The American Bar Association Standing Committee on Ethics and Professional Responsibility recently issued guidance concerning the ethical duties held by firms and lawyers when a lawyer decides to leave the firm.

First and foremost, under Model Rule 1.4, lawyers have an ethical duty to inform their clients that they intend to change firms.  Where the attorney had “significant contact” with the client, the lawyer and the firm should agree on a letter to be sent to the client which provides such notice and gives the client the option to go with the lawyer, stay with the firm or take their matter to a new lawyer.  In the event that the lawyer and the firm cannot agree on the form of a letter, the firm cannot prevent the lawyer from sending his or her own letter to a client soliciting the client to move with them.  As the ABA guidance states, “Clients are not property . . . Subject to conflicts of interest considerations, clients decide who will represent them going forward when a lawyer changes firm affiliation.”

Firms may not impose unreasonable restrictions on departing lawyers, such as rigid notification requirements that have the effect of either restricting the client’s choice of counsel or serving as a financial disincentive to the lawyer to leave.  Such restrictions may violate Model Rule 5.6(a), which effectively prohibits noncompete clauses. Restrictions that may be considered reasonable are those that serve to ensure an orderly transition by allowing for updating, organizing and transition of files or staffing changes.

In addition, firms may not deny the departing lawyer access to firm resources during the transition period.  For example, the firm cannot force the lawyer to work at home, or restrict the lawyer’s access to email, support staff or first records.  Such restrictions would prevent the lawyer from representing clients diligently and competently during the transition period.

Identifying who your client is at the outset is one of the most important aspects of the attorney-client relationship.  It governs who you can seek payment from and who can sue you for malpractice.  This is particularly important when your client is a limited liability company, general or limited partnership, or a closely held corporation.  Do you only represent the entity or do you also represent the individual cases of that entity?  Either may be appropriate and the engagement letter should make it explicitly clear what the answer is.

In a recent Appellate Division decision in Hedenberg v. Ciardi, 2019 WL 6248016, the defendant law firm represented an LLC.  Two members of that LLC, however, sued the law firm for malpractice for not advising them, individually, of the ramifications of having the entity declare bankruptcy.

In affirming the Court’s granting of defendants’ summary judgment motion dismissing the case, the Appellate Division first correctly found that there was no written engagement letter with the individual plaintiffs, only with the LLC.  With that as a starting point (and here ending too), the Court next addressed the legal question of whether there was an implied attorney-client relationship and found there was none.  The defendants were able to succeed on their summary judgment motion dismissing the case because it adequately drafted an engagement letter identifying its client as the LLC.

State v. Martinez, just approved for publication,  offers some interesting lessons for criminal defense attorneys who seek to interview cooperating witnesses. It offers even more interesting lessons for the prosecutors who seek to surreptitiously record those interviews.

Defense counsel are entitled to ask for an interview with any state’s witness. This witness advised prosecutors that the defense attorney would probably offer him money, presumably to change his story. Based on that allegation alone, prosecutors surreptitiously recorded the interview by wiring the witness.

The defense attorney did not offer the witness money; nor did he commit any other ethical breach.

The State  revealed the recording just 3 days before trial. The trial judge denied a motion to dismiss and / or to bar the cooperating witness from testifying, but opined that the secret taping “should send a chill down the spine of any criminal defense attorney or prosecutor [who] has ever interviewed a witness”.

It remains to be seen whether the defense will gain any legal traction for this client from opposing and exposing the state’s conduct. The Appellate Division just affirmed the trial judge’s decision to affirm the denial of the motion to dismiss,  but remanded for a plenary hearing on the effects of the taping, specifically whether the practice led to a revelation of any defense strategy. The opinion gives a thorough historical analysis of the actions taken by prosecutors when investigating defense counsel. Good reading.

There are ethics issues playing out in the courtroom and legal media about the alleged  conduct of a Pennsylvania trial court judge and defense counsel in a case in which a jury awarded $8 billion (yes, billion) in punitive damages against Johnson & Johnson in a Risperdal trial. J&J attorneys filed a recusal motion, among other post-judgment motions, which has already been denied. The alleged conduct will undoubtedly become part of J&J’s appellate strategy.

Following a three week trial the judge admittedly posed with jurors for photos at the jurors’ request in the courtroom. Both plaintiff and defense counsel took photos. J&J now claims the judge “high-fived” jurors, implicitly approving of their verdict. The judge denies having done so. There are photos taken by Plaintiff’s council which have not been released to the defense. The judge has threatened to file ethics complaints against J&J counsel for fabricating the “high-five” part of the story.

Jurors become attached to judges during long trials. Judges typically thank them for their service, perhaps more fervently in a long case. The picture request is a bit more unusual.

The “high-five”, if it happened, feels uncomfortable. It implies a blessing on the verdict, complicating any post-judgement motion practice and adding a layer of taint to the trial rulings.

