The inquirer asks if there are any ethical impediments or professional liability insurance issues if an attorney who is an employee and associate with a law firm handles cases from independent clients who are not clients of the law firm and the attorney receives payment from those clients pursuant to a retainer agreement.
The Committee is limited to rendering advice on ethical issues arising under the Pennsylvania Rules of Professional Conduct (the "Rules"), and not on those issues involving substantive areas of the law. The inquirer's questions concerning professional liability insurance issues concern substantive areas of contract and liability law and thus will not be specifically addressed. However, in general the Committee points out that there are several different types of professional liability policies, and that coverage can be effected by any number of issues and limitations, including (but not limited to) in some policies, a denial of coverage when work is done without the knowledge or consent of the firm to whom the policy is issued. The Committee strongly cautions the inquirer to review the actual policy or policies in question and to consult with the appropriate insurance professionals to determine the impact on coverage of her proposed course of action.
Pennsylvania's Rules of Professional Conduct have been amended effective January 1, 2005. This opinion will analyze the inquiry under those amended rules.
The ethical issues raised are impacted by whether the inquirer engages in the conduct with the consent of the firm for which she works. Should it be with the firm's consent issues are raised under the following Rules: Rule 1.0e (informed consent); Rule 1.7 (conflicts of interest), Rule 1.10 (imputed conflict of interests); Rule 1.6 (confidentiality); Rule 7.1 (communications concerning a lawyer's service) and Rule 7.5 (firm names and letterhead.)
Rule 1.7(Conflict of Interest: Current Clients), provides in part that:
a)Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
(b)Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law:
(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent.
Comment 18 to this Rule provides in part that: Informed consent requires that each affected client be aware of the relevant circumstances and of the material and reasonably foreseeable ways that the conflict could have adverse effects on the interests of that client. See Rule 1.0(e) (informed consent). The information required depends on the nature of the conflict and the nature of the risks involved
Comment 19 to this Rule provides in part that:
Under some circumstances it may be impossible to make the disclosure necessary to obtain consent. For example, when the lawyer represents different clients in related matters and one of the clients refuses to consent to the disclosure necessary to permit the other client to make an informed decision, the lawyer cannot properly ask the latter to consent--
Rule 1.0e (Terminology) provides that:
'Informed consent' denotes the consent by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct
In further clarification of the Rule, Comment 6 provides in part that,
"--Ordinarily, this will require communication that includes a disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client or other person of the material advantages and disadvantages of the proposed course of conduct and a discussion of the client's or other person's options and alternatives. In some circumstances it may be appropriate for a lawyer to advise a client or other person to seek the advice of other counsel.
Rule 1.10a (Imputation of Conflicts of Interest) provides that:
(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7, or 1.9, unless the prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm, or unless permitted by Rules 1.10(b) or (c).
Sections b and c are not relevant to the discussion of this opinion
Rule 1.6a (Confidentiality of Information) provides that:
(a) A lawyer shall not reveal information relating to representation of a client unless the client gives informed consent, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraphs (b) and (c).
Paragraphs b and c are not relevant to the discussion of this opinion.
The interaction of all these rules puts a significant compliance responsibility on the inquirer under the proposed conduct. Even though the practices between the inquirer and the firm are to be separate, under Rule 1.10a, the representations of the firm's clients are imputed to the inquirer and vice versa for purposes of conflicts of interests. Thus, while normally a conflicts of interest check would have to be done between any new clients and existing clients of the firm, the independent clients of the inquirer's would also have to be made part of that conflicts check. Likewise, the conflicts check run by the inquirer for those independent clients would have to include the firm's clients. Should there be any client in conflict with another in either practice, absent disclosure and waiver under Rule 1.7b that representation would be prohibited. However, since the practices are separate, the inquirer would need the informed consent under Rule 1.6, of each of the clients in her independent practice to make disclosure to the firm of the facts that she is providing representation and for what, so as to allow a complete conflicts check. This is a burden that would also be placed on the firm. Any of the clients in either practice has the absolute right to decline that waiver of confidentiality, thus defeating the ability to run the conflicts check. In addition, since informed consent requires that other alternatives be provided to those who are asked to consent either to a waiver of confidentiality or an actual conflict, one option would be for the client to go to another attorney and to be advised of that right.
Other issues arise regarding disclosures necessary to avoid confusion among potential clients as to which practice is providing representation. Rule 7.1 (Communications Concerning a Lawyer's Service) provides that:
A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.
Comments 1 and 2 to that Rule provide that:
(1) This Rule governs all communications about a lawyer's services, including advertising permitted by Rule 7.2. Whatever means are used to make known a lawyer's services, statements about them must be truthful.
(2) Truthful statements that are misleading are also prohibited by this Rule. A truthful statement is misleading if it omits a fact necessary to make the lawyer's communication considered as a whole not materially misleading. A truthful statement is also misleading if there is a substantial likelihood that it will lead a reasonable person to formulate a specific conclusion about the lawyer or the lawyer's services for which there is no reasonable factual foundation.
Rule 7.5 (Firm names and letterhead) provides in part that:
(a) A lawyer shall not use a firm name, letterhead or other professional designation that violates Rule 7.1
(d) Lawyers shall not state or imply that they practice in a partnership or other organization unless that is the fact.
Under Rules 7.1 and 7.5, the inquirer must make sure that her independent clients understand that they are not in any way being represented by the firm. Her letterhead and business cards need to clearly define the capacity in which she is providing representation, so that the clients understand that they do not have the benefit of the firm's reputation or resources when being represented independently by the inquirer. The situation becomes more complex should the inquirer be handling this independent practice without the knowledge of her firm, and/or in violation of the terms of her employment with the firm. If her employment provides that she is compensated for directing all of her legal talents and energies for the benefit of the firm, and that any clients that come to her are in fact to be handled as firm clients, then the proposed conduct, in addition to raising all the above concerns also triggers a violation of Rule 8.4c (Professional Misconduct), which provides that:
It is professional misconduct for a lawyer to:
(c) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;
The Committee strongly cautions that should the inquirer engage in the proposed conduct without the knowledge of, or against the terms of employment with her firm, that this raises serious questions about dishonesty and misrepresentation. In addition to being unable to comply with the rules and waivers as outlined above, the conduct would also constitute a significant violation of Rule 8.4c.