An open letter to Avvo

Dear Mark or Josh or Dan (or others at Avvo):

I am a lawyer of little relative influence but I know you are likely familiar with me because I have, time and time again here on my small platform written about the travails your business model is enduring as state after state issues ethics opinions warning lawyers who do business with you that they are acting unethically.  (And Josh has been kind enough to post comments here from time to time as well.)

It, of course, has happened again with the latest Virginia ethics opinion that has just been put out.  I won’t belabor anyone reading this with the breakdown of that opinion other than to say that it hits on many of the same problems that have been hit on by other states over the last couple of years (and a couple that come up less frequently as well).  I also know that you were actively engaged in trying to convince the powers-that-be in Virginia to not issue that opinion.  I’ve even read Dan’s oral remarks published online.

I also won’t do as I normally do and break down the analysis offered in this latest ethics opinion other than to say that this one – yet again – is correct in its interpretation and application of Virginia’s rules.  (At least it is correct as to the big, universally applicable rules impacting your current business model related to fee-sharing, payments for referrals, and the like.)  Of course it is.  These opinions keep coming out because the existing rules are pretty clear about the problems and why lawyers are prohibited from participating.

I’m also writing this as an open letter to urge Avvo – if it really is interested at heart in doing the things for the profession and consumers that it says it is interested in doing – to change its focus from trying to fight the issuance of ethics opinions in states or to then engage in criticism of those opinions as somehow incorrect or “part of the problem.”  Instead, your time and money should be shifted — if those are your real goals — to pursuing efforts to have the rules that currently prohibit lawyers from being involved with your business model changed.

You are fighting a losing battle in trying to change the outcomes of ethics opinions.  You could, however, be fighting a winning battle if you made active efforts to file petitions with the appropriate bodies in various states to propose revisions to the ethics rules that would permit participation with your service and other companies doing similar things.

For example, just about anyone who wants to in my state could file a Petition with the Tennessee Supreme Court and propose changes to the ethics rules which here are housed in Supreme Court Rule 8.  There are pretty similar processes in many jurisdictions.  (I would have thought y’all might have worked this notion out by now given how differently you’ve watched things appear to go in North Carolina where you’ve been participating in efforts to change the rules rather than efforts to try to get someone to issue an opinion that would pretend the rules don’ say what they say.)

I can’t guarantee how successful you would be in obtaining satisfactory rule revisions in jurisdictions but I’d bet a shiny quarter or two that your batting average will be greatly improved upon how you are doing in terms of favorable ethics opinions versus unfavorable ethics opinions.

I reckon that this open letter will likely have the same effect of most open letters written by human beings, but . . . at least I’ll still feel better for having said it.

About last week… (and some actual content too)

So, I didn’t manage to post last week and this is something of an apology to those of you loyal readers who kept coming to the site last week each day looking for content.  (Rest assured, there’s also some substantive discussion of a live ethics issue in the post as well.)

I don’t have any real great excuse as there is always work, sometimes travel, and other commitments to overcome to keep this blog going, but the only new piece of the puzzle last week that played a role in my failure to come through was my 44th birthday last Tuesday.

It was a weird one as thinking about it caught me up and resulted in more melancholy than joy.  Thinking about it statistically, 44 signaled that was likely through 2/3 of my life and only had 1/3 to go.  In that context, and I’m certain likely many others in the legal profession, I kept ruminating on my belief that I haven’t been as successful professionally as I would have hoped I’d be at this stage of my life.  I know this sounds like one of those Facebook posts from people pursuing an indirect “woe is me” cry for attention but it isn’t meant that way at all, just an explanation for last week’s radio silence.

Speaking of Facebook, Florida continues to dedicate far too may judicial resources to the resolution of a question that — if you set technology aside ought to be easily answerable — can judges and lawyers be “friends” on Facebook.

Karen Rubin over at The Law For Lawyers Today provided a good run down last week of the history of the Florida case, so I won’t retread that ground and instead am going to take the opportunity to repeat (though I don’t believe I’ve ever stated them here on my blog) my views on the absurdity of the underlying “debate” about the issue.

Judges are human beings.  Human beings, even awful ones, are still going to manage to have a few friends.  The judicial ethics rules do not prohibit judges from having friends who are lawyers.  Thus, there is no rational way the judicial ethics rules can be said to prohibit judges from being friends with lawyers on Facebook.  The judicial ethics rules do contemplate that a friendship between a judge and a lawyer can, if close enough, result in a judge needing to recuse herself from a case involving the lawyer.  Thus, whether a judge and a lawyer are friends on Facebook should simply be one factor in evaluating whether the nature of the friendship is close enough that the judge needs to recuse.  Actual real-world interactions between the lawyer and the judge though should be a more important factor.  The analysis of this issue in any jurisdiction, including Florida, should be as simple as that.

