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© 2016 Downey Law Group LLC. For educaonal purposes only. Legal Ethics: Top Mistakes That Lead to Malpractice Michael Downey Raphael Nemes Downey Law Group LLC June 2016

Legal Ethics: Top Mistakes That Lead to Malpractice

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Page 1: Legal Ethics: Top Mistakes That Lead to Malpractice

© 2016 Downey Law Group LLC. For educa!onal purposes only.

Legal  Ethics:  Top  Mistakes  That  Lead  to  Malpractice

Michael  DowneyRaphael  Nemes

Downey  Law  Group  LLCJune  2016

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11.3

8.9

8.8

8.6

6.7

6.6

5.9

5.4

5.3

5

0 2 4 6 8 10 12

Failure   to  Know/Apply  Law

Planning  Error

Inadequate  Disc/Investigation

Failure   to  File  Documents/No  Deadline

Failure   to  Calendar

Failure   to  Know  Deadline

Procrastination

Failure   to  Obtain  Client  Consent

Conflict  of  Interest

Fraud

10  Most  Common   Legal  Malpractice  Error  Allegations  

Percentage

Source:  ABA  Standing  Committee  on  Lawyers’  Professional  Liability

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Administrative  Errors

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Calendaring

• Failure  to  calendar  properly• Failure  to  react  to  calendar  entries

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Calendaring

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Document  Completion  Errors

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Lost  Files  &  Documents

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Lost  Files  &  Documents

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Consequences  

• Disciplinary  liability  (lawyers)– Normally  not  from  single  mistake

– “Reasonable  measures”?

• Civil  liability  (lawyers  and  firm)– Special  protections  for  special  information

– Notice  requirements  in  many  states

– (Insurance  coverage?)

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Rule  1.1-­‐ Duty  of  Competence

A  lawyer  shall  provide  competent  representation  to  a  client.  Competent  representation  requires  the  legal  knowledge,  skill,  thoroughness,  and  preparation  necessary  for  the  representation.

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Rule  1.1  – Technology  Competence

• [8]  To  maintain  the  requisite  knowledge  and  skill,  a  lawyer  should  keep  abreast  of  changes  in  the  law  and  its  practice,  including  the  benefits  and  risks  associated  with  relevant  technology,  engage  in  continuing  study  and  education  and  comply  with  all  continuing  legal  education  requirements  to  which  the  lawyer  is  subject  

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Watch  the  Video  Before  Posting  It• Attorney  posts  video  on  YouTube,  thinking  it  shows  police  planting  drugs  on  his  client

• In  reality,  the  video  showed  his  client  selling drugs  and  revealed  the  identity  of  a  confidential  source

• Attorney:  the  video  caused  a  “media  storm”  and  “people  who  have  known  me  my  whole  life  don’t  speak  to  me  now”

• Result:  attorney  suspended   for  five  months,  sues  the  ARDC  for  violation  of  his  1st Amendment  free  speech  rights

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(http://www.abajournal.com/news/article/lawyer_suspended_for_posting_video_of_undercover_drug_buy_in_mistaken_belie/)

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Rule  1.3-­‐ Duty  of  Diligence

A  lawyer  shall  act  with  reasonable  diligence  and  promptness  in  representing  a  client.

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Rule  5.1  – Responsibilities  of  Partners  [and]  Supervisory  Lawyers

(a) A  partner  in  a  law  firm,  and  a  lawyer  who   individually  or  together  with  other   lawyers  possesses  comparable  managerial  authority   in  a  law  firm,  shall  make  reasonable  efforts  to  ensure  that  the  firm  has  in  effect  measures  giving  reasonable  assurance that  all  lawyers  in  the  firm  conform  to  the  Rules  of  Professional  Conduct.          

(b) A  lawyer  having  direct  supervisory   authority  over  another   lawyer  shall  make  reasonable  efforts  to  ensure  that  the  other   lawyer  conforms to  the  Rules  of  Professional  Conduct.  

