The California bar is seeking member input on a proposed opinion that tackles some of the knottiest questions in legal ethics: whether—and if so, when and how—lawyers who seek advice on potential errors must disclose those deliberations to the affected client.
The proposed opinion notes that courts have given “considerable attention” in recent years to whether to recognize a privilege for internal or external consultations about possible errors—the records of which aggrieved clients often seek to discover in malpractice cases.
The proposed opinion does not directly analyze those privilege questions; instead, it focuses on “ethical questions [that] arise concerning what disclosures if any the lawyer must make to the client about” those consultations.
The California bar’s Committee on Professional Responsibility and Conduct has circulated the opinion for public comment. The comment deadline is June 18.
Hypo 1: Discovery Dilemma
The committee framed its analysis through a hypothetical litigation matter that a firm defended for a client.
A lawyer staffed on the case sought advice from outside counsel on complying with his discovery obligations. The opinion implies the lawyer may have been concerned about the client’s failure to produce documents.
The lawyer didn’t disclose “the fact of this consultation,” the opinion says, but did inform the client of steps that had to be taken “to comply with Lawyer’s ethical obligations, some of which included how document collection from Client should proceed and the production of additional documents.”
The opinion identifies two “central ethical questions” in this hypothetical: “(1) whether Lawyer has a conflict of interest with the client that requires further action and (2) whether Lawyer met his ethical duty to communicate with Client.”
No Conflict, No Duty to Disclose Consultation
California, like every other jurisdiction, has adopted a version of ABA Model Rule 1.7(a)(2), which deals with conflicts that arise when the representation of a client is “materially limited” by a lawyer’s personal interest.
The committee said the lawyer in its hypothetical didn’t create this type of conflict when he sought advice on the discovery matter.
The committee pointed to ABA Ethics Op. 08-453, 24 Law. Man. Prof. Conduct 616 (2008), which considered a similar issue.
“A lawyer’s effort to conform her conduct to applicable ethical standards is not an interest that will materially limit the lawyer’s ability to represent the client,” the ABA opinion said.
The California panel agreed. Its proposed opinion says “seeking legal advice to ensure compliance with ethical obligations does not in itself create adversity” between the lawyer and client. Clients “should understand that their attorneys are required to act ethically,” the proposed opinion says.
Citing a New York panel, the proposed opinion further states that the lawyer needn’t reveal that he sought advice on his ethical obligations.
Hypo 2: Limitation Lapse
A second hypothetical introduced facts that complicated the conflict analysis.
The lawyer, the opinion says, later discovered that the limitations period may have lapsed on cross-claims the client could have asserted.
The lawyer again consulted with outside counsel, who concluded that the limitations period did expire. Outside counsel said the client may be prejudiced by the inability to assert the cross-claims, “depending on how the the litigation develops.”
Disclose Error? Yes
The proposed opinion says any conflict “is only a possible one” at the “initial point of the consultation,” when the lawyer raises the possibility of a prejudicial error with outside counsel.
“Lawyer’s concern may be unfounded, either because he was incorrect in his understanding of the deadline for filing a cross-complaint, or because there may be options for relief from any deadlines that had passed,” the opinion says. At that point “there is not yet a duty to inform” the client, but there is “a duty to investigate further,” it says.
But once the lawyer determines that there was an error, the firm has a duty to “disclose the relevant facts” to the client, the opinion says.
What “relevant facts” would need to be disclosed? The opinion says the required disclosure “would likely include the fact that the deadline to file a cross-complaint had passed; that Lawyer failed to file a cross-complaint; that the error cannot be remedied; and that the client no longer has the opportunity to seek” the cross-claims.
Disclose Consultation? It Depends
Does the required disclosure include informing the client about the consultation with outside counsel?
“The answer depends on whether the consultation with Outside Counsel is itself a significant development relating to the representation under [California Rule of Professional Conduct] 3-500,” the opinion says, citing the standard that corresponds with ABA Model Rule 1.4 (communication).
The fact of the consultation “would not appear under these facts to constitute” such a development, the opinion says. That’s because “who made the determination” that the statute had run “makes no difference” to the options “available for moving ahead,” the opinion states.
“There may be other situations, however, where consultation with Outside Counsel would constitute a fact that a lawyer should disclose to a client pursuant to Rule 3-500,” the opinion says.
Once the firm realizes the client “has a potential claim,” it must “consider carefully” whether it is ethically barred from continuing the representation, the opinion says.
“An important consideration will be whether Law Firm’s representation of Client will be materially and adversely affected by the potential claim, and whether Law Firm can continue to exercise independent judgment on Client’s behalf,” the opinion says.
The committee said its analysis does not change if the ethical dilemmas are brought to a firm’s in-house counsel, as opposed to an outside attorney.
“Questions have been raised about whether [conflict] imputation rules make it ethically impermissible for law firm in-house counsel to advise the firm on matters concerning current clients,” the opinion says.
But the committee said it agrees with courts that have “rejected that view” in recent cases. Those courts have recognized the “potential benefits” of analyzing such issues in-house, “including accessibility and timing,” the committee said.
On Privilege, State/Federal Split Widens
Bar panels generally don’t analyze legal, as opposed to ethical, issues. So the proposed opinion doesn’t address whether the records of internal firm consultations about potential errors would be discoverable in a subsequent malpractice case.
But the committee did note that courts have given “considerable attention” to that question in “the past few years,” and many of those decisions are cited in the opinion.
Over the past three decades, there have been three discernible trends in the case law addressing the existence of an “intrafirm privilege.”
In 1989, a federal district court refused to recognize such a privilege, saying it would conflict with a firm’s fiduciary obligations to the client.
A nearly unbroken line of cases adopted that reasoning for more than two decades. See 28 Law. Man. Prof. Conduct 662 .
A reversal began in 2011, when state courts in a number of jurisdictions began to recognize the privilege. See 30 Law. Man. Prof. Conduct 750 (California); 29 Law. Man. Prof. Conduct 424 (Georgia); 28 Law. Man. Prof. Conduct 140 (Illinois); 29 Law. Man. Prof. Conduct 422 (Massachusetts); 31 Law. Man. Prof. Conduct 6 (New Hampshire); 32 Law. Man. Prof. Conduct 404 (New York).
But many federal courts continued to reject the privilege—particularly when the law firms asserting it failed to promptly withdraw from a matter after discovering the mistake or conflict that necessitated the consultation. See 27 Law. Man. Prof. Conduct 486 ; 27 Law. Man. Prof. Conduct 561 ; 32 Law. Man. Prof. Conduct 132 .
The proposed opinion is Cal. State Bar Standing Comm. on Prof’l Responsibility & Conduct, Formal Op. Interim No. 12-0005.