In fact, I believe that judges using Facebook and being friends with lawyers actually does the public a service because it provides litigants and their counsel with a level of transparency they might not otherwise obtain to evaluate whether a judge has a real-world friendship with a lawyer that merits the bringing of a motion to disqualify the judge.  On Facebook, even if a judge has all of her privacy settings as locked down as possible, you can still view a list of the judge’s friends.  Armed with that information, a litigant or a lawyer can then raise the issue and may come to learn of a true, deep friendship between lawyer and judge that might not have otherwise been discovered.

Frustrations with Formal Ethics Opinion 2017-F-164

Recently (and one of the frustrations I have with this opinion I am now writing about is, that “recently” is about as specific as I can pin things down in terms of the date of issuance), the Board of Professional Responsibility in Tennessee issued a Formal Ethics Opinion giving some guidance on the ability of a Tennessee lawyer to be a part of a multi-state law firm using a trade name.

It is, on the whole, an adequate ethics opinion in that it essentially gets the answers to the questions it raises correct, but it is more frustrating than it is adequate given how it addresses the issues and, as hinted at above, how it was surfaced by the Board as having even been issued.

First, here are my frustrations with the substance.  Here are the questions FEO 2017-F-164 tackles:

I. Do the Tennessee Rules of Professional Conduct allow a partnership between a Tennessee Professional Services Corporation and a Florida Professional Services Corporation?

II. Can the partnership ethically use a trade name?

III. Can the Florida office of the partnership ethically lease space from SETCO Services, a title company?

Admittedly, the Board gets the answers to each of these questions correct.  Those answers are, of course, “yes,” “yes,” and “yes.”  But the opinion does not do the best job of showing its work as to some of the answers, completely ignores the fact that the questions being answered also can’t be addressed without taking a look at Florida’s analogous ethics rules, and, as to the third question, misrepresents to an extent how RPC 5.7 actually works in Tennessee, appears to assume more facts beyond the facts indicated in the opinion.

As further background to understand my griping, here is the entirety of the facts provided by the Board about the request that has been directed to them:

The requesting lawyer proposes a 50%-50% partnership between a Tennessee Professional Services Corporation (PA) and a Florida Professional Services Corporation (PA) that will operate under a trade name, SETCO Law. The Florida PA will lease space from SETCO Services, a title company, for which the requesting lawyer is in-house counsel, in Destin, Florida. The Tennessee PA will lease space from another law firm, Brannon Law, located in Memphis, TN.

The proposed Firm will have a separate computer system, including secure email system, apart from SETCO Services and can only be accessed by employees of the Firm. The Firm will have its own logo which will be conspicuous within the building. All clients, before engagement with the Firm, will be provided with a written engagement letter that provides in detail that SETCO Law is an entity separate and apart from SETCO Services and Brannon Law and that engagement with the Firm is in no way tied to any affiliation with SETCO services or any services provided therefrom.

The first two questions are readily capable of dispatch under Tennessee’s rules given that we are very reasonable on questions of trade names and, of course, do not present any unreasonable barriers to lawyers being part of a multi-state law firm.  However, it is exceedingly unhelpful for this opinion to be issued and make no reference to the fact that a lawyer seeking guidance about the second question needs to take a look at Florida’s ethics rules as well and that makes no reference at all to the fact the lawyer ought to also be educated about RPC 8.5 and how that rule provides for choice of law determinations when more than one jurisdiction’s ethics rules may be applicable to the conduct of a lawyer.

The method of addressing the third question though presents the most frustrating piece from a substantive standpoint.  This is because the third question only asks whether or not the law firm’s Florida office can lease space from a title company.  The answer to that question is: of course they can.  The first paragraph of that part of the opinion gets the answer exactly right:

No ethical rules restrict the location of the office of a lawyer. Nothing prevents a lawyer from entering into a landlord-tenant relationship and having an office in the same building as a land title company.

Unfortunately, it doesn’t stop with those two sentences but instead offers further advice and guidance about RPC 5.7 with respect to law related services.  That advice and guidance is fine – in a vacuum but this opinion isn’t in a vacuum – but the opinion reads as certain things being mandatory in order to be able to lease the space, rather than being explained as being important in evaluating whether or not acts undertaken by a lawyer affiliated with the title company can be treated as providing services that are separately distinct from the delivery of legal services so that only some, but not all, of the Tennessee ethics rules apply to that conduct.  Nothing about RPC 5.7 requires a lawyer to do any of those things simply to be able to lease office space from someone.

