer, the Bar Association of San Francisco published the only California opinion that exists on this topic.  Based on a detailed analysis of California’s applicable rules (See CRPC Rule 5.5 and California Rules of Court (CRC) Rule 9.40-9.49.1), statutes (Business & Professions (B&P) Code sections 6125-6133), and case law (Birbrower, Montalbano, Condon & Frank v. Superior Court (1998) 17 Cal. 4th 119 and Estate of Condon (1998) 65 Cal.App.4th 1138), it advises that a lawyer who is not licensed in California, but merely physically present here while using technology to remotely practice law in compliance with the rules of the jurisdiction where the lawyer is licensed, should not be held in violation of California’s UPL rules and laws so long as the lawyer does not advertise or otherwise hold out as a licensed California lawyer, does not establish an office or other systematic or continuous presence for the practice of law in California, and does not represent a California person or entity.  However, if such a lawyer represents a California client, an assessment of liability will depend on the nature of the representation, whether the representation complies with the regulations of the jurisdiction where the lawyer is licensed, the role of other California lawyers in the representation, and other factors relevant to the protection of the client.  BASF’s opinion further advises that California-licensed lawyers sitting in a jurisdiction where they are not licensed must adhere to the rules of that jurisdiction.  Failure to do so could be found to violate CRPC Rule 5.5(a).

 Lawyer & Client Impairment – CAL 2021-207: Client with Diminished Capacity & CAL 2021-206: Colleague Impairment

The State Bar of California’s Committee on Professional Responsibility & Conduct (COPRAC) issued two ethics opinions this year focused on the issue of competence in an attorney-client relationship.  One addresses a lawyer’s mental impairments that impede a lawyer’s fitness to engage in the practice of law competently and diligently.  The other opinion concentrates on the ethical obligations of a lawyer when a client suffers from diminished capacity.

COPRAC’s opinion on colleague impairment advises that a lawyer’s impairment does not excuse that lawyer’s compliance with the rules of professional conduct and the State Bar Act.  Importantly, an impaired lawyer’s conduct can also trigger obligations for the impaired lawyer’s subordinates, supervisors, and other colleagues who know of the impaired lawyer’s conduct. The ethical obligations of an impaired lawyer’s colleagues may include, but are not limited to, communicating significant developments related to the lawyer’s conduct to the client and promptly taking reasonable remedial action to prevent or mitigate any adverse consequences resulting from an impaired lawyer’s actions.  However, each lawyer’s action will ultimately depend on the nature of the client’s representation, the severity of the impaired lawyer’s unethical conduct, whether the client has been harmed or will be harmed by the impaired lawyer’s conduct, the nature of the lawyer’s impairment, the size of the law firm and the resources available, and each lawyer’s position within the firm.

COPRAC’s opinion concerning a client with diminished capacity advises that a lawyer’s ethical obligations to such a client, including the duties of competence, communication, loyalty, and nondiscrimination, do not change, but that the client’s diminished capacity may require the lawyer to change how the lawyer goes about fulfilling them.  A lawyer representing a competent client may propose that the client give advanced consent to protective disclosure in the event that the client later becomes incapacitated and that incapacity exposes the client to harm. However, if that has not or cannot be accomplished prior to a client’s incapacitation, the opinion recommends that a lawyer may still seek the client’s informed consent to take protective measures when the lawyer reasonably believes that the client’s diminished capacity exposes the client to harm. If appropriately limited and informed, consent from a client with diminished capacity is ethically proper.  If possible, the lawyer should attempt to preserve a normal attorney-client relationship with such a client, including that the client makes decisions normally reserved to the client.  However, the opinion recognizes that a lawyer must sometimes make difficult judgments relating to the client’s capacity provided that such judgments are informed and disinterested. Significantly, the opinion advises that a lawyer should not be viewed as having acted unethically simply because in hindsight those judgments are later determined to have been mistaken.

Duties to Prospective Client – CAL 2021-205: Duties to Prospective Client

 The third opinion issued by the State Bar in 2021 addresses a lawyer’s duties to prospective clients.  The opinion focuses on issues that could arise when an interviewing lawyer receives confidential information from a prospective client. In sum, the opinion advises that “when a person is a prospective client within the meaning of CRPC Rule 1.18(a), the interviewing lawyer owes the prospective client the same duty of confidentiality owed to an existing or former client pursuant to CRPC Rules 1.6 and 1.9 even though no lawyer-client relationship thereafter ensues.”  Therefore, the lawyer may not use or disclose confidential information learned from the prospective client without the prospective client’s informed written consent. This is true even if the information would be material to the representation of an existing client of the lawyer or the lawyer’s law firm because the duty of confidentiality to the prospective client outweighs the duty to inform the current client.

