Bar News - July 21, 2006
Rewriting the Rules: Expanded Reporting Discretion Expands Potential Liability
By: Dan Wise
The NH Supreme Court Advisory Committee on Rules has announced it is accepting comments until Sept. 30 on a proposal, submitted by the NHBA Ethics Committee after several years of work, to overhaul and modernize the NH Rules of Professional Conduct. “Rewriting the Rules” is an ongoing series in Bar News highlighting aspects of the Ethics Committee rewrite. Visit “Rewriting the Rules” at www.nhbar.org for the first installment (published in the June 23 Bar News), for a Bar Journal article exploring in detail these changes, and more.
The Ethics Committee’s proposal to rewrite the NH Rules of Professional
Conduct revises the core rule of client confidentiality to set a new balance between the lawyer’s duties to his clients and the public interest when the lawyer possesses information that would result in death or “substantial bodily harm” to others.
The revision of Rule 1.6 regarding Client Confidentiality provides additional discretion for attorneys to disclose confidential information about clients, and follows—without going as far as—the recommended language of the latest version of the ABA Model Rules of Professional Conduct.
The ABA, in the wake of several corporate scandals and the increased corporate accountability strictures set by the Sarbanes-Oxley law, provides discretion to an attorney to disclose client confidences not only for the previously mentioned exceptions, but also “to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s service.”
Also, Rule 1.13: Organization as a Client, has been revised according to the recommendations in the ABA Model Rules, clarifying that “the single all-encompassing duty of corporate counsel confronted with misconduct is to protect the interests of the organization and to report any misconduct to the highest levels of authority in the organization unless “it is not necessary in the best interest of the organization.” The attorney retains the discretion to disclose client information if there is “reasonable certainty” of substantial injury to the organization if the action is not taken.
In a Spring 2006 Bar Journal article, attorneys Peter Beeson, Mitchell Simon and Elizabeth Baker acknowledge that the rewritten rules’ emphasis on reporting misconduct “up the ladder” and expanded discretion to disclose client confidences will increase the attorney’s exposure to negligence or breach of fiduciary claims by the entity when misconduct is not disclosed and causes harm to the organization. Furthermore, “When the attorney continues to work with the company, he or she also runs the risk that regulators or prosecutors who learn of the attorney’s proximity to misconduct will consider the possibility of ‘aiding and abetting’ claims.”
The Ethics Committee also proposes to substitute the phrase “informed consent” in place of “consent after consultation” throughout the Rules of Professional Conduct (RPC). The Ethics Committee defines “informed consent” as “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the immaterial risks of and reasonably available alternatives to the proposed course of conduct.” In a number of the situations, the RPC proposal also requires confirmation in writing of the agreement or client decision.
The Ethics Committee proposes tighter standards for viewing conflicts and more disclosure requirements, including such areas as:
- adverse litigation between clients being considered an unwaivable “concurrent conflict”;
- business transactions with clients, including the duty to advise the client of the “desirability of seeking…independent legal counsel” before proceeding;
- the settling of a potential malpractice claim with a current or former client without advising the client, in writing, of the “desirability” of independent counsel.
In one aspect of conflicts, the Ethics Committee adds an exception to the general rule on the imputation of conflicts. The first sentence of Rule 1.10 (a) imputes conflicts to other lawyers in the firm unless “the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm. “
Duty to Prospective Client
The Ethics Committee proposal contains a new rule, Rule 1.18, to cover duties to a “prospective client,” defined in paragraph (a) as: “a person who provides information to a lawyer regarding the possibility of forming a client-lawyer relationship with respect to a matte.” This new rule, as the NH Comment points out, acknowledges the reality that in today’s era of communication, it is very hard for a lawyer to avoid receiving a significant amount of information—through e-mail, voice-mail, telephone conversation or other contact—from someone seeking representation, or purporting to do so, without the attorney affirmatively encouraging the client.
The new rule generally forbids an attorney from representing someone with “interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received and reviewed information from the prospective client that could be significantly harmful to that person in the matter.” But this rule does contain significant exceptions—including allowing a firm to screen the lawyer who received the information from other attorneys in the firm who might represent clients with opposing interests to the prospective client. Another exception is intended to cover situations where a client makes contact with an attorney for the bad-faith purpose of “infecting” that attorney and preventing them from representing a particular client in the future. According to Comment 2 to Rule 1.18, “Not all persons who communicate information to an attorney unilaterally are entitled to protection under this Rule. A person who communicates information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship…or for the purpose of disqualifying an attorney from participation in a matter; or through contemporaneous contact with numerous attorneys; is not a ‘prospective client’ within the meaning of [the definition of prospective client as outlined in paragraph (a).”
Ethics Proposal on the Web
Review the Ethics Committee proposal in either of two ways through the NHBA Web site at www.nhbar.org:
- Printable version. Download and print the 225-page PDF file of the Ethics Committee submission, which includes the text of the revision proposal as well as the ABA Model Rules and the current NH Rules of Professional Conduct.
- Browsable, rule-by-rule version. In the updated rule-by-rule version, each rule is on its own page, with links to the current NH Rules of Professional Conduct and to the ABA Model Rules. Browse each rule of interest to you and print out individual rules as needed.
The Web page also has links to previous Bar News and Bar Journal articles, and a recent NH Trial Bar News article regarding the fee-splitting rule. (Posted with permission from the NHTLA.)
Additionally, all Ethics Committee information, including past opinions and articles, is now available at www.nhbar.org under Legal Links.