And that would be bad enough but, again, the opinion completely overlooks or ignores that the office space lease question involves the office in Florida and so there is no compelling analysis given why it would be Tennessee’s RPC 5.7 that would govern at all, rather than Florida’s version of any such rule.

Having now unburdened myself on the substantive flaws, I’d like to offer a quick word about the frustrating problem with the process.  For whatever reason, the Board of Professional Responsibility did not publicize the issuance of this opinion until they happened to insert it in a regular quarterly publication that is a much larger document.  And even then what has been published is an unsigned, undated version of the opinion.  Seems very difficult to understand why that approach was undertaken.

Should you want to go read for yourself the undated, unsigned Formal Ethics Opinion 2017-f-164, you can do so at that link.

Disturbing development in a recent disciplinary case

Late this Summer, the Tennessee Supreme Court issued an opinion, over a dissent, that imposed a public censure against a lawyer for what were, pretty clearly, a series of failures on the part of the lawyer’s staff in the handling of a client’s matter.  What makes the case, Garland v. BPR, interesting, and worthy of that dissent, is not the level of discipline imposed but the choice of the particular rules the lawyer was charged with violating.  The things that make it interesting and dissent-worthy are also the things that make it potentially disturbing as precedent for lawyers and lawyers (like me) who defend lawyers.

Even though the case was clearly one in which the staff to whom the lawyer delegated tasks and responsibilities failed to do their job correctly, the Board did not charge the lawyer with a violation of the rule that is tailor-made for that situation, RPC 5.3.

RPC 5.3 requires the following of a lawyer in Garland’s position:

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer;

(b) a lawyer having direct supervisory authority over a nonlawyer shall make reasonable efforts to ensure that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer; and

(c) a lawyer shall be responsible for conduct of a nonlawyer that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:

(1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the nonlawyer is employed, or has direct supervisory authority over the nonlawyer, and knows of the nonlawyer’s conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Instead of trying to build a case against Garland for any failures under RPC 5.3, the Board charged him with violations of RPC 1.3 and RPC 1.4, contending that he personally failed to act diligently in the client’s matter and failed to properly communicate directly with the client.  The Board also charged Garland with what is often an add-on violation, RPC 8.4(a), but appears to have done so with an unusual twist — justifying it on the argument that the lawyer committed violations of the rules “through the acts of another,” where the “another” was a member of his own staff.

Justice Kirby, in her dissent, made the point that the rule that should have been the focus of the case was not:

The facts in this case center on the failure of Mr. Garland’s staff to response to [client’s] inquiries, the staff’s failure to make Mr. Garland aware of things that needed his attention, or staff members’ general incompetence in tasks such as filing and mailing.

Despite the fact that, “Rule 5.3 was tailor-made for situations such as the one presented in this case,” Justice Kirby trumpeted that the Board did not pursue any charge against Garland for a violation of that rule but instead leveled RPC 1.3 and 1.4 charges and explained her reluctance to adjudicate the disciplinary matter when the Court had “no findings on what measures Mr. Garland should have had in place to supervise his staff,” “no findings on what efforts Mr. Garland should have made to reasonably ensure that his staff’s conduct was appropriate,” and “no findings on whether Mr. Garland ordered or ratified his staff’s infractions, or whether he learned of them at a time when the consequences to [the client] could have been avoided or mitigated.”

Justice Kirby not only dissented from the ruling but also scolded the Board for not pursuing the case under the correct disciplinary rule — “I fault the Board primarily for the posture of this case. It is important for ethical charges against lawyers to be properly framed, so that the rules adopted to govern certain situations are applied to the intended situations.”

Justice Kirby’s admonition to the Board is important for at least two reasons.  First, as she herself writes:

There are countless lawyers in Tennessee with law practices similar to Mr. Garland’s high-volume practice, in which many daily tasks and interactions with clients are delegated to nonlawyer staff. Delegating such tasks to nonlawyer employees does not
violate ethical rules, but failing to properly supervise nonlawyer employees does. It is important for practicing lawyers to understand what this Court expects from them in terms of supervising nonlawyer staff to whom mundane but important tasks are delegated.

Hopefully, and perhaps even more vitally, Justice Kirby’s admonition to the Board needs to have an impact because of the significant problems that could be created for lawyers if the Board is allowed to use RPC 8.4(a) to impose discipline in situations where RPC 5.3 would not support that outcome.  In other words, Justice Kirby’s words — “Delegating tasks to nonlawyer employees does not violate ethical rules” — need to continue to be the law in Tennessee.  If the Board is permitted to charge lawyers with infractions of RPC 8.4(a) on the basis that the failing of a staff member is the lawyer violating the rules through the “acts of another,” then RPC 5.3 essentially becomes surplusage in the rules altogether.