(c) A  lawyer  shall  be  responsible   for  another   lawyer’s  violation  of  the  Rules  of  Professional  Conduct  if:

(1) the  lawyer  orders  or,  with  knowledge  of  the  specific   conduct,   ratifies  the  conduct   involved;   or

(2) the  lawyer  is  a  partner  or  has  comparable  managerial  authority   in  the  law  firm  in  which   the  other  lawyer  practices,  or  has  direct  supervisory   authority  over  the  other  lawyer,  and  knows  of  the  conduct   at  a  time  when  its  consequences   can  be  avoided  or  mitigated  but  fails  to  take  reasonable  remedial  action.

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Rule  1.1  – Co-­‐Counsel  Arrangements• Retaining  Or  Contracting  With  Other  Lawyers

• [6]  Before  a  lawyer  retains  or  contracts  with  other   lawyers  outside   the   lawyer’s  own  firm  to  provide  or  assist  in  the  provision  of   legal  services  to  a  client,  the  lawyer  should   ordinarily  obtain   informed  consent   from  the  client  and  must  reasonably  believe  that  the  other   lawyers’  services  will  contribute  to  the  competent   and  ethical  representation  of  the  client.  See  also  Rules  1.2(e)  and  Comment  [15],  1.4,  1.5(e),  1.6,  and  5.5(a).  The  reasonableness   of  the  decision  to  retain  or  contract  with  other  lawyers  outside   the  lawyer’s  own   firm  will  depend   upon  the  circumstances,  including  the  education,   experience  and  reputation   of  the  nonfirm  lawyers;  the  nature  of  the  services  assigned  to  the  nonfirm  lawyers;  and  the   legal  protections,  professional  conduct   rules,  and  ethical  environments   of  the  jurisdictions   in  which  the  services  will  be  performed,  particularly  relating  to  confidential   information.

• [7]  When  lawyers  from  more  than  one  law  firm  are  providing   legal  services  to  the  client  on  a  particular  matter,  the  lawyers  ordinarily  should   consult  with  each  other  and  the  client  about  the  scope  of  their  respective  representations and  the  allocation  of  responsibility   among  them.  See  Rule  1.2.  When  making  allocations  of  responsibility   in  a  matter  pending  before  a  tribunal,  lawyers  and  parties  may  have  additional  obligations  that  are  a  matter  of  law  beyond   the  scope  of  these  Rules.

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Rule  5.3  – Supervising  Non-­‐LawyersWith  respect  to  a  nonlawyer   employed  or  retained  by  or  associated  with  a  lawyer:

(a)  a  partner,  and  a  lawyer  who  individually  or  together  with  other  lawyers  possesses  comparable  managerial  authority  in  a  law  firm  shall  make  reasonable   efforts  to  ensure  that  the  firm  has  in  effect  measures  giving  reasonable   assurance  that  the  person’s  conduct  is  compatible  with  the  professional  obligations  of  the  lawyer;

(b)  a  lawyer  having  direct  supervisory  authority  over  the  nonlawyer  shall  make  reasonable  efforts  to  ensure  that  the  person’s  conduct  is  compatible  with  the  professional  obligations  of  the  lawyer;  and

(c)  a  lawyer  shall  be  responsible  for  conduct  of  such  a  person  that  would  be  a  violation  of  the  Rules  of  Professional  Conduct  if  engaged  in  by  a  lawyer  if:

(1)  the  lawyer  orders  or,  with  the  knowledge  of  the  specific  conduct,  ratifies  the      conduct  involved;  or

2)  the  lawyer  is  a  partner  or  has  comparable  managerial  authority  in  the  law  firm  in  which  the  person  is  employed,   or  has  direct  supervisory  authority  over  the  person,  and  knows  of  the  conduct  at  a  time  when  its  consequences   can  be  avoided  or  mitigated  but  fails  to  take  reasonable   remedial  action.

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Intentional  Wrongs

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Defamation

• Lawyer  makes  claims  adversary  considers  false  and  defamatory.    

