United States: Recent N.Y. Ethics Opinions: October 2015

Last Updated: October 7 2015
Article by Tyler Maulsby

Here are summaries of ethics opinions issued during June 2015. The opinions were issued by the NYSBA Committee on Professional Ethics. NYLER will continue to provide updates on new ethics opinions issued by this and other ethics committees in New York State.

For information about how to obtain an ethics opinion from the NYS Bar Association Committee on Professional Ethics, please visit http://www.nysba.org/Ethics/.


NYSBA Ethics Op. 1057 (June 5, 2015):
Revealing Information When Requesting to Withdraw from the Representation

Opinion 1057 addresses what information a lawyer may reveal when seeking leave from the court to withdraw from a representation. A lawyer's client was insisting that the lawyer file certain petitions in the litigation that the lawyer considered frivolous and irrelevant to the subject of the lawyer's representation. The lawyer asked whether he may use, in support of his request to withdraw from the representation, documents filed by his client in a separate federal action if the documents may reveal that his client is possibly incompetent or unstable. The opinion analyzes whether the information at issue is "confidential information" within the meaning of Rule 1.6 and if so whether the lawyer is authorized to disclose such information. Rule 1.6 defines "confidential information" as, inter alia, information "likely to be embarrassing or detrimental to the client if disclosed." Exempt from the definition, however, is "information that is generally known in the local community... ."

The Opinion reasons that information in the public record (such as a court filing) can still be "confidential information" because it may not be "generally known." Therefore, the Opinion concludes, "unless the allegations in the client's other lawsuits were reported in the public media, or unless the client himself has widely publicized the allegations, the documents in the client's other cases ... constitute confidential information of the client." The Opinion then analyzes Rule 1.16's limits on what information a lawyer may disclose in support of a motion to withdraw. The Opinion explains that the lawyer should first determine whether withdrawal is mandatory or permissive under Rule 1.16. If withdrawal is not mandatory, there may be less justification for revealing confidential information.

Further, Rule 1.16(e) requires a lawyer seeking to withdraw from the representation to "take steps, to the extent reasonably practicable, to avoid foreseeable prejudice to the rights of the client." As an initial step, the lawyer should attempt to withdraw by telling the Court that "professional considerations require termination of the representation," (citing Comment [3] to Rule 1.16). However, if the Court does not allow the lawyer to withdraw solely by citing "professional considerations," the lawyer may not disclose confidential information absent a court order to do so. If the Court does require the lawyer to disclose information adverse to his client's interest, Comment [14] to Rule 1.6 cautions that the disclosure should be no greater than the lawyer reasonably believes necessary to accomplish the purpose. The lawyer may also ethically decide not to immediately comply with a Court's order to disclose confidential information and may test the Court's ruling with an appeal. Finally, if the lawyer obtains informed consent from the client, as defined in Rule 1.0(j), the lawyer may reveal confidential information in support of his motion.

The full opinion is available at: https://www.nysba.org/CustomTemplates/Content.aspx?id=57384

NYSBA Ethics Op. 1058 (June 10, 2015):
Choice of Law Rules and a Lawyer's Obligations Regarding Client Funds

In Opinion 1058 a lawyer admitted only in New York planned to reside in Illinois and practice immigration law only. The lawyer inquired whether she was still required, under Rule 1.15(b) to maintain client funds in an account with a banking institution within New York State. The Opinion analyzes Rule 8.5's choice of law provisions and concluded that the lawyer, assuming she only practiced in Illinois, was not required to maintain client funds in a New York banking institution. The Opinion notes that the lawyer's practice before the Board of Immigration Appeals is not before a "court" within the meaning of Rule 8.5(b)(1). Therefore, Rule 8.5(b)(2)'s choice of law provisions apply. Under Rule 8.5(b)(2), the rules to be applied are the rules of the "admitting jurisdiction" where the lawyer "principally practices" unless the lawyer's conduct clearly has a "predominant effect" in a different jurisdiction where the lawyer is licensed to practice. Because the lawyer may practice before the federal immigration authorities in Illinois, she is deemed "licensed to practice" in Illinois for the purposes of Rule 8.5(b)(2). Therefore, unless the lawyer's conduct had a predominant effect in New York (for instance, if she solicited business in New York), the Illinois Rules of Professional Conduct should apply. The Opinion concludes that because the Illinois Rules of Professional Conduct do not require the lawyer to maintain client funds in a New York banking institution, the lawyer is not required to do so. The Opinion notes, however, that in the event of a violation of the Rules, there could be disciplinary proceedings in both jurisdictions because both states' version of Rule 8.5 allow for reciprocal discipline.