This Florida lawyer should not have “Went for It”

I had it in mind that I might write a little something about the Pennsylvania lawsuit against the Morgan & Morgan firm over lawyer advertising issues, but Karen Rubin and the fine folks at The Law for Lawyers Today beat me to that punch with a nice piece at their site that you can read at this link.

So, instead, but still staying on the general theme of lawyer advertising issues, I’m going to focus just a bit on a story coming out of what is often thought of as “ground-zero” in the U.S. when it comes to the battle over lawyer advertising issues — Florida.  It is a tale of a lawyer who is being suspended for one year over conduct involving solicitation of a client.  (Should you want to, you can read the full per curiam opinion of the Florida Supreme Court in Florida Bar v. Dopazo here.)

The opinion mostly focuses on the question of what was the right amount of punishment, deciding to increase the suspension from the 60 days that was recommended to a full one-year suspension.  That isn’t my interest for today.  My interest for today is to use this case as a reminder of a few things in the context of larger issues that are going on in the world of lawyer advertising (and, in particular, the APRL effort to persuade the ABA to revise the Model Rules to streamline the restrictions on both general advertising and solicitation).

Those who study questions of legal ethics or attorney advertising or both will remember that the only U.S. Supreme Court case to uphold a restriction on attorney advertising efforts as constitutional is Florida Bar v. Went For It.  The restriction upheld there was the 30-day off limits concept for soliciting representation by mail from folks affected by disaster or traumatic personal injury in any fashion.

Dopazo’s conduct not only ran afoul of prohibitions on in-person solicitation but was well within that kind of 30-day off-limits period and would have been prohibited in any form or fashion.

In March 2007, days after her son suffered traumatic brain injury as the result of a motor vehicle injury, Penny Jones was approached at Jackson Memorial Hospital Ryder Trauma Center  by Dopazo, who successfully solicited her to become a client of his for a fee.  There was no prior relationship between Jones and Dopazo, nor were his legal services sought by her or anyone acting on her behalf.

No one who is out there actively advocating for revisions to the ethics rules addressing lawyer advertising and solicitation is pushing a rule revision that would permit this kind of in-person solicitation in a hospital even if a jurisdiction did not also have some version of a 30-day off-limits period.  Even those of us who question the fairness of 30-day off limits provisions because they only prohibit communications from one side of things -_ the side seeking to provide representation — are in favor of restrictions on in-person solicitation by lawyers of strangers.

Those of us who are actively advocating for changes though are very much in favor of trying to not have these sort of situations — which can be adequately addressed by simple prohibitions — drive the discourse to try to justify more expansive restrictions on commercial speech.  Among the many reasons for that are the kinds of unnecessary and unneeded restrictions that can come to pass because of expansions of such concepts.

Using my own state as an example, over time our rule imposing a version of the 30-day off limits provision has now been expanded to prevent lawyers from sending letters to strangers offering to provide representation in a divorce matter within 30 days of the filing of a divorce.  I’ve written in the past about the problems I have with that concept (if you click through that link which gives you an electronic/pdf-ish version of The Memphis Lawyer magazine from 2015, you’ll need to go to pages 14-15 to read the column).

So, unquestionably, this Florida lawyer’s situation is one that the ethics rules ought to prohibit.  But the fact that such conduct was engaged in does not provide a basis for saying that the rules aren’t in need of reform.

(N.B. You might be asking yourself why in the world a lawyer is being disciplined in 2017 for misconduct that happened in 2007.  The opinion elaborates that it was not the target of the solicitation who complained about Dopazo but rather that the Florida Bar only learned of the incident in 2011 as a result of the findings of an FBI investigation of this lawyer over alleged payments to non-lawyers for a client recruitment scheme involving medical clinics.  Interestingly, the delay in the prosecution of the case from 2011 to 2015 was, in fact, taken into account as a mitigating factor when concluding that the appropriate discipline was a one-year suspension.)

Coming to praise rather than bury: NYC Bar Op. 2017-6

About two weeks ago, I had the opportunity to speak to the Tennessee Defense Lawyers Association for an hour on ethics issues, using a “hot topic” format.

One of the topics I covered was the many things there are beyond just being parties on opposite sides of the “v” in litigation that present conflicts to be managed, avoided, and addressed in handling lawsuits.

