Sunday, January 27, 2019

DC Ethics Committee new opinion on crowdfunding -- UPDATED

The District of Columbia Bar Legal Ethics Committee has issued a new Ethics Opinion (Number 375) on whether an attorney can finance the representation of a client through "crowdfunding."

The opinion is short and straightforward and essentially follows the reasoning of other jurisdictions that have issued opinions on the subject.  You can read the full opinion here. Its summary describes its conclusions as follows:
Lawyers are generally free to represent clients who pay for legal services through crowdfunding. The ethical implications of crowdfunding a legal representation vary depending on the lawyer's level of involvement in the crowdfunding. When the client directs the crowdfunding and the lawyer is merely aware of it, the lawyer incurs no specific ethical obligations although the lawyer should consider potential risks associated with receipt of such funds and may counsel the client on the wisdom of publicly sharing confidential information. When the lawyer directs the crowdfunding, the lawyer must comply with the Rules governing a lawyer's receipt of money from third parties. Further, a lawyer who directs the crowdfunding should be cognizant of ethical obligations regarding fee agreements, communications with donors, and the management of the funds raised. 
Again, this is equivalent to what has been decided elsewhere, but there is one point the opinion does not address, and that is that under certain circumstance crowdfunding can lead to sharing fees with a non-lawyer.  Now, if my memory is correct, DC allows sharing fees with non lawyers under certain circumstances but I don't think its rule applies to crowdfunding.

I published a short article on the subject in which I discuss the issues and the few opinions available back then.  You can read it here.

UPDATE (1/27/19):  Karen Rubin, of The Law For Lawyers Today, has posted a comment on the opinion here.

Thursday, January 17, 2019

Texas Committee proposes new rules on advertising

As you probably remember, the ABA recently amended the rules related to advertising and solicitation.  Some states are now following its lead.

The Texas Committee on Disciplinary Rules has proposed revisions to Texas’s ethics rules on advertising that are open for public comment until March 1, 2019.  You can read the proposal here.  Brian Faughnan has a short comment on what he sees as the pros and cons here.

Wednesday, January 9, 2019

Supreme Court issues opinion on federal cap on attorneys' fees

The US Supreme Court recently issued its opinion in Culbertson v. Berryhill holding that a federal law imposing 25 percent cap on attorney’s fees in Social Security cases applies only to fees relating to court proceedings rather than all fees incurred. 

You can read the opinion here.

The SCotUS blog has a comment on the opinion go here, a comment on the oral argument here and more documents and links here.

Courthouse News has a short summary here.

The grades you don't want as a student and basic duties owed to clients, or the basic principles of ethical lawyering

Years ago, I wrote a short essay on whether we could reduce the professional conduct rules to just a few basic principles.  I concluded that, although we need the rules for guidance on specific issues, we can use a few general principles to define the notion of professional responsibility upon which all rules are generally based.

Along the same lines, a few weeks ago, Brian Faughnan posted a comment on “A recipe for ethical lawyering?” in which he expressed a similar idea by referring to the 5 Cs of lawyering:
Be COMPETENT at what you do
Recognize and respect your obligations of CONFIDENTIALITY
COMMUNICATE appropriately with your clients (and others) both as to content and frequency
Employ CANDOR in all situations in your practice [If you absolutely cannot be 100% truthful, and can’t simply stay silent, then don’t be false.]
Avoid CONFLICTS for which you don’t have, or cannot get, consent.
A few days later, Michael Kennedy followed up with his own commentary on the 5 Cs.

There is little to add to these two fine comments, but I will mention my own take on the 5 Cs, which is this: to try to get my students to remember the basic duties attorneys owe their clients, I tell them to think about the grades the do NOT want to get this semester: 1 F, 1 D and 4 Cs:

The F is for the Fiduciary duty owed to clients which in fact includes most, if not all, the others.

The D is for Diligence.

The Cs are for Competence, Confidentiality, Communication and Conflicts.

There are a couple of problems with my little word game for my students,* but it works for its purpose, I guess.... I hope...

*Note that “Conflicts” is, of course, not a duty – the duty is loyalty – but I needed a “C” to make the saying work!  Also note that I did not mention candor because, technically, the rule on candor says candor is owed to the tribunal, and my lesson was on duties owed to the client.  The equivalent of candor owed to the client would be Honesty, which I mention separately.  It is covered in the "catch-a;;" Rule 8.4 but can also be included in the notion of a fiduciary duty.

Sunday, January 6, 2019

The Virginia State Bar has proposed a significant revision to Rule 4.4(b) and its comments

The Virginia State Bar has proposed a significant revision to Rule 4.4(b) and its comments that does NOT follow the text of the Model Rules. 

