Friday, December 14, 2018

ABA Opinion 484: can a lawyer refer a client to a financing company in which the lawyer owns a financial interest?

At the end of November, the ABA Committee on Professional Responsibility issued Formal Opinion 484 on whether a lawyer may refer a client to a fee financing companies in which the lawyer owns a financial interest.  I have not read the opinion in full, so I can't comment on it at this time.  Here is the summary:
Lawyers may refer clients to fee financing companies or brokers in which the lawyers have no ownership or other financial interests provided they comply with Model Rules 1.2(c), 1.4(b), 1.5(a) and (b), 1.6, 1.7(a)(2), and 1.9(a). If a lawyer were to acquire an ownership or other financial interest in a finance company or brokerage and thereafter refer clients to that entity to finance the lawyer’s fees, the lawyer would be entering into a business transaction with a client, or obtaining a security or pecuniary interest adverse to the client, or both. In that instance, the lawyer would also be required to comply with Model Rule 1.8(a).

ABA Opinion 483 on the duties related to data breaches

Last October, the ABA Committee on Professional Responsibility published Formal Opinion 483 to provide guidance on how lawyers should handle data breaches before, during, and after an event. In short, lawyers must take proactive steps to protect sensitive client data and they must disclose material data breaches.

You can read the opinion here.  Here is a summary by the National Law Review:
The ABA states that data breaches pose a “major professional responsibility and liability threat” to the entire legal profession.  It defines a data breach as “a data event where material client confidential information is misappropriated, destroyed or otherwise compromised, or where a lawyer’s ability to perform the legal services for which the lawyer is hired is significantly impaired by the episode.”  When there is data breach, attorneys must first comply with state and federal legislation. Next, attorneys must disclose a breach to a current client if (a) that client’s material, confidential information is or reasonably may have been compromised (e.g., unauthorized access, use, theft, or destruction), or (b) the breach has materially disrupted the attorney’s ability to serve the client (e.g., ransomware limiting access to client information for any material amount of time). In essence, lawyers must notify clients when incidents like ransomware materially impair operations—even when there is no evidence of exfilatrated or compromised data.  Here, strong defense mechanisms include up-to-date, accessible, and easily restorable back-ups to fend off disruption of legal services
For some commentary on the opinion go here:

Faughnan on Ethics (on the relationship between the opinion and Model Rules 1.15 and 4.4)

Above the law

Lawyer Ethics Alerts Blog

Articles about lawyering and artificial intelligence

While I was away from blogging during the last few weeks I saw a few articles about artificial intelligence that you might find interesting.  Here are the links:

LawTech: Time for a cybernetic legal ethics?

What’s Artificial About Ethical AI In The Legal Industry? Everything

Legal Ethics: The Ethical Dilemma of Artificial Intelligence (The National Law Review)

Where Avvo Legal Services left off, Basic Counsel picks up

Regular readers of this blog know I have been writing about Avvo Legal Services for a long time, and that I have expressed serious concerns about possible ethics violations in participating in it.  You also know that those concerns were shared by enough jurisdictions out there that Avvo Legal Services stopped providing services and is no longer in business.

But where it left off, a new platform has taken its place.  I have not reviewed the details on how it functions but from what little I have read so far, it is clear they are trying to address the concerns that made participating in Avvo such a risk for lawyers.

The new platform is called Basic Counsel and it seeks to enable attorneys to offer flat-fee, limited scope services, while complaying with every state’s professional conduct rules.

Bob Ambrogi, of Law Sites, describes the services in some detail here.  In a nutshell, consumers search or browse the site for the service they need in the location they need it. When a consumer buys a service, the fee is sent directly to the lawyer and Basic Counsel collects a separate “platform fee” from the consumer of 5 percent of the service cost (with a $10 minimum).  As the lawyer works on the client's case, the platform offers ways for the attorney to keep the client informed on the tasks progress and ways for attorney and client to communicate and share documents.

As Ambrogi points out, with regard to the potential ethics issues raised by a site such as this, there are clearly some differences between Basic Counsel and Avvo Legal Services.  For example, a concern of ethics bodies was that Avvo set the fee and defined the scope of the service. On Basic Counsel, the lawyer sets the fee and defines the scope.  Also, Avvo Legal Services collected the fee from the client and held it until the service was completed, which some said interfered with the lawyer’s duty to safeguard client funds. On Basic Counsel, the funds go directly to the lawyer.

Still another ethics issue for Avvo Legal Services was that it charged the lawyer a marketing fee, which some ethics bodies saw as fee splitting. Basic Counsel charges the client a platform fee, and Marchbanks says the fee is for the direct benefits the client obtains from using the platform — not for anything the attorney provides.

This sounds good, yet it is not clear to me how calling the fee a "platform fee" distinguishes it from Avvo's marketing fee when both are based on a percentage of the amount charged by the attorney.  It was that fact, which does not seem to be different in Basic Counsel's system, that got Avvo in trouble.  On the other hand, the percentage involved in Avvo was higher than the 5 percent charged by Basic Counsel.  In Avvo's case, the percentage also increased as the price for the services increased.