The opinion further addresses that absent informed written consent from the prospective client, the interviewing lawyer is prohibited from accepting representation materially adverse to the prospective client in the same or a substantially related matter, which is imputed to other members of the law firm unless the interviewing lawyer took reasonable measures to obtain only information that was reasonably necessary to determine whether to represent the prospective client and the law firm promptly undertook screening and other measures as specified in CRPC Rule 1.18(d)(2). Finally, although the opinion advises that a prospective client may give advance informed written consent for a law firm to act adversely to the prospective client in the same matter or substantially related matters, the opinion should be reviewed for specific guidance in order to effectively manage any risk of liability.

Ethical Screens – CLA Ethics Committee Formal Opinion No. 2021-1 (February 11, 2021)

On February 11, 2021, the ethics committee of the California Lawyers’ Association published its opinion on the elements of an effective screen in compliance with the rules of professional conduct.  The opinion advises that are four required elements of an effective screen: (1) timely imposition of the screen, (2) prohibitions of communications across the screen, (3) no fee-sharing with prohibited persons, and (4) notice to affected clients.  Other factors mentioned that are not required, but may be considered, when evaluating the efficacy of a screen include, “the physical and operational separation of those on each side of the screen, limitation of prohibited individuals’ access to the screened matter’s file, the communication employed within the firm regarding its terms, negative internal consequences for violations of the terms, and the monitoring of the screen.” The opinion makes clear that it did not opine on the circumstances under which conflicts may be addressed through an ethical screen where a waiver is obtained.

Joining a Lawyer Networking Group – SDCBA Ethics Opinion dated January 14, 2021

In the wake of the LegalMatch Case (Jackson v. Legalmatch.com (2019) 42 Cal.App.5th 760, 773 [rev. denied, Jackson v. Legalmatch.com, 2020 Cal. LEXIS 1699 (Mar. 11, 2020)), the San Diego County Bar Association published an ethics opinion in early 2021 addressing under what circumstances a lawyer may join a networking group that is not registered with the State Bar of California as a licensed attorney referral service.  The opinion advised that a California lawyer may not be a member of a networking group if it: “(1) limits the number of lawyer members; (2) prohibits membership in other networking groups; and (3) places pressure on non-lawyer members to make a minimum number of referrals to other members of the group.” However, it advises that “a lawyer may join a networking group that does not promise referrals as a benefit of membership; does not limit the number of lawyer members; and does not pressure members to provide referrals to one another—provided the lawyer follows other Rules of Professional Conduct, including rules 5.4(e) and 7.2(b).”

The post California Ethics Opinions of 2021 appeared first on California Attorney Ethics Counsel.

Unfortunately, an ownership interest in a California law firm cannot be held in a trust. For either limited liability form of a law partnership—LLP or professional corporation—the State Bar Rules, Business and Professions Code, and the Corporations Code all prohibit ownership of a law firm by a trust, which of course is not a licensed person and not a person at all. Put another way, there is no authority from the State Bar of California, which is the entity from which the limitations on liability flow and that regulates lawyers and law firms, to support the position that ownership in a law firm can be held in a trust.

Neither is the trust the same as the lawyer, as some might suggest. The fact that the trust is a separate legal entity is more or less the whole point. Sub-trusts, or other contraptions and contortions, don’t solve the problem.

If your ownership interest is held in a trust in your firm’s governing documents, this issue will require a close analysis and a potential correction. The risk is that the limited liability protections of the LLP or the PC will be destroyed because the transfer—to a trust—is invalid. That’s a big risk, obviously, and one that requires careful attention if you have transferred, or are considering transferring, your ownership interest in a law firm into a trust.

The post Can a Trust Hold Ownership of a Law Firm? Nope. appeared first on California Attorney Ethics Counsel.

California’s legal ethics rules do not require that attorneys adopt a succession plan. But compliance with the ethics rules seems unlikely without one. The duty of diligence (CRPC Rule 1.3(a) and (b)), the duty of competence (Rule 1.1(a)), and the duty of loyalty each require attorneys and firms to avoid taking or exposing their clients to risks that place their clients’ interests in peril. Attorneys also have a duty to avoid reasonably foreseeable prejudice in terminating a client representation under CRPC Rule 1.16(a). What could be more perilous or prejudicial for a client than having an attorney suddenly disappear from handling a matter with no plan for someone else to handle it?

A well-developed succession plan will prevent that peril and meet these ethical obligations.  For more information on succession planning and how it is also good for your business, see “Succession Planning for (Dearly) Departed Partners.”

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