IN THE SUPREME COURT OF VIRGINIA AT RICHMOND IN THE MATTER OF SUPREME COURT RULES PART 6, II, RULES OF PROFESSIONAL CONDUCT 1.10 AND 5.
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1 VIRGINIA: IN THE SUPREME COURT OF VIRGINIA AT RICHMOND IN THE MATTER OF SUPREME COURT RULES PART 6, II, RULES OF PROFESSIONAL CONDUCT 1.10 AND 5.8 PETITION OF THE VIRGINIA STATE BAR Kevin E. Martingayle, President Karen A. Gould, Executive Director James M. McCauley, Ethics Counsel Virginia State Bar 1111 East Main Street Suite 700 Richmond, VA Phone (804) Fax (804)
2 TABLE OF CONTENTS I. Overview of the Issues 2 A. Rule B. Rule II. Publication and Comments 5 A. Rule B. Rule III. Proposed Rule Changes 10 IV. CONCLUSION 14 ii
3 VIRGINIA: IN THE SUPREME COURT OF VIRGINIA AT RICHMOND IN THE MATTER OF SUPREME COURT RULES, PART 6, II, RULES OF PROFESSIONAL CONDUCT 1.10 and 5.8 PETITION TO THE HONORABLE CHIEF JUSTICE AND THE JUSTICES OF THE SUPREME COURT OF VIRGINIA: NOW COMES the Virginia State Bar, by its president and executive director, pursuant to Part 6, IV, Paragraph 10-4 of the Rules of this Court, and requests review and approval of an amendment to Rule of Professional Conduct 1.10 and review and approval of Rule of Professional Conduct 5.8, Part 6, II, Rules of Virginia Supreme Court, as set forth below. The proposed amendment to Rule 1.10 was approved by a unanimous vote (0 abstentions) and proposed Rule 5.8 was approved by a vote of 64 to 1 (0 abstentions) by the Council of the Virginia State Bar on June 12, 2014 (Record, Page 96). 1
4 I. Overview of the Issues A. Rule 1.10 The Virginia State Bar Standing Committee on Legal Ethics ( Committee ) has proposed an amendment to Rule of Professional Conduct This proposed rule amendment is intended to avoid a situation in which a lawyer avoids the imputation of a conflict of interest by avoiding the knowledge that another lawyer in the firm has a conflict as to the representation. Under the current standard of knowing that another lawyer in the firm is prohibited from undertaking the representation, a lawyer can avoid the application of Rule 1.10(a), which would impute a conflict to him, by willfully failing to learn the information that establishes the existence of the conflict. The proposed Rule amendment imputes a conflict if the lawyer knows or reasonably should know that another lawyer in the firm is prohibited from representing the client. The proposed amendment adds a new Comment [2a] to explain that the failure to 2
5 maintain or use a system for identifying conflicts may be deemed a violation of Rule 1.10(a), if proper use of the system would have identified the conflict. A redlined version of the proposed amendments is included in Section III, below. A. Rule 5.8 The Committee has also proposed a new Rule of Professional Conduct 5.8. Proposed Rule 5.8 is based on Florida RPC and is not derived from an ABA Model Rule of Professional Conduct. The proposed Rule codifies a number of the suggestions from Virginia legal ethics opinions on departing lawyers obligations into more concrete steps to follow. It does not change the Committee s interpretation of a lawyer s obligations in these circumstances, but it does make clear that these are obligations, not suggestions, and establishes default rules for situations where the lawyer and firm cannot agree on how to proceed, or where the client does not respond to the required notification. 3
6 Current guidance on the responsibilities of lawyers and law firms during a separation or dissolution comes from advisory opinions that are largely not based on any Rules of Professional Conduct but rather lay out aspirational goals for how the client notification should be handled and its content. Lawyers have duties under Rule 1.4 (Communication), Rule 1.16 (Declining or Terminating Representation), and Rule 7.1 (Communications Concerning a Lawyer s Services) to communicate with clients promptly and truthfully and in a manner that will allow the client s interests to be protected, but the advisory opinions go beyond those basic duties to recommend, in detail, a particular type of communication with affected clients. If the departing lawyer had primary responsibility for a client s matter, that client should be given timely notice of the lawyer s departure and advised of the options from which the client may choose. In the heat of an acrimonious law firm breakup or lawyer departure, the lawyers involved fight over and cannot 4
7 agree on who the departing lawyer or the law firm should give the notice. Because of the significance of this issue, the frequency with which these issues are raised on the Ethics Hotline, and the acrimony that often accompanies a firm departure or dissolution, the Committee believes that it will be helpful to have a Rule of Professional Conduct that explicitly dictates how and under what circumstances clients must be notified, rather than relying exclusively on advisory opinions. The proposed new Rule is included in Section III, below. II. Publication and Comments A. Rule 1.10 The Standing Committee on Legal Ethics approved the proposed amendments to Rule 1.10 at its meeting on January 16, 2014 (Record, Page 6). The Virginia State Bar issued a press release dated January 22, 2014, pursuant to Part 6, IV, Paragraph 10-2(c) of the 5
