Cal. Rules Redo Marries Borrowed Rules With Old and New

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By Joan C. Rogers

July 11 — The California State Bar is seeking feedback by Sept. 27 on a big set of proposed revisions to the rules governing lawyer conduct in the Golden State.

The bar's board of governors June 23 agreed to float 68 proposed new and amended California Professional Conduct Rules for a 90-day public comment period.

The proposed rules mostly track the numbering of the Model Rules and borrow some of the substance of the ABA models, but rework or add to several rules and preserve some of California's current rules, including its strict confidentiality standards.

Some highlights of the package are:

  •  A hybrid general standard for conflicts of interest;
  •  Restrictions on nonrefundable fees and flat fees;
  •  A narrow screening rule;
  •  A unique rule on representing clients with diminished capacity;
  •  Two alternatives for an updated bias rule;
  •  Streamlined advertising and solicitation rules; and
  •  A flat ban against sex with current clients.

The proposals leave out Model Rule 1.18 (duties to prospective clients), Model Rule 8.3 (reporting misconduct) and a half-dozen other ABA models. ( See box).

The process of shifting to a version of the Model Rules in California is on a fast track—but far from complete. The commission said it will seek additional comment for any revisions to these drafts before sending final proposals to the bar's board of governors for possible approval. Even when the board has approved a final set of rules, none of them will go into effect unless and until the California Supreme Court accepts them.

Public Hearing

There will be a public hearing July 26 on the proposed rules at the state bar's Los Angeles office, with a remote link enabling people to testify from the bar's San Francisco office. The time limit for registering to speak is July 20.

Heather L. Rosing, who's with Klinedinst in San Diego, told Bloomberg BNA that some of the proposals likely to provoke the most discussion are the draft rules on prohibited discrimination, harassment, and retaliation; client trust accounting and preserving client property; sexual relations with clients; and advertising and solicitation.

“I think that the attorneys in California will be very interested in some of the proposed changes,” Rosing said. “We are urging every attorney to take the time to study them, and to give us their comment,” she said.

Rosing is one of several advisors to the commission but made clear that she was expressing her own views and not speaking for the commission in her comments to Bloomberg BNA.

Rules Revision Redux

The proposals came from the second Commission for the Revision of the Rules of Professional Conduct, which the state bar put together less than two years ago after the California Supreme Court abruptly told the bar to go back to the drawing board in its years-long effort to update the state's lawyer conduct rules.

Some ABA Standards Left Out

A memorandum accompanying the package of proposed California rules explains why the drafting commission decided against these ABA standards:

▸Model Rule 1.18, duties to prospective clients;

▸Model Rule 2.3, evaluation for use by third parties;

▸Model Rule 5.7, responsibilities regarding law related services;

▸Model Rule 6.1, voluntary pro bono service;

▸Model Rule 6.2, accepting appointments;

▸Model Rule 6.4, law reform activities;

▸Model Rule 7.6, political contributions to get government engagements or appointment by judges; and

▸Model Rule 8.3, reporting misconduct.

The proposed rules also omit some features of particular ABA rules, such as Model Rule 1.8(d) (literary or media rights) and Model Rule 1.8(i) (proprietary interest in client's cause of action or litigation).

In 2010 the state bar approved a a set of proposed rules developed by the first rules revision commission. See 26 Law. Man. Prof. Conduct 473 , 619 .

But in September 2014, the justices bagged those proposals and gave the bar specific marching orders to reboot the rules revision process. The court told the bar to submit new proposals for its consideration no later than March 31, 2017. See 30 Law. Man. Prof. Conduct 661.

The reconstituted commission held hearings, convened numerous times and developed the new set of proposals at top speed, building on the work of the previous commission whose work spanned nearly a decade.

“The Rules Revision Commission has worked extremely hard in order to have these proposed rules ready for public comment this summer,” Wendy Wen Yun Chang told Bloomberg BNA. “They are the result of rigorous debate and thoughtful analysis,” she said.

Chang is a partner is the Los Angeles office of Hinshaw & Culbertson LLP. She's one of the commission's advisors but, like Rosing, made clear that she was speaking with Bloomberg BNA only in her personal capacity and not on behalf of the commission.

Merri A. Baldwin also praised the scope and speed of the commission's work. “The fact that the commission has managed to pull together a comprehensive set of proposed rules in such a short period of time is truly commendable,” she told Bloomberg BNA.

