Oregon State Bar
2001 House of Delegates Meeting

Seaside Civic and Convention Center
415 First Ave.
Seaside, OR 97318

Saturday, September 22, 2001, 10:00 a.m.

Agenda


Dear OSB Member:

Enclosed is your agenda for the 2001 OSB House of Delegates Meeting, which will be held on Saturday, September 22, 2001, at the Seaside Civic and Convention Center. It begins at 10:00 a.m. Although only delegates may vote on the resolutions, members are encouraged to participate in the discussion and debate of these items. If you are unable to attend, please contact one of your delegates to express your views on the resolutions. Delegates are listed in the September issue of the Bulletin and on the bar’s Web page at www.osbar.org.

Matters that will be considered by the HOD include proposed revisions to DR 1-102 in light of In re Gatti, 330 Or 517, 8 P3d 966 (2000), changes to the process used to elect the state bar’s ABA delegates, an increase in inactive membership fees, changes to the ethics rule on recovering costs from clients, and creation of a bar disciplinary process study. The full text and explanatory statements for all resolutions are in the enclosed agenda. If you have any questions about the House of Delegates meeting, contact Teresa Bowen, Executive Assistant, at 800-452-8260, ext. 386 (in Oregon only), (503) 620-0222, ext. 386, or by e-mail at twenzel@osbar.org.

I also encourage you to attend the Annual Awards Luncheon, which will be from 12 noon to 2:00 p.m. on Friday, September 21, at the Seaside Civic and Convention Center. Tickets ($30 per person) can be obtained by filling out the OSB convention registration form, enclosing a check, and forwarding both check and registration form to the OSB. You may also obtain tickets by calling the OSB Order Desk at 800-452-8260, ext. 413 (in Oregon only) or 503-620-0222, ext. 413. Keep in mind, seating is limited. Our special award honorees are:

I look forward to seeing you at these events in Seaside!

Edwin A. Harnden, President
Oregon State Bar


 

OREGON STATE BAR

2001 House of Delegates Meeting
Seaside Civic and Convention Center
Saturday, September 22, 2001, 10:00 a.m.
Presiding Officer: Edwin A. Harnden

Agenda

1. Call to Order
    Edwin A. Harnden

2. Overview of Parliamentary Procedure
    George A. Riemer

3.  Report of the President 
    Edwin A. Harnden

4. Adoption of Final Meeting Agenda
    Edwin A. Harnden

5. Report of the Chair of the BOG Budget and Finance Committee
    Malcolm H. Scott

Items with Financial Impact

6. Proposal to Increase Inactive Membership Fees  
    BOG Resolution No. 1  
    Presenter: Malcolm H. Scott

7. Creation of Bar Disciplinary Process Study  
    Delegate Resolution No. 1  
    Presenter: James D. Hennings

Other Resolutions

8. In Memoriam
    BOG Resolution No. 2  
    Presenter: Edwin A. Harnden

9. Amends DR 1-102 –  Misconduct; Responsibility  for Acts of Others  
    BOG Resolution No. 3  
    Presenter: Charles R. Williamson, III
 

        Additional reference materials on this resolution:
        In re Gatti, 330 Or 517, 8 P3d 966 (2000)
        Complaint in United States of America v. Oregon State Bar

10. Changes to the Process Used to  Elect the Oregon State Bar’s  ABA Delegates  
     BOG Resolution No. 4  
     Presenter: Agnes Sowle

Old Business

11. Amends DR 5-103(B) — Recovery of Costs from Clients
     Delegate Resolution No. 2  
     Presenter: Nancy M. Cooper

 


Items with Financial Impact

6. Proposal to Increase Inactive Membership Fees (BOG Resolution No. 1)

Resolved, the House of Delegates approve an increase of inactive membership fees (and the corresponding fees for Active Emeritus and Active Retired members) from $80.00 to $110.00 for 2002 and thereafter.

2002 BOG Fee Resolution

It is hereby resolved by the Board of Governors of the Oregon State Bar that the Oregon State Bar’s 2002 annual membership fees and Client Security Fund assessment shall be unchanged from 2001, except that inactive, active emeritus, and active retired membership fees shall be increased by $30.00 from 2001, and shall be as follows:

1. Active Members.

A. For members admitted in any jurisdiction before January 1, 2000: $371.00 for the basic membership fee; $30.00 for the Affirmative Action Program fee; and $15.00 for the Client Security Fund assessment; for a total of $416.00.

