2 out of 3 ain’t bad – NC releases a threesome of ethics opinions on the same day

In a lot of jurisdictions, mine included, formal ethics opinions from the governing disciplinary body are issued, if not rarely, then on a “few and far between” kind of time frame.  In North Carolina, on October 23, 2015, 3 were released in one day.

Two of them provide overall good advice.  One of those two is particularly timely for lawyers given growing concerns about hacking and phishing concerns.  The other offers a very well-reasoned, and appropriately terse, approach to an ethics issue rarely made the subject of ethics opinions.  The third… well let’s hold off saying anything about the third until the end.

NC Formal Ethics Opinion 2015-6 addresses an array of questions that all emanate (more or less) from the same general scenario:  what are the professional responsibilities of a lawyer who, through no fault of his own, has been the victim of crime or fraud that depletes money in the trust account to a level in which all obligations can no longer be satisfied?  2015-6 is a pretty faithful application of the principles underlying RPC 5.1 and RPC 5.3 and reaches the conclusion, over and over again, that a lawyer who gets ripped off despite having in place reasonable measures to give reasonable assurance of compliance with the ethics rules by the other lawyers and nonlawyers in the firm, is not to be held responsible as an ethical matter for making payment of the amount lost as a result of the wrong doing of the third party.  The North Carolina State Bar stresses, as it should, that it is not opining about the potential for civil liability as between attorney and client (or third party who has entrusted funds in the attorney’s trust account) for the lost funds but is limiting itself just to questions of ethical responsibility.

The opinion gives what would serve as a good answer to almost all questions in this general area with its first answer — addressing a scenario where a third party has made counterfeit checks designed to look like they are for the lawyer’s trust account and used those checks to commit theft from the account:

If Lawyer has managed the trust account in substantial compliance with the requirements of the Rules of Professional Conduct… but, nevertheless, is victimized by a third party theft, Lawyer is not required to replace the stolen funds.  If, however, Lawyer failed to follow the Rules of Professional Conduct on trust accounting and supervision of staff, and the failure is the proximate cause of theft from the trust account, Lawyer may be professionally obligated to replace the stolen funds. . . .

Under all circumstances, Lawyer must promptly investigate the matter and take steps to prevent further thefts of entrusted funds.

The opinion essentially applies this same rubric to provide good answers to successive questions, such as whether the lawyer is liable if a hacker gains access to the lawyer’s computer system and causes an authorized electronic funds transfer to take place, and how the lawyer’s duty of reasonable care can require a lawyer to be wary of an email “spoofing” situation designed to result in causing the lawyer to think they are wiring funds to their client but actually wiring funds to someone else.  The opinion even offers practical guidance that, while perhaps not supportable under a strict reading of the ethics rules, makes good sense from a loss prevention standpoint and when we let ourselves remember that the ethics rules are rules of reason and should be construed as such.  Specifically, the opinion indicates that while the lawyer is pursuing and investigating other remedies for clients affected by a theft, the lawyer is permitted, despite the prohibition on commingling in RPC 1.15, to deposit his own funds into the trust account to replace stolen funds.

The second opinion, Formal Ethics Opinion 2015-7, addresses a variation of a question I’ve often been asked by lawyers: do “prior professional relationships” you’ve had outside of the practice of law count to permit in-person solicitation that would otherwise be prohibited by RPC 7.3?  The North Carolina State Bar explains that yes they do.  Specifically, the questioner in 2015-7 can so characterize her relationship with a health care professional someone with whom she developed a business relationship while working as a health care consultant.  In so doing, the opinion succinctly focuses on the heart of the issue — the reason justifying such a prohibition on in-person solicitation at all.   The prohibition exists to “prevent undue influence, intimidation, and over-reaching by the lawyer.”  Thus, certain types of prior relationships are exempted because it is considered “unlikely that a lawyer will engage in abusive practices” when they have those kinds of prior relationships.  The opinion acknowledges that the term “prior professional relationship” is “not limited to prior client-lawyer relationships” and finds the questioner’s situation to qualify.  (Historically, I have made this same point but more expansively by noting that the language of the rules knows how to say “former client” when it means to impose that limitation, as well as how to use other words that would carve out a more narrow exception than what is intended by “prior professional relationship.”

The third opinion, Formal Ethics Opinion 2015-5, actually gives the correct answer, but justifies its response using what I believe is clearly the wrong rule.  In so doing, it fails to even reference the rule that does justify the outcome.  The question the opinion addresses is:

Lawyer A is appointed to represent a criminal defendant in an appellate matter.  Subsequently, Lawyer A withdraws from the representation of the client and Lawyer B is appointed successor appellate counsel.

Must Lawyer A obtain the former client’s consent prior to discussing the client’s case with Lawyer B or prior to turning over the former client’s file to Lawyer B?

The opinion concludes that the answer is no — unless the client had previously specifically instructed Lawyer A to not speak with Lawyer B — but rests its conclusion on the concept that RPC 1.6(a) permits a lawyer to make disclosure of confidential information when “the disclosure is impliedly authorized in order to carry out the representation.”  The problem, however, is that the question makes clear that the first lawyer has already withdrawn from representing the client.  Thus, from the first lawyer’s perspective, there is no representation to carry out much less any disclosure that can be argued to be impliedly authorized for the purpose of carrying out the representation.

There is a justification in the ethics rules for the answer “no.”  RPC 1.16(d) addresses steps a lawyer must still perform after the termination of a representation.  The NC version of the rule tracks the ABA Model Rule in stating generally that:  “Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests….”  In Tennessee, we make the utlility of RPC 1.16(d)  as the answer to this question more obvious by providing a numbered list of six items that may be included, depending on the circumstances, in “protecting the client’s interests.”  The third item being “cooperating with successor counsel engaged by the client.”  Yet, even without that specific language, the NC rule’s general requirement of taking reasonably practicable steps to protect the client’s interest  is a much more justifiable way of validating the answer to the question presented in Formal Ethics Opinion 2015-5.

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