• Defamation  – Elements

– False  statement  concerning  plaintiff  by  defendant

– Unprivileged  publication  of  statement  to  third  party

– Damages  to  plaintiff

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Fraud

Claim  against  Lawyer  for  Lawyer’s  own  conduct

Claim  against  Lawyer  for  client’s  conduct

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Elements  of  Fraud

(1) a  false  statement  of  material  fact;   (2) the  defendant's  knowledge  that  the  statement  was  

false;  (3) the  defendant's  intent  that  the  statement  induce  

the  plaintiff  to  act;  (4) the  plaintiff's  reliance  on  the  statement;   and(5) the  plaintiff's  damages  resulting  from  reliance  on  

the  statement

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Rule  1.6(b)-­‐(c)  – Disclosing  Client  Fraud

(b)  A  lawyer  may  reveal  information   relating   to  the  representation   of  a  client   to  the  extent   the   lawyer  reasonably   believes   necessary:            (1) to  prevent  the  client   from  committing   a  crime   in  circumstances   other  than  those  

specified   in  paragraph  (c);    (2) to  prevent  the  client   from  committing   fraud  that   is  reasonably   certain   to  result   in  

substantial   injury  to  the  financial   interests   or  property  of  another   and  in  furtherance   of  which  the  client   has  used   or  is  using  the   lawyer’s  services;          

(3) to  prevent,  mitigate   or  rectify  substantial   injury  to  the  financial   interests   or  property  of  another   that   is  reasonably   certain  to  result   or  has  resulted   from  the  client’s   commission   of  a  crime  or  fraud  in  furtherance   of  which  the  client   has  used  the   lawyer’s  services;    .  .  .  

(c)  A  lawyer  shall  reveal   information   relating   to  the  representation   of  a  client   to  the  extent   the   lawyer  reasonably   believes   necessary   to  prevent  reasonably   certain   death  or  substantial   bodily  harm.

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Malicious  Prosecution

(1) the  commencement   or  continuance  of  an  original  criminal  or  civil  judicial  proceeding  by  the  defendant;  

(2) the  termination  of  the  proceeding  in  favor  of  the  plaintiff;  

(3) the  absence  of  probable  cause  for  such  proceeding;  

(4)  malice;  and  

(5)  damages.

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Abuse  of  Process

(1)  the  existence  of  an  ulterior  purpose  or  motive  and  (2)  some  act  in  the  use  of  legal  process  not  proper  in  the  regular  prosecution  of  the  proceedings.

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“Litigation  Privilege”

• Affirmative  defense  protecting  lawyers  from  being  sued  for  defamation  due  to  litigation-­‐related  conduct

• Applies  to  statements  related  to  a  judicial  proceeding  that  refer  to  the  matters  being  litigated

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Waffle  House  Litigation

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Problems  from  Past  Clients

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Duty  of  Confidentiality

• Often  arise  when  an  attorney  violates  the  duty  to  protect  client  confidences  even  after  the  representation  ends

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Rule  1.9(c)A  lawyer  who  has  formerly  represented  a  client  in  a  matter  or  whose  present  or  former  firm  has  formerly  represented  a  client  in  a  matter  shall  not  thereafter:

(1) use  information  relating  to  the  representation  to  the  disadvantage  of  the  former  client  except  as  these  Rules  would  permit  or  require  with  respect  to  a  client,  or  when  the  information  has  become  generally  known;  or

(2) reveal  information  relating  to  the  representation  except  as  these  Rules  would  permit  or  require  with  respect  to  a  client.

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Conflicts  from  Past  Representations  –Rule  1.9(a)  and  (b)

(a) A  lawyer  who  has  formerly  represented  a  client  in  a  matter  shall  not  thereafter  represent  another  person  in  the  same  or  a  substantially  related  matter  in  which  that  person’s  interests  are  materially  adverse  to  the  interests  of  the  former  client  unless  the  former  client  gives  informed  consent.            

