ISBA Assembly Meeting December 15, 2012

Informational Report B

Professional Conduct Opinions

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ISBA Professional Conduct Advisory Opinion _______________________________________________ Opinion No. 12-11 May 2012 Subject: Discharged of lawyer; Division of Fees; Fees and Expenses Digest: A discharged attorney may not share in a division of fees with his former client’s

successor attorney where the client does not agree in writing to the arrangement. References: Illinois Rules of Professional Conduct, Rules 1.5(c)(e), 1.8(i), 1.16(d)

ISBA Advisory Opinion Nos. 92-22, 93-17, 94-14 and 02-02

ABA Informal Ethics Op. 1520 (1986)

ABA Annotated Model Rules of Professional Conduct (7th ed. 2011)

770 ILCS 5/1 Attorneys Lien Act Friedman v. Malevitis, 304 Ill. App. 3d 979, 710 N.E.2d 843, 238 Ill.Dec.

46 (1st Dist. 1999) Delapaz v. Selectbuild Construction, Inc., 394 Ill. App. 3d 969, 917

N.E.2d 93, 334 Ill.Dec. 496 (1st Dist. 2009)

Upgrade Corp. v. Michigan Carton Co., 87 Ill. App. 3d 662, 410 N.E.2d 159 (1st 1980)

Twin Sewer & Water, Inc. v. Midwest Bank & Trust Co., 308 Ill. App. 3d 662, 720 N.E.2d 636 (1st 1999)

In re Estate of Callahan, 144 Ill. 2d 32, 578 N.E.2d 985 (1991) Stephanie Kanwit, Attorneys’ Liens: When Can You Retain Client’s Files?, 79 Ill. Bar J. 274 (1991)

Patrick Sean Ginty, When Can You Retain Files for Failure to Pay Fees?,

92 Ill. Bar J. 97 (2004)

FACTS Client discharges Lawyer A in his personal injury case in favor of Lawyer B. Both lawyers then reach a written agreement on division of the contingent fee in exchange for Lawyer A tendering

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the client’s file. Lawyer B subsequently advises A that the complexities of the case require that she engage additional counsel and that she was refusing to honor their agreement as it lacked the written consent of the Client.

QUESTIONS 1. Where Lawyer A has a proper attorney’s lien for a contingent fee as well as a retaining

lien on the client’s file, and accepts Lawyer B’s offer to share future fees, is client consent necessary for a division of fee agreement to be enforceable?

2. Must a client consent in writing to a division of fee agreement between her current

attorney and her former discharged attorney?

OPINIONS Division of Fees-Discharged Attorney The instant questions are resolved by reference to Rule 1.5(e) of the Rules of Professional Conduct which states:

(e) A division of a fee between lawyers who are not in the same firm may be made only if:

(1) the division is in proportion to the services performed by each lawyer, or if the primary service performed by one lawyer is the referral of the client to another lawyer and each lawyer assumes joint financial responsibility for the representation; (2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and (3) the total fee is reasonable.

Thus, any arrangement for a division of fees between attorneys to which the client does not agree in writing violates the above Rule, regardless of whether the basis for the division is the proportionality of services performed by each lawyer or the referral of one attorney to another. See Rule 1.5, Comment [7] Division of Fee. In addition, this result is compelled by the Illinois Appellate Court’s decision in Friedman v. Malevitis, 304 Ill. App. 3d 979, 710 N.E.2d 843, 238 Ill.Dec. 46 (1st Dist. 1999). In that case, a discharged lawyer entered into an agreement with the successor lawyer, without the consent of the client, to divide on a percentage basis any fee earned from the resolution of the underlying case. When the case was settled the successor attorney refused to pay the agreed upon percentage and the discharged lawyer filed suit. The successor attorney claimed the agreement was void because it violated public policy and RPC 1.5. The Appellate Court agreed and noted: “it is clear that Illinois public policy prohibits a discharged lawyer from receiving a percentage-based fee where said fee was not related to the value of services rendered, the client does not consent to the fee arrangement, and the discharged attorney has no responsibility for the pending litigation.” Friedman, 304 Ill.App.3d at 987, citing Leoris v. Dicks, 150 Ill. App. 3d 350, 353, 501 N.E.2d 901, 903, 103 Ill.Dec. 584 (1st Dist. 1986).

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Notwithstanding the impropriety of the fee division described above, it is clear that a discharged lawyer is entitled to some amount of fee on a quantum meruit basis. E.g. Delapaz v. Selectbuild Construction, Inc., 394 Ill. App. 3d 969, 917 N.E.2d 93, 334 Ill.Dec. 496 (1st Dist. 2009). The discharged and successor lawyers are free to agree upon a fee to be paid the discharged lawyer, whether upon a percentage or quantum meruit basis, as long as the client consents in writing. In the absence of client consent confirmed in writing, however, the discharged lawyer’s remedy would be for the court to determine the appropriate quantum meruit amount using a number of well established factors. Delapaz, 394 Ill. App. 3d at 973 (“Several factors are considered in determining the quantum meruit amount for services rendered, which include ‘the time and labor required, the attorney’s skill and standing, the nature of the cause, the novelty and difficulty of the subject matter, the attorney’s degree of responsibility in managing the case, the usual and customary charge for that type of work in the community, and the benefits resulting to the client.’”).

Liens - Retaining and Statutory Although the above is dispositive of the questions presented, the questions posed above note that Lawyer A did have a ‘proper attorneys’ lien for a contingent fee as well as a retaining lien on the client’s file.’ How these liens affect the ability of the attorney to collect her fees and expenses requires further explanation. Rule 1.8(i) of the Rules of Professional Conduct, based upon the American Bar Association Model Rules of Professional Conduct, contains the following statements in Comment [16] pertaining to the general rule that lawyers are prohibited from acquiring a proprietary interest in litigation:

“In addition, paragraph (i) sets forth exceptions for liens authorized by law to secure the lawyers’ fees or expenses and contracts for reasonable contingent fees. The law of each jurisdiction determines which liens are authorized by law. These may include liens granted by statute, liens originating in common law and liens acquired by contract with the client.”

Reference to the Annotated Model Rules of Professional Conduct (7th ed. 2011) may not be helpful to the Illinois practitioner as the ABA has conceded this issue to the law of each jurisdiction. See ABA Informal Ethics Op. 1520 (1986) (whether upon withdrawal, lawyer may withhold documents necessary for prosecution or defense of client’s case is matter of state law governing attorney’s liens). A “retaining lien” is defined in Illinois as a common law possessory lien which entitles an attorney to retain any funds, property and papers which come into her possession as part of her professional relationship with a client until amounts due her for services rendered have been paid. See Upgrade Corp. v. Michigan Carton Co., 87 Ill. App.3d 662, 410 N.E.2d 159 (1st 1980); ISBA Opinions 93-17, 02-02; Stephanie Kanwit, Attorneys’ Liens: When Can You Retain Client’s Files?, 79 Ill. Bar J. 274 (1991). A retaining lien, however, is extinguished by giving the property back to the client. Once the attorney surrenders the property, the retaining lien is lost. Upgrade Corp. v. Michigan Carton Co., 87 Ill. App. 3d 662, 665, 410 N.E.2d 159, 161. In addition, a retaining lien is a passive lien and cannot be judicially enforced. Only when the

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attorney is brought into court by the client to force her to turn over his money or his papers can the lien then be raised as a defense. Twin Sewer & Water, Inc. v. Midwest Bank & Trust Co., 308 Ill. App. 3d 662, 720 N.E.2d 636 (1st 1999). Obviously, in a personal injury case taken on a contingent fee basis, there are no funds or rarely any property of the client involved and, thus, only the client’s file or other papers could be retained. Despite the common law ‘retaining lien’ to enforce payment of her bill, Rule 1.16(d) of the Rules of Professional Conduct requires a discharged attorney to “take steps to the extent reasonably practicable to protect a client’s interest, such as...surrendering papers and property to which the client is entitled.” See ISBA Advisory Opinion 94-14. Even though the Rule allows a lawyer to retain papers relating to the client “to the extent permitted by other law,” the difficult question is whether the client, or the successor attorney, may arguably need the client’s file or his papers to protect the client’s interest. See Patrick Sean Ginty, When Can You Retain Files for Failure to Pay Fees?, 92 Ill. Bar J. 97 (2004) for an extended discussion of the competing principles between the attorney’s right to her fee and the client’s right to his property and files. The author concludes with the admonition, with which this Committee agrees, that just because a retaining lien may be available to encourage clients to pay their fees doesn’t mean you should use it in any given case. In personal injury cases where attorneys customarily advance the expenses of the litigation pursuant to Rule 1.5(c) of the Rules of Professional Conduct, the discharged lawyer may have incurred out of pocket expenses in obtaining police reports, ambulance reports, medical records and the like which would be of benefit to the successor attorney if surrendered. Most successor attorneys would be willing to reimburse such costs at the time the documents are surrendered if not at the conclusion of the case. However, withholding such records and reports would require the successor attorney to obligate the client to incur the duplicate expense of acquiring the same records and thus extinguish the client’s need to bring the discharged lawyer to court and, ergo, obviate the retaining lien. The “proper attorney’s lien” mentioned in the first question most likely refers to one perfected under the Attorneys Lien Act, 770 ILCS 5/1. However, the practitioner should remain aware that it is well established in Illinois that a client has the implied right, with or without cause, to discharge his attorney. An attorney discharged without cause is entitled to be paid on a quantum meruit basis for services rendered prior to discharge as the contingent fee contract no longer governs their relationship. In re Estate of Callahan, 144 Ill. 2d 32, 578 N.E.2d. 985 (1991); ISBA Advisory Opinion 92-22. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-12 May 2012 Subject: Appearance of Impropriety, Conflict of Interest – Personal Interests; Imputed Disqualification; Government Representation Digest: A lawyer may not continue to represent a school district against which the

lawyer’s partner has initiated an adverse proceeding. Recusal from consideration of the partner’s adverse proceeding will not remove the conflict of interest. However, the school board may give informed consent to the lawyer’s continued representation in unrelated matters if the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation despite the conflict of interest. The notion of avoiding the “appearance of impropriety” is no longer a standard of lawyer professional conduct in Illinois.

References: Illinois Rules of professional Conduct, Rules 1.0(e), 1.0(i), 1.7, and 1.10(a) ISBA Advisory Opinion Nos. 11-04 (March 2011); Opinion 09-02 (January

2009); Opinion 94-21 (March 1995); and Opinion 86-4 (August 1986) Restatement Third, The Law Governing Lawyers § 122, Comment g (2000) Schwartz v. Cortelloni, 177 Ill.2d 166, 685 N.E.2d 871 (1997) In re Vrdyolyak, 137 Ill.2d 407, 560 N.E.2d 840 (1990) Miller v. Norfolk & Western Railway Co., 183 Ill. App. 3d 261, 538 N.E.2d 1293

(4th Dist. 1989)

FACTS The inquiring lawyer, a partner in a law firm, regularly represents a school district. Another firm partner has initiated a proceeding against the district to require it to send the partner’s child to a private school for children with learning disabilities. The matter has been submitted to the State Board of Education for a due process hearing. The State Board’s decision may subsequently be appealed to the Circuit Court by the losing party. The inquiring lawyer has excused himself from school board executive sessions when the partner’s matter has been discussed. The school board is currently counseled regarding this matter by special counsel employed by a consortium of school districts to handle such disputes. Some members of the community have suggested that this situation creates an appearance of impropriety, requiring the firm to withdraw from any representation of the school district.