Why can't they make the platform fee a flat fee itself, not dependent on the value of the services?  It seems to me that would be a safer way to deal with this.  Otherwise, the door is still open for the interpretation that the fee constitutes sharing a fee with a non lawyer.

Having said that, as I have written about before many times, it is possible the rules can and will be changed to welcome this type of interaction because of the obvious benefits it provides to consumers.  But until that time, lawyers should be careful not to engage in conduct that has been interpreted to constitute sharing fees with non lawyers in violation of the rules.

Also, it is not clear whether lawyers should be concerned about confidentiality issues when it uses the platform to communicate and share documents with clients and prospective clients.

Florida Supreme Court: there is no reason to treat "Facebook friendships" differently when it comes to disqualifying judges

Almost a year ago, I wrote that the Florida Supreme Court was considering the question of whether a judge should be disqualified from presiding over a case because he or she was a "Facebook friend" of one of the lawyers.  In my post I argued that whether the relationship between a lawyer and a judge is so close as to call the judge’s impartiality into question should be decided on a case by case basis.  I agreed with my friend and colleague Ray McKoski who had written an article in which he argued that imposing a per se rule would be an overreaction given the fact that judges preside over lawyers who they know and are friends with outside of Facebook. As he correctly stated, there is no rule that automatically bars a lawyer from appearing before a judge when the two share an actual friendship.

Well, now we have the official answer to the question from the Florida Supreme Court.  Last month, the Court released its long awaited decision, holding that
In some circumstances, the relationship between a judge and a litigant, lawyer, or other person involved in a case will be a basis for disqualification of the judge. Particular friendship relationships may present such circumstances requiring disqualification. But our case law clearly establishes that not every relationship characterized as a friendship provides a basis for disqualification. And there is no reason that Facebook “friendships”—which regularly involve strangers—should be singled out and subjected to a per se rule of disqualification. 
The case is called Law Offices of Herssein & Herssein v United Services Automobile Association.  You can read the opinion here.

It seems to me the opinion reaches the correct result, and what it surprising is that the decision was actually 4 to 3.  The position of the dissenting judges was that "a judge’s involvement with social media is fraught with risk that could undermine confidence in the judge’s ability to be a neutral arbiter. . . . I would adopt a strict rule requiring judges to recuse themselves whenever an attorney with whom they are Facebook “friends” appears before them. This rule does little to limit the judge’s personal liberty, while advancing the integrity of the judicial branch as the one branch of government that is above politics."

Yet, it is not clear how the fact the friendship originates in Facebook makes it so different from an actual old fashioned "personal" friendship that we need a strict rule.

For more commentary on the opinion go to:

Ethical Grounds

Faughnan on Ethics

The ABA Journal

Jurist

Hinshaw

Lawyer Ethics Alert Blog

Thursday, December 13, 2018

Free Webinar on Confidentiality and Privilege

On December 17, 2018, the ABA will host a webinar with the author of The Attorney-Client Privilege: A Practitioner's Guide, on client confidentiality and attorney-client privilege. This webinar is free to ABA members.

To register, go here.

I know, I know, it has been a long time....

It has been a while since I posted on the blog, and I am sorry about that.  My semester became extremely busy at one point because I had to take on two other courses and other projects, so I had very little time...  But now I am done with classes and, although I still have to grade exams for a couple of weeks, I have more free time.  There is a lot to talk about and I will try to catch up with the news before the end of the year. 

Saturday, November 17, 2018

Florida Bar Board of Governors approves revised rule on qualifying provider fees and ethics opinion on “expert” and “specialist” -- UPDATED

On October 12, The Florida Bar’s Board of Governors voted to approve substantive revisions to Bar Rule 4-7.14 related to the use of “expert” and “specialist.”

Revised Bar Rule 4-7.14 would allow non-certified attorneys to call themselves “expert” or “specialist” if they can objectively verify that claim based upon the lawyer’s education, training, experience, and “substantial involvement” in the area of practice. The amended rule would also allow law firms to call themselves “experts” or “specialists” if that claim can be objectively verified for at least one lawyer in the firm.  The law firm making the claim would be required to have a disclaimer stating that not all firm members meet the same standards, if there are lawyers who do not qualify.

Lawyer Ethics Alert Blog has more information here.

UPDATE (11/17/18):  Legal Ethics in Motion has a short comment here.

Wednesday, October 24, 2018

Short comment on recent amendments to Model Rules on advertising and other forms of communication about legal services

Back in August I reported that the ABA had adopted a few amendments to the rules related to communication of legal services (aka advertising and solicitation) and later posted some links to a few comments about them.   Adding to that list, here is a link to a short comment by Legal Ethics in Motion.

Tuesday, October 23, 2018

ABA Committee on Ethics and Professional Responsibility issues opinion on duties related to safeguarding of data and data breaches

Last week, the ABA Standing Committee on Ethics and Professional Responsibility issued a formal opinion in which it concludes that lawyers have a duty to safeguard client data and to notify clients of a data breach. 

You can read the opinion (Formal Opinion 483) here.   The ABA Journal has a summary here.