Baldwin is a shareholder in Rogers Joseph O'Donnell, San Francisco, and currently chairs the state bar's Committee on Professional Responsibility and Conduct, known as COPRAC.

Guiding Principles

Jeffrey L. Bleich, the commission's co-vice-chair, told Bloomberg BNA he believes the commission did a good job of sticking to the guiding principles the court set out for revising the rules. He's a partner in Dentons US LLP, San Francisco/Oakland.

Bleich summarized those principles this way: “(1) to focus on public protection and on ensuring that the rules were clear to practicing lawyers; (2) to avoid ‘aspirational' or ‘theoretical' obligations, and confine ourselves to identifying areas where a lawyers' behavior should warrant discipline; (3) to make changes only if there was a good and articulable reason for doing so based on experience (not clever conjecture); and (4) to look to other jurisdictions and align California's rules where there was a genuine and justified national consensus.”

“California's rules haven't been updated for decades, and were overdue for this type of review,” Bleich said. “Yet, many lawyers are surprisingly passionate about these rules, and so every proposed change drew some sort of controversy,” he said.

Model Rules Numbering System …

Every state except California uses the Model Rules numbering system, with some modifications in a few jurisdictions. Accordingly, California's completely different numbering system seems alien to most lawyers in other states.

The proposed California rules shift to the ABA numbering system, with a few variations such as separately numbered rules for the subparts of Rule 1.8.

This change isn't as minor as it seems, according to Rosing. “While it seems like a small thing, I think the practitioners in California will greatly benefit from the Rules being renumbered to align with the ABA Model Rules numbering,” Rosing told Bloomberg BNA.

“This will make it much easier for California practitioners to reference ABA authorities, and compare our standards with the standards in other states,” she said.

… and Some Model Rules Content

Some of the proposed rules also borrow the language and format of the corresponding ABA models. For example, proposed Rule 5.1 and Rule 5.3 on managerial and supervisory responsibilities within a law firm, as well as draft Rule 5.2 on responsibilities of subordinate lawyers, are nearly identical to the corresponding ABA models.

“I think that overall the new rules are an improvement,” Baldwin said in regard to the commission's efforts to bring the California rules more in line with the ABA rules. “There are important benefits to having a more standardized set of ethical and disciplinary standards nationally,” she said.

However, there are some instances in which the proposed rule is an awkward or unworkable amalgam of the existing California rule and the ABA rule, Baldwin said.

Rosing said that in her opinion, aligning the California Rules of Professional Conduct with the Model Rules has significant value.

“Practitioners are now oftentimes licensed in multiple states, and many federal courts require compliance with both the ABA Model Rules and the state’s ethics code,” Rosing said. “Because of this growing trend towards multi-jurisdictional practice, practitioners benefit from something resembling a national standard,” she said.

However, “the proposals do differ from the Model Rules in some significant ways,” Rosing said. “California has many unique features in its current body of ethics rules, and the Commission has determined that some of these should not be sacrificed for the sake of uniformity,” she said.

Rosing also pointed out that the rules revision commission had to consider the State Bar Act, found in the California Business and Professions Code, in recommending updates. “The Commission could not amend the Rules in such a way that they would conflict with these statutory provisions,” she said.

Lots of Changes

In an interview with Bloomberg BNA, Scott B. Garner noted that the proposed rules involve big changes for California lawyers. “Lots of rules are changing,” he said.

Garner is a partner in Umberg Zipser LLP in Irvine, Cal. He's co-chair of the Orange County bar's Professionalism and Ethics Committee and just finished a term as COPRAC's chair.

Some of the commission's proposed changes are intended to make the rules consistent with California case law, Garner said. But “some of the rules do adopt the Model Rules’ format and language, which in some instances will be a significant change from our current rules,” he said.

“It will be interesting to see how courts rely on the existing authority that cites to the old rules,” Garner said. Determining which cases and ethics opinions still apply will be challenging, he said.

Baldwin said the comprehensive nature of the proposals has a downside for purposes of public comment—that is, “it is extremely difficult to review and analyze so many rules at once in a way that is meaningful.”

“I have some concerns that the level of public engagement may be diminished as a result, to the detriment of the process,” she said.

Rosing and others pointed out that it's been many years since comprehensive revisions to California's professional conduct rules.

“It is definitely time to make changes, not only to align the California Rules with the ABA Model Rules, but to update some of the concepts to reflect the realities of today's practice of law,” Rosing said

Revisions are needed to protect clients against new ways in which they can be harmed, Rosing said. The rules also need updating in light of emerging technologies and new forms of communications, and to be workable and practical in today's legal environment, she said.

