While I am on something of a short streak of writing about people much more famous and influential than I am, it seems as good a time as any to offer my thoughts about the article that two very fine lawyers with Hinshaw & Culbertson wrote for The Professional Lawyer in 2017 about even more aspects of the growing problems outside counsel guidelines are creating for lawyers in private practice. (These same two authors did an earlier article that talked about the problems with indemnity provisions in such guidelines – you can go read that here if you’d like.) The more recent article was titled The New Battle Over Conflicts of Interest: Should Professional Regulatorys–or Clients–Decide What is a Conflict?
If you don’t know the article of which I speak, or it has been a while since you read it, you can go read it (again) here.
It is difficult to contest the point being made by the authors in this article, and the earlier one, that increasingly frequent provisions in OCGs are creating real problems for lawyers in private practice. Particularly so, those pieces of OCGs that feel like they are overreaching related to who must be treated as clients for purposes of determining conflicts.
The authors summarize the nature of these issues quite well as involving clients using OCGs to “expand the definition of who is the client (far beyond the bounds of prevailing case law);” “limit the universe of other clients from whom lawyers and their firms may accept work;” and to “expand the definition of ‘interest’ and ‘positional’ conflicts in order to prevent lawyers and firms from undertaking or continuing to work for other clients that may take public positions on issues that the client unilaterally—and often ex post facto—deems adverse to its own interests.”
What I do disagree with, however, is the authors’ proposal for how to fix this problem. The authors propose that states amend their versions of Model Rule 5.6 to make it unethical for lawyers to propose or agree to restrictions on their right to practice in connection with being hired by a client, just as is now the case for employment agreements or as terms for resolving a client’s matter.
Under the proposed revision, Rule 5.6 would read as follows (the bold and italicized piece being the new stuff):
A lawyer shall not participate in offering or making:
(a) a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement
concerning benefits upon retirement; or
(b) an agreement in which a restriction on the lawyer’s right to practice is part of the terms of engagement of a lawyer by a client or of the settlement of a client controversy.
My immediate reaction to reading that proposal was to think of the problems I have whenever people argue for imposing term limits on their elected representatives. You get the opportunity to vote people out every time they come up for re-election. You shouldn’t need a law that limits the number of terms they can serve because you can always simply just vote them out of office in the regular course of things.
The solution to overreaching in outside counsel guidelines is equally simple: lawyers and firms should reject OCGs that go too far and refuse to agree to terms that unreasonably define who must be treated as the client or that become tantamount to restrictions on the right to practice.
The counterargument for that position is about the same as the counter-argument when the discussion involves term limits — the deck is typically too stacked in favor of incumbents so that the balance of power is truly off and that simply saying “you can vote them out” is naive.
The nature of present day demands on lawyers and law firms means that most firms and lawyers won’t be willing enough to turn work away to push back on outside counsel guidelines that are unreasonable and amount to overreaching. Any firm that really wants to take a stand will have too much economic pressure on it to do so. I hear the point, but, while that might be a pretty bad basis for enacting term limits and preventing some truly effective politicians from serving for as long as their constituents might like, it’s an extraordinarily bad basis for revising an ethics rule.
In particular, it is a bad basis for revising an ethics rule when there are already one or more ethics rules that lawyers can point to as being breached by aspects of the very OCGs being complained about. For example, the authors point out that OCGs, in order to enforce their expansive requirements about what is a conflict, also impose obligations on the lawyer to tell the client about matters they are contemplating undertaking. In so doing, these OCGs are demanding that lawyers agree to disclose information that they are obligated to treat as confidential under RPC 1.18 (assuming they have that provision in their state).
A lawyer who wants to refuse to agree to outside counsel guidelines of that type would have a strong, persuasive argument to offer not only about that violation but the potential risk that an in-house lawyer would have – if insisting that it remain in the agreement – of being considered to have violated their state’s version of Model Rule 8.4(a) which, in most places, makes it a disciplinary violation for a lawyer to “knowingly … induce” another lawyer to violate the ethics rules.
It also seems to me be a bridge too far for lawyers and firm to be able to demand that clients be permitted to agree to advance conflict waivers and similar contractual provisions which would serve to narrow the scope of conflicts but also demand that clients should not be able to propose that the lawyer agree to treat requirements of conflicts even more broadly.
The authors also offer an alternative to their own proposed revised language – perhaps to avoid issues associated with when a restriction would be made a term of engagement or not, by suggesting that Rule 5.6 could otherwise be revised simply in (b) to prohibit “an agreement containing a restriction on the lawyer’s right to practice.” There would be significant problems — perhaps in the nature of unintended consequences – that would come from that alternate revised Rule 5.6 proposal.
If someone is being hired as an in-house lawyer, their corporate employer should be permitted to require that they restrict their practice to only representing the corporate employer and not represent any other clients while employed in-house. Technically speaking, the second version of the revised Rule 5.6 wouldn’t permit that. And, even if you are a private practice lawyer and one client wants to provide you with enough work that they also want to have you agree that you won’t work on any other matters for any other clients, why shouldn’t that be okay?
There are examples out there of such lawyers other than just Tom Hagen, the lawyer in The Godfather.
And, coincidentally, Hagen’s also a pretty good example of a lawyer who should have simply turned down a proposed client engagement rather than allowing economic benefits to sway his decision.