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self-study / Legal Ethics

Oct. 17, 2018

The new conduct rules: a snapshot

Stanley Mosk Courthouse

Wendy Chang

Judge, Los Angeles County Superior Court

Loyola Law School, 1995

Wendy is based in the firm's Los Angeles office. She is a member of the American Bar Association's Standing Committee on Ethics and Professional Responsibility. She served as an advisor to the State Bar of California's Commission for the Revision of the Rules of Professional Conduct and is a past chair of the State Bar of California's Standing Committee on Professional Responsibility and Conduct. Wendy is a certified specialist in legal malpractice law by the State Bar of California's Board of Legal Specialization.



On May 10, the California Supreme Court issued an order approving a new set of Rules of Professional Conduct, the first comprehensive overhaul of California's ethics rules since 1989. With an effective date of Nov. 1, the Supreme Court gave California practitioners a little less than six months to get familiar with the new rules and make any necessary adjustments so that they will be in compliance when Nov. 1 arrives. The new rules are meant to be a clear and enforceable set of disciplinary standards. Here are some highlights of some of the major changes affecting most lawyers generally (detailed analysis of the individual rules will follow in future articles from the Daily Journal):

1. More Rules. California's existing 46 rules become 69 rules.

2. New numbering system. California joins the rest of the country by adopting a ABA Model Rules-based numbering and organizational system. All the current numbering will change.

3. Diligence. Reasonable diligence becomes an independent rule in Rule 1.3. Reasonable diligence means commitment and dedication to the client's interests, and not acting with disregard, neglect or undue delay. (Current California Rules of Professional Conduct, Rule 3-110(B) defines competence as, among other things, acting with diligence.)

4. Fees. Rule 1.5 retains California's unconscionability standard for fees, rejecting the Model Rules unreasonable standard. Rule 1.5(d) states that "earned on receipt" or "non-refundable" retainers must be true retainers (to ensure the lawyer's availability only), with client agreement after disclosure that a true retainer means the client will not be entitled to a refund on all or part of the fee charged. Rule 1.5(e) authorizes and defines a flat fee.

5. Fee Division Among Lawyers. Rule 1.5.1 continues to permit a pure referral fee (not requiring joint assumption of responsibility or proportionality to work). However, agreements to divide fees must be consented to by the client in writing at the time of the agreement to divide fees or as soon thereafter as reasonably practicable after full written disclosure to the client of the fact that a fee division will be made, the identity of the lawyers/law firms to the division, and the terms of the division. By contrast, current Rule 2-200 does not require that the agreement between the lawyers be in writing, does not require identification of the parties to the division, and permits client consent at the time of the fee split (which is oftentimes at the end of a case when all the work has been done).

6. Safekeeping Funds and Property. Rule 1.15 states that advance fee deposits (commonly mislabeled as a "retainer") must be deposited into a client trust account maintained in California. This rule uses the word "funds received or held" -- which means it applies to all such fees, even those received prior to effective date of the rule. By contrast, current Rule 4-100 only requires advance costs to be deposited into a client trust account.

7. Current Client Conflicts of Interest. Rule 1.7 moves away from current Rule 3-310's "checklist" approach for current client conflicts, and adopts straight-forward Model Rules-based trigger -- whether there is a direct adversity to another current client in the same or separate matter or whether there is a significant risk that the lawyer's representation of the client will be materially limited by the lawyer's responsibilities to or relationship with another client, a former client or a third person, or by the lawyer's own interests. Rule 1.7 retains California's "informed written consent" standard (compared with the Model Rules "Informed consent, confirmed in writing" standard). Comment [9] recognizes advance waivers under certain circumstances, and acknowledges that the experience and sophistication of the client, as well as independent representation, are factors in determining whether the client's consent is fully informed.

8. Imputation. Rules 1.10, 1.8.11 and 1.18(c) codify common-law imputation principles.

9. Ethical Screening. Rule 1.10 permits ethical screening for lateral attorneys in a new firm who did not substantially work on a former client conflict-causing matter in the previous firm. (This is a significantly narrower screen than permitted under the Model Rules). Rule 1.11 permits screening for government lawyers moving into private practice who participated "personally and substantially" in the former matter.

10. Prospective Clients. Rule 1.18 codifies common law that a lawyer owes a duty of confidentiality as to confidential information received from prospective clients. Further, the lawyer shall not represent a client with material adverse interests to a prospective client in the same or substantially related matter if the lawyer received confidential information material to the matter from the prospective client -- even if the lawyer was never actually hired. Rule 1.18, however, defines "prospective client" as someone who consults the lawyer for the purpose of hiring the lawyer or securing legal services/advice, and Comment [2] excludes those who communicate information (a) unilaterally without a reasonable expectation that the lawyer is willing to be retained, (b) after the lawyer had stated an unwillingness or inability to consult, or (c) without a good faith intention to seek legal advice or representation.

11. Supervision. Rules 5.1 and 5.3 impose a duty to supervise subordinates. A duty to supervise currently exists only as a comment to current Rule 3-110. Rule 5.2 imposes duties on subordinate lawyers to comply with the rules.

12. Sexual Relations with Clients. Rule 1.8.10 imposes a strict prohibition on sexual relations with a current client who is not a spouse or registered domestic partner, unless a consensual sexual relationship exists between them when the attorney client relationship commences. This is a major change from current Rule 3-120, which applies only to lawyer demands for quid pro quo sexual relations, the lawyer's use of coercion, intimidation or undue influence in entering sexual relations with a client, or where continued representation after sexual relations will result in incompetence. Special procedural requirements exist for Bar prosecutors if the complainant is not the client (for example, is a spouse or jealous other).

13. Prohibited Discrimination/Harassment/Retaliation. Current Rule 2-400 prohibiting discriminatory conduct in a law practice expands under Rule 8.4.1, which prohibits unlawful harassment, discrimination and harassment in the representation, termination or refusing the accept the representation of a the client, and in law firm operations. Rule 8.4.1 is limited to unlawful conduct as determined by reference to applicable state and federal statutes and decisions, and excludes conduct protected by the First Amendment. Rule 8.4.1 also removes the pre-adjudication precondition that existed in Rule 2-400. Rule 8.4.1 contains various self-reporting obligations.

14. Confidentiality. There are no changes to California's duty of confidentiality (Rule 1.6), which remains the strictest in the nation.

15. Rejected Rule. Proposed Rule 1.14 (Clients with Diminished Capacity) was the only proposed rule that was rejected.

In addition to the above, other changes exist in the new rules. All California lawyers should review the rules entirely, and make all necessary changes to be in compliance by Nov. 1.


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