I mentioned the difficult situations that can arise as a case evolves and someone shows up on the radar screen as an important witness — particularly an expert witness — and the importance of running supplemental conflicts checks to make sure that a lawyer or her firm doesn’t first figure out the problem when learning during the deposition that the witness claims to be a client of the lawyer’s firm.  That is a scenario that lawyers sometimes don’t always think about in advance but for which there is little, if any, push back on the idea that it is a conflict about which to be concerned.

I pivoted from that topic to a similar topic — issuing subpoenas for documents to witnesses — that lawyers are more inclined to want to try to intellectualize as not creating a conflict situation because it can have the feel of a “routine” act and it also “feels” like an administrative hassle.

At the time of that presentation, I somehow had not yet seen a recent Formal Ethics Opinion out of the New York City Bar on that very topic – if I had seen it I certainly would have pointed to it — because it is a very well done treatment of the issue.  The question addressed in NYC 2017-6 is:

What ethical restrictions apply when a party’s lawyer in a civil lawsuit issues a subpoena to another current client or may need to do so?

Now, a word before delving into the insight that can be gleaned by all lawyers in all jurisdictions from this opinion about an important, but not dispositive, difference in the language of New York’s Rule 1.7(a).

In Tennessee, and many other jurisdictions with rules patterned after the ABA Model Rules, RPC 1.7(a) reads so as to address two types of conflicts as being “concurrent conflicts of interest.” One where the lawyer would be required to represent one client in matter directly adverse to the interests of another client, and one where the lawyer’s duties to someone else (or the lawyer’s own personal interests) will impose a “material limitation” on the lawyer’s ability to represent the client.

The NY version of Rule 1.7(a) has slightly different language on each of those two fronts.  NY’s 1.7(a) indicates that a lawyer has a conflict:

if a reasonable lawyer would conclude that either (1) the representation will involve the lawyer in representing differing interests; or (2) there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.

And, “differing interests” is specifically defined in NY’s rules to mean “every interest that will adversely affect either the judgment or the loyalty of a lawyer to a client, whether it be a conflicting, inconsistent, diverse, or other interest.”  Now those NY variations on the language make it a bit easier and cleaner to see the issues created when a lawyer pursues a subpoena for records from one client for another client but so much of the opinion that explains the analysis is written not just well, but in a practical fashion that, in my opinion, allows it to resonate for lawyers in jurisdictions with the ABA Model Rule language on conflicts as well.

After surveying the landscape of earlier opinions on these subjects, the NYC opinion laid out a number of helpful conclusions:

First, issuing a subpoena to a current client to obtain testimony from that client will ordinarily give rise to a conflict of interest.  Obtaining testimony typically inconveniences the witness, involves probing a witness’ recollection, and at times may involve challenging and confronting the witness, any of which a current client may reasonably perceive to be disloyal.

[snip]

Second, it will ordinarily be a conflict of interest for a lawyer to seek to obtain documents via a subpoena to a current client.  The production of documents in response to a subpoena very often requires an allocation of resources (time and money) which the subpoenaed party would prefer not to expend.  This is all the more so when outside counsel needs to be retained, and the scope of production needs to be negotiated.

[snip]

The opinion then goes on to offer some further practical advice for lawyers to keep in mind because of their ethical obligations which the opinions lays out as:

(a) the necessity for lawyers to run conflict checks prior to serving a subpoena; (b) the potential need to decline or limit a representation, or to obtain informed consent, if a lawyer knows before being retained that subpoenaing a current client may be necessary; and (c) the retention of “conflicts counsel” to avoid the need to withdraw, or the risk of disqualification, when a lawyer learns during the course of a litigation of the need to subpoena another current client.

The opinion does go on to provide helpful explanatory details for each of those topics, and you can go read the opinion in full at this link.

 

An ethics opinion from the Coinhusker state

Answering the question that was undoubtedly on the minds of every lawyer practicing in that state, the Lawyer’s Advisory Committee of the Nebraska Supreme Court issued Ethics Advisory Opinion for Lawyers No. 17-03 making clear that, yes, lawyers can accept payment from clients in the form of Bitcoin or other similar digital currencies.

I don’t exactly know what to make of this opinion.  I’m not normally a list maker, but here’s a quick pros and cons lists to label my feelings.

Pros:

  1.  It offers a pretty good explanation of what Bitcoin is and how it works.
  2. If you are a Nebraska lawyer interested in the answer to the question it definitely gives you a definitive answer.
  3. It is well written.
  4. It demonstrates how adaptable ethics rules for lawyers are that they don’t have to be changed simply because new technology arises that didn’t exist when the rule was first created.  (But see con #3.)