The full opinion is available at: https://www.nysba.org/CustomTemplates/Content.aspx?id=57385

NYSBA Ethics Op. 1059 (June 12, 2015):
Disclosure of Information to Governmental Granting Organization and Obtaining Informed Consent from Minor Child

Opinion 1059 addresses the circumstances under which lawyers for minor clients in immigration proceedings may disclose certain information about their clients' cases to governmental granting organizations. The inquiring lawyers work for legal assistance organizations that receive governmental grants to represent minor clients in immigration removal proceedings. As a condition of the grants, the lawyers are required to report certain data about their clients' cases. The information is reviewed by the Vera Institute for Justice, a private non-profit organization, which also redacts any information that it believes to be privileged or confidential before reporting the information to the government. Most of the required information is basic procedural data about the clients' cases, however, the governmental granting organization also requests that the grantees input in a narrative field the "results of interview designed to capture the [client's] understanding of Immigration Proceedings before and after receiving program services."

With regard to the procedural information requested by the governmental granting organization, the Opinion reasons that as long as the information would not be "embarrassing or detrimental to the clients" then such information would not be considered "confidential information" as defined by Rule 1.6. The Opinion notes, however, that such a determination should be made on a case-by-case basis. With respect to the substantive item that requests information about the client's understanding of immigration proceedings, the Opinion reasons that such information would constitute confidential information and therefore the lawyers may not disclose such information absent informed consent. The lawyers in this scenario may appropriately seek informed consent but the lawyers must assess on an individual basis whether the client is capable of giving informed consent. If the client is capable of providing informed consent, the attorney must make full disclosure of "information adequate for the [client] to make an informed decision" and the attorney must "adequately explain[] to the [client] the material risks of the proposed course of conduct and reasonably available alternatives" as required by Rule 1.0(j). If the client is incapable of giving informed consent but is in the custody of a parent or guardian, the attorney may seek informed consent from the available parent or guardian.

The full opinion is available at: https://www.nysba.org/CustomTemplates/Content.aspx?id=57386

NYSBA Ethics Op. 1060 (June 12, 2015):
Nonlawyer Management of Law Firm Escrow Sub-Accounts

Opinion 1060 addresses whether a law firm may have a nonlawyer staff member direct the firm's bank to open individual escrow sub-accounts and transfer funds from a sub-account to the master escrow account in the name of the lawyer and under the lawyer's direction. Rule 1.15, which governs lawyers' obligations with respect to client funds, requires, inter alia, that "all authorized signatories of a[n] [escrow account] are lawyers admitted to practice law in New York State." Rule 1.15(e). Notwithstanding Rule 1.15(e)'s requirement about signatories, the Opinion reasons that lawyers may delegate certain responsibility to nonlawyer staff members provided the lawyer closely supervises the nonlawyer.

Specifically, Rule 5.3(a) requires a lawyer or law firm to ensure that the work of nonlawyers is "adequately supervised" and that the lawyer exercise a degree of supervision over nonlawyers that is "reasonable under the circumstances." Comment [2] to Rule 5.3 also advises lawyers to "make reasonable efforts to establish internal policies and procedures designed to provide reasonable assurance that nonlawyers [will comply with the Rules]." Finally, Rule 5.3(b) states that a lawyer is responsible for the conduct of a nonlawyer employee over whom the lawyer has supervisory authority. If the nonlawyer employee were to violate the Rules, therefore, the lawyer would be held responsible.

Citing a prior opinion, the Opinion notes that certain responsibilities for client funds cannot be delegated and that lawyers delegating any responsibility regarding client funds to other employees must closely supervise the employees. The Opinion concludes that in the proposed scenario, where the nonlawyer employee would not withdraw any money from the master escrow account, the lawyer may delegate such a task to a nonlawyer employee provided that the employee is closely supervised.