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QUESTIONS

Two questions have been submitted by the inquiring lawyer: 1. May the lawyer continue to serve as counsel for the school district regarding matters other than the adverse proceeding initiated by his partner? 2. Must the lawyer resign as counsel for the school district to avoid the appearance of conflict of interest or impropriety?

OPINIONS 1. With respect to the first question, the relevant Illinois Rules of Professional Conduct are those dealing with conflicts of interest and the imputation of conflicts of interest. The general rule regarding concurrent conflicts of interest is Rule 1.7, which provides:

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent.

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The general rule regarding imputation of conflicts of interest is Rule 1.10(a), which provides:

(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.

It appears from the inquiry that the lawyer’s representation of the school district predated the partner’s adverse proceeding. It also appears that the partner is acting pro se in the adverse proceeding. The partner’s proceeding is “directly adverse” to the school district, a current firm client, which results in a conflict of interest under Rule 1.7(a)(1). For purposes of Rule 1.7(a)(1), it does not matter that the inquiring lawyer has excused himself from the school board’s consideration of the partner’s adverse proceeding or that the partner’s adverse proceeding is unrelated to any other representation of the district by the firm. See Comment [6] to Rule 1.7 (a “lawyer may not act as an advocate in one matter against a person the lawyer represents in some other matter, even when the matters are wholly unrelated”). The partner’s conflict is imputed by Rule 1.10(a) to every other lawyer associated in the firm. As a result, the inquiring lawyer may not continue representation of the district in any matter, unless there is informed consent as discussed below. See Comment [4] to Rule 1.7 (if conflict arises after representation has been undertaken, lawyer ordinarily must withdraw unless lawyer obtains informed consent). If the inquiring lawyer’s partner has retained other counsel not associated in the firm to handle the proceeding against the district, that fact would change the analysis, but not the ultimate result. In that situation, the inquiring lawyer himself would have a conflict under Rule 1.7(a)(2) with respect to the partner’s adverse proceeding. As explained in Comment [8] to Rule 1.7, a conflict exists if there is a significant risk that the lawyer’s ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited by the lawyer’s other responsibilities or interests. Under the facts presented, it appears implausible that the inquiring lawyer could render detached, objective advice to the district regarding his partner’s adverse proceeding. In a similar situation, ISBA Opinion 11-04 (March 2011) concluded that a lawyer’s zeal in cross-examining his partner’s spouse would be materially limited by loyalty to his partner, citing Comment [3] to Rule 1.10 (if loyalty to other firm lawyer materially limited representation, that personal disqualification imputed to other lawyers in firm). Because conflicts of interest are determined with respect to clients, rather than matters, recusal by the lawyer from school board discussions of the partner’s adverse proceeding does not remove the conflict. Nor does the fact that the partner’s adverse proceeding is unrelated to the firm’s other work for the district resolve the conflict. In this situation, however, Rule 1.7(b)(1) would permit the lawyer and the firm to continue representation of the school district in unrelated matters notwithstanding the conflict of interest if the inquiring lawyer reasonably believes that the firm will be able to continue to provide competent and diligent representation to the district in the unrelated matters, and both the school board and the lawyer’s partner give informed consent, confirmed in writing. Rule 1.0(i) defines “reasonably believes” to denote that the “lawyer believes the matter in question and that the

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circumstances are such that the belief is reasonable.” Prior ISBA opinions have also concluded that a lawyer’s reasonable belief when seeking consent to a conflicted representation must be objectively reasonable under the circumstances. See, e.g., ISBA Opinion 09-02 (January 2009); and Opinion 94-21 (March 1995). Rule 1.0(e) defines “informed consent” as the “agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” In conflict situations, Comment [18] to Rule 1.7 further explains that the information required depends on the nature of the conflict and the nature of the risks involved. If the school district is represented with respect to the partner’s adverse proceeding by other counsel not associated with the lawyer’s firm, then the school board’s consent would not be prohibited by Rule 1.7(b)(3) because the matter does not involve the assertion of a claim by one client against another client represented by the lawyer [or firm] in the same litigation. As explained in Comment [17] to Rule 1.7, the prohibition applies when the lawyer seeks to represent clients who are aligned directly against each other in the same litigation or other proceeding before a tribunal. See also Restatement Third, The Law Governing Lawyers § 122, Comment g(iii) (2000) (for conflict to be nonconsentable, clients must be represented by same lawyer and aligned directly against each other in same litigation). Although there is contrary authority in a few states, Illinois law permits public entities to consent to conflicts of interest of their counsel. Miller v. Norfolk & Western Railway Co., 183 Ill. App. 3d 261, 538 N.E.2d 1293 (4th Dist. 1989); ISBA Opinion 94-21 (March 1995); and Opinion 86-4 (August 1986). From the facts given, the inquiring lawyer does not appear to be a member of the school board, and therefore would not be subject to In re Vrdolyak, 137 Ill.2d 407, 560 N.E.2d 840 (1990), which concluded that even with full disclosure, a lawyer-legislator may not represent government employees adverse to the unit of government of which he was a member. 137 Ill.2d at 424, 560 N.E.2d at 846. 2. With respect to the second question, the notion of avoiding the “appearance of impropriety” is no longer a standard of lawyer professional conduct in Illinois. The concept originated with Canon 9 of the 1980 Illinois Code of Professional Responsibility, which stated: "A lawyer should avoid even the appearance of impropriety." The 1980 Code was repealed and superseded in 1990 by the Illinois Rules of Professional Conduct, which were modeled after the 1983 American Bar Association Model Rules of Professional Conduct. See Schwartz v. Cortelloni, 177 Ill.2d 166, 179, 685 N.E.2d 871, 877 (1997). Neither the 1983 ABA Model Rules nor the 1990 Illinois Rules mentioned the “appearance of impropriety.” Comment [5] to 1983 ABA Model Rule 1.9 explained the absence of the “appearance of impropriety” rubric from the 1983 ABA Model Rules as the result of two concerns: first, it was little more than a matter of subjective judgment; and second, because “impropriety” was undefined, the term “appearance of impropriety” was question begging. (The 1990 Illinois Rules had no comments.) In Schwartz, the Illinois Supreme Court noted and adhered to the rejection of the “appearance of impropriety” standard by Comment [5] to 1983 ABA Model Rule 1.9. 177 Ill.2d at 179; 685 N.E.2d at 878. Former Comment [5] to 1983 ABA Model Rule 1.9 was deleted as part of the 2002 revisions to the ABA Model Rules. As a result, there is no mention of the “appearance of impropriety” in the

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2002 version of the ABA Model Rules or Comments. Likewise, there is no mention of the “appearance of impropriety” in the 2010 Illinois Rules of Professional Conduct or Comments, which were based on the 2002 ABA Model Rules and Comments. Given this clear legislative history, the “appearance of impropriety” is no longer a standard for professional discipline of lawyers in Illinois. Finally, it should be noted that this opinion attempts to address only issues arising under the Rules of Professional Conduct. Illinois statutes, local ordinances, and other rules regarding conflicts of interest may be relevant to lawyers who represent, or appear before, public entities. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-13 May 2012 Subject: Conflict of Interest – Personal Interests; Imputed Disqualification; Government Representation Digest: A lawyer may not continue to represent a plan commission or city council after

the lawyer’s partner has appeared before those bodies to oppose a zoning change. The lawyer’s recusal from the plan commission’s or city council’s consideration of the partner’s zoning matter will not remove the conflict of interest. However, the plan commission and city council may give informed consent to the lawyer’s continued representation in unrelated matters if the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation despite the conflict of interest. If the lawyer’s partner represents others in the zoning matter before the plan commission or city council, the partner must disclose the representation and conform to the applicable rules regarding candor to a tribunal.

References: Illinois Rules of Professional Conduct, Rules 1.0(e), 1.0(i), 1.7, 1.10(a), and 3.9 ISBA Advisory Opinion Nos. 12-12 (May 2012); Opinion 11-04 (March 2011);

Opinion 09-02 (January 2009); Opinion 94-21 (March 1995); and Opinion 86-4 (August 1986).

Miller v. Norfolk & Western Railway Co., 183 Ill. App. 3d 261, 538 N.E.2d 1293

(4th Dist. 1989) Restatement Third, The Law Governing Lawyers § 122, Comment g (2000)

FACTS The inquiring lawyer is a City Attorney and as such sits with and advises the City Council and City Plan Commission, including the rendering of legal opinions. A partner in the inquiring lawyer’s law firm personally opposes a zoning change in the partner's neighborhood and has appeared and spoken in opposition to the change, both before the Plan Commission and Council.

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QUESTIONS Three questions are posed by the inquiring lawyer: 1. May the partner of the City Attorney appear personally or on behalf of clients before the Plan Commission or Council, both of whom are advised by the City Attorney? 2. May the City Attorney advise the Plan Commission and Council on matters in which a partner or associate advocates a particular position? 3. Must the inquiring lawyer resign as City Attorney to avoid the appearance of conflict of interest or impropriety?

OPINION With respect to the first two questions, as a general matter, any person is entitled to appear or represent himself or herself pro se before a public body. However, if that person is also a lawyer associated in a law firm, the appearance could create a conflict of interest for the lawyer as well as other lawyers in the firm. The relevant Illinois Rule of Professional Conduct regarding concurrent conflicts of interest is Rule 1.7, which provides:

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

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(4) each affected client gives informed consent.

The general rule regarding imputation of conflicts of interest is Rule 1.10(a), which provides:

(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.