Cons:

  1.  I don’t know who this opinion is really for in terms of usefulness.
  2. Nebraska? Surely that wasn’t the state with a pressing need to be the first to issue an opinion on this topic.
  3. It incorrectly treats using property to pay an attorney fee differently than when the property involved isn’t Bitcoin.
  4. It entirely overlooks the most important aspect of lack of confidentiality in terms of impact on such a payment arrangement.

Since expanding on the “cons” is always a bit more fun as a writer, let me do that.

Who is the opinion for?  Why would any lawyer today be willing to accept Bitcoin as a form of payment?  Most answers to that question that I can come up with require the lawyer to be something of a believer in its use as a financial system.  If the lawyer in question happens to practice in Nebraska, that seems a pretty solid bet.  If that is true, then to some extent the opinion gives with one hand but takes away with the other by saying that a lawyer can accept payment in Bitcoin but then has to immediately convert the payment back into dollars.  If a lawyer is willing to put his or her faith into the Bitcoin currency system (and obviously the client must already have faith in that system), then why require them to immediately convert that client’s payment to dollars?

The answer to that – according to the opinion — is that Bitcoin is classified as property under the law and not as a currency and has the potential for rapid fluctuation in value.  But… shifting to the third con on the list… why should accepting this kind of property with fluctuating value as payment for services be treated so differently than other forms of property?

While we likely wouldn’t need a regulatory body to issue an ethics opinion on whether lawyers can accept payment in the form of gold or silver (of course they can), would we be comfortable with such an opinion declaring the lawyer has to immediately sell that property to turn it into cash?  If gold and silver seem too unwieldy for the thought exercise, then how about shares of stock or stock options.  (Let’s assume those would be otherwise done in compliance with restrictions such as Model Rule 1.8(a) and (i).)  Stocks can certainly fluctuate significantly in value and always have the potential to do so very rapidly.

Would you agree with an opinion that says a lawyer would have to immediately trade shares of stock for dollars because of the risk of rapid increase in value or decrease in value?  Why can’t two or more grown-ups negotiate an agreement for compensation in the form of property with a fluctuating value just because one or more of them is an attorney?  Why wouldn’t the lawyer taking on the risk of decrease in value play a role in evaluating reasonableness of the fee?

And, finally, the opinion talks a bit about confidentiality issues involved in payment via Bitcoin from a third party rather than the client, but completely overlooks the fundamental risk to client confidentiality created by accepting payment in Bitcoin from a client.  Such a transaction — necessarily because of the very architecture upon which Bitcoin is founded as the opinion does explain — is an open transaction for which confidentiality cannot be reasonably expected much less guaranteed.

Somehow the opinion  doesn’t manage to advise lawyers to make sure the client understands that – unlike cash or checks or wire transfers or even credit card payments — the fact of the client’s payment of money to a particular lawyer and all of the implications that payment entails is available to anyone sophisticated enough to understand how to delve into the Bitcoin ledger system.

So, in the end, sure the opinion says that a lawyer can accept payment in Bitcoin, but under this framework why would anyone ever do so?

Perfect timing.

(Edited – Dec. 8, 2017 to fix very embarrassing mistakes as to the company name of Atrium.)

On the heels of my posting earlier this week about my failure to understand how the Atrium law firm backed by the Atrium tech company is something that complies with California’s ethics rules (much less ethics rules in other states besides D.C. that are based on the Model Rules should it attempt to expand as it plans), news comes now at the end of the week that one of the Big 4 accounting firms is launching its first law firm in the United States.

As this ABA Journal story explains, PwC is opening ILC Legal but, importantly for my discussion purposes, it is doing so in D.C.  As noted when I discussed the Atrium deal, D.C. is currently the only U.S. jurisdiction that permits the kind of non-lawyer ownership in a law firm that is prohibited everywhere else in the country.  Now, interestingly, the PwC spokesperson quoted in the story indicates that isn’t the reason D.C. was picked.  There may be many more details in the AmLaw story referenced by the ABA Journal but I am not a subscriber to that publication so I can’t get to it to read.  Not sure what details could be in there though that would change the fact that I’m skeptical that any structural separation PwC may have come up with for this law firm will comport with any ethics rules other than D.C.’s at this moment in time.

In my Atrium post, I asked readers to envision whether if a bank were doing what the tech company was doing, anyone would have any qualms at all about saying that it didn’t appear to comply in any way with the pertinent ethics rules.  I could just have easily used an accounting firm as an example instead of a bank.