Hybrid Conflicts Standard

Garner said he expects a ton of comments on draft Rule 1.7, which addresses conflicts of interest involving current clients. “It's a beefy rule,” he said.

Garner noted that the proposed rule uses the Model Rule language for conflicts of interest—“that is, there is a conflict requiring informed written consent where there is a ‘significant risk of material limitation.'”

“This is different from the current California standard, which relied on the risk that the lawyer had confidential information that was material to the representation,” he said.

“I believe this newer formulation will give courts greater flexibility in flushing out what is and is not a conflict of interest,” Garner said.

However, Baldwin said proposed Rule 1.7 is an instance where the combination of Model Rule language with California provisions doesn't work. The commission's proposal “retains certain provisions of current Rule 3-310(B) within a framework based on Model Rule 1.7 in a way that does not make sense,” she said.

“It would be far better to drop the remainder language from Rule 3-310 and adopt a rule that is based more closely on Model Rule 1.7,” Baldwin said.

Confidentiality Stays Strict

With regard to lawyer-client confidentiality, Garner said that “the client confidentiality rules haven’t really changed very much because the Rules Revision Commission felt constrained by the statute which provides that lawyers will protect a client’s secrets at every peril to him or herself.”

“Although there are a lot of legal ethics experts that would like to see the confidentiality rules changed in certain respects, that just isn’t going to happen unless the legislature amends the statute,” he said.

Chang also mentioned that the proposals don't relax lawyer-client confidentiality. “California will continue to have only a single exception to the duty: the criminal death or substantial bodily harm exception,” she said.

“California's duty of confidentiality has always been the strictest in the nation, and exists as a matter of statutory mandate, in addition to the Rules of Professional Conduct,” Chang said. “Proposed California Rule 1.6 does not change that historical strict approach.”

This broad approach to the duty of confidentiality necessarily spilled over into the drafting of other rules, Chang said.

Accordingly, the proposed California rules won't permit disclosure in situations where the Model Rules might, Chang said. She cited as examples proposed Rule 1.14 (clients with diminished capacity) and Comment [3] to that rule, and proposed Rule 3.3(b) (candor toward the tribunal) and Comment [5] to that rule.

One-Fourth of Commission's Proposed Rules Don't Have Any Source in California's Current Rules

These proposed rules being aired for public comment don't have any counterpart in the current California Rules of Professional Conduct:

Rule 1.3 (diligence)

Rule 1.8.2 (use of current client's information)

Rule 1.8.11 (imputation of prohibitions under specific conflicts rules)

Rule 1.10 (imputation of conflicts: general rule)

Rule 1.11 (special conflicts of interest for government officials and employees)

Rule 1.12 (former judge, arbitrator, mediator or other third-party neutral)

Rule 1.14 (client with diminished capacity)

Rule 2.4 (lawyer as third-party neutral)

Rule 3.2 (delay of litigation)

Rule 3.9 (advocate in nonadjudicative proceedings)

Rule 4.1 (truthfulness in statements to others)

Rule 4.3 (communication with an unrepresented person)

Rule 4.4 (duties concerning inadvertently transmitted writings)

Rule 5.1 (responsibilities of managerial and supervisory lawyers)

Rule 5.2 (responsibilities of subordinate lawyer)

Rule 5.3 (responsibilities regarding nonlawyer assistants)

Rule 6.3 (membership in a legal services organization)

Nonrefundable and Flat Fees

Proposed restrictions on nonrefundable and flat fees are likely to spark controversy during public comment on the proposed rules.

During the previous commission's work, criminal defense lawyers and others strongly objected to proposed limits on flat fees, and those restrictions didn't make it into the final body of proposed rules. See 26 Law. Man. Prof. Conduct 473.

In the current proposals, draft Rule 1.5 permits a fee to be denominated “earned on receipt” or “non-refundable” only if the fee is a true retainer and the client agrees in writing after disclosure that none of it is refundable.

Also, proposed Rule 1.5 permits a flat fee that's paid in advance “as long as the lawyer performs the agreed upon services.”

Draft Rule 1.15 (safeguarding funds and property) specifies how a lawyer must handle a flat fee paid in advance. The lawyer must deposit the funds in a trust account until the fee is earned unless the lawyer makes certain specific disclosures to the client in writing and the client gives informed written consent.