From the facts presented, it is difficult to determine whether the partner’s opposition to the zoning change is “directly adverse” to the Plan Commission or the City within the meaning of Rule 1.7(a)(1). If the partner is attacking a zoning ordinance provision that has been enacted, then the partner would be acting “directly adverse” to the City, resulting in a conflict under Rule 1.7(a)(1). For purposes of Rule 1.7(a)(1), it does not matter if the inquiring lawyer excuses himself from Plan Commission or Council consideration of the partner’s opposition or that the partner’s opposition is unrelated to any other representation of the City by the firm. See Comment [6] to Rule 1.7 (lawyer may not act as advocate in one matter against a person the lawyer represents in some other matter, even when matters are wholly unrelated). The partner’s conflict is imputed by Rule 1.10(a) to every other lawyer associated in the firm, and as a result, the inquiring lawyer may not continue representation of the City in any matter, unless there is informed consent as discussed below. If the partner is appearing before the Plan Commission or Council only to advocate a particular policy position for the Plan Commission or Council to consider, then the partner would not be “directly adverse” to the law firm’s clients (Plan Commission and City) within the meaning of Rule 1.7(a)(1). Nevertheless, if there is a significant risk that the lawyer’s representation of either the Plan Commission or the City would be materially limited by the lawyer’s responsibilities to a third person (the partner) or by a personal interest of the lawyer (an interest in accommodating or not alienating the partner), then there would be a conflict of interest under Rule 1.7(a)(2). Comment [8] to Rule 1.7 explains that even where there is no direct adverseness, a conflict of interest exists if there is a significant risk that a lawyer’s ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited as a result of the lawyer’s other responsibilities or interests. Under the facts presented, there appears to be a significant risk of material limitation of the inquiring lawyer’s representation of the Plan Commission or the City concerning the partner’s zoning matter because it is unlikely that the lawyer could render detached, objective advice. In a similar situation, ISBA Opinion 11-04 (March 2011) concluded that a lawyer’s zeal in cross-examining his partner’s spouse would be materially limited by loyalty to his partner, citing Comment [3] to Rule 1.10. Because conflicts of interest are determined with respect to clients, rather than particular matters, recusal by the lawyer from discussions of the partner’s opposition does not remove the conflict. Again, unless there is informed consent as discussed below, the lawyer must withdraw from any representation of the Plan Commission or City.

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In this situation, however, Rule 1.7(b) would permit continued representation in unrelated matters notwithstanding the concurrent conflict of interest if the lawyer reasonably believes that the lawyer or the firm will be able to provide competent and diligent representation to the Plan Commission and the City, and each gives informed consent. Illinois Rule 1.0(i) defines “reasonably believes” to denote that the “lawyer believes the matter in question and that the circumstances are such that the belief is reasonable.” Prior ISBA opinions have also concluded that a lawyer’s reasonable belief when seeking consent to a conflicted representation must be objectively reasonable under the circumstances. See, e.g., ISBA Opinion 09-02 (January 2009); and Opinion 94-21 (March 1995). The term “informed consent” is defined in Rule 1.0(e) as the “agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” In conflict situations, Comment [18] to Rule 1.7 explains that the information required depends on the nature of the conflict and the nature of the risks involved. Consent to the inquiring lawyer’s conflict of interest by the Plan Commission and the City is permissible. Although there is contrary authority in a few states, Illinois law permits public entities to consent to conflicts of interest of their counsel. Miller v. Norfolk & Western Railway Co., 183 Ill. App. 3d 261, 538 N.E.2d 1293 (4th Dist.1989); ISBA Opinion 12-12 (May 2012); Opinion 94-21 (March 1995); and Opinion 86-4 (August 1986). Even if the partner’s opposition is considered to be a “litigation” matter, if the City is represented in that matter by other counsel not associated with the inquiring lawyer’s firm, then consent by the Plan Commission and the City would not be prohibited by Rule 1.7(b)(3) because the matter does not involve the assertion of a claim by one client against another client represented by the lawyer [or firm] in the same litigation. As explained in Comment [17] to Rule 1.7, the prohibition applies when the lawyer seeks to represent clients who are aligned directly against each other in the same litigation or other proceeding before a tribunal. See also Restatement Third, The Law Governing Lawyers § 122, Comment g(iii) (2000) (for conflict to be nonconsentable, clients must be represented by same lawyer and aligned directly against each other in same litigation). With respect to the third question, as explained in ISBA Opinion 12-12 (May 2012), the notion of avoiding the “appearance of impropriety” is no longer a standard of lawyer professional conduct in Illinois. Although the subject was not raised by the inquiring lawyer, the law firm and the partner who opposes the zoning change should be mindful of Rule 3.9, which was added to the Illinois Rules of Professional Conduct in 2010. Rule 3.9 provides that a “lawyer representing a client before a legislative body or administrative agency in a nonadjudicative proceeding shall disclose that the appearance is in a representative capacity and shall conform to the provisions of Rules 3.3(a) through (c) and 3.4(a) through (c).” As explained in Comments [1] and [2] to Rule 3.9, legislative and administrative agencies have a right to expect lawyers to deal with them as they deal with courts, even if the rule subjects lawyers to regulations that are inapplicable to advocates before those agencies who are not lawyers. Comment [3] notes, however, that it does not apply to representation of a client in otherwise permitted lobbying activities. (The Illinois clarification regarding lobbying is not part of the ABA Model Rules comment.) If the partner in

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the situation presented appears before the Plan Commission or the Council to represent himself or others opposing the zoning change, then Rule 3.9 would apply to that representation. Finally, it should be noted that this opinion attempts to address only issues arising under the Rules of Professional Conduct. Illinois statutes, local ordinances, and other rules regarding the disclosure of the nature of any representation, as well as conflicts of interest, may be relevant to lawyers who represent, or appear before, public entities. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-14 May 2012 Subject: Advertising and Solicitation; Communications with Client, Law Firm

Partnership and Employment Agreements; Law Firms Digest: After departure, an associate who has left a law firm may contact clients of the

firm with whom he had an attorney-client relationship. The Rules of Professional Conduct do not preclude him from informing such clients that he has departed and that they have the right to continue with the firm or transfer the file to him. Notice to the client is mandatory where a departing associate has been involved in representing the client in such degree or kind that the departure could reasonably affect either the client’s decisions regarding the representation or the means of accomplishing the client’s objectives. In such case, the associate must ensure that he or the firm (or both) timely inform the client of his departure. Whether such notice must issue before the associate’s departure will depend on the circumstances.

References: Illinois Rules of Professional Conduct, Rules 1.4, 1.16, 5.1, 5.2, 5.6, 7.1, and 7.3 ISBA Advisory Opinion Nos. 86-16 (May 1987) Arizona Bar Ethics Opinion 10-02 ABA Formal Ethics Op. 99-414 (1990) Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460 (Ill. 1998)

Dowd & Dowd, Ltd. v. Gleason, 352 Ill. App. 3d 365 (1st Dist. 2004)

FACTS Three questions have been raised regarding the propriety of contacting clients of a firm when an associate attorney leaves a firm.

QUESTIONS 1. May an associate who has departed a firm contact clients of the firm with whom he had an attorney-client relationship, regardless of whether he brought the clients to the firm, to inform the clients that he has left the firm?

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2. May the departed associate in question 1 inform a client that the client has the right to continue with the firm or transfer his file to the departed associate? 3. Conversely, must an associate who has formed an attorney-client relationship with a client of the firm inform the client that he will no longer be with the firm and representing the client?

OPINION Questions 1 and 2 Questions 1 and 2 concern a former associate’s post-departure communications with clients (with whom he had an attorney-client relationship) at his former firm. Because the departing associate had a “prior professional relationship” with these clients, Illinois Rule of Professional Conduct (“Rule”) 7.3 does not preclude him from directly contacting these clients to inform them of his departure or to solicit their employment. Under Rule 7.1, any such communication must not be false or misleading. Rule 5.6 prohibits the former employer from restricting the right of the departing associate “to practice after termination of the [employment] relationship,” except where such restriction concerns retirement benefits. Therefore, a restriction placed by the former employer to prohibit the former associate from soliciting the firm’s clients is generally improper. See Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460, 480–82 (Ill. 1998) (“Dowd I”). The “client has a right to discharge” the firm “at any time, with or without cause,” and therefore is generally free to discharge the law firm and transfer the matter to the departed associate if the client so chooses. Rule 1.16 n.4; see also ISBA Op. No. 86-16 (May 1987)(“[T]he clients in question are free to choose to be represented by the departing associate, the firm, or neither.”). The Rules do not prohibit the departed associate from informing the client of the client’s freedom to discharge the law firm and choose other counsel. The communication, however, should not mislead the client regarding the client’s right to stay with the law firm. The Committee expresses no opinion regarding whether any solicitation or contact would constitute tortuous interference of contract or would violate any other substantive law. Further, importantly, Questions 1 and 2 do not involve pre-departure communication while the associate is still employed by the firm, that is, at a time when the associate’s fiduciary duties to his employer will place significant restrictions (beyond the Rules) on his communications with the firm’s clients. See Dowd I, 181 Ill. 2d at 474. Question 3 Question 3 concerns whether, and under what circumstances, notice to the client of the associate’s departure is mandatory. Rule 1.4 states:

(a) A lawyer shall:

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(1) promptly inform the client of any decision or circumstance with respect to which the client’s informed consent, as defined in Rule 1.0(e), is required by these Rules;

(2) reasonably consult with the client about the means by which the client’s objectives are to be accomplished;

(3) keep the client reasonably informed about the status of the matter; (4) promptly comply with reasonable requests for information; and (5) consult with the client about any relevant limitation on the lawyer’s conduct

when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

See also Rule 1.16(d): “Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, [etc.]” Based on the foregoing, where an associate is substantially involved in the representation of a client, a duty may arise to timely inform the client of the associate’s departure. The duty will arise where the associate’s involvement is of such degree or kind that the associate’s departure could reasonably affect the client’s decisions regarding the representation or the means of accomplishing the client’s objectives. See Rule 1.4(a)(2) and (b); Ariz. Bar Ethics. Op. 10-02 (“Whether the client needs to be informed of the lawyer’s departure and reminded of the client’s right to choose counsel depends on whether, viewed from the perspective of the client, the client’s decision about who should continue the representation might depend on the continued involvement of the departing lawyer.”). Conversely, where an associate has not had meaningful contact with the client, has had little involvement in currently active matters, or has acted solely in a subordinate role, notifying the client of the associate’s departure is typically unnecessary. Ordinarily notice to the client need not precede the associate’s departure. Pre-departure notice is required only where failure to provide pre-departure notice would reasonably affect the means to accomplish the client’s objectives or prejudice the client’s ability to make an informed decision regarding the representation. In all events, this opinion does not grant license to the associate to solicit the firm’s clients for personal gain while still employed by the firm. Such solicitation may violate substantive law, including fiduciary duties owed by the associate to his employer. See Dowd I, 181 Ill. 2d. at 474 (“[P]retermination solicitation of clients by members of an existing firm for the benefit of a new firm rises to a breach of fiduciary duty.”); see also ABA Formal Op. 99-414 (“The departing lawyer also must consider legal obligations other than ethics rules that apply to her conduct when changing firms, as well as her fiduciary duties owed the former firm.”). As was true in response to Questions 1 and 2, under Rule 7.1, any notification to the client must not be false or misleading. An appropriate notification may inform the client of the client’s right to determine whether the current law firm, the departing lawyer, or a different lawyer or law firm altogether will represent the client. See Dowd & Dowd, Ltd. v. Gleason, 352 Ill. App. 3d 365, 372 (1st Dist. 2004) (“[I]t is not improper for the lawyer to notify the client of his impending departure provided that he makes it clear that the legal representation is the client’s choice.”).