So, bottom line for this Friday is, whatever your reaction might be to the PwC news (assuming it is one of concern), you ought to have the same – and even stronger — reaction to the Atrium situation.  Atrium isn’t even starting in D.C. where it could arguably be compliant.

(And, thanks to David Carr – a California ethics attorney – for the comment he posted to my earlier story with some further thoughts about the situation in California for Atrium.  Boiled down though, those thoughts seem to me to indicate that Atrium’s approach doesn’t comply with California’s rules as I suspected and that their only hope is that their own clients won’t complain about them and, apparently, that if anyone else does it won’t gain any traction with regulators.)

 

Things I don’t understand… Atrium LLP

You may, by now, have read an article or two about the launch of a “technology-focused law firm” by the name of Atrium LLP.  Its headquarters are in California.  Having now read several articles about it – and how it has come to be and how it will operate – I simply don’t understand it.

I get what a technology-focused law firm might be, of course.  What I don’t get is how in the world any of the lawyers involved with the venture can think that they can do this and comply with the ethics rules.

I kept reading more and more about it to figure out what I was missing that would not cause this arrangement to be a violation of the rules prohibiting sharing of fees with nonlawyers and prohibiting investment by non-lawyers in law firms.  I could still be missing the explanation, but I haven’t found it yet.

Here – through a series of snippets – is the situation as it has been reported.

Let’s start with information from an ABA Journal article as a base:

With $10.5 million, serial entrepreneur Justin Kan is about to take on Big Law….Atrium LLP will compliment, but is separate from, Atrium Legal Technology Services, also operated by Kan. Atrium LTS will develop the technologies and processes that automate repetitive tasks and manage the firm’s operations….While Kan is not an attorney, the firm’s founding partners are. Augie Rakow is a former partner at Orrick, Herrington & Sutcliffe, while Bebe Chueh is an attorney and founded AttorneyFee.com, which sold to LegalZoom in 2014. The other co-founder and Atrium LTS chief technology officer, Chris Smoak, is a serial entrepreneur and software engineer. Kan is the founder of live-streaming sites Justin.tv and Twitch.tv, selling the latter to Amazon for nearly $1 billion in 2014.

[snip]

While separate entities, the financial relationship between Atrium LTS and Atrium LLP is inextricable. Atrium LTS provided the firm a loan to cover all startup costs, and Atrium attorneys are being paid through options in Atrium LTS or a salary for advising the technology company.

[snip]

In June, Atrium LTS closed a Series A funding round worth $10.5 million, which was led by General Catalyst, a venture capital firm focused on early stage investments.

Let’s sprinkle in a few more salient details from Bob Ambrogi’s interview and post with affiliated folks at his Law Sites blog:

What is launching today is a law firm, Atrium LLP, that is separate and apart from Kan’s technology company Atrium LTS, but that is symbiotically connected to it. Atrium’s lawyers will focus exclusively on practicing law, while Atrium LTS (the LTS is for Legal Technology Services) will handle all operations for the firm, even including marketing, and develop and operate software to streamline the firm’s workflows.

[snip]

Atrium LTS is paying all the start-up costs for the law firm, structured as a loan. Atrium attorneys receive stock or options in Atrium LTS and some receive salaries from Atrium LTS for serving as advisors.

Now, a bit more from the Atrium website itself:

To solve this, Augie teamed up with successful lawyer-turned-entrepreneur Bebe Chueh to found Atrium, a technology-first law firm. They partnered with Justin and Chris Smoak to also create Legal Technology Services, a legal technology company with a world-class engineering team to build tools for that firm.

Strikingly absent from anything I have been able to find and read about the rollout of Atrium is how it isn’t just outright flouting California’s ethics rules that prohibit non-lawyer ownership in law firms and that prohibit people who aren’t lawyers from being partners in a law firms.  Although California does not yet have rules tracking the Model Rules in many areas (so they don’t for example have all of the provisions of ABA Model Rule 5.4), it does have Rule 1-310 that pretty much tracks Model Rule 5.4(b).

Rule 1-310 Forming a partnership With a Non-Lawyer

A member shall not form a partnership with a person who is not a lawyer if any of the activities of that partnership consist of the practice of law.

Discussion:

Rule 1-310 is not intended to govern members’ activities which cannot be considered to constitute the practice of law. It is intended solely to preclude a member from being involved in the practice of law with a person who is not a lawyer.

