Current and Timely Information and Analysis About
California Attorney Ethics in Practice

Sharing Confidential Information with a new Firm Can Create Risks

An increasingly common problem for partners considering departing a law firm and joining another is whether and to what extent the partner can share confidential business information about the lawyer’s practice with the new firm without violating legal and ethical obligations. It is difficult to imagine any law firm agreeing to bring in a lateral partner or group of lawyers without reviewing detailed information about the prospective practice, including financial information like revenue and profitability details, client details, staffing considerations, and related business information. But for a partner at a firm, disclosing any of these categories of information to a new firm in negotiations can implicate the partner’s duties to the old firm and to clients.

California’s Rules of Professional Conduct include some of the strictest client confidentiality requirements in the country, making this issue especially relevant for California partners.  What are the risks of disclosing information in negotiations with a potential new firm? In summary, there are several:

  • Potentially violating your fiduciary duties, duties of confidentiality, and similar obligations to your firm and violating other partnership agreement provisions;
  • Potentially violating your ethical obligations of client confidentiality and loyalty; and
  • Potentially revealing your departure planning just by accessing the confidential information at your firm.

You can mitigate these risks, but it requires detailed advance effort and practical planning. You need to know the rules governing these potential disclosures and develop a specific strategy to navigate them.

California Supreme Court Approves Major Revisions to Ethics Rules

The California Supreme Court yesterday approved a significant overhaul of California’s legal ethics rules, moving California’s rules closer to the structure of the ABA’s Model Rules for the first time. The Court’s Order approved 27 rules as submitted last year by the State Bar’s Commission for the Revision of the Rules of Professional Conduct, 42 rules as revised by the Court, and denied approval of one proposed rule (regarding a lawyer’s obligations representing a client with diminished capacity). The revised rules, effective November 1, 2018, change the numbering and format of California’s rules.  Substantively, the revised rules relate to personal relationships with clients, conflicts imputed through a law firm, attorney advertising, and attorney’s fees, and represent a years-long effort to simplify and to update the rules that govern California lawyers.

California Supreme Court Overturns Jewel Doctrine

The Jewel doctrine is no more in California.  In Heller Ehrman v. Davis Wright Tremain, the California Supreme Court held that a dissolved law firm has no property interest in fees generated after dissolution for hourly matters that were in progress when the firm dissolved.  The immediate implication is that a lawyer who leaves a dissolved law firm and takes clients to a new law firm does not have to give back profits earned on those matters at the new firm.  The case also has significant implications for partners departing even when the firm is not dissolving, since it confirms that client matters are not the property of the firm.

Jewel Doctrine Will be Revisited by California Supreme Court

The California Supreme Court is expected shortly to issue a decision in its review of Jewel v. Boxer, the long-standing and besieged case that stands for the proposition that a dissolved law firm has a right to recover profits for matters that departed partners take from the failed firm, absent an agreement otherwise.  The Court heard oral argument in December in the case, which reached the Court as a certified question from the 9th Circuit in the bankruptcy case of Heller Ehrman LLP:  “Under California law, what interest, if any, does a dissolved law firm have in legal matters that are in progress but not completed at the time the law firm is dissolved, when the dissolved law firm had been retained to handle the matters on an hourly basis?”

Jewel‘s so-called Unfinished Business rule, under which a law firm has a right to recover profits from matters at a dissolved law firm that transfer to new firms, has been attacked and upheld, embraced and distinguished, almost in equal measure, since it was issued.  Its application to hourly rate work has never been confirmed.  Some significant things have changed since Jewel was decided by the Court of Appeal in 1984.  California has since adopted the Revised Uniform Partnership Act; Jewel‘s reasoning is based in part on provisions of the then-applicable Uniform Partnership Act.  The Jewel partners did not have a written partnership agreement.  Today, many law firm partnership agreements contract around the Jewel question of who gets paid for unfinished business (remarkably, of course, many law firms still operate without a written partnership agreement).More

The Legal Ethics of Lawyer Wellness

The recent report of the ABA’s National Task Force for Lawyer Well-Being, entitled “The Path to Lawyer Well-Being: Practical Recommendations for Positive Change,” is striking for several reasons.  It’s the detailed description of the scope of the crisis in lawyer wellness, examined in a comprehensive analysis.  It’s the tone of the report–an urgent call to action–which is rare for any ABA committee.  But perhaps most striking is the fact that, for anyone who is a lawyer or who knows or works with lawyers, the scope of the problem and the crisis it has created matches familiar experience.  Addiction, anxiety, stress, depression, and suicide are familiar to the profession and have been for some time, which makes the report required reading for any lawyer.

Significantly, the report makes the compelling point that “lawyer well-being influences ethics and professionalism,” directly linking a lawyer’s wellness to the affirmative ethical duties of competence, diligence, truthfulness, communications, and relationships with people other than clients.  This highlights the ethical responsibilities of lawyers, law firms, law schools, regulators, judges, and bar associations to “build a more sustainable culture” for the legal profession in a five-step call to action:

“(1) Identifying stakeholders and the role that each of us can play in reducing the level of toxicity in our profession.
(2) Ending the stigma surrounding help-seeking behaviors. This report contains numerous recommendations to combat the stigma that seeking help will lead to negative professional consequences.
(3) Emphasizing that well-being is an indispensable part of a lawyer’s duty of competence. Among the report’s recommendations are steps stakeholders can take to highlight the tie-in between competence and well-being. These include giving this connection formal recognition through modifying the Rules of Professional Conduct or their comments to reference well-being.
(4) Expanding educational outreach and programming on well-being issues. We need to educate lawyers, judges, and law students on well-being issues. This includes instruction in recognizing mental health and substance use disorders as well as navigating the practice of law in a healthy manner. To implement this recommendation effectively, more resources need to be devoted to promoting well-being.
(5) Changing the tone of the profession one small step at a time. This report contains a number of smallscale recommendations, such as allowing lawyers to earn continuing legal education (CLE) credit for well-being workshops or de-emphasizing alcohol at bar association social events. These small steps can start the process necessary to place health, resilience, self-care, and helping others at the forefront of what it means to be a lawyer. Collectively, small steps can lead to transformative cultural change in a profession that has always been, and will remain, demanding.”