California’s Commission for the Revision of the Rules of Professional Responsibility has proposed 68 new and amended rules for attorneys, and is seeking public comment on the proposed rules. California is the only state that whose professional responsibility rules do not track the ABA Model Rules. The Commission has issued an Executive Summary detailing the proposed and amended rules, comments, and dissenting views. The Commission also issued a detailed list of rule revisions considered, but rejected. Among other things, the proposed rules include suggested revisions to rules related to personal relationships with clients, conflicts imputed through a law firm, attorney’s fees, and handling clients with diminished capacity. The public comment period expires September 27.
California Attorney Ethics in Practice
May 12, 2016
California Supreme Court Will Review Arbitration, Advance Conflict Waivers, and Disgorgement of Fees
The California Supreme Court has granted review in Sheppard, Mullin, Richter & Hampton, LLP v J-M Manufacturing Co., Inc. to address several legal ethics issues of critical importance to California law firms. The Court of Appeal in the case below held that the question of whether the firm’s arbitration provision was enforceable was for the court, not the arbitrators, to decide; that the firm’s simultaneous representation of J-M and another client violated California Rules of Professional Conduct 3-310(C)(3); and that the firm’s violation of Rule 3-310(C) made the entire fee agreement unenforceable, meaning the firm was not entitled to any fees related to the matter from the date of the conflict forward.
The Supreme Court’s review will consider the following: “(1) May a court rely on non-legislative expressions of public policy to overturn an arbitration award on illegality grounds? (2) Can a sophisticated consumer of legal services, represented by counsel, give its informed consent to an advance waiver of conflicts of interest? (3) Does a conflict of interest that undisputedly caused no damage to the client and did not affect the value or quality of an attorney’s work automatically (i) require the attorney to disgorge all previously paid fees, and (ii) preclude the attorney from recovering the reasonable value of the unpaid work?”More
March 31, 2016
Recent examples in California courts have demonstrated the limits of advance conflict waivers and the effects of these limits. Needless to say, finding out that an advance conflict waiver is not effective to resolve a conflict can come as a shock, because it generally happens after-the-fact. Recent cases suggest that attorneys and firms who use advance conflict waivers should go back to the drawing board to evaluate how they are used and, more importantly, what they can accomplish and what they cannot.
Start at the beginning. California Rules of Professional Conduct Rule 3-310(C) provides that attorneys cannot represent clients with conflicting or potentially conflicting interests “without the informed written consent of each client.” Rule 3-310(A)(2) provides that “‘Informed written consent’ means the client’s or former client’s written agreement to the representation following written disclosure.” In general terms, an advance conflict waiver is a provision in an attorney-client fee agreement that notifies the client of the potential for conflicts and ostensibly gets the client to waive those potential conflicts in advance. But waiving potential conflicts in advance is the trick. Before a conflict arises, how can you adequately describe the circumstances of the conflict to a client so that the client can give informed consent? The answer is fairly straightforward: you can’t. This does not mean that advance conflict waivers are worthless, however.More
March 15, 2016
Some recent California cases have illustrated the importance of a properly drafted arbitration provision in attorney-client fee agreements, and what is at stake. Typically, arbitration is vastly superior to litigation for law firms to resolve disputes with clients related to representation, including fee disputes. Arbitration is confidential, generally has limited discovery and streamlined procedures, and can lead to a swifter resolution of what are sure to be ugly issues. But if your arbitration provision is not properly drafted, it may not be worth much when you need it. Some minor revisions to your fee agreement may mean the difference between arbitrating and litigating disputes with clients. More
February 29, 2016
We frequently repeat the refrain that client confidentiality in California is not a gray area: you must keep client information confidential. Most attorneys (hopefully) by now know not to divulge confidential client information on social media. Some attorneys have learned the hard way that casual comments about clients or client matters on social media is perilous. But attorneys must also focus on the potential to reveal confidential client information indirectly on social media. You may be revealing a lot on social media even though you aren’t posting directly about clients or client matters. How so?More