Narrow Screening Provision

Proposed Rule 1.10 (general rule on imputation of conflicts) allows law firms to use screening measures without client consent in limited circumstances to avoid imputation of an incoming lawyer's conflict of interest from prior association with another firm.

However, the draft provision authorizes screening only where the incoming lawyer “did not substantially participate in the same or a substantially related matter” at the other firm. That limitation makes the proposed screening provision narrower than the one in Model Rule 1.10.

The use of screening measures got a thumbs up from a California appeals court in Kirk v. First Am. Title Ins. Co., 2010 BL 78795, 108 Cal. Rptr. 3d 620, 26 Law. Man. Prof. Conduct 239 (Cal. Ct. App. 2010).

Garner said lots of firms in California already use screens in reliance on Kirk. But some courts construe Kirk as narrowly as possible, he said.

Garner said he's skeptical the proposed screening measure will actually pass.

The issue of screening was controversial during the earlier commission's travails. Public comment strongly favored adoption of a screening provision, but the bar's board of governors nixed the idea, leaving the law on that subject to be developed through court decisions. See 26 Law. Man. Prof. Conduct 324.

Clients With Diminished Capacity

Several lawyers Bloomberg BNA contacted for comment mentioned that proposed Rule 1.14 (client with diminished capacity) differs substantially from Model Rule 1.14.

California's proposed rule had to be structured around the statutorily-mandated duty of confidentiality, Rosing pointed out.

The detailed California proposal allows a lawyer to take protective action under certain circumstances when a client has significantly diminished capacity, but the lawyer must explain why and obtain the client's consent.

In seeking the client's consent, a lawyer can get an appropriate person to help the lawyer communicate with the client, but in doing so the lawyer can't disclose more information than necessary to protect the client from substantial physical, psychological or financial harm.

Lawyers can seek a client’s advance informed written consent to take protective action in the event certain circumstances later occur.

Prohibited Discrimination

The proposals being floated for public comment include two versions of an amended Rule 8.4.1 on prohibited discrimination, harassment and retaliation.

One alternative, labelled “ALT1,” is the commission's recommended version of Rule 8.4.1. It would expand current Rule 2-400 in several ways, such as extending the prohibition beyond the management or operation of law firms, broadening it to cover additional protected categories and enlarging it to encompass retaliation.

The commission's version would also eliminate the current rule's requirement that there be a final civil determination of wrongful discrimination before a disciplinary investigation can commence or discipline can be imposed.

Chang told Bloomberg BNA that the commission's proposal—that is, ALT1—“would be a big step forward in California's commitment to equality and fairness in the profession, making discrimination and harassment a black-letter ethical violation.”

The adjudication precondition in the current California discrimination rule “sends a terrible message,” Chang said.

The bar's board of governors decided to float an alternate version of Rule 8.4.1 (“ALT2”) for public comment along with the commission's proposed rule.

“Disappointingly, the ALT2 version of proposed Rule 8.4.1, not approved by the Commission, would insert a pre-adjudication precondition back into the rule,” Chang said.

Hire Me!

As for rules on marketing legal services, the commission proposed replacing current Rule 1-400 with the Model Rules framework of having five separate rules that regulate different aspects of lawyers' commercial speech.

No Sex With Current Clients Unless Lovers First

Proposed Rule 1.8.10 prohibits lawyers from engaging in sexual relations with a client unless they already had a consensual sexual relationship when the lawyer-client relationship began.

The flat ban is stricter than current Rule 3-120, which forbids lawyers to demand sexual favors from clients or to coerce clients into having sexual relations.

The proposed rule carries forward the definition of “sexual relations” in the existing rule.

The five proposed rules differ substantially from the Rule 1-400. They're mostly similar to the ABA rules in substance, but with a few notable departures.

Notably, the commission recommended repealing or relocating all of the existing “standards” that the bar's board of governors has adopted on lawyer advertising. However, proposed Rule 7.1 retains the board's authority to adopt advertising standards.

Also, the proposed rules don't carry forward the current archiving requirement in Rule 1-400(F) that commands lawyers to keep a copy of their advertisements for two years.

To contact the reporter on this story: Joan C. Rogers in Washington at jrogers@bna.com

To contact the editor responsible for this story: Ethan Bowers at sbowers@bna.com

For More Information

Public comment notice, with links to executive summaries and other materials, is at http://calbar.ca.gov/AboutUs/PublicComment/201608.aspx.

Links to clean and redline drafts of the proposed rules and other materials are at http://ethics.calbar.ca.gov/Committees/RulesCommission2014/ProposedRules.aspx.

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