Takeaway? If you feel a judge is exhibiting bias in rulings (distinguished from finding your arguments are just not worthy), make a record. Note unfriendly facial expressions, inappropriate tone of voice, even gestures. Note them in a respectful tone, but do not let them pass.

A California Court ruled that depending on the terms and language of a Settlement Agreement – and whether the attorney signs it for any reason (where the attorney signed as approving to form and content) – an attorney may be bound to the confidentiality provisions contained therein.  In Monster Energy Co. v. Schechter, et al., California Sp. Ct., Case No. S251392, aff’d Fourth Appellate District, Division Two (E066267), the State Court held that the attorney’s public statement that the settlement resulted in “substantial dollars” for Plaintiff could be a breach of the Settlement Agreement.  In particular, the Court cited language in the agreement that counsel, and not only the parties, were bound by confidentiality provisions.  The Court ruled that the lawyer’s position that the boilerplate language “agreed as to form and content” was not intended to bind him to contract terms would ultimately have to be decided by the trier of fact, and denied the attorney’s motion to dismiss.

Attorneys should be careful to review Settlement Agreements to determine if they, in addition to their clients, are agreeing to any obligations.

The Appellate Division recently ruled that a retainer agreement which contained a mandatory arbitration clause, for both fee disputes and legal malpractice claims, is unenforceable against the firm’s former client,  under the circumstances. Delaney v. Trent S. Dickey and Sills Cummis & Gross, PC, Docket No. A-1726-17T4, decided August 23, 2019.

Appellant Delaney sought the services of Sills in a business dispute with limited liability company partners. He was apparently dissatisfied with his original attorney and retained Sills. He signed a three page retainer agreement which briefly summarized the scope of the representation.

The retainer agreement stated in the last paragraph that disputes between the client and the firm would be resolved through Arbitration  “in accordance with the provisions set forth in Attachment 1 to this retainer letter”. The thirty-three page attachment (JAMS rules) was not provided to the client.

An attorney at Sills stated he provided the client with the Agreement and watched him sign it, and that the client (who was a sophisticated businessman), did not ask any questions.

The client stated that the attorney did not explain the agreement, and did not explain the arbitration process outlined in the attachment which had not been given to him. The client stated if he had been told the costs of arbitration would greatly exceed the cost of filing in Superior Court and that fees and costs could be shifted against him, he never would have signed the agreement.

The trial court held the retainer agreement was enforceable, both as to the fee and the related malpractice action.

The Appellate Division reversed the trial court and held that the terms of an Agreement that violate the RPCs are unenforceable. Specifically, the agreement and conduct surrounding the signing violated RPC 1.4(c), since the matter in question was not explained to the client to the extent necessary “to permit the client to make informed decisions regarding the representation”. Specifically, the client was not told an estimate of the costs associated with arbitration, since the JAMS material was not provided.

Additionally, the JAMS rules limit substantive discovery, another fact not revealed or explained to the client. Finally, the Court held that the retainer agreement violated RPC 1.8(h)(1), which prohibits a lawyer from making an agreement with a client to prospectively limit the client from filing a legal malpractice claim.

The Appellate Division described its ruling as narrow: when a firm  provides a retainer agreement to a client, but omits the attached terms and does not explain them to a client, it runs afoul of the RPCs and the agreement is void.

Firms should review their retainer agreements and procedures for explaining terms to a prospective client, including the possible need for suggesting independent counsel to review terms for the client.

As the Model Rules of Professional Conduct demonstrate, a lawyer may serve many functions for a client: advisor, advocate, negotiator, or evaluator, to name a few.  Under any role, however, a lawyer is obligated to act with the best interests of his or her client in mind, even when the client is not paying for legal services.  In this regard, attorneys must be mindful that they owe the same professional duties to both paying and pro bono clients.  Indeed, the New Jersey Advisory Committee on Professional Ethics long ago held in Opinion 671 that “the same ethical rules apply regardless of whether legal advice and representation is provided on a compensated or a pro bono basis,” and that there is “no separate, more relaxed version of applicable ethical precepts for attorneys providing pro bono advice.”  Advisory Committee on Professional Ethics, Opinion 671 (April 5, 1993).  “Duties of competence, confidentiality, and conflict avoidance, for example, all remain fully applicable.”  Id.  Likewise, law firms should not simply staff junior attorneys on pro bono matters to avoid the cost of staffing more senior attorneys on such matters, as the RPCs require supervising attorneys to ensure that those under their supervision comply with the requirements of the RPCs.  See RPC 5.1(b) (“A lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.”).

Much as the RPCs do not distinguish between compensated and pro bono work, neither do malpractice claims, and a lawyer’s failure to abide by the RPCs in the pro bono context in the same way he or she would in working for a paying client could just as easily open the lawyer up to a malpractice claim.  (See, for example, the recently filed case in the Superior Court for the State of California, County of Orange, Bernier, et al. v. Jones Day, et al., Case No. 30-2019-01085904-CU-PN-CJC.)  In short, lawyers should ensure that all clients are provided the same quality of work, regardless of compensation structure.

