ABA moves cautiously on proposals to revise Model Rules of Professional Conduct. (News & Trends).

The American Bar Association (ABA) House of Delegates in August began its first overhaul of ethics rules for lawyers since 1983. It did so by rejecting proposals that would have required all fee arrangements to be in writing, allowed disclosure of client confidences to prevent financial injury, and relaxed conflict-of-interest rules. But delegates narrowly approved a new prohibition on sex with clients.

At the ABA's annual meeting, the delegates acted on the most substantive of more than 50 ethics-rules changes proposed by the association's Commission on Evaluation of the Rules of Professional Conduct (known as the Ethics 2000 Commission). They will reconvene in Philadelphia in February to consider the remaining proposals.

The ethics rules that apply to lawyers are set by state licensing authorities, but most states use the ABA model rules as a guide. Trial lawyers are watching the progress of several proposals with particular interest.

Focus on fees

The delegates approved expanded language prohibiting lawyers from charging unreasonable fees or unreasonable amounts for expenses, but they struck a proposal to require that all fee agreements--except when a lawyer is charging a regularly represented client at the usual rate--be in writing.

Lucien Pera of Memphis, a member of both the ethics commission and the House of Delegates, said this was the only truly contentious fees issue debated at the meeting. In the end, Pera said, the delegates thought the requirement "just too burdensome. The benefits were not considered great enough to outweigh the difficulties."

A proposal to add "the degree of risk assumed by the lawyer" to the list of factors to be considered in determining reasonableness of a fee (instead of simply asking whether it is fixed or contingent) met with vigorous debate before the meeting, said commission counsel Becky Stretch, but it was dropped before the commission presented its report. ATLA had opposed this proposal. (See ABA to Propose Revision of Model Rules of Professional Conduct, TRIAL, Feb. 2001, at 17.)

While the ethics rules have always required that contingent fee agreements be in writing, the delegates added language requiring that they be signed by the client, and that clients be clearly notified of any expenses for which they will be liable.

Keeping confidences

After contentious debate, the House of Delegates rejected a significant expansion of the rule governing secrecy between lawyers and clients. The current model rule allows a lawyer to disclose client confidences only to prevent the client from committing a crime that is likely to cause imminent death or substantial bodily harm. The failed proposals would have allowed disclosure to prevent fraud as well, even though that conduct would cause only financial injury rather than bodily harm. They also would have allowed disclosure to let the lawyer mitigate or rectify consequences of a financial fraud or crime.

Commission member Lawrence Fox of Philadelphia led the opposition to these proposals. "I start from the proposition that confidentiality is terribly important," he said. "Therefore, any exception better be really important as well." Preventing economic harm doesn't warrant an exception to confidentiality, he added.

Geoffrey Hazard of the University of Pennsylvania Law School, also a commission member, disagreed. He called the delegates' action "a serious mistake," and said that "economic harm is what's important to transactional lawyers."

For example, Hazard said, if a client is attempting to conceal assets in a bankruptcy or divorce, a lawyer should be allowed to disclose this for his or her own protection. Had the rule been expanded, Hazard said, "lawyers would not have been rushing out to blow the whistle," but could have done so if necessary.

Nancy Moore of Boston University, chief reporter for the commission, said the delegates are out of step with actual practice. Many states already allow, or even require, disclosure of noncriminal fraud, or crimes or fraud that may cause economic harm, Moore said.

But the ABA's role is not to act as "dogooders," Fox said. "Lawyers do the most good by representing their clients." Eroding confidentiality would make clients reluctant to speak freely with their attorneys, he added, depriving lawyers of the chance to dissuade clients who are planning to break the law.

The delegates chose the middle ground, approving a shortened version of the rule that allows disclosure to prevent "reasonably certain," rather than imminent, death or substantial bodily harm, and no longer requires that the suspected activity be criminal. This change could, for example, allow lawyers to report a client's plan to use a harmful chemical or put a dangerous product on the market.

Hazard said such scenarios are unlikely, but added that the new rule will be helpful in some cases, such as where a lawyer learns of a client's plan to commit suicide. The amended rule will allow disclosure even in states where suicide is not a crime.

The delegates also approved provisions allowing disclosure to obtain legal advice about a lawyer's compliance with ethics rules and to comply with a court order, but they added comments urging lawyers to assert all valid arguments against disclosure.

Conflicts of interest

The delegates voted down a proposal that would have relaxed the conflict-of-interest rules to allow a law firm to represent a client with whom one of the firm's lawyer's has a conflict, in some circumstances. Traditionally, when one lawyer in a firm has a conflict with a client, it is imputed to the entire firm, which is disqualified from representing the client unless the client waives the conflict.

This rule is based on a view of law firms as collegial environments where information is shared. The commission's proposal would have allowed representation if the disqualified lawyer was screened from any participation in the matter and did not share in the fee, and if the client was given written notice.

Pera, who favored this proposal, said that "more and more states are allowing screening, and where it is allowed, it works." But the measure was defeated, he said, because the delegates valued loyalty to the client and wished to avoid adopting something that "just doesn't look right."

While the delegates rejected this broad change, they expanded the previous version of the rule to provide that a lawyer's disqualification won't be imputed to the firm when the conflict "is based on a personal interest" of the lawyer and there is no significant risk that it will materially limit the client's representation by other lawyers in the firm.

The delegates also added new provisions requiring that waivers of conflicts of interest be in writing. Lawyers must send a confirmation letter to a client who has agreed to waive a conflict, but the client need not sign the letter.

No sex, please; we're lawyers

The delegates voted 204-200 to add a rule that prohibits sex with clients unless a consensual sexual relationship predated the attorney-client alliance. Fox said the delegates agreed that, for the most part, sex with clients "is a terrible idea." But he and others who voted against the rule argued that the prohibition should appear in a comment, where it would not have the force of a rule.

"The problem I have with the rule is that it's too categorical," Fox said. "There are some situations that may be benign," such as a relationship between an attorney who represents an organization and someone who works for the organization. Pera said many delegates were persuaded that it was time to adopt a ban on attorney-client sex after reviewing similar rules adopted by other professions.

After the February ABA meeting, the House of Delegates is expected to adopt the full report of the commission, as revised by the votes on each proposed change. It then becomes ABA policy and will be circulated to state high courts and ethics boards. Regardless of what states choose to do, Pera said, "the nicest thing about Ethics 2000 is that we have had a very open process that has increased public discussion of what ethics rules should be."

The commission's initial report and a summary of the delegates' actions at the August convention are available at www.abanet.org/cpr/ethics2k.html.