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Where a duty to notify the client arises, it governs both the law firm and the departing associate. See Rules 5.1 and 5.2; ABA Formal Op. 99-414 (“[B]oth the departing lawyer and the responsible members of the firm who remain have ethical responsibilities to clients on whose active matters the lawyer currently is working….”). Neither the associate nor the law firm should obstruct the other’s compliance with ethical obligations. See Ariz. Bar Ethics. Op. 10-02. Rather, both the law firm and the associate should ensure that the client is adequately informed of the departure, whether the notification comes from the law firm, the associate, or both. Where feasible, joint notification may avoid duplicative or conflicting communications to clients as well as charges of impermissible solicitation. Nonetheless, if the law firm does not provide adequate and timely notification, the associate must do so. See ABA Formal Op. 99-414 (“When the departing lawyer reasonably anticipates that the firm will not cooperate on providing…joint notice, she herself must provide notice to those clients for whose active matters she currently is responsible or plays a principal role in the delivery of legal services….”). Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-15 May 2012 Subject: Confidentiality Digest: Use of a lawyer listserv or bar association online discussion group can be a useful

and effective means to educate lawyers and can provide a resource when lawyers engage in research and decision-making. However, when lawyers consult with other lawyers who are not associated with them in the matter, both the consulting lawyer and the consulted lawyer must take care to protect client confidentiality and the attorney-client privilege and take care to avoid creating a conflict of interest with existing clients. In addition, an online discussion group is not a substitute for the consulting lawyer’s legal research.

References: Illinois Rules of Professional Conduct, Rules 1.0(e), 1.1, 1.4, 1.6, 1.7, 1.9 ABA Formal Ethics Op. 98-411 (1998) Maine Ethics Op. 171 (1999)

Oregon Formal Ethics Op. 2011-184 (2011)

FACTS A bar association provides several subject-based online discussion groups for members to pose questions to, and share information with, other lawyer members. Lawyer A is a member of that association, and also a solo practitioner. Lawyer A encounters an issue related to discovery of information in a divorce proceeding, and would like to post a question to the e-mail discussion group to try to gain information as to how Lawyer A should proceed.

QUESTION May Lawyer A post a question on the family law e-mail discussion group explaining her discovery dilemma to seek the advice of other bar association members?

OPINION An online discussion group can serve to educate a lawyer and allows a lawyer to test her understanding of legal principles by asking questions of other lawyers. Such a service can help a lawyer to provide competent representation pursuant to Rule 1.1 of the Illinois Rules of Professional Conduct, particularly when the lawyer does not have a partner or co-counsel to

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whom she can turn to for advice. However, both the consulting lawyer and the consulted lawyer must abide by their professional responsibilities. The consulting lawyer must take care to maintain client confidentiality pursuant to Rule 1.6 when asking for advice about a client’s matter. Rule 1.6(a) provides, “A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by paragraph (b) or required by paragraph (c).” Comment 5 to Rule 1.6 states that lawyers in a firm are impliedly authorized to discuss with each other information regarding a firm client “unless the client has instructed that the particular information be confined to specified lawyers.” As Lawyer A is a solo practitioner, she must seek the needed advice from other lawyers who are not associated with the client’s matter. Comment 5 to Rule 1.6 provides, “Except to the extent that the client’s instructions or special circumstances limit that authority, a lawyer is impliedly authorized to make disclosures about a client when appropriate in carrying out the representation.” The comment does not suggest what disclosures might be impliedly authorized. An ABA opinion, ABA Formal Ethics Opinion 98-411 (1998) suggests that Rule 1.6 permits disclosures of information relating to the representation of a client “to lawyers outside the firm when the consulting lawyer reasonably believes the disclosure will further the representation by obtaining the consulted lawyer’s experience or expertise for the benefit of the consulting lawyer’s client.” Thus, a consultation or inquiry that is general or abstract in nature and that does not involve the disclosure of information relating to the representation of the client does not violate Rule 1.6. Similarly, a question posed as a hypothetical may not generally violate Rule 1.6, as long as there is not a reasonable likelihood from the question or the discussion that the identity of the client could be determined. See, e.g., Oregon Formal Ethics Op. 2011-184. If the consulted lawyer or other persons viewing the inquiry could determine the identity of the client or if the inquiry otherwise risks disclosure of information relating to the representation that could harm the client, then the lawyer must consult with the client pursuant to Rule 1.4 and obtain the client’s informed consent. “Informed consent” is defined by Rule 1.0(e) as denoting “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” As set forth in ABA Formal Ethics Opinion 98-411, informed consent might include an explanation as to how the disclosure could harm the client, including that the disclosure may constitute a waiver of the attorney-client privilege. See also Maine Ethics Op. 171 (1999). A consulting lawyer should also be cautious about seeking advice from another lawyer who is or is likely to be counsel for an adverse party in the matter. In situations where the identity of the consulting lawyer’s client is not adequately protected, the consulting lawyer risks that the information disclosed in the inquiry may be used adversely to the consulting lawyer’s client. Additionally, some listserv discussions may be searchable, depending on how the listserv is set up. And even in ‘closed’ discussion groups, there is little to prevent someone from forwarding a particular message to another person outside the group.

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Finally, the consulting lawyer should not view the consultation as a substitution for the lawyer’s legal research and judgment. As set forth in Comment 5 to Rule 1.1, competent handling of a client’s matter “includes inquiry into and analysis of the factual and legal elements of the problem, and use of methods and procedures meeting the standards of competent practitioners.” The consulted lawyer in an online discussion group must also heed his or her professional obligations. Generally, a consulted lawyer does not create a client-lawyer relationship with the consulting lawyer’s client by virtue of the consultation alone. However, the consulted lawyer must consider the duty of loyalty to his or her own clients when consulting for the benefit of the clients of a consulting lawyer. See ABA Formal Ethics Opinion 98-411. As noted in the ABA opinion, the duties of a lawyer to provide competent representation of a client suggest that the lawyer must take reasonable steps to avoid knowingly engaging in conduct adverse to his or her own client’s interests. See also Illinois Rules of Professional Conduct, Rules 1.7 and 1.9. In a situation where the identity of the consulting lawyer’s client is not protected, the consulted lawyer will need to check for possible conflicts of interest. In all other situations, the consulted lawyer should take reasonable steps to insure that the information provided to the consulting lawyer will not impair the obligations to the consulted layer’s current or former clients.

CONCLUSION Lawyer A may consult with other lawyers in an online discussion group. If the nature of the discovery dilemma is general and abstract, if there is no risk that Lawyer A’s client can be identified from the inquiry, and if Lawyer A does not disclose information relating to the representation of the client, then Lawyer A will not need to obtain her client’s informed consent to engage in the consultation. If however, Lawyer A’s client can be identified from the inquiry or if Lawyer A needs to disclose information relating to the representation, then Lawyer A must confer with the client and obtain the client’s informed consent. Lawyer A must also take reasonable steps to avoid consulting with counsel for the adverse party in the discovery dispute. The consulted lawyer should also take reasonable steps to avoid providing information to Lawyer A that could impair any obligations to the consulted lawyer’s clients. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-16 May 2012 Subject: Confidentiality; Conflicts of Interest Digest: Formal mentoring programs create an opportunity for a new or recently licensed

lawyer to receive professional guidance and practical knowledge from a more experienced lawyer. However, both the new lawyer and the mentor must take care to protect client confidentiality and the attorney-client privilege and take care to avoid creating a conflict of interest with existing clients.

References: Illinois Rules of Professional Conduct, Rules 1.0(e), 1.1, 1.4, 1.6, 1.7, 1.9 ISBA Advisory Opinion No. 12-15 (May 2012) ABA Formal Ethics Opinion 98-411 (Aug. 30, 1998)

Maine Ethics Op. 171 (1999)

Oregon Formal Ethics Op. 2011-184 (2011)

FACTS Lawyer A participates in a formal mentoring program for new lawyers, and is paired with Lawyer B as a mentor. Lawyer B is not in the same law firm as Lawyer A. Lawyer B has practiced in the area of personal injury litigation law for 25 years. Lawyer A is primarily developing a practice related to auto accident personal injury litigation. Lawyer A would like to consult with Lawyer B on how to conduct discovery in a client matter.

QUESTION May Lawyer A discuss information related to the client matter with Lawyer B as part of the mentoring relationship?

OPINION Whenever a new lawyer as part of a formal mentoring program consults about a client matter with mentoring lawyer who is not associated with him on the matter, both the new lawyer and the mentor must abide by their respective ethical obligations to their clients. See, e.g., ISBA Opinion 12- 15; ABA Formal Ethics Opinion 98-411 (Aug. 30, 1998).

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The new lawyer must take care to maintain client confidentiality pursuant to Rule 1.6 when asking for advice about a client’s matter. Rule 1.6 (a) provides, “A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by paragraph (b) or required by paragraph (c).” Comment 5 to Rule 1.6 provides, “Except to the extent that the client’s instructions or special circumstances limit that authority, a lawyer is impliedly authorized to make disclosures about a client when appropriate in carrying out the representation.” The comment does not suggest what disclosures might be impliedly authorized. An ABA opinion, ABA Formal Ethics Opinion 98-411 (1998) suggests that Rule 1.6 permits disclosures of information relating to the representation of a client “to lawyers outside the firm when the consulting lawyer reasonably believes the disclosure will further the representation by obtaining the consulted lawyer’s experience or expertise for the benefit of the consulting lawyer’s client.” Thus, an inquiry by the new lawyer that is general or abstract in nature and that does not involve the disclosure of information relating to the representation of the client does not violate Rule 1.6. For instance, a general question about discovery procedures in personal injury matters probably would not violate client confidentiality. Similarly, a question posed as a hypothetical may not generally violate Rule 1.6, as long as there is no risk from the question or the discussion that the identity of the client could be determined. Disclosures should be limited to the information necessary for a fruitful consultation. See, e.g., Oregon Formal Ethics Op. 2011-184; www. ilsccp.org (Illinois Commission on Professionalism sample Mentoring Agreement states, “the New Lawyer will not identify any client to the Mentor or reveal to the Mentor any client confidence, nor will the New Lawyer seek professional or legal advice from the Mentor about specific legal matters or clients.”). If the mentor can determine the identity of the client or if the inquiry otherwise risks disclosure of information relating to the representation that could harm the client, then the new lawyer must consult with the client pursuant to Rule 1.4 and obtain the client’s informed consent prior to the consultation with the mentor. “Informed consent” is defined by Rule 1.0(e) as denoting “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” As set forth in ABA Formal Ethics Opinion 98-411, informed consent might include an explanation as to how the disclosure could harm the client, including that the disclosure may constitute a waiver of the attorney-client privilege. See also Maine Ethics Op. 171 (1999). A new lawyer should also take steps to avoid a mentoring relationship with another lawyer who is or is likely to be counsel for an adverse party in any of the new lawyer’s client matters. Similarly, the mentor must take reasonable steps to avoid creating any conflicts of interest with existing or former clients of the mentor or of the mentor’s law firm by virtue of the creation of the mentoring relationship. See generally, Illinois Rules of Professional Conduct, Rules 1.7 and 1.9. See also ISBA Opinion 12-15; ABA Formal Ethics Opinion 98-411 (1998). If a conflict of interest develops for either a client of the new lawyer or a client of the mentor by virtue of the mentoring relationship, the lawyers must consult with their respective clients pursuant to Rule

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1.4 and they may be required to withdraw from the representation if necessitated by Rules 1.7 or 1.9. Finally, the consulting lawyer should not view the consultation as a substitution for the lawyer’s legal research and judgment. As set forth in Comment 5 to Rule 1.1, competent handling of a client’s matter “includes inquiry into and analysis of the factual and legal elements of the problem, and use of methods and procedures meeting the standards of competent practitioners.”