8 Rules of this Court (Record, Page 7). Notice of the proposed amendments was also published on the bar s website on the Proposed Rule Changes page (Record, Page 11) and in the bar s E-News on February 1, 2014 (Record, Page 13). Three comments were received from: Michelle Gowdy (Record, Page 19), on behalf of the Local Government Attorneys, expressing no comment; Martha McQuade (Record, Page 15), in favor of the proposed amendment; and Andrew Burcher (Record, Page 17), in opposition to the proposed amendment. B. Rule 5.8 The Committee approved proposed Rule 5.8 at its meeting on November 21, 2013 (Record, Page 22). The Virginia State Bar issued a press release dated December 1, 2013, pursuant to Part 6, IV, Paragraph 10-2(C) of the Rules of this Court (Record, Page 23). Notice of the proposed amendments was also published in the Virginia Lawyer Register, Vol. 62, No. 6 at page 5 in the January 2014 issue (Record, Page 30); on the 6
9 bar s website on the Proposed Rule Changes page (Record, Page 28); and in the bar s E-News on December 3, 2013 (Record, Page 25). The deadline for comments was then extended to March 6, 2014, with notice of the extension published in the bar s E-News on February 1, 2014 (Record, Page 34), and on the bar s website on the Rule Changes page (Record, Page 33) and on the News and Information page (Record, Page 32). Eighteen comments about the proposed Rule were received from Bradley Marrs (Record, Page 77), Benjamin Shapiro (Record, Page 91), Andrew Cornick (Record, Page 90), Kevin Fitzpatrick (Record, Page 89), Norman Thomas (Record, Page 95), M. Bruce Wallinger (Record, Page 94), Kevin Grierson (Record, Page 86), Brandon Waltrip (Record, Page 87), Sandra Milburn (Record, Page 85), Leslie Haley (Record, Page 83), Benjamin Cooper IV (Record, Page 76), William Curdts (Record, Page 75), W. Edward Riley IV (Record, Page 44), Washington Metropolitan Area Corporate Counsel Association (Kessler & Sarwal) (Record, Page 41), J. William 7
10 Snyder, Jr. (Record, Page 46), K. Ruppert Beirne (Record, Page 68), Karen Lebo (Record, Page 71), and Paul Saunders II (Record, Page 38). In response to issues raised by the comments, the Committee amended the proposed rule to clarify that the duties of communication established by this rule also implicate the lawyer s obligations under Rules 1.3 and 1.16 and to more clearly and succinctly define when a lawyer s departure requires notification to clients. Initially, based on concerns raised by some comments, the Committee revised paragraph (d) to parallel paragraph (e) and provide that, when a client fails to respond to the notification, the client will be deemed to remain a client of the lawyer who is primarily responsible for the client s active matters. However, this language triggered discussion during the Executive Committee meeting on June 11, 2014, that raised two concerns. First, the determination of the lawyer primarily responsible for the client s matter in a firm where two or more lawyers work on that same 8
11 client s matter left the determination of that issue to the subjective interpretation and perception of the lawyers involved, the firm and the client. Resolution of that issue could require litigation that is unnecessary and contrary to the client s interests. Second, once a lawyer leaves the law firm and the notice required by this rule is given, the departing lawyer and law firm must await the client s election. When the client fails to communicate his or her election to go with the departing lawyer or remain with the law firm, the law firm is left with a situation in which the law firm remains responsible for that client s matter and any potential liability or ethical obligations that entails. The change to paragraph (d) addresses this problem by stating that in the event the client does not communicate his or her election, the client remains a client of the firm until either the client notifies the law firm otherwise, or the law firm terminates the representation in a written communication to the client. 9
12 Many of the comments asked the Committee to address issues that are beyond the scope of the client-focused duties imposed by the Rules of Professional Conduct, such as whether a departing lawyer is required to give his firm advance notice of his departure. III. Proposed Rule Changes Rule 1.10 Imputed Disqualification: General Rule (a) While lawyers are associated in a firm, none of them shall knowingly represent a client when the lawyer knows or reasonably should know that any one of them practicing alone would be prohibited from doing so by Rules 1.6, 1.7, 1.9, or 2.10(e). *** Comment *** [2a] A lawyer or firm should maintain and use an appropriate system for detecting conflicts of interest. The failure to maintain a system for identifying conflicts or to use that system when making a decision to undertake employment in a particular matter may be deemed a violation of Rule 1.10(a) if proper use of a system would have identified the conflict. *** Rule 5.8 Procedures For Notification to Clients When a Lawyer Leaves a Law Firm or When a Law Firm Dissolves (a) Absent a specific agreement otherwise: (1) Neither a lawyer who is leaving a law firm nor other lawyers in the firm shall unilaterally contact 10