(b) A  lawyer  shall  not  knowingly  represent  a  person  in  the  same  or  a  substantially  related  matter  in  which  a  firm  with  which  the  lawyer  formerly  was  associated  had  previously  represented  a  client  (1)  whose  interests  are  materially  adverse  to  that  person;  and(2)  about  whom  the  lawyer  had  acquired  information  protected  by  Rules  1.6  and  1.9(c)  that  is  material  to  the  matter;  unless  the  former  client  gives  informed  consent.

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Changing  Law  Firms

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Ethical  and  Other  Obligations

• "The  departing  lawyer  must  also  consider  legal  obligations  other  than  ethics  rules  that  apply  to  [his/her]  conduct  when  changing  firms,  as  well  as  .  .  .  fiduciary  duties  owed  the  former  firm.  The  law  of  agency,  partnership,  property,  contracts,  and  unfair  competition  impose  obligations  that  are  not  addressed  directly  by  the  Model  Rule  .  .  .  " ABA  Formal  Opinion  99-­‐414

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Basic  Principles  for  Laterals

• Partners  owe  fiduciary  duties  to  other  partners

• Lawyer  employees  may  owe  fiduciary  duties  to  firm

• Courts  will  (almost)  always  look  out  for  clients

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Translation  of  Principles  to  Action

• Notify  partners  first• Then  notify  clients– Clients  chose  who  represents  them  – now  and  in  the  future

– Lawyers  do  not  "own" clients• Withdraw  from  matters  remaining  behind

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The  Former  Firm  Should  NOT  .  .  .  

• Withhold  client  files• Misrepresent  the  lawyer's  current  association• Hide  the  lawyer's  new  association• Prevent  clients  from  learning  of  the  departure

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Departing  Lawyers  Should  NOT .  .  .  

• Seek  work  for  the  new  firm  before  notifying  the  old  firm

• Remove  client  files  from  the  old  firm• Advise  clients  not  to  pay  former  firm's  bills• Compete  by  comparing  confidential  information  from  the  former  firm  (rates,  etc.)

• Malign  the  former  firm

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Insured  for  Prior  Work?

• Generally  policy  covers  legal  services  provided  by  "insured"–Work  done  at  firm– By  people  at  firm  or  associated  with  firm

• Services  at  prior  firm  typically  not  covered– Right  to  indemnification  under  corporate  law– "Tail" policies

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Beware  Conflicts

• Krutzfeldt  Ranch  v.  Pinnacle   Bank (Mt.  2012)  – Lawyer  advised  plaintiff  on  tax  consequences  of  proposed  settlement

– Lawyer  billed  plaintiff  $2375– Lawyer  joined  firm  representing  defendant– Firm  was  disqualified  for  conflict

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Lateral  Moves  and  Conflicts

Law  Firm  #2Law  Firm  #2

What  conflicts  do  laterals  bring  to  Firm  #2?    And  remove  from  Firm  #1?

Law  Firm  #1Law  Firm  #1

Moving  Lawyers

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Ordinary  Imputation  Within  Firm  – Rule  1.10  (Imputing  1.7  and  1.9)

ConflictedLawyerColleague ColleagueColleague Colleague

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Imputation  of  Concurrent  Conflicts  Within  Firm

• Rule  1.10  –While  associated  in  a  firm,  no  lawyer  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  prohibition  is  based  on  a  personal  interest  of  the  prohibited  lawyer  and  does  not  present  a  significant  risk  of  materially  limiting  the  representation

• This  disqualification  may  be  waived  under  conditions  set  in  Rule  1.7

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Two  (Separate  Firms)

Law  Firm  #1 Law  Firm  #2Law  Firm  #2

No  imputation.

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Lateral  Moves  – Part  I(Receiving  Firm)

Law  Firm  #2Law  Firm  #2

What  conflicts  do  laterals  bring  to  Firm  #2?    And  remove  from  Firm  #1?

Law  Firm  #1Law  Firm  #1

Moving  Lawyers

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Scenario

• Lawyer  is  at  Law  Firm  #1  while  Law  Firm  #1  represented  Client

• Lawyer  moves  to  Law  Firm  #2

• If  there  was  a  conflict  for  Firm  #1,  would  Lawyer's  movement  bring  the  conflict  to  Firm  #2

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What  Is/Was  Lateral's  RelationshipWith  Client's  Work?