It also has a rule that imposes other restrictions on sharing fees with nonlawyers, Rule 1-320

Now, I noticed from one of the articles the idea that Atrium LTS (the tech company) is only “loaning” the start up costs to Atrium.  I mean there are lots of places where that concept seems vulnerable to analysis, but throw in the point that the way the attorneys for the Atrium law firm are getting paid is either stock or stock options in Atrium the tech company or salaries paid by Atrium the tech company for being advisors to the tech company and … just … come on. That really doesn’t pass any laugh test.  Does it?

So, really, what am I missing about this?  Assume the things being done by Atrium the tech company as part of launching Atrium the law firm were being done by an actual bank, wouldn’t everyone immediately recognize that the lawyers involved were violating the ethics rules?

Don’t get me wrong, I’m a huge believer in the benefits of moving away from the billable hour and innovation in the delivery of legal services and embracing technology, but the Atrium model sounds very much like something that can only be done in California (or just about any other U.S. jurisdiction besides D.C.) if, first, the ethics rules are revised to permit it.

Is this just an effort by an entity with lots of resources to do it and dare someone to stop them?

A patchwork post for your Friday

Today’s content will be an original recipe of (1) part shameless self-promotion; (2) two parts serious recommendations to read the writings of others; and (3) pop culture recommendations for your downtime this weekend.

First, the shameless.  I am pleased to announce the plan for this year’s Ethics Roadshow.  Here’s the promotional piece you will soon see making the rounds to explain this year’s endeavor.

This is the 13th year that Brian Faughnan is performing the Ethics Roadshow for the TBA, but that is NOT actually the reason for the “13 Reasons Why” title.  This year’s program “Ethics Roadshow 2017 The Mixtape:  Thirteen Reasons Why Ethics Issues are More Complicated Than Ever.” is so-titled because of the presenter’s slavish devotion to being influenced by pop culture.

This past year, a highly controversial show largely about teen suicide and its consequences aired on Netflix.  “13 Reasons Why,” was based on a much less controversial book but the series was heavily criticized for – among other things – violating the “rules” in the world of television for how (and how not) suicide is to be depicted.  Questions, of course, exist about whether such rules are outdated in a day and age when it is as easy as surfing the Web for someone, even a teenager, to find such information.

Questions also exist in modern law practice about whether certain ethics rules are outdated, and we will spend some time talking about that issue and related topics.  We will also discuss the problems with substance abuse, stress, and mental health issues that plague our profession and put our members at risk of self-harm at rates much higher than the general population and other professions.)  The outdated technology of audiotape also plays a significant role in the Netflix series.  (It is also making something of a comeback in the music industry.)  We will spend time talking about the ethical obligations of lawyers when it comes to use of technology and whether some of those obligations and the risks of modern technology might create an incentive for lawyers to make use of some outdated technology in the future as a way of better protecting client information.

And, we will cover it all in a format that had its heyday when cassette tapes were king – the “mixtape.”  Your presenter will curate the order of topics for you with any eye toward your three-hour listening experience.

If you are a Tennessee lawyer (or a lawyer who practices in a nearby state) interested in attending, all of the stops will take place in December 2017 and you can find them and register for them at these links: Memphis, Nashville, Knoxville, and Chattanooga. You can also register for video broadcasts of the program in Jackson and Johnson City.

In terms of reading recommendations, go check out yesterday’s post from Karen Rubin over at The Law for Lawyers Today on a follow up to an issue I’ve written about – the problems with protecting client confidentiality in a world in which border agents are demanding access to electronic devices and their contents.  Karen writes about a lawsuit filed by an organization near and dear to me that is challenging the practice.  Also go check out the latest blogpost from Avvo’s General Counsel, Josh King, about the intersection of First Amendment issues and the issuance of ethics opinions.  While I don’t know the details of the discussion at a New York event he references, I do know some of the players that were there and I can’t help but wonder if what Josh is interpreting as a bad take on the issue of constitutional challenges and certain concepts being settled actually stems from a more fundamental disagreement about whether saying lawyers cannot pay referral fees to non-lawyers is actually a restriction on commercial speech at all.  If not, then it doesn’t require intermediate scrutiny in terms of any First Amendment challenge but is merely reviewed on a rational review basis.  And, I’m guessing the point someone was trying to make was that others have tried and readily failed to say that states don’t have a sufficient interest in regulating the practice of law to prevent letting lawyers pay non-lawyers for making referrals.

Finally, recommendations for a more pleasurable way to spend your weekend. If you happen to have Netflix, I actually do (albeit sheepishly) recommend checking out the 13 Reasons Why series.  Less sheepishly, as to the efforts to bring the mixtape concept back, I wholeheartedly recommend exploring some of the online mixtapes that Lin Manuel Miranda, the creator of Hamilton has curated.  You can grab one of them at this link.