13 clients of the law firm for purposes of notifying them about the anticipated departure or to solicit representation of the clients unless the lawyer and an authorized representative of the law firm have in good faith conferred or attempted to confer and have been unable to agree on a joint communication to the clients concerning the lawyer leaving the law firm; and (2) A lawyer in a dissolving law firm shall not unilaterally contact clients of the law firm unless authorized members of the law firm have in good faith conferred or attempted to confer and have been unable to agree on a method to provide notice to clients. (b) When no procedure for contacting clients has been agreed upon: (1) Unilateral contact by a lawyer who is leaving a law firm or the law firm shall not contain false or misleading statements, and shall give notice to the clients that the lawyer is leaving the law firm and provide options to the clients to choose to remain a client of the law firm, to choose representation by the departing lawyer, or to choose representation by other lawyers or law firms; and (2) Unilateral contact by members of a dissolving law firm shall not contain false or misleading statements, and shall give notice to clients that the firm is being dissolved and provide options to the clients to choose representation by any member of the dissolving law firm, or representation by other lawyers or law firms. (c) Timely notice to the clients shall be given promptly once the departure or dissolution has been decided, and shall provide information concerning potential liability for fees for legal services previously rendered, costs expended, and how any deposits for fees or costs will be handled. 11
14 (d) In the event that a client of a departing lawyer fails to advise the lawyer and law firm of the client s intention with regard to who is to provide future legal services, the client shall be deemed a client of the law firm until the client advises otherwise or until the law firm terminates the engagement in writing. (e) In the event that a client of a dissolving law firm fails to advise the lawyers of the client s intention with regard to who is to provide future legal services, the client shall be deemed to remain a client of the lawyer who is primarily responsible for the legal services to the client on behalf of the firm until the client advises otherwise. Comment [1] Although there may also be significant business and legal issues involved when a lawyer leaves a law firm or a law firm dissolves, this rule addresses the rights of the clients to be fully informed and able to make decisions about their representation. Accordingly, the rule emphasizes both the timing and the content of the required notice to clients. Upon the departure of a lawyer or the dissolution of the law firm, the client is entitled to notice that clearly provides the contact information for the departing lawyer, the status of the client s file and any other property, including advanced legal fees, in the possession of the lawyer or law firm, and information about the ability and willingness of the lawyer and/or firm to continue the representation, subject to Rule Nothing in this rule or in the contract for representation may alter the ethical obligations that individual lawyers have to a client as provided elsewhere in these rules. Any client notification agreement, whether pursuant to this rule or otherwise, must also comport with Rule 5.6(a). Lawyers may also have fiduciary, contract, or other 12
15 obligations to their firms that are outside the scope of these rules. [2] While this rule requires the departing lawyer and the law firm to confer in good faith in order to make a joint communication to the departing lawyer s clients, the duty to communicate with clients and to avoid prejudicing the clients during the course of representation requires prompt communication when the lawyer primarily responsible for those clients is leaving the firm. See, e.g., Rules 1.3(c), 1.16(d) and 1.16(e). If continued representation by the departing lawyer and/or by the law firm is not possible, the communication shall clearly state that fact and advise the client of the remaining options for continued representation, including the client s right to choose other lawyers or law firms. [3] For purposes of the notification required by this rule, client refers to clients for whose active matters the departing lawyer has primary responsibility. [4] While clients have the right to choose counsel, such choice may implicate obligations. Those obligations may include a requirement to pay for legal services previously rendered and costs expended in connection with the representation as well as a reasonable fee for copying the client s file. See Rule 1.16(e). Some clients may be limited in their ability to choose counsel. For example, when the lawyer is appointed by a court to represent a client, the appointed lawyer is responsible for the representation until relieved or replaced by the court. [5] Lawyers involved in either a change in law firm composition or a law firm dissolution may have duties to notify the court if they represent clients in litigation. In either case, a lawyer who is counsel of 13
16 record before a court must file a motion to withdraw or a motion for substitution of counsel if he no longer represents the client. See Rule 1.16(c). IV. CONCLUSION The Supreme Court is authorized to regulate the practice of law in the Commonwealth of Virginia and to prescribe a code of ethics governing the professional conduct of attorneys. Va. Code , Pursuant to this statutory authority, the Court has promulgated rules and regulations relating to the organization and government of the Virginia State Bar. Va. S. Ct. R., Pt. 6, IV. Paragraph 10 of these rules sets forth the process by which legal ethics advisory opinions and rules of professional conduct are promulgated and implemented. Proposed Rule 5.8 and the amendments to Rule 1.10 were developed and approved in compliance with all requirements of Paragraph 10. THEREFORE, the bar requests that the Court approve the proposed amendments to Rule of Professional Conduct 1.10 and proposed Rule 5.8, Part 6, II of the Rules of the Virginia Supreme Court for the reasons stated 14
17 above. Respectfully submitted, VIRGINIA STATE BAR By Kevin E. Martingayle, President By Karen A. Gould, Executive Director Dated this 18th day of June,
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