Lawyer's  Relationship  with  Client  Work  at  

Firm  #1

Applicable  Rule Impact  on  Firm  #2

Client  work  comes  with  Lawyer

Rule   1.7 Conflict   transfers  to  Firm  #2

Lawyer  did  work,  but  work  stays

Rule   1.9(a) Conflict   if  "substantially  related"

Lawyer  did  no  work,  but  had  access   to  information

Rule   1.9(b) Conflict   if  information   is  material

Lawyer  did  no  work,  had  no  access   to  information

Rule   1.9  general No  transfer  of  conflict

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Conflicts  from  Past  Representations  –Rule  1.9(a)  and  (b)

(a) A  lawyer  who  has  formerly  represented  a  client  in  a  matter  shall  not  thereafter  represent  another  person  in  the  same  or  a  substantially  related  matter  in  which  that  person’s  interests  are  materially  adverse  to  the  interests  of  the  former  client  unless  the  former  client  gives  informed  consent.            

(b) A  lawyer  shall  not  knowingly  represent  a  person  in  the  same  or  a  substantially  related  matter  in  which  a  firm  with  which  the  lawyer  formerly  was  associated  had  previously  represented  a  client  (1)  whose  interests  are  materially  adverse  to  that  person;  and(2)  about  whom  the  lawyer  had  acquired  information  protected  by  Rules  1.6  and  1.9(c)  that  is  material  to  the  matter;  unless  the  former  client  gives  informed  consent.

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Screening  for  Lateral  Hires• Rule  1.10 (e)  When  a  lawyer  becomes  associated  with  a  firm,  no  

lawyer  associated  in  the  firm  shall  knowingly  represent  a  person  in  a  matter  in  which  that  lawyer  is  disqualified  under  Rule  1.9  unless  the  personally  disqualified  lawyer  is  timely  screened  from  any  participation  in  the  matter  and  is  apportioned  no  part  of  the  fee  therefrom.

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Imputation  Without  Screen

ConflictedLawyerColleague ColleagueColleague Colleague

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No  Imputation  With  Screen

ConflictedLawyerColleague Colleague

Ethical  Screen Ethical  Screen

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Lateral  Move  With  Screen

Law  Firm  #2

Screen  to  prevent  imputationin  new  firm.

Law  Firm  #1Law  Firm  #1

Moving  Lawyers

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Screening  for  Lateral  Hires• Rule  1.10 (e)  When  a  lawyer  becomes  associated  with  a  firm,  no  

lawyer  associated  in  the  firm  shall  knowingly  represent  a  person  in  a  matter  in  which  that  lawyer  is  disqualified  under  Rule  1.9  unless  the  personally  disqualified  lawyer  is  timely  screened  from  any  participation  in  the  matter  and  is  apportioned  no  part  of  the  fee  therefrom.

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Components  of  Rule  1.10(e)

• Screen  only  for  Rule  1.9(a)  or  (b)  conflicts  arising  from  prior  firm

• Screen  must  prevent– Participation  in  matter– Receipt  of  fees  from  matter

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Lateral  Moves  – Part  II(Departed  Firm)

Law  Firm  #2Law  Firm  #2

What  conflicts  do  laterals  leave  at/remove  from  Firm  #1?

Law  Firm  #1Law  Firm  #1 Law  Firm  #2

Moving  Lawyers

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What  Is  Old  Firm's  On-­‐Going  Relationship  With  Client's  Work?