CONCLUSION Lawyer A may discuss general information relating to discovery procedures with his or her mentor, Lawyer B. However, Lawyer A should take caution not to reveal any information relating to the representation of a particular client with Lawyer B. Moreover, both Lawyer A and Lawyer B should avoid the creation of a conflict of interest with any existing or former clients by virtue of the creation of the mentoring relationship. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion _________________________________ Opinion No. 12-17 July 2012 Subject: Advertising and Solicitation; Arbitration and Mediation; Multijurisdictional

Practice; and Unauthorized Practice of Law Digest: Representation of a party in a grievance arbitration in Illinois may be

considered the practice of law, however, a lawyer licensed in another state may serve as representative of a party at a grievance arbitration without being admitted to practice in Illinois so long as the representation is in accordance with Illinois Rules of professional Conduct RPC 5.5(b) and (c). With regard to advertising, nothing in the Rules specifically authorizes lawyers admitted in jurisdictions other than Illinois to advertise in Illinois, therefore, whether and how lawyers may communicate the availability of their services to prospective clients in this jurisdiction is governed by Rules 7.1 to 7.5.

References: Illinois Rules of Professional Conduct, Rules 5.5, 7.1, 7.2, 7.3, 7.5, 8.5 ABA Model Rule 5.5

68 Ill. Adm. Code 1110.90 83 Ill. Adm. Code 200.90 50 Ill. Adm. Code 8100.2112 Colmar, Ltd. v. Freemantlemedia North America, Inc., 344 Ill. App. 3d 977 (2003).

NISHA, LLC v. Tribuilt Const. Group, LLC., 2012 Ark. 130, 2012 Ark LEXIS 157 (2012).

People ex rel. Chicago Bar Assoc. v. Goodman, 366 Ill. 346, 8 N.E. 2d

941 (1937). People ex rel. Illinois State Bar Assoc. v. Schafer, 404 Ill. 45, 87 N.E. 2d

773 (1949). In re Yamaguchi, 118 Ill.2d 417, 515 N.E. 2d 1235 (1987).

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FACTS A lawyer licensed in a jurisdiction other than Illinois seeks to represent employers in union grievance arbitration proceedings in Illinois. The grievance arbitration proceedings usually arise from collective bargaining agreements to settle contract disputes by use of third-party arbitrators. The arbitrators are not judges and frequently are not lawyers. The arbitration takes place at a hearing where the formal rules of evidence do not apply. The collective bargaining agreements provide that either party may choose a representative, who may or may not be a lawyer, to present their arguments.

QUESTIONS 1. Is representation of a party in a grievance arbitration in Illinois considered the

practice of law? 2. May a lawyer licensed in another state serve as representative of a party at a

grievance arbitration without being admitted to practice in Illinois? 3. Does the text of the following advertisement violate the Illinois Rules of

Professional Conduct? Grievance Arbitration John Doe, J.D., Ph.D. Representing Management 1/800/555-5555 4. Might the advertisement appear in a professional or trade journal in Illinois? 5. Might the advertisement be mailed directly to an employer in Illinois?

OPINION I. Is representation of a party in a grievance arbitration in Illinois considered

the practice of law? The Illinois Supreme Court has held, consistent with the generally held principle, that the practice of law involves more than the representation of parties in litigation and includes the giving of advice or the rendering of any services requiring the use of legal skill or knowledge. People ex rel. Illinois State Bar Assoc. v. Schafer, 404 Ill. 45, 87 N.E. 2d 773, 776 (1949); See also, In re Yamaguchi, 118 Ill.2d 417, 515 N.E. 2d 1235 (1987). The Court has also held that the representation of parties in contested workers' compensation matters before an arbitrator of the Illinois Industrial Commission constituted the practice of law. People ex rel. Chicago Bar Assoc. v. Goodman, 366 Ill. 346, 8 N.E. 2d 941, (1937). The respondent in Goodman had argued that he was not practicing law because he was representing parties before an administrative agency rather than a court. The Supreme Court responded that the "character of the act done, and not the place where it is committed" is the decisive factor. Goodman, 8 N.E. 2d at 947. Illinois courts have not directly addressed whether representing a party in an arbitration constitutes the practice of law, however, the Illinois Appellate Court has determined that an out-of-state lawyer representing a party in an arbitration is not necessarily engaged in

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the unauthorized practice of law. Colmar, Ltd. v. Freemantlemedia North America, Inc., 344 Ill. App. 3d 977 (2003) (finding arbitration award was not void because party was represented by attorney not authorized to practice law in Illinois); compare, NISHA, LLC v. Tribuilt Const. Group, LLC., 2012 Ark. 130, 2012 Ark LEXIS 157 (2012)(a non-lawyer appearing in a representative capacity in an arbitration engages in the unauthorized practice of law.) In light of Colmar and the revisions to Rule 5.5 discussed below, we need not determine whether representing a party in an arbitration constitutes the practice of law, and can instead directly address the question of whether an out-of-state attorney can represent a party in an arbitration1. II. May a lawyer licensed in another state serve as representative of a party at a grievance arbitration without being admitted to practice in Illinois? By statute, 705 ILCS 205/1, no person is permitted to practice law in Illinois without an Illinois license. Certain exceptions have been recognized to this general rule. For example, a lawyer may obtain permission to participate in a particular cause pursuant to Supreme Court Rule 707. Further, in its Opinion No. 92-6 the Committee concluded that principles of federal preemption would permit a lawyer from another jurisdiction to practice in the federal courts in Illinois even though the lawyer did not have an Illinois license. This exception was codified in Illinois Rule 5.5(d) which mirrors ABA Model Rule 5.5 (d) and provides, in relevant part: A lawyer admitted in another United States jurisdiction, and not disbarred

or suspended from practice in any jurisdiction, may provide legal services in this jurisdiction that:

* * *

(2) are services that the lawyer is authorized to provide by federal law or other law of this jurisdiction.

Comment [18] to Rule 5.5 further defines “other law” as including statute, court rule, executive regulation or judicial precedent.

1 Regardless of whether representing a party in a grievance arbitration constitutes the practice of law, there is significant authority to support the proposition that any attorney acting in that capacity must still adhere to the Illinois Rules of Professional Conduct even if non-lawyers may also appear. See, e.g., 68 Ill. Adm. Code 1110.90 (attorneys appearing in a representative capacity in administrative hearings before the Department of Financial and Professional Regulation must conform their conduct to the Illinois Rules of Professional Conduct even though non-lawyers may also appear in a representative capacity); 83 Ill. Adm. Code 200.90 (all persons, lawyer and non-lawyer, appearing in proceedings before the Illinois Commerce Commission shall conform to the standards of conduct of attorneys before the courts of Illinois as set forth in the Illinois Rules of Professional Conduct); 50 Ill. Adm. Code 8100.2112 (attorneys appearing in a representative capacity in administrative hearings under the Title Insurance Act before the Department of Financial and Professional Regulation must conform their conduct to the Illinois Rules of Professional Conduct even though non-lawyers may also appear in a representative capacity.)  

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Rule 5.5(c) goes even further and allows a lawyer admitted in another United States jurisdiction who is not disbarred or suspended from practice in any jurisdiction to provide legal services on a temporary basis in this jurisdiction that:

(1) are undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter;

(2) are in or reasonably related to a pending or potential proceeding before a tribunal in this or another jurisdiction, if the lawyer, or a person the lawyer is assisting, is authorized by law or order to appear in such proceeding or reasonably expects to be so authorized;

(3) are in or reasonably related to a pending or potential arbitration, mediation, or other alternative dispute resolution proceeding in this or another jurisdiction (emphasis supplied), if the services arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice and are not services for which the forum requires pro hac vice admission; or

(4) are not within paragraphs (c)(2) or (c)(3) and arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice.

Subsection (c)(3) would seem to directly address the second question of this inquiry and the Committee concludes that it would allow an attorney licensed in another United States jurisdiction who is not disbarred or suspended to provide legal services in connection with the grievance arbitration, so long as the services are: 1) temporary; 2) are reasonably related to the lawyer’s practice in another jurisdiction; and 3) are not in a forum which requires pro hac vice admission. In determining whether the services are temporary, Comment [5] specifies that this Rule does not authorize a lawyer to establish an office or other systematic and continuous presence in this jurisdiction without being admitted to practice generally here other than under the two circumstances enumerated in Rule 5.5(d), i.e. the services are being provided to the lawyer’s employer or its organizational affiliates, or are services the lawyer is authorized to provide by federal or other law. (Note that Comment 4 states that systematic and continuous presence is not limited to instances where the lawyer is physically present in this jurisdiction.) Comment [6] states that, although there is no single test to determine whether a lawyer’s services are provided on a “temporary basis,” services may be “temporary” even though the lawyer provides services in this jurisdiction on a recurring basis, or for an extended period of time, as when the lawyer is representing a client in a single lengthy negotiation or litigation. Second, Comment 14 to Rule 5.5 gives further guidance on the factors to consider in determining whether the services are reasonably related to the lawyer’s practice. Specifically, when the client has been previously represented by the lawyer, or may be resident in or have substantial contacts with the jurisdiction in which the lawyer is