On June 25, 2019, the New Jersey Supreme Court’s Advisory Committee on Professional Ethics issued Opinion Number 735, deciding that Lawyer A can ethically purchase a Google AdwordSM or keyword that is competitor Lawyer B’s name (e.g., Pat Smith Law Firm purchases a keyword for Alex Doe Law Firm, so that when users search “Alex Doe Law Firm,” Pat Smith Law Firm will also appear in the search results, generally as an “ad.”  Lawyer A, however, crosses the line when (s)he pays a search engine to insert a hyperlink on Lawyer B’s name that diverts the user to Lawyer A’s firm when the user clicks on it.  Continue Reading Lawyers may purchase a Google AdwordSM or keyword that is a competitor lawyer’s name, but there are ethical limits to what lawyers can do with search engine services

There are three basic components to an attorney’s eligibility to practice in the State of New Jersey: (1) annual registration, including making the required annual payments to the Lawyer’s Fund for Client Protection (N.J. Ct. R. 1:28); (2) fulfilling the bi-annual CLE reporting requirements; and (3) maintaining an IOLTA (Interest on Lawyers Trust Accounts) fund (N.J. Ct. R. 1:28A).  Noncompliance with any of these requirements may render an attorney ineligible to practice.

Practicing law while ineligible may lead to ethics charges.  In fact, the current eligibility of an attorney under investigation for other alleged ethical infractions is routinely checked by the relevant disciplinary authority.  It is at this stage that an attorney may learn for the first time that (s)he is ineligible, perhaps through a completely innocent, technical oversight.  An ethics investigation that would otherwise be dismissed may now have the potential of proceeding to a formal complaint depending on the length of time of practicing while ineligible and the likelihood that the attorney knew or should have known (s)he was ineligible.

Moreover, there may come a time where an attorney needs to be admitted pro hac vice, and quickly. You do not want to find out you are ineligible when you are in a crunch. Worse yet, you don’t want to inaccurately represent in a certification to the court that you are active and in good standing in your jurisdiction.

We recommend that you confirm your status is active by going to the attorney index, which is available here.

If for some reason you are deemed inactive, find out why and immediately take corrective steps.  If you do so and the issue of your practicing while ineligible later surfaces, you will have a much higher chance of avoiding charge by having the infraction deemed as unknowing or de minimis.

Bonus tip:  If you move law offices, you must update your address on your attorney registration. This is required under Rule 1:21-1(a), and noncompliance may and has led to ethics charges.

The ABCNY has issued Formal Opinion 2019-5, requiring a lawyer receiving payment in cryptocurrency to comply with RPC 1.8(a) (business transactions with client), concluding it is different than an ordinary fee agreement.  It is thus advisable for attorneys to become familiar with RPC 1.8(a) and not assume that a typical engagement letter will be sufficient.

RPC 1.8(a) provides that:

A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise professional judgment therein for the protection of the client, unless:

  • The transaction is fair and reasonable to the client and the terms of the transaction are fully disclosed and transmitted in writing in a manner that can be reasonably understood by client;
  • The client is advised in writing of the desirability of seeking, and is given a reasonable opportunity to seek, the advice of independent legal counsel on the transaction; and
  • The client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

ABCNY concluded that while RPC 1.8(a) “does not apply to ordinary fee arrangements between client and lawyer reached at the inception of the client-lawyer relationship” [Rule 1.8 Cmt [4C]], because cryptocurrency is more property than cash, RPC 1.8(a) may be implicated under the following circumstances:

  1. The lawyer agrees to provide legal services for a flat fee of X units of cryptocurrency, or for an hourly fee of Y units of cryptocurrency.
  2. The lawyer agrees to provide legal services at an hourly rate of $X dollars to be paid in cryptocurrency.

If, however, a client is given a choice between paying in dollars or cryptocurrency, the ABCNY found that RPC 1.8(c) is not implicated because in that situation paying in cryptocurrency is more of a convenience, rather than a requirement.

ABCNY then noted that RPC 1.8(a) is only implicated if the client expects the lawyer to advise the client concerning the fee arrangement.  Thus, “if the client is a sophisticated party who is knowledgeable about cryptocurrency or is represented by separate counsel, it is unlikely that the client expects the lawyer to exercise professional judgment for the client.  Indeed, in many instances the client may be more sophisticated than the lawyer on matters relating to cryptocurrency, in which case it would not be reasonable for the client to rely on the lawyer’s exercise of professional judgment.  Conversely, if the lawyer is advising the client about the implications of paying fees in cryptocurrency, then the client certainly would expect the lawyer to provide professional judgment on the client’s behalf in the transaction.”

Whether or not a client expects a lawyer to advise on the fee arrangement is a fact-intensive inquiry and attorneys should err on the side of caution.  The main takeaway is that in any fee arrangement concerning cryptocurrency, the attorney should review RPC 1.8(a) to determine whether it is applicable.