Firm  #1's  Relationship  to    Client  Work

Applicable  Rule Impact  on  Firm  #2

Work  for  Client   remains  at  firm

Rule   1.7 Conflict   remains   at  Firm  #1

All  work  for  Client    leaves  firm  – but  information   remains

1.10(b) Firm  can  handle   adverse  matter  unless   matter  is  substantially  related   and  information   is  material

All  work    for  and  information   about  Client    leaves  firm

1.10(b) Firm  can  handle   adverse  matter

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Non-­‐Competes  ProhibitedRule  5.6.  A  lawyer  shall  not  participate  in  offering  or  making:

(a)  a  partnership,  shareholders,  operating,  employment,  or  other  similar  type  of  agreement  that  restricts  the  right  of  a  lawyer  to  practice  after  termination  of  the  relationship,  except  an  agreement  concerning  benefits  upon  retirement;  or

(b)  an  agreement  in  which  a  restriction  on  the  lawyer's  right  to  practice  is  part  of  the  settlement  of  a  client  controversy.

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Beware  the  “Failing  Firm"

• Lawyer  departures  may  trigger  a  default  on  a  firm's  line  of  credit

• Firms  that  inherit  lawyers  from  failing  firms  may  face  Jewel  v.  Boxer  (Cal.  App.  1984)  claims

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Managing Risk  from  Failing  Firms

• Partnership  agreement– Clear  dissolution  provision– Jewel  v.  Boxer  waiver– Handling  of  work  in  progress

• Personal  guarantees• Tail  insurance

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Hess  v. Bresney (7th Cir. May  4,  2015)

• Hess  was  terminated  from  K&A• Hess sued  for  fees  for  cases  where  he  “did  all  the  work”  before  his  termination– Employment  agreement included  bonuses  based  upon  fees  generated

• Potential ambiguity  – “generated”  versus  “received”

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Business  with  Clients

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Business with  Clients  – Rule  1.8(a)A  lawyer  shall  not  enter  into  a  business  transaction  with  a  client  or  knowingly  acquire  an  ownership,  possessory,  security  or  other  pecuniary  interest  adverse  to  a  client  unless:

(1) the  transaction  and  terms  on  which  the  lawyer  acquires  the  interest  are  fair  and  reasonable  to  the  client  and  are  fully  disclosed  and  transmitted  in  writing  in  a  manner  that  can  be  reasonably  understood  by  the  client

(2) the  client  is  informed  in  writing  that  the  client  may  seek  the  advice  of  independent  legal  counsel  on  the  transaction,  and  is  given  a  reasonable  opportunity  to  do  so;  and

(3) the  client  gives  informed  consent,  in  a  writing  signed  by  the  client,  to  the  essential  terms  of  the  transaction  and  the  lawyer’s  role  in  the  transaction,  including  whether  the  lawyer  is  representing  the  client  in  the  transaction.

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Requirements  of  Rule  1.8(a)• The  terms  of  the  transaction  must  be  fair  and  reasonable  to  the  client;

• The  terms  must  be  fully  disclosed  in  a  writing  transmitted  to  and  reasonably  understood  by  the  client;

• The  client  must  be  advised  in  writing  of  the  desirability  of  seeking  independent  legal  advice,  and  must  be  given  reasonable  opportunity  to  obtain  such  advice;  and

• The  client  must  give  informed  consent  by  signing  a  document  that  sets  forth  the  essential  terms  of  the  transaction;  and

• The  document  memorializing  the  transaction  must  indicate  whether  the  lawyer  is  representing  the  client  in  the  transaction,  or  not.

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Key  Email  Mistakes

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Key  Email  Mistakes

Common  ethics  issues  related  to  use  of  email  include:

• Using  an  unsecured  server  or  email  system

• Inadvertently  sending  email  containing  confidential  information  to  the  wrong  recipient

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Rule  1.6(e)  – Protecting  Client  Information

• A  lawyer  shall  make  reasonable  efforts  to  prevent  the  inadvertent  or  unauthorized  disclosure of,  or  unauthorized  access to,  information  relating  to  the  representation  of  a  client.

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Rule  1.6(e)  – Protecting  Client  Information

• A  lawyer  shall  make  reasonable  efforts  to  prevent  the  inadvertent  or  unauthorized  disclosure of,  or  unauthorized  access to,  information  relating  to  the  representation  of  a  client.