The Model rule states: "A lawyer who receives a document or electronically stored information relating to the representation of the lawyer's client and knows or reasonably should know that the document or electronically stored information was inadvertently sent shall promptly notify the sender."

In contrast, the proposed new rule in Virginia states:  "A lawyer who receives a document or electronically stored information relating to the representation of the lawyer's client and knows or reasonably should know that the document or electronically stored information is privileged and was inadvertently sent shall immediately terminate review or use of the document or electronically stored information, promptly notify the sender, and abide by the sender’s instructions to return or destroy the document or electronically stored information."

Do you see the difference?  The proposed rule imposes a much more detailed duty on the lawyer and addresses what the comments to the Model Rules refer to as matters "beyond the scope of [the] rules." 

In particular, comment [2] to Model Rule 4.4(b) states that "[w]hether the lawyer is required to take additional steps, such as returning the document or electronically stored information, is a matter of law beyond the scope of these Rules ..."  But, as you see above, the Virginia proposed rule does impose specific duties that go beyond notifying the sender.  They impose a duty to immediately terminate review or use of the materials, and abide by the sender’s instructions to return or destroy the document or electronically stored information.  Presumably, this means to stop reading the moment it is evident the attorney should not be reading whatever it is that was sent by mistake. 

The Legal Profession Blog has the full text of the proposed new rule here.

Texas Bar issues opinion on whether attorney can renegotiate a flat fee

Long time readers of this blog might remember that I have published a couple of short articles on flat fees. (See here and here, for example.)  One issue related to flat fees that is interesting is whether an attorney should have the right to renegotiate the fee if it turns out that he or she miscalculated the amount of time the legal services would take.  Obviously, you would think that once the fee agreement is set, the attorney can't unilaterally change it to force the client to pay more.  The main reason a client would agree to a flat fee is the fact they know ahead of time how much the total fee will be.

This puts an attorney in a difficult position when it turns out the amount of work the fee pays for turns out to be a lot more than expected.  The attorney could ask the client to pay more, but what if the client refuses?  After all, they have a contract that says the services would be provided for the agreed amount and therefore have the right to expect the work will be done regardless of how much work it is.  In a case like that, the lawyer miscalculated and would suffer the consequences of his/her mistake.  Like I said, I guess there is nothing that says that the lawyer can't ask the client to pay more, but if the client refuses, the lawyer has to suck it up -- do the work diligently, competently and completely even if it means taking a financial loss.

So the question I would ask is whether it would be ethical for the lawyer to include in the initial contract a clause allowing the lawyer to recalculate or at least to force the client to agree to renegotiate the fee under certain conditions.

A few months ago, the Texas Bar issued an Ethics Opinion partially addressing the issue.  It concludes as follows:
A lawyer may renegotiate his fixed, flat fee for representing a client in a litigation matter after the litigation is underway if modification of the fee agreement is fair under the circumstances. The burden of proving fairness is the lawyer’s and will depend upon factors such as the length of the lawyer-client relationship, whether the reason for the renegotiation could have been anticipated at the outset of the representation, and the client’s level of sophistication. Before seeking to renegotiate a fixed fee, the lawyer should be mindful of the risks that the lawyer voluntarily assumed when proposing or agreeing to that fee—including the possibility that the fixed fee might not be adequate to compensate the lawyer when compared to other fee arrangements.
Notice that the opinion refers to "renegotiating the fee" not to including something in the initial contract.  Does that mean that the opinion considers it ethical for an attorney to seek to renegotiate with the client, or that it would be ethical for the attorney to change the terms of the original agreement?   It is not clear, but it seems to me it is talking about whether it is ethical to ask the client to renegotiate, and it concludes that it would be depending on certain factors.

But, to me, that does not really answer some of the other important questions.  Let's say it is ethical for the attorney to ask, what happens if the client refuses to agree to the new proposed fee?  Can the attorney force the client to accept new terms?  Does the fact that the attorney can ask a client to renegotiate the terms of the contract, make the new terms themselves part of the contract?    My guess is that these questions would need to be addressed in the original contract and the client would have to agree to the terms ahead of time.

Also notice that the opinion seems to be limited to litigation.  Why is that?  What if a client asks me to prepare a will and I agree to do it for a flat fee of $100, which is my hourly fee, because I think it won't take me more than an hour.  Later I realize it will take me a lot longer than that. If the language of the opinion is limited to litigation, I'd have to suck it up, which a litigator wouldn't.  Why the difference?  What makes their time or work more valuable than mine?

You can read the full opinion (which is very short) here.