B. For members admitted in any jurisdiction before January 1, 2000,who fail to pay their active fees and assessments of $416.00 by the due date: $466.00.

C. For members admitted in any jurisdiction on or after January 1, 2000: $314.00 for the basic membership fee; $15.00 for the Affirmative Action Program fee; and $15.00 for the Client Security Fund assessment; for a total of $344.00.

D. For members admitted in any jurisdiction on or after January 1, 2000, who fail to pay their active fees and assessments of $344.00 by the due date: $386.00.

E. For those members admitted in Oregon in 2002, the fees shall be apportioned.  

 The Client Security Fund assessment of $15.00 shall be paid in full by each new admittee.

F. For those members who pass away in 2002, the fees shall be apportioned upon request of an appropriate representative. The Client Security Fund assessment of $15.00 and the increase of fees due to payment made after the due date shall not be included in the apportioned refund.

G. Exemptions to active member fees:

(1) Members who were admitted to practice law in Oregon prior to January 1, 1952, are exempt from the basic membership fee, the Affirmative Action Program fee, and the Client Security Fund assessment.

(2) Members who are on active military duty in compliance with the terms of ORS 408.450 are exempt from the payment of all active membership fees and assessments. Members who are in the VISTA or Peace Corps or other programs serving the national interest as described in Board of Governors Policy 10.302 are exempt from the payment of all active membership fees and assessments. The payment of active membership fees and assessments may also be waived if members satisfy the requirements of Board of Governors Policy 10.301 on hardship exemptions.

2. Active Emeritus Members.

A. For members admitted to practice law in any jurisdiction before January 1, 1987, who do not engage at any time in the practice of law except for providing annually a minimum of 40 hours of pro bono legal services to indigent clients referred by Oregon State Bar certified Pro Bono programs: $125.00. The fee consists of $110.00 for the basic membership fee and $15.00 for the Client Security Fund assessment. A listing of programs available for participation by members in this category shall be maintained by the Executive Director of the Oregon State Bar.

B. For those active emeritus members who fail to pay their active emeritus fees and assessments of $125.00 by the due date: $150.00.

C. The Active Emeritus membership category is in the process of being changed to Active Pro Bono. If these changes go into effect in 2002, the membership fees for Active Pro Bono membership shall be as herein provided for Active Emeritus membership, as set forth in paragraphs 2.A. and B. above.

3. Active Retired.

A. For members admitted to practice law in Oregon prior to January 1, 1962, who do not engage at any time in the practice of law except for pro bono legal services to indigent clients referred by Oregon State Bar certified Pro Bono programs, volunteer service as bar counsel, or as a member of the SPRB or other disciplinary entity, the same fees and assessments as established for active emeritus members in paragraph 2 above.

B. The Active Retired membership category is in the process of being changed to Active Emeritus. If these changes go into effect in 2002, the membership fees for Active Emeritus shall be the same as herein provided for Active Retired membership, as set forth in paragraphs 2 and 3.A. above.

4. Inactive Members.

A. The 2002 membership fee for inactive members shall be $110.00.

B. For those inactive members who fail to pay their fees of $110.00 by the due date: $135.00.

C. Exemptions to inactive member fees:

(1) Members who were admitted in Oregon prior to January 1, 1952.

(2) Members in active military duty in compliance with the terms of ORS 408.450 are exempt from the payment of inactive membership fees. Members who are in the VISTA or Peace Corps programs in compliance with Board of Governors Policy 10.302 are exempt from the payment of inactive membership fees. The payment of inactive membership fees may also be waived if members satisfy the requirements of Board of Governors Policy 10.301 on hardship exemptions.

5. Payment Date: All fees and assessments shall be paid simultaneously, in one remittance, not later than the due date, or within 60 days of the date of admission to the Oregon State Bar, whichever occurs later.

6. Definitions: Apportioned fees pertain only to those members admitted in Oregon or who passed away during calendar year 2002. If the member is admitted or passes away in January, the apportioned fee or refund, as the case may be, shall be 12/12; February shall be 11/12; December shall be 1/12. The calculation shall be rounded up to the nearest dollar for each fee allocation.

Background

The Board of Governors approved an increase in the Inactive Membership Fee from $80 to $110 for 2002 at its meeting on July 28, 2001. The purpose of the increase is to pass on the cost of bar services and products used by this class of membership. The primary services and products received by inactive members are an annual subscription to the Bulletin, inclusion in and a copy of the Directory, inclusion in the bar’s database and access via the OSB Web page, opportunity to join sections, and the ability to participate in bar-sponsored insurance and credit card affinity programs. The last increase in the Inactive Membership Fee was in 1989 and the cost of the services and products to this membership class has increased since then. This increase is essentially a Consumer Price Index (CPI) adjustment; the increase is approximately 37.5% and the CPI has risen over 37% since 1989. Currently these services are subsidized by the fees of active members, whose fees have increased four times in the same period of time.