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What  Are  "Reasonable"  Precautions

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Evaluation  of  Safeguards• Factors  to  be  considered  in  determining  the  reasonableness  

of  the  lawyer’s  efforts  include,  but  are  not  limited  to,  – the  sensitivity  of  the  information– the  likelihood  of  disclosure  if  additional  safeguards  are  not  employed

– the  cost  of  employing  additional  safeguards– the  difficulty  of  implementing  the  safeguards (and)  – the  extent  to  which  the  safeguards  adversely  affect  the  lawyer’s  ability  to  represent  clients  (e.g.,  by  making  a  device  or  important  piece  of  software  excessively  difficult  to  use)

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Two  Additional  Caveats• A  client  may  require  the  lawyer  to  implement  special  security  

measures  not  required  by  this  Rule  or  may  give  informed  consent  to  forgo  security  measures  that  would  otherwise  be  required  by  this  Rule.  

• Whether  a  lawyer  may  be  required  to  take  additional  steps  to  safeguard  a  client’s  information  in  order  to  comply  with  other  law,  such  as  state  and  federal  laws  that  govern  data  privacy  or  that  impose  notification  requirements  upon  the  loss  of,  or  unauthorized  access  to,  electronic  information,  is  beyond  the  scope  of  these  Rules.  

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In  re  Eisenstein (Mo.  4/5/2016)• Eisenstein  represented  Husband  in  divorce• Husband  accessed  Wife’s  email  without  permission,  and  gave  

Eisenstein  documents  including  questions  Wife’s  attorney  had  prepared  for  direct  examination

• Eisenstein  did  not  produce  the  documents  received  from  Wife’s  email,  until  giving  them  to  opposing  counsel  as  exhibits  during  trial

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Consequences  in  Eisenstein

• Eisenstein  was  found  to  have  used  improperly  obtained  information  (violating  Rule  4-­‐4.4)  and  concealing  documents  with  evidentiary  value  (violating  Rule  4-­‐3.4)

• Eisenstein  received  an  indefinite  (minimum  6  month)  suspension

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Commingling  or  Mismanaging  Funds

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Trust  Accounting  Violations

• Improper  or  inadequate  paperwork

• Commingling  lawyer’s  funds  with  client  funds  or  funds  belonging  to  a  third  party

• Misappropriation

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Rule  1.15A  lawyer  shall  hold  property  of  clients  or  third  persons  that  is  in  a  lawyer’s  possession  in  connection  with  a  representation  separate from  the  lawyer’s  own  property.  

Funds  shall  be  deposited   in  one  or  more  separate  and  identifiable   interest-­‐ or  dividend-­‐bearing  client  trust  accounts  maintained  at  an  eligible  financial  institution  in  the  state  where   the  lawyer’s  office  is  situated,  or  elsewhere  with  the  informed  consent  of  the  client  or  third  person.  

For  the  purposes  of  this  Rule,  a  client  trust  account  means  an  IOLTA  account  as  defined  in  paragraph  (i)(2)  (j)(2),  or  a  separate,  interest-­‐bearing  non-­‐IOLTA  client  trust  account  established  to  hold  the  funds  of  a  client  or  third  person  as  provided  in  paragraph  (f).  

Funds  of  clients  or  third  persons  shall  not  be  deposited  in  a  non-­‐interest-­‐bearing  or  non-­‐dividend-­‐bearing  account.  

Other,  tangible  property  shall  be  identified  as  such  and  appropriately  safeguarded.   Complete  records of  client  trust  account  funds  and  other  property  shall  be  kept  by  the  lawyer  and  shall  be  preserved   for  a  period  of  seven  years  after  termination  of  the  representation.

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Retainers

• Retainers– Type  -­‐-­‐ “true”  or  “security”  or  “advance  payment”?

– How  much?–Where  do  you  deposit  them?

• Where  should  a  lawyer  put  an  advanced  payment  of  a  fixed  fee?

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Basic  Rule  on  Handling  Funds  Paid  for  Legal  Services

WorkPayment Payment

Trust  Account

Operating  Account

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Three  Exceptions  in  Illinois

• 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.  