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admitted; when the matter, although involving other jurisdictions, may have a significant connection with that jurisdiction; when significant aspects of the lawyer’s work might be conducted in that jurisdiction or a significant aspect of the matter may involve the law of that jurisdiction. The necessary relationship might also arise when the client’s activities or the legal issues involve multiple jurisdictions. In addition, the services may draw on the lawyer’s recognized expertise developed through the regular practice of law on behalf of clients in matters involving a particular body of federal, nationally uniform, foreign, or international law. Because the inquirer did not provide information on the nature of his/her practice, the committee declines to opine on whether or not this aspect of the analysis is satisfied. Third, Comment 12 relates specifically to subsection (c)(3) and notes that the lawyer must still obtain admission pro hac vice in the case of a court-annexed arbitration or mediation or otherwise if court rules or law so require. Assuming the arbitration at issue in this inquiry is not court-annexed, this requirement would be satisfied. Finally, Comment 4 provides that a lawyer who is not licensed in this jurisdiction but undertakes to provide legal services here in accordance with the relevant provisions of Rule 5.5 discussed above, must not hold out to the public or otherwise represent that the lawyer is admitted to practice in this jurisdiction. See also Rule 7.1. In addition, Comment 20 cautions that, in some circumstances such as when the representation occurs primarily in this jurisdiction and requires knowledge of the law of this jurisdiction, a lawyer practicing under these provisions may be required to inform the client that the lawyer is not licensed to practice law in this jurisdiction. It is worth noting that Comment 19 provides that any lawyer who provides legal services in accordance with the relevant provisions of Rule 5.5 discussed above, is subject to the disciplinary authority of this jurisdiction. See Rule 8.5(a). III. Issues related to advertising With respect to the proposed advertisement, the Committee initially notes that Comment 21 to Rule 5.5 specifically states that Paragraphs (c) and (d) do not authorize communications advertising legal services to prospective clients in this jurisdiction by lawyers who are admitted to practice in other jurisdictions, but instead directs lawyers to the provisions of Rules 7.1 to 7.5 for guidance in determining what types of communications are appropriate. Illinois Rule 7.1 provides generally that a lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. Rule 7.5(b) provides that firm letterheads and identification of affiliated lawyers from different jurisdictions shall make clear the jurisdictional limitations of lawyers not licensed to practice in the jurisdiction where the office is located. Any advertisements or solicitations directed to potential Illinois clients would be misleading if the lawyer's jurisdictional limitation were not disclosed clearly. Therefore the text of the proposed advertisement as stated would violate the Illinois Rules in that

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regard. The Committee expresses no opinion as to any other aspect of the text of the proposed advertisement. The inquirer also asks whether the proposed advertisement could appear in a professional or trade journal in Illinois and whether it could be mailed directly to Illinois employers. Rule 7.2 provides that appropriate advertising may be conducted through any public media. If the proposed advertisement otherwise complies with the Illinois Rules, then its appearance in a trade or professional journal would not violate the Rules. With regard to the final question of whether the advertisement could be mailed directly to an employer in Illinois, under Rule 7.3, direct solicitation of potential clients, which includes written, recorded or electronic communication addressed to specific recipients, is permitted under certain circumstances providing that such communications include the words “Advertising Material” on the outside envelope, if any, and at the beginning and ending of any recorded or electronic communication. The general requirements of Rule 7.1 also apply to any materials used in direct mail solicitation. The Committee expresses no opinion as to when a non-Illinois lawyer’s advertisements in Illinois constitute such a continuous and systematic presence that renders the lawyers’ Illinois activities no longer temporary and therefore in violation of Rule 5.5.

CONCLUSION Although it is undetermined whether representing a party in a grievance arbitration constitutes the practice of law in Illinois, the committee concludes that Rule 5.5 provides that an attorney licensed in another United States jurisdiction who is not disbarred or suspended may provide legal services in connection with the grievance arbitration, so long as the services are: 1) temporary; 2) are reasonably related to the lawyer’s practice in another jurisdiction; and 3) are not in a forum which requires pro hac vice admission. The Committee further concludes that attorneys not licensed in Illinois may advertise their services by direct mail and/or professional trade journals in Illinois so long as the advertisements conform to Rules 7.1 through 7.5 of the Illinois Rules of Professional Conduct, paying careful attention to making proper disclosures as to where the attorney is licensed so as not to be misleading, and keeping in mind whether such advertisements would constitute a continuous and systematic presence in Illinois in violation of Rule 5.5. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-18 July 2012 Subject: Prospective Clients; Conflicts of Interest Digest: An attorney may not encourage a client to engage in the practice known as “taint

shopping,” whereby a prospective client meets with an attorney for the sole purpose of disqualifying the attorney from representing an opponent. An attorney who participates in an initial consultation with a prospective client, but who is not retained by the prospective client, is not prohibited from later representing a client with materially adverse interests in the same or in a substantially related matter if: (a) before the consultation, the attorney obtained the prospective client’s informed consent of any conflict that might arise from the information disclosed by the prospective client; (b) even in the absence of an informed consent, the attorney did not receive information that could be significantly harmful if used in the matter; or (c) the attorney can establish that the prospective client revealed information to the attorney with no intention of retaining the attorney.

References: Illinois Rules of Professional Conduct 1.0(e), 1.2(d), 1.6, 1.7, 1.9, 1.18, 4.4(a), 8.4 Illinois Rules of Professional Conduct 1.18, Comments 2-6 Illinois Rules of Professional Conduct 4.4, Comment 1 Restatement (Third) of the Law Governing Lawyers, sec. 15 ABA Formal Op. 90-358 (1990) ISBA Op. 12-05 (2012) ISBA Op. 95-4 (1995) Montana Bar Ethics Op. 010830 (2000) Virginia Legal Ethics Opinion 1794 (2004)

FACTS A family law attorney advises a divorce client to meet with other attorneys in the community for the sole purpose of creating a conflict of interest so that the client’s spouse could not retain the other attorneys in the divorce matter. The client then proceeds to meet with the other attorneys with no intent of retaining their services.

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QUESTION

1. May an attorney advise a client to meet with other attorneys in the community solely for the

purpose of disqualifying the other attorneys from future representation of an opponent? 2. If an attorney meets with a prospective client, may the attorney later represent a client with materially adverse interests in the same or in a substantially related matter?

OPINION

A. An attorney may not advise or direct a client to meet with other attorneys in the community solely for the purpose of disqualifying the other attorneys from future representation of an opponent.

Taint shopping refers to the actions of someone engaging in the strategic elimination of potential attorneys for an opposing party by consulting with those attorneys for the sole purpose of disqualifying them from future adverse representation. Rule 8.4(c) of the Illinois Rules of Professional Conduct provides that it is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation. Rule 8.4(d) prohibits an attorney from engaging in conduct prejudicial to the administration of justice. Rule 8.4(a) provides that it is improper for an attorney to violate the rules through the actions of another. Rule 1.2(d) prohibits an attorney from counseling a client to engage in conduct that the lawyer knows is fraudulent. Taint shopping requires the use of deceit in order to be effective and accordingly, an attorney may not advise a client to engage in such conduct. Directing a client to engage in taint shopping also violates Rule 4.4(a) which provides, “In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person or use methods of obtaining evidence that violate the legal rights of such a person.” As set forth in Comment [1] to Rule 4.4,“Responsibility to a client requires a lawyer to subordinate the interests of others to those of the client, but that responsibility does not imply that a lawyer may disregard the rights of third persons. It is impractical to catalogue all such rights, but they include legal restrictions on methods of obtaining evidence from third persons and unwarranted intrusions into privileged relationships, such as the client-lawyer relationship.” Taint shopping interferes with the ability of another to retain the counsel of his or her choice and is thus just such an unwarranted intrusion into a prospective attorney-client relationship. Taint shopping burdens the unsuspecting lawyer to unnecessarily prepare for the initial consultation and participate in the meeting and assists in defeating the legal rights of other individuals to hire the counsel of their choice. See, e.g., Virginia Ethics Opinion 1794 (2004).

B. An attorney who participates in an initial consultation with a prospective client, but who is not retained by the prospective client, is not prohibited from later representing a client with materially adverse interests in the same or in a substantially related matter if (a) the attorney obtained informed consent from the prospective client including consent that no

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information disclosed during the consultation will prohibit the lawyer from representing a different client in the matter; (b) even in the absence of informed consent, the attorney received no information that could be significantly harmful if used in the matter, or (c) the attorney can establish that the prospective client revealed information to the attorney with no intention of retaining the attorney.

Generally, lawyers have a duty, in their representation of clients, to maintain the confidentiality of information relating to the representation pursuant to Rule 1.6 of the Illinois Rules of Professional Responsibility and to avoid impermissible conflicts of interest pursuant to Rules 1.7 through 1.9 of the Rules. However, lawyers’ duties to prospective clients are not as extensive as the duties to clients. As the Restatement Third of the Law Governing Lawyers, sec. 15 cmt. B notes, in explaining why the prospective client should not receive all the protections given to a client, “A lawyer’s discussions with a prospective client often are limited in time and depth of exploration, do not reflect full consideration of the prospective client’s problems, and leave both prospective client and lawyer free (and sometimes required) to proceed no further. Hence, prospective clients should receive some but not all of the protection afforded clients.” Rule 1.18 addresses a lawyer’s obligations to prospective clients. The Rule provides as follows:

(a) A person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client. (b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client. (c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d). (d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if:

(1) both the affected client and the prospective client have given informed consent, or (2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and that lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.

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Pursuant to the Rule, information given to a lawyer by a prospective client seeking legal representation is protected. Moreover, if the initial consultation with the lawyer is bona fide and the lawyer receives information from the potential client that could be significantly harmful, then the prohibitions against conflicts of interest could potentially preclude future representation of an adverse party. See also ISBA Op. 12-05 (2012) and 95-04 (1995). If, on the other hand, the person consulting with the lawyer was not genuinely seeking legal representation, then the Rule would not apply. Under the Rule, a prospective client is defined as “[a] person who discusses with a lawyer the possibility of forming a client-lawyer relationship.” As noted in Comment [2], “Not all persons who communicate information to a lawyer are entitled to protection under this Rule.” If the individual has no real expectation of retaining the attorney, then the individual would not qualify as a true prospective client and the reasonable expectation of confidentiality would be absent. See, e.g., Montana Bar Ethics Op. 010830 (2000). Thus, if the lawyer can establish that the prospective client revealed information to him or her with the sole intention of disqualifying the lawyer from future representation, then the prohibitions of Rule 1.18 would not apply. Unfortunately, proving such circumstances may be difficult. Given the problems of proving the prospective client’s deceit, an attorney should consider limiting initial interviews with prospective clients so as to only obtain the information necessary to determine whether or not to undertake the new matter. See, Rule 1.18, Comment [4]. If the lawyer obtains no information in the initial consultation that could be significantly harmful if used in the subsequent matter, then the lawyer would not be precluded from future adverse representation. Rule 1.18, Comment [6]. Limiting information received at an initial consultation also has the added benefit of minimizing the imputation of any conflict to other members of the disqualified lawyers firm. The lawyer may also wish to consider obtaining the informed consent of the prospective client. As set forth is Comment [5] to Rule 1.18:

A lawyer may condition conversations with a prospective client on the person’s informed consent that no information disclosed during the consultation will prohibit the lawyer from representing a different client in the matter. See Rule 1.0(e) for the definition of informed consent. If the agreement expressly so provides, the prospective client may also consent to the lawyer’s subsequent use of information received from the prospective client.