Presenter: Malcolm H. Scott

Return to Agenda


7. Creation of Bar Disciplinary Process Study (Delegate Resolution No. 1)

Whereas, the House of Delegates of the Oregon State Bar has the duty in annual session to consider and debate matters of concern to the membership of the Oregon State Bar and to provide learned advice and direction on matters concerning the practice of law in the state of Oregon.

Whereas, the House of Delegates of the Oregon State Bar believes that there exists substantial confusion relating to the purposes, priorities, processes, and allocation of authority in the present system of Bar Discipline.

Resolved, that the House of Delegates requests and instructs the Board of Governors of the Oregon State Bar:

1. To establish and supervise a complete study of the State Bar disciplinary system;

2. To report at the 2002 Oregon State Bar House of Delegates meeting on the results of the study; and

3. To make recommendations to the 2002 Oregon State Bar House of Delegates meeting for changes to present processes, rules, and statutes as needed.

This study shall provide for input from the members of the Oregon State Bar and other interested parties within each region of the Oregon State Bar and if possible, and with the assistance of local county bar associations, within each county of the state of Oregon.

This study shall be broad in scope but will specifically look at the following matters:

  1. The specific purposes and goals of the disciplinary process.
  2. The scope and limits of the disciplinary process.
  3. The appropriate speed of the disciplinary process.
  4. The appropriate rules of procedure to ensure an equitable process fair to complainants and lawyers.
  5. The process of setting enforcement priorities.
  6. The clear establishment of authority throughout the process.
  7. The appropriate use of volunteer members of the Oregon State Bar or paid staff.
  8. Appropriate methods, other than the present adversarial case law system, for the bar to debate, develop ethical rules, and educate attorneys on those rules.
  9. Whether the goals and processes should be presented to and approved by the House of Delegates.

Background

Since 1987 the Oregon State Bar has been involved in nine separate reviews of the Disciplinary process.

1987 ABA evaluation of Oregon Disciplinary system

1990 Disciplinary Rules and Procedures Committee response to the ABA evaluation

1993 Board of Governors Adjudication of Disciplinary Cases Task Force

1994 Disciplinary Rules and Procedures Committee review of ABA McKay Commission

1994 Proposal for discipline diversion proposal to Oregon Supreme Court

1995 Board of Governors task force to review State Professional Responsibility Board

1996 Joint meeting of Oregon Supreme Court, State Professional Responsibility Board and Board of Governors regarding key goal of disciplinary process

2001 Adoption of Amendments of Bar Rules of Procedure related to disciplinary rules

2001 Board of Governors limited Disciplinary Work Group (in progress)

During the same time, there have been increased calls for more bar staff (to handle the cases), questions concerning the use of volunteer bar members in the disciplinary process, requests for more stringent rules related to cooperation with Bar requests for information, questions concerning the reliance that can be placed on ethical advice from the Oregon State Bar, and a major case (Gatti), which has lead to the creation of special task forces and an emergency meeting of the House of Delegates. Despite all of these activities, the disciplinary process remains unknown by the general Bar membership.

There are a multitude of questions ranging from the purposes and limits of the disciplinary process, the certainty of the ethical rules and the process of development of the rules, to the involvement of Bar members in the basic honor of our profession.

This Resolution would require that the Board of Governors create a full review process, hopefully including local Bar Associations and Professional Legal Groups, to study the disciplinary process and forward a report to the House of Delegates for discussion and the adoption of possible recommendations.

It is time for the House of Delegates to review a full study of Bar discipline and bring the special learning and skills of our profession to debating and then confirming or creating an appropriate, fair, and speedy system. It is time to ensure a just system to guarantee our honor as attorneys and thereby protect the public that has given us special status.

Presenter: James D. Hennings

Return to Agenda


Other Resolutions

8. In Memoriam (BOG Resolution No. 2)

Resolved, that the OSB House of Delegates and members assembled stand for a moment of silence in honor of the members of the Oregon State Bar whose deaths have been reported since the 2000 House of Delegates Meeting.