• Fixed  fee  – set  payment  for  work  – Note:  Missouri  requires opposite  treatment

• "General  retainer" – for  availability of  the  lawyer• "Advance  payment  retainer"

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Advance  Payment  Retainer• 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.

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Dealing  with  MistakesIf  you’ve  made  a  real  mistake:

(1) confirm  that  you  really  did  make  the  mistake

(2) Enlist  the  help  of  another  lawyer,  such  as  a  mentor  or  trusted  senior  lawyer.  

Ethics/risk  management  counsel  and/or  the  supervising  attorney  may  need  to  be  notified

(3) Attempt  to  formulate  a  solution

(4) Notify  client  of  the  problem  if  client  is  materially  affected

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Dealing  with  Potential  Malpractice

• Ordinarily  a  lawyer  must  notify  his/her  insurer  in  writing  of  a  potential  malpractice  claim

• An  insurer  may  provide  additional  resources  to  mitigate  or  avoid  a  claim

• Admitting  liability  or  settling  may  waive  coverage  of  a  claim

• A  potential  malpractice  claim  may  impact  the  underlying  representation  in  a  number  of  ways

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Responding  to  Sanctions  Motion

• Before  submitting  a  response,  ask  an  uninvolved  lawyer  to  review  it

• Avoid  attacking  the  accuser  as  a  means  of  defense

• Consider  notifying  your  professional  liability  insurer

• Do  NOT  ignore  a  motion  for  sanctions  or  a  disciplinary  complaint

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11  Tips  for  Responding  to  an  Ethics  Complaint

• Take  a  breath  

• Consider  notifying  your  insurer

• Consider  retaining  counsel

• Review  the  file

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11  Tips  for  Responding  to  an  Ethics  Complaint

• Review  the  law

• Prepare  a  careful  response

• Provide  details

• Be  succinct

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11  Tips  for  Responding  to  an  Ethics  Complaint

• Provide  proof

• Be  professional

• Be  honest

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Risk  Management  and  Mistakes

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Dealing  with  Mistakes

• Confirm  you  made  the  mistake  (quickly)• Enlist  help  from  another  lawyer– Re-­‐confirm  presence  of  mistake  – Who

• Mentor• Ethics/risk  management  counsel• Supervising  attorney• Client-­‐relationship  attorney• Practice  group  leader• Insurer

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More  on  Addressing  Mistakes

• Formulate  possible  solution• Discuss  issue  with  client  (as  appropriate)– Fiduciary  obligation/Rule  1.4– Avoid  admitting  liability

• Attempt  to  resolve  problem

• Rule  5.2  issues

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Professional  Liability  Insurance

• "Claims  made" policies  – when  claim  is  made,  not  when  malpractice  occurs– "Claim" is  very  broad• Demand  letter• Lawsuit

– "Pre-­‐claim" coverage  varies  greatly  by  policy• MO  Bar  Plan  -­‐-­‐ $5000  for  disciplinary  work• Many  policies  $0• Some  policies  $25,000  or  more

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"Claims"-­‐Made  Policies

• If  you  leave  your  firm  (coverage  source),  you  may  lose  coverage  for  subsequent  claims

• A  "tail" policy  may  be  available

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Work  Done

Policy  A Policy  B Policy  C

Demand   letter  received

Settlement/  Judgment   Paid

X X X

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How  Much  Coverage?

• "Self-­‐insured  retention" (deductible)• "Burning”  or  “wasting”  policy  – coverage  limit  is  for  defense  and resolution

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Cost  of  Insurance

• Cost  – solos  sometimes  spend  $60-­‐100  per  month,  while  large  firms  may  spend  $500  per  month

• Variables  – coverage,  practice,  claims  history

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Ethics  Rules  and  Insurance

• Oregon  requires  LPL  insurance

• Many  states  require  disclosure  of  whether  a  lawyer  has  insurance– Sometimes  to  clients– Sometimes  to  bar  regulator

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Michael  DowneyDowney  Law  Group  LLC

(314)  961-­‐6644(844)  961-­‐6644  toll  free

[email protected]  

Thank  You