Rule 1.0(e) defines informed consent as “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” To be effective, the informed consent should identify the risks of disclosure of information to the lawyer in the initial consultation. See, e.g., ABA Formal Op. 90-358 for more information regarding advance waivers of conflicts of interest.

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CONCLUSION A lawyer may not advise or direct a client to engage in the practice commonly known as taint shopping whereby a client consults with other lawyers in the community for the sole purpose of disqualifying the other lawyers from future representation of an opponent. A lawyer who meets with the prospective client is not prohibited from future adverse representation if the lawyer can prove that the prospective client had no intention of actually hiring the lawyer, if the lawyer received no information that could be significantly harmful to the prospective client pursuant to Rule 1.18, or if the lawyer can demonstrate that the lawyer first obtained the informed consent of the prospective client pursuant to Rule 1.18 of the Illinois Rules of Professional Conduct. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-19 July 2012 Subject: Client Funds and Property; Fees and Expenses; Fees Paid by Third Party Digest: An “advance payment retainer” can be used by or on behalf of a spouse in a

divorce case if all of the requirements of Rule 1.15 are satisfied. The advance payment retainer should not be used, however, if the client’s purpose can be accomplished with a “security retainer.”

References: Illinois Rule of Professional Conduct 1.15 Dowling v. Chicago Options Associates, Inc. 226 Ill. 2d 277, 875 N.E. 2d 1012 (2007)

FACTS Lawyer represents spouse in a divorce. Spouse is concerned whether or not Spouse will have enough money to pay lawyer for the divorce. Lawyer sets up an advance payment retainer in full compliance with the Illinois Rule of Professional Conduct, but does not factor those funds in as part of the marital assets, and refunds unused funds to Spouse directly after the settlement is reached. Is this proper under the Illinois Rules of Professional Conduct? Lawyer represents Spouse in a divorce, but Spouse does not have money to pay for legal services. Parent of Spouse agrees to pay for the divorce. Rather than give money to Spouse directly for fear it could be considered a marital gift and therefore joint property of the marriage, Lawyer sets up an advance payment retainer in full compliance with the Illinois Rules of Professional Conduct and Parent pays Spouse’s legal fees up front through these funds. Upon completion of the divorce, unused funds are returned to the Parent. Is this proper under the Illinois Rules of Professional Conduct?

QUESTION Is the use of an “advance payment retainer” appropriate under the two scenarios set forth above?

OPINION Rule 1.15 of the Illinois Rules of Professional Conduct permits the use of an “advance payment retainer” whereby the retainer, upon payment to the lawyer, becomes the property of the lawyer and is to be deposited in the lawyer’s general account rather than the lawyer’s trust account. However, any unearned portion of the retainer must be returned to the client. The Rule does not limit the use of such retainers to any particular type of legal proceeding.

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Although this Opinion deals specifically with advance payment retainers, first recognized in 2007 in Dowling v. Chicago Options Associates, Inc., 226 Ill. 2d 277, 875 N.E. 2d 1012 (2007), Rule 1.15 defines and discusses two other types of retainers which have been long-recognized: (1) the “general” or “classic” retainer which is paid to ensure the lawyer’s availability for a particular matter; and (2) the “security retainer” which secures payment for future services by the lawyer. The Rule also discusses and distinguishes from retainers the payment of a fixed fee for legal services. The Rule provides in part:

(c) A lawyer shall deposit in a client trust account funds received to secure payment of legal fees and expenses, to be withdrawn by the lawyer only as fees are earned and expenses incurred. Funds received as a fixed fee, a general retainer, or an advance payment retainer shall be deposited in the lawyer’s general account or other account belonging to the lawyer. An advance payment retainer may be used only when necessary to accomplish some purpose for the client that cannot be accomplished by using a security retainer. An agreement for an advance payment retainer shall be in a writing signed by the client that uses the term “advance payment retainer” to describe the retainer, and states the following:

(1) the special purpose for the advance payment retainer and an explanation why it is advantageous to the client;

(2) that the retainer will not be held in a client trust account, that it will become the property of the lawyer upon payment, and that it will be deposited in the lawyer’s general account;

(3) the manner in which the retainer will be applied for services rendered and expenses incurred; (4) that any portion of the retainer that is not earned or required for expenses will be refunded to the client;

(5) that the client has the option to employ a security retainer, provided, however, that if the lawyer is unwilling to represent the client without receiving an advance payment retainer, the agreement must so state and provide the lawyer’s reasons for that condition.

The characteristics and distinctions between these forms of payment for legal services are discussed in detail in comments [3A], [3B], [3C], and [3D] to the Rule. While the two fact situations above involve efforts to use advance payment retainers, each situation also involves substantive divorce law. It is beyond the scope of this Committee to determine, for example, whether the Spouse’s lawyer in the first scenario has violated any substantive divorce or discovery rule by not factoring the advance retainer into the mix of marital assets or whether in the second fact situation the Spouse’s parents have made a marital gift.

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However, we can opine upon the propriety of the use of advance payment retainers in each situation. First, we note that the comments to the Rule provide that an advance payment retainer should be used “sparingly.” More importantly, the Rule itself provides that such a retainer “may be used only when necessary to accomplish some purpose for the client that cannot be accomplished by using a security retainer.” We believe that the fee payments in both fact situations could have been accomplished through the use of a security retainer and that the use of the advance payment retainer was not justified in either case. In the first situation the Spouse could have given the lawyer the same amount of money in the form of a security retainer as he or she did with the advance payment retainer. There was no threat of bankruptcy or any other fact to indicate the Spouse was better off through the use of an advance payment retainer. The lawyer could use the funds regardless of the form of the retainer, and the client would have satisfied his or her spendthrift tendencies by giving the money to the lawyer in the form of a retainer. Moreover, the lawyer would have to determine whether the funds as marital assets regardless of the type of retainer. The funds would come from the Spouse in either case. The same is true in the second case. Whether or not the parents of the spouse made a marital gift to the Spouse is not dependent on the type of retainer given to the lawyer. In both types of retainers the lawyer would use the funds and return any unused portion. So once again, the payment to the lawyer could have been accomplished through the use of a security retainer, and should have been done in this instance. Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association

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ISBA Professional Conduct Advisory Opinion ________________________________ Opinion No. 12-20 July 2012 Subject: Contingent Fees Digest: Whether a lawyer may charge a contingent fee for seeking to identify and recover

unclaimed property of a client is dependent on the extent of the lawyer’s knowledge of various factors at the time of undertaking the representation. However, such a fee, even if otherwise appropriate, must be reasonable.

References: Illinois Rule of Professional Conduct 1.5(a)

In re Teichner, 104 Ill. 2d 150, 470 N.E. 2d 972 (1984);

In re Gerard, 132 Ill. 2d 507, 548 N.E. 2d 1051 (1989); In re Doyle, 144 Ill. 2d 451, 581 N.E. 2d 669 (1991); Guerrant v. Roth, 334 Ill. App. 3d 259, 777 N.E. 2d 499 (1st Dist. 2002); In re Estate of Sass, 246 Ill. App. 3d 610, 616 N.E. 2d 702 (2nd Dist. 1993);

Schweihs v. Davis, Friedman, Zavett, Kane, 344 Ill. App. 3d 493, 800 N.E. 2d 448 (1st Dist. 2003);

Robert S. Pinzur, Ltd. v. The Hartford, 158 Ill. App. 3d 871, 511 N.E. 2d 1281 (2nd Dist. 1987)

ISBA Opinion No. 91-13

QUESTION

An attorney inquires whether he may properly charge a contingent fee for representing a client in discovering and obtaining unclaimed property.

OPINION

A. Case Law Discussion The present inquiry in reality presents two (2) questions; i.e., (a) the propriety of charging on a contingent fee basis to discover and obtain unclaimed property; and (b) the reasonableness of the contingent fee as is thereafter sought to be collected by the attorney.

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Several Illinois Supreme Court cases have dealt with similar issues in a disciplinary setting. Such cases have concluded that the charging of a contingent fee for services akin to those involved here is not of itself improper if the attorney is unaware at the time of undertaking the representation that the locating and obtaining of such property will be simple and involve minimal services or risk on his part. However, the Court has in each such instance then gone on to test the reasonableness of the amount of the contingent fee sought to be collected as against the time incurred, the difficulty encountered, the risk of non-recovery undertaken by the attorney, and the applicability of the other factors listed in Rule 1.5(a) in determining the reasonableness of a fee. To this effect, Rule 1.5(a) of the Illinois Rules of Professional Conduct has as its benchmark that “(a) lawyer shall not make an agreement for, charge, or collect an unreasonable fee...” The list of factors therein set forth to be considered in determining the reasonableness of a fee includes, among other things, “whether the fee is fixed or contingent.” Comment 3 to such Rule goes on to elaborate that “[c]ontingent fees, like any other fees, are subject to the reasonableness standard of paragraph (a) of this Rule,” and that “[i]n determining whether a particular contingent fee is reasonable, or whether it is reasonable to charge any form of contingent fee, a lawyer must consider the factors that are relevant under the circumstances.” The Illinois Supreme Court discussed such issues in In Re Teichner, 104 Ill. 2d 150, 470 N.E. 2d 972 (1984). Such case involved a disciplinary proceeding arising from an attorney’s having undertaken to represent a woman on a twenty-five percent (25%) contingent fee basis for seeking to recover as beneficiary of a life insurance policy taken out by the man with whom the client had cohabited and raised a family for in excess of twenty (20) years. The client had already, at the time of retaining the attorney, submitted a claim with the insurance company. She was concerned, however, as to her right to recovery both because she and the decedent were never married, and because the decedent was still legally married at the time of his death to a woman who had indicated that she would make a claim on the policy. However, the wife thereafter failed to make any such claim, and the insurance company paid off on the policy to the attorney’s client in a matter of just three weeks, with little being done by the attorney other than a couple of phone calls to the insurance company. The attorney claimed and received a contingent fee of approximately $7,000.00 against the $28,000.00 value of the life insurance policy. The Supreme Court in Teichner first discussed the propriety of the attorney having undertaken the insurance policy claim on a contingent fee basis. The Court expressed its belief that the disciplinary hearing panel had been unduly critical of the attorney’s taking the matter on a contingent basis, with the Court stating that at the time of doing so, realistic concerns existed as to the right and ability of the client to recover on the policy. While the client shortly thereafter obtained payment on the policy with little effort by the attorney, the Court recognized that the attorney was unaware at the time of taking on the representation that such a routine payment would so quickly resolve the matter. The Court concluded that, judging the matter in light of the circumstances as they existed when presented to the attorney, the attorney’s belief that the claim might prove questionable and time consuming was not unreasonable. Accordingly, while noting that the better course might have been for the attorney to await word from the insurance company as to the already submitted claim before taking the case on a contingency basis, the Court deemed the taking of the claim on such basis to be appropriate under the circumstances.