In Memoriam

Bliss Ansnes, Orlando, Florida

J. Arthur Berg, Coquille

Richard H. Berman, Ashland

Howard I. Bobbitt, Portland

Kathleen M. Bogan, Laguna Niguel, California

Hon. Wesley Brownton, La Grande

William Burpee, Boise, Idaho

Jeffrey C. Carey, Portland

Willard K. Carey, La Grande

Morris A. Carter, Klamath Falls

Nick Chaivoe, Portland

James H. Clarke, Portland

Bartlett F. Cole, Portland

Alfred H. Corbett, Camp Sherman

Elaine H. Craig, Dayton

Walter A. DePuy, Springfield

Charles P. Duffy, Portland

Fred P. Eason, Spring Valley, California

Harold Eichsteadt, Woodburn

Neva M. Elliott, Portland

Burdette W. Erickson, Portland

Burton J. Fallgren, St. Helens

Evelyn Scott Ferris, Salem

Fritz H. Giesecke, Fairfax, Virginia

Christine M. Goble, Eugene

Gerald B. Gray, Aloha

Howard E. Green, Salem

Mortimer H. Hartwell, Portland

Donald R. Husband, Eugene

Edwin L. Jenkins, Portland

Leslie W. Klein, Klamath Falls

Bernard B. Kliks, Lake Oswego

Amy Levinson, Portland

Leonard I. Lindas, Fallon, Nevada

Anita C. Lobo, Portland

Jerrold E. Markham, Yachats

Dwight E. McFaddin, Portland

Kenneth A. Morrow, Eugene

Robert E. Moulton, Eugene

M.C. Moynihan, Lebanon

R.W. Nahstoll, Portland

Nancy K. Nakata, Portland

James A. Nelson, Portland

James C. Purcella, Portland

Robert R. Renfro, Portsmouth, New Hampshire

William J. Robert, Eugene

Jack W. Stanley, Sunlakes, Arizona

Betty Tonsing, Long Beach, California

Robert C. Wall, Portland

Erskine B. Wood, Vancouver, Washington

Presenter: Edwin A. Harnden

Return to Agenda


9. Amends DR

1-102 - Misconduct; Responsibility for Acts of Others (BOG Resolution No. 3)

Whereas, the OSB Board of Governors has formulated the following amendment to Disciplinary Rule 1-102 and recommends its approval by the OSB House of Delegates, pursuant to ORS 9.490(1).

Resolved, the House of Delegates approve the following amendment of DR 1-102 pursuant to ORS 9.490(1):

DR 1-102 Misconduct;
Responsibility for Act of Others

(A) It is professional misconduct for a lawyer to:

(1) Violate these disciplinary rules, knowingly assist or induce another to do so, or do so through the acts of another;

(2) Commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness to practice law;

(3) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(4) Engage in conduct that is prejudicial to the administration of justice;

(5) State or imply an ability to influence improperly a government agency or official.

(B) A lawyer shall be responsible for another lawyer's violation of these disciplinary rules if:

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

(2) The lawyer has direct supervisory authority over the other lawyer and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

(C) A lawyer is bound by the rules of professional conduct notwithstanding that the lawyer acted at the direction of another person.

(D) Notwithstanding DR1-102(A)(1), (A)(3) and (A)(4) and DR 7-102(A)(5), it shall not be professional misconduct for a lawyer to advise clients or others about or to supervise lawful covert activity in the investigation of violations of civil or criminal law or constitutional rights, provided the lawyer's conduct is otherwise in compliance with these disciplinary rules. 'Covert activity,' as used in this rule, means an effort to obtain information on unlawful activity through the use of misrepresentations or other subterfuge carried out by publicly funded law enforcement agencies, including the federal and state departments of justice and district attorneys, and publicly funded civil rights enforcement agencies, including nonprofit organizations such as legal services offices and fair housing entities and any other lawyer acting in the role of private attorney general. 'Covert activity' may be commenced by a lawyer or involve a lawyer as an advisor or supervisor only when the lawyer in good faith believes there is a reasonable possibility that unlawful activity is taking place or will take place in the foreseeable future.

Background

On January 19, 2001, the OSB House of Delegates approved the following addition to DR 1-102, which was then submitted to the Supreme Court for adoption:

(D) Notwithstanding subsections (A)(1) and (A)(3) and DR 7-102(A)(5), it is not misconduct for a lawyer to supervise or advise about lawful covert activity in the investigation of violations of civil or criminal law or constitutional rights, provided the lawyer's conduct is otherwise consistent with these disciplinary rules.