The full opinion is available at: https://www.nysba.org/CustomTemplates/Content.aspx?id=57387

NYSBA Ethics Op. 1061 (June 15, 2015):
Reporting Client's Payment History to Subscription-Based Database

Opinion 1061 addresses whether a lawyer may report a client's payment history in a database that would report on the client's timeliness of payment of his or her legal bills. The database would be available to subscribing law firms and lawyers and subscribers would be able to file reports on the payment histories of their clients and review reports by other lawyers. The inquirer contemplates that the client would sign a consent allowing the firm to report on the client's timeliness of payment. The Opinion analyzes Rules 1.6 and 1.9 to determine whether the information at issue—specifically a client's payment history—is "confidential information." Citing a previous opinion, the Opinion notes that a client's unpaid account status is most likely "confidential information" under Rule 1.6 because it is likely to be "embarrassing or detrimental to the client if disclosed."

Additionally, Rule 1.9, which governs a lawyer's duties to former clients, prohibits the lawyer from revealing confidential information unless permitted by the Rules. Two such exceptions to Rule 1.9's prohibition are disclosure of information necessary to collect a fee and information about which the client has given informed consent. With respect to the former, a lawyer may only disclose information that is "reasonably necessary" to establish or collect the lawyer's fee. The Opinion notes that reporting a client's payment history is not "reasonably necessary" because a fee can be collected without making such a report. Rule 1.6(a)(i) states, however, that the duty to keep payment history confidential may be waived by the client with informed consent confirmed in writing. When obtaining informed consent, the lawyer should fully explain the material risks of consenting, including the possible uses of the information that will be put into the database and should advise the client of his or her right to have independent counsel review the consent. Further, the lawyer may not condition the representation based on the client consenting to the disclosure of a client's payment history, because such a condition would constitute coercion. The client may provide advance consent, similar to advance consent to waive a conflict, however, the client may revoke consent at any time.

The full opinion is available at: https://www.nysba.org/CustomTemplates/Content.aspx?id=57389

NYSBA Ethics Op. 1062 (June 29, 2015):
Use of Crowdfunding to Finance Law Practice

Opinion 1062 addresses whether a lawyer may engage crowdfunding in order to raise capital to start a law firm. The Opinion addresses several crowdfunding models and briefly comments on each one. Specifically, the opinion addresses: the Lending Model, the Equity Model, the Royalty Model, the Donation Model, and the Reward Model. The opinion states that the Lending Model, similar to a traditional working capital loan, is ethically permissible but may not accomplish the firm's goal since it would only increase the amount of debt. The Donation Model is also ethically permissible provided the lawyers make clear that the donors will not receive anything in return and that the firm is a for-profit entity.

Conversely, the Royalty Model, which rewards the investor with a percentage of the proceeds, and the Equity Model, which provides a percentage of ownership in the venture, clearly violate Rule 5.4(a)'s prohibition on sharing legal fees with nonlawyers and Rule 5.4(d)'s prohibition on nonlawyer ownership of law firms. The Reward Model, the Opinion reasons, may fit the firm's needs and also may comply with the Rules. Under the Reward Model, the lawyers would provide the funders with a sample of the service (in this case the law firm) in order to raise capital. The inquiring lawyers proposed that the "rewards" they would provide to funders would be in the form of informational legal updates, progress reports, and the performance of pro bono work for a third-party non-profit legal organization.

With regard to pamphlets and progress reports, the Opinion states that the lawyers must comply with Rule 7.1 which governs lawyer advertising. The lawyers should also make sure that their informational pamphlets do not give individual legal advice in violation of Rule 7.1(r). Finally, in connection with the offer to perform pro bono work, the lawyers should only accept matters which they are competent to handle as required by Rule 1.1 and which do not create a conflict of interest in violation of Rules 1.7 and 1.9.

The full opinion is available at: https://www.nysba.org/CustomTemplates/Content.aspx?id=57390

Originally published by the New York Legal Ethics Reporter.



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