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However, the Court’s inquiry did not end there. Rather, the Court went on to analyze the reasonableness of the fee collected under the circumstances as they came to be known subsequent to the undertaking of the representation. In so proceeding, the Court noted that a contingency fee contract is always subject to the supervision of the Court as to its reasonableness, and that it is the duty of the Court to guard against the collection of an excessive fee. The Court determined that the services claimed to have been rendered by the attorney were minimal and artificial, and took little effort on the attorney’s part. Accordingly, the Court determined that the attorney was not entitled to collect a contingency fee in the amount claimed and originally agreed upon with the client. In so holding, the Court stated that a lawyer of ordinary prudence would be left with “a definite and firm conviction” that a $7,000.00 fee in the circumstances of the case was not only excessive, but was, as the hearing panel had earlier concluded, unconscionable, and warranted discipline. Similar considerations were presented in In Re Gerard, 132 Ill. 2d 507, 548 N.E. 2d 1051 (1989). Such case involved an eighty-four (84) year old woman who, in the process of having her will prepared by the attorney, asked his help in finding certain paper assets which she claimed to be missing, and which she believed to have been taken from her when she had recently been hospitalized. The attorney offered her the choice of an hourly or contingent fee, and she selected a one-third (1/3) contingency. At the time, the attorney did not know the nature of the assets that were missing, their value, or the circumstances of their disappearance beyond what is recited above. Shortly thereafter, however, upon making inquiry, the attorney learned that the supposedly missing assets were Certificates of Deposits issued by seven (7) financial institutions, the funds of which were safely accounted for at the issuing banks, and the value of which totaled approximately $450,000.00. Under such circumstances, the attorney had little more to do than to register the CD’s in the name of the trust which he had established for the client. The attorney claimed and received for his efforts, as per the agreed upon contingent fee, a fee in the amount of almost $160,000.00. The Supreme Court did not agree with the client’s contention that the attorney had committed a fraud in having entered into a contingent fee agreement, stating, as it had in Teichner, that such a claim must be viewed in light of what was known by the attorney at the time of entering into the fee agreement. The Court went on, however, to analyze the reasonableness of the amount of the fee as against the work performed by the attorney, and concluded that the fee was excessive. As in Teichner, the Court stated that a lawyer of ordinary prudence would have been left with a definite and firm conviction that a $160,000.00 fee was excessive for what the Court termed to be essentially administrative/non-legal services, and stated that the attorney, upon learning the true facts concerning the status of the CD’s, should have reformed the fee agreement with the client to provide for a fee in a reasonable amount. The Court thus found that the circumstances presented warranted discipline of the attorney. It should be noted that the Court in Gerard, in discussing the propriety of contingent fees generally, questioned the charging of such a fee in a non-adversarial, non-litigation setting. The Court stated that it is common knowledge that contingent fees are to be collected only if an attorney successfully champions the legal rights and claims of his client, with the result that the

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client is compensated through a settlement or judgment against those who denied his claims. The Court went on to state that the attorney in the case before it could not charge or collect a one-third (1/3) contingent fee because he did not “recover” the CD’s by means of a settlement or judgment. The Court cited approvingly to an Appellate Court decision (See Robert S. Pinzur, Ltd. v. The Hartford, 158 Ill. App. 3d 871, 511 N.E. 2d 1281 (2nd Dist. 1987)), to the effect that the term “recovered” requires that an attorney’s recovery of property or money for a client resulted from an action taken by the attorney, and that otherwise the attorney receives an unjust windfall. Finally, in 1991, the Supreme Court decided the case of In re Doyle, 144 Ill. 2d 451, 581 N.E. 2d 669 (1991), where the Court went through a similar analysis in determining the propriety of an attorney’s collecting a contingent fee of $34,000.00 as against the proceeds of a life insurance policy which was recovered. In reliance upon Teichner, the Court recognized that, while a contingent fee contract may be valid at the time of its formation, the Court still has a duty, after review of the facts, to safeguard the public from the collection of an excessive fee. Thus, the Court recognized that the attorney in question had a good-faith belief, at the time of taking on the representation on a contingent fee basis, that the client’s claim on the insurance policy would be disputed, and therefore that the charging of a contingent fee was appropriate. The Court went on, however, to conduct a reasonableness analysis. In doing so, it recognized that by the time that such contingent fee actually came to fruition, the attorney was aware that no challenge had been brought as to the policy, and that the policy had been honored in routine fashion within a mere month of the claim on the policy having been submitted. The Court nonetheless found, however, that the contingent fee agreed upon was reasonable because it was to be applied in payment not just for the services performed in making the claim on the insurance policy, but also for a multitude of other services performed by the attorney, which the Court found to be substantial. Having conducted such an analysis, the Court found that, contrary to the circumstances present in Teichner and Gerard, a lawyer of ordinary prudence would not have definitely and firmly believed that a $34,000.00 fee was excessive, and the Court accordingly found that no discipline was warranted. It should again be noted that, as had been stated by the Supreme Court in Gerard, the Court in Doyle reiterated that a contingent fee is appropriate and may be collected only if an attorney champions the legal rights and claims of the client, with the client being compensated through a settlement or judgment against those who denied his claims. Other cases subsequently decided by the Illinois Appellate Court in reliance on the aforesaid Supreme Court decisions include Guerrant v. Roth, 334 Ill. App. 3d 259, 777 N.E. 2d 499 (1st Dist. 2002); In re Estate of Sass, 246 Ill. App. 3d 610, 616 N.E. 2d 702 (2d Dist. 1993); and Schweihs v. Davis, Friedman, Zavett, Kane, 344 Ill. App. 3d 493, 800 N.E. 2d 448 (1st Dist. 2003)). B. Application of the Law to the Present Inquiry The present inquiry asks the general question of whether an attorney may represent a client on a contingent fee basis in seeking to discover and obtain unclaimed property. However, it sets forth none of the information from which such an inquiry may be answered. The Supreme Court

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Opinions previously discussed recognize that no per se prohibition exists as would in all instances preclude the charging of a contingent fee for the type of services here involved (but see discussion, infra). Rather, the propriety of charging such a fee in any given instance is dependent on the extent of the attorney’s knowledge at the time of undertaking the representation as to the existence, amount and difficulty in locating and obtaining the property, as well as the risk being undertaken by the attorney that the representation will result in a non-recovery. By way of example, were the lawyer’s task limited to a simple internet search or the submission of a claim form, we would consider undertaking such an engagement on a contingent fee basis improper. Conversely, if the matter required significant effort or sophisticated research, or both, with no certainty on the lawyer’s part that any property exists, a contingent fee would likely be appropriate. Accordingly, just as we cannot say that the charging of a contingent fee for locating and recovering unclaimed property is per se improper, we cannot state as a general proposition that the charging of a contingent fee for the locating and recovery of unclaimed property is appropriate in all instances. We can only direct the inquiring attorney to apply the Supreme Court’s decisions against the circumstances of his situation. Moreover, the attorney must be aware that even if the charging of a contingent fee would otherwise be proper based on the facts known to him at the time of undertaking the representation, the reasonableness of such a fee will remain at issue, and subject to the Court’s subsequent review. Accordingly, the possibility exists that an agreed upon contingent fee may not be fully recoverable should the services actually performed be such as to, in the words of the Supreme Court, result in a definite and firm conviction that the amount of the fee is excessive.

We feel that some comment is necessary on our part as to the discussion in Gerard, also referenced in Doyle, to the effect that any contingency fee is proper only if the attorney successfully champions the legal rights and claims of his client, with the result that the client is compensated through a settlement or judgment. Although such was stated by the Court, the fact is that neither the Gerard case, nor arguably the Teichner or Doyle cases, involved adversarial or litigated claims, yet the Court in each such instance conducted an analysis of the propriety of charging a contingent fee and concluded in each such instance that the charging of such a fee was proper under the circumstances. Seemingly, such discussion would have been unnecessary were a contingent fee to always be improper in matters not involving adversarial or litigated claims subject to resolution by settlement or judgment. Moreover, we see no reason why the propriety of charging a contingency fee should be restricted to litigated or adversarial matters resulting in a settlement or judgment. In this regard, see our previous Opinion No. 91-13, where we recognized, in accord with the Comments to ABA Model Rule 1.8 then existing, that contingency fee agreements may be employed in non-litigation contexts. We noted, however, that since such matters generally involve less uncertainty than litigation, the reasonableness of the contingent fee may be more closely scrutinized by the Courts. We believe such rationale to be correct, and to be consistent with the analyses conducted in the Supreme Court Opinions. Additionally, we believe, consistent with the above, that contingent fees have a proper place in providing counsel to persons not otherwise able to afford an attorney to locate unclaimed property, regardless of the possibly non-adversarial nature of the matter involved. A contingent fee in such circumstances may provide the only means by which a party can obtain the services of a lawyer. Moreover, should lawyers not be allowed to charge a contingent fee to perform services of the nature here involved, the only alternative remaining available to the client may be to use the services of an asset finding firm, which typically charges on a contingency basis for the purported locating of assets which it is already aware of both as to location and amount. Such firms are not, however, as are lawyers, subject to ethical rules which would limit the contingency fee charged to an amount that is reasonable, and subject to review by the Court. Accordingly, a client is afforded substantial protections by being able to retain an attorney to investigate and recover property on a contingent fee basis, rather than being left to other available alternatives. Finally, question could be raised as to whether an attorney’s being retained solely to locate and recover unclaimed property is so non-legal in nature as to be inappropriate, regardless of whether done on a contingency or other fee basis. For many of the reasons already stated, we do not believe such to be the case. Moreover, as previously alluded to in our discussion of the Gerard case, the Supreme Court in such instance referred to the services therein involved, i.e., locating a client’s CD’s, as being essentially administrative and non-legal in nature, and requiring no legal skills. The Court nonetheless approved of the attorney’s taking of such matter on a contingency basis, criticizing the attorney only for the unreasonableness of the amount subsequently sought to be collected based on the services actually performed. Accordingly, it does not appear that the Court viewed services such as the locating of a client’s CD’s as being inappropriate for an attorney to perform, regardless of whether they were being done on a contingency or other fee basis. The same would seemingly be true in the present instance.

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CONCLUSION Whether an attorney may represent a client on a contingent fee basis for seeking to discover and obtain unclaimed property depends largely on the extent of the attorney’s knowledge at the time of undertaking the representation as to the existence, amount, and difficulty in locating and obtaining such property, and the risk of there being a non-recovery. However, the contingent fee charged, even if otherwise appropriate at the time of the representation being undertaken, must be reasonable Professional Conduct Advisory Opinions are provided by the ISBA as an educational service to the public and the legal profession and are not intended as legal advice. The opinions are not binding on the courts or disciplinary agencies, but they are often considered by them in assessing lawyer conduct. © Copyright 2012 Illinois State Bar Association