Ch-Ch-Ch-Ch-Changes: Longstanding Ethical Duties in the Context of Economically Driven Developments in the Legal Profession
LACBA Update, September 2006
By Patrick A. Fraioli Jr., with apologies to David Bowie. Fraioli is a partner in the firm of Moldo Davidson Fraioli Seror & Sestanovich LLP and a member of LACBA’s Professional Responsibility and Ethics Committee. The views expressed are his own.
American business has undergone significant changes in the last several decades, and the legal profession has not been immune. “The law” is undeniably also a business. As a result, business practices such as the permanent hiring of temporary employees (e.g. contract lawyers) and outsourcing have been adopted by law firms across our state and nation. Moreover, lawyers often market to other professionals (including other lawyers with complementary specialties) to develop ongoing cross-referral relationships. These practices, while economically valuable, can raise ethical issues for firms and attorneys who do not remain vigilant.
Duty of Competence. An attorney has a duty to be competent in any representation. This includes the duty to supervise the work of subordinate attorney and nonattorney agents. Cal. Rule of Prof’l Conduct R. 3-110(A)-(C) and Discussion; Layton v. State Bar (1990) 50 Cal.3d 889, 900. However, an attorney cannot be held responsible for every detail. Palomo v. State Bar (1984) 36 Cal.3d 785, 755. “If the member does not have sufficient learning and skill when the legal service is undertaken, the member may nonetheless perform such services competently by 1) associating with or, where appropriate, professionally consulting another lawyer reasonably believed to be competent, or by 2) acquiring sufficient learning and skill before performance is required.” Rule 3-110(C).
Pressures to land and retain clients, combined with the increased mobility and connectivity of lawyers and staff, have led attorneys to employ contract attorneys who have substantive expertise the attorney lacks. These attorneys may not be licensed or even physically present in California. For example, outsourcing enterprises have sprung up everywhere, in places as far flung as India, often at rates far cheaper than those of local attorneys. See Los Angeles County Bar Ass’n, Prof’l Responsibility & Ethics Comm., Formal Op. No. 513 (review of ethical implications of the use by attorneys licensed in California of out-of-state legal outsourcing services that promise to write appellate briefs for the attorney’s client in cases in the California courts). A lawyer with a productive referral relationship thus can obtain a client’s business in an area where the lawyer and firm have little substantive expertise without formally associating with another attorney outside the firm (who would then have access to the client). Though economically useful, this does not relieve attorneys of their duty to be competent or to associate with attorneys who are.
Duty to Communicate with the Client and Disclose Material Facts. Rule 3-500 of the Rules of Professional Conduct and Section 6068(m) of the Business and Professions Code require an attorney to keep the client reasonably informed of significant developments relating to the representation. Whether use of an outside lawyer constitutes a significant development depends on the circumstances of each case. In general, a client is entitled to know who or what entity is handling the client’s representation. See COPRAC Formal Ops. 2004-165 & 1994-138; LACBA Formal Op. No. 473. The attorney bears the responsibility to be reasonably aware of the client’s expectations. If the attorney knows the client’s expectation is that the attorney alone will be acting for the client, then disclosure of any such contract-lawyer relationships appears to be required. Id.
Moreover, disclosure issues also can arise out of the billing arrangements. An attorney should accurately disclose the basis on which any cost is passed on to the client, whether it is simply passed through or marked up. See Rule 3-500; Bus. & Prof. Code Secs. 6068(m), 6147, 6148. If the client pays both the attorney’s fees and costs for the contract attorney, the contract relationship is likely to be considered a significant development. It is advisable to include these types of costs in the written fee agreement’s disclosures at the outset.
Duty to Preserve the Client’s Confidences. “It is the duty of an attorney...[t]o maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” Bus. & Prof. Code Sec. 6068(e)(1). “The duty to preserve a client’s confidential information is broader than the protection afforded by the lawyer-client privilege.” See COPRAC Formal Op. 2004-165; Cal. State Bar Formal Op. No. 1993-133. The attorney’s duty has been applied even when the facts are already part of the public record. See LACBA Formal Ops. Nos. 267 & 386.
Of course, client confidences and secrets may be disclosed to outside contractors as long as they agree to maintain secrecy. See LACBA Formal Ops. Nos. 374, 423. However, the responsible attorney must ensure that client confidences and secrets are protected by all who will be given access, even after the representation ceases. Bus. & Prof. Code Sec. 6068(e)(1); Rule 3-310(E) and Discussion.
Referral relationships, however, can complicate these matters. When two lawyers (or any two professionals) refer clients to each other (and often the client and professionals are all friends), the lawyer(s) might mistakenly assume that the client does not mind its confidences being shared with the referring professional. This should not be taken for granted.
Additionally, where a third party pays the client’s bill, that third party does not have a right and should not have access to the client’s confidences, despite the economic relationship, unless the client consents. This should be addressed in writing at the outset of the relationship.
Finally, the physical presence of contract lawyers in different jurisdictions, often beyond the reach of our courts to enforce nondisclosure agreements and our State Bar to discipline violators and thus provide deterrence, may reduce the effectiveness of nondisclosure agreements. Attorneys should consider these issues before entering into such relationships.
Duty of Undivided Loyalty. Attorneys should always satisfy themselves that no conflict exists that would preclude the representation. See Rule 3-310; Flatt v. Superior Court (1994) 9 Cal.4th 275, 277 (an attorney owes an undivided duty of loyalty to existing clients and in some cases to former clients). This can be more difficult to accomplish when the attorney or firm uses a lot of contract lawyers and staff because the firm’s institutional memory may be degraded by so much turnover. Nonetheless, conflict checks are essential and must be done thoroughly. This can be fertile ground for ethics violations, especially since these issues often arise at the intersection of ethical duties to clients and the economic realities for the attorney or firm. At a minimum, every lawyer or firm’s conflict check should be designed to take account of all contract lawyers and paralegals, no matter how brief their tenure.
Duty to Exercise Independent Professional Judgment at All Times. Attorneys are responsible for the work product of employees performed pursuant to their direction and authority, and must exercise independent professional judgment on behalf of the client at all times. See Beck v. Wecht (2002) 28 Cal.4th 289, 295; Dynamic Concepts Inc. v. Truck Insurance Exchange (1998) 61 Cal.App.4th 999, 1009. The attorney cannot delegate to another person—such as a contract lawyer with more expertise in a particular subject area or the other professional who referred the client—decision-making functions such as authority over legal strategy, questions of judgment, or the final content of any work product. If this occurs, depending on the licensing status of the contract lawyer or professional in question, the attorney may be aiding and abetting the unauthorized practice of law. See Bus. & Prof. Code Sec. 6125; Rule 1-120; Farnham v. State Bar (1976) 17 Cal.3d 605, 612. This may result in a disagreement between the attorney and the referring professional, but there is no basis for the attorney to compromise his or her duties to the client based on an economic relationship with a third party.
Attorneys’ Duties to the Courts. Attorneys—even contract attorneys—have duties to the courts. Once a lawyer has been identified as scheduled to appear at a hearing (for example, at an appellate argument), the court will expect that attorney to be present until otherwise notified. If no one shows up at the hearing or argument because the attorney—whether an employee, partner or contract attorney—has left the firm and expected the firm to send a replacement, the court may sanction the original attorney. See Aguilar v. Lerner (2004) 32 Cal.4th 974, 12 Cal.Rptr.3d 287, 88 P.3d 24. See also Attorneys’ Continuing Duties to Court after Termination of Attorney-Client Relationship, County Bar Update (December 2004). This is especially important for temporary lawyers to remember since the Aguilar court made clear the individual attorney has a duty to inform the court of his or her nonappearance despite the fact that it was and is the firm, not the attorney individually, that is counsel of record on the matter. All attorneys scheduled to appear in court should inform the court when they intend not to appear for whatever reason.
These are just some of the issues raised by the changing economic realities of the legal marketplace, making imperative the review of the Rules of Professional Conduct and consultation with ethics experts to stay abreast of developments in ethics and related law.