On April 11, 2001, the Supreme Court voted to reject this proposed rule change. The minutes of the court’s April 11 meeting identify four reasons for not approving the change: (1) it permitted any member of the bar to create and participate in any kind of subterfuge to gain information, which was not within the range of conduct (undercover criminal and civil rights investigations) relied upon to justify the amendment; (2) the amendment would permit a lawyer to do indirectly what a lawyer is not permitted to do directly and nullifies the public protection in the current ethical norm that lawyers cannot evade the disciplinary rules by acting through an agent; (3) the ethical principle of honesty is embedded in several other rules so that amending only DR 1-102 will create significant interpretive problems; and (4) the amendment would nullify one of the most fundamental responsibilities of lawyers—honest conduct. In conclusion, the Court said, 'The change in the proscription against this type of conduct which the proposed amendment entails is immense.'

Following the Supreme Court’s rejection of the foregoing proposed rule change, OSB President Ed Harnden asked BOG member Charles Williamson to chair a second study group to consider further options regarding a rule change. The group met with three members of the Supreme Court in May 2001. The bar thereafter developed another proposed rule change which, together with modifications suggested by Multnomah County District Attorney Michael Schrunk, was shared with those justices.

In May 2001 the United States of America (USDOJ) sued the Oregon State Bar in U.S. District Court in Eugene, Oregon, seeking a declaration that DR 1-102 and DR 7-102 are 'invalid, null and void, as applied to federal attorneys for actions taken in the performance of their otherwise lawful duties on behalf of the United States.' The suit also seeks to enjoin the bar from 'instituting, prosecuting, or continuing any disciplinary proceeding or action against federal attorneys for actions taken in the performance of their otherwise lawful duties on behalf of the United States on the ground that such attorney violated DR 1-102 or DR 7-102.' The bar is represented by Bob Weaver and Garvey, Schubert & Barer of Portland in this litigation. The bar’s motions against the complaint and the USDOJ’s motion for summary judgment are set for hearing before Chief Judge Michael Hogan on September 25, 2001.

In a related development, the 2001 Oregon Legislature passed and the Governor signed into law House Bill 3857, which authorizes lawyers for public bodies to direct, provide legal advice for, and participate in covert activities for purposes of enforcing the law notwithstanding ORS 9.527(4). This new law went into effect on June 28, 2001.

The Board of Governors met on July 28, 2001, and formulated a new proposed DR 1-102(D) for presentation to the OSB House of Delegates on September 22, 2001. The board met again on August 14, 2001, to approve the preliminary agenda for the House of Delegates meeting, at which time the board approved deleting language ('and there is no other reasonable or practical way to obtain the information') from the version of the rule it had previously approved on July 28, 2001. The proposal before the House is the version that the Board of Governors approved on August 14, 2001.

The board believes the proposed addition to DR 1-102 addresses the concerns raised by the Oregon Supreme Court in April 2001. Specifically, the new proposal authorizes both government lawyers and lawyers in private practice to advise and supervise undercover investigations to ferret out violations of the law in certain designated circumstances, subject to the requirement that any such lawyer have a good-faith belief that there is a reasonable possibility that unlawful activity is taking place or will take place in the foreseeable future.

The Board of Governors recommends that the OSB House of Delegates approve this proposed rule change. The board believes this rule meets the needs of lawyers working with law enforcement personnel and others to uncover illegal activity, while at the same time ensuring that there are appropriate checks on the involvement of lawyers in conduct that, although lawful, may be considered to involve some form of subterfuge, dishonesty, deceit, or misrepresentation.

The following documents provide further background on this resolution:

(1) General Counsel George Riemer’s letter to Justices Gillette, Durham, and DeMuniz dated May 23, 2001;

(2) District Attorney Michael Schrunk’s letter to Angel Lopez and George Riemer dated June 22, 2001;

(3) General Counsel George Riemer’s letter to Justices Gillette, Durham, and DeMuniz dated June 25, 2001; and

(4) House Bill 3857.

Additional information on this topic is available on the Oregon State Bar’s Web site including:

(5) In re Gatti, 330 Or 517, 8 P3d 966 (2000);

(6) Complaint in United States of America v. Oregon State Bar (CV01-6168-HO).

 TEXT OF ITEMS (1), (2), (3) AND (4)

Text of Item (1) General Counsel George Riemer’s letter to Justices Gillette, Durham, and DeMuniz dated May 23, 2001

May 23, 2001

Honorable W. Michael Gillette
Honorable Robert D. Durham
Honorable Paul J. DeMuniz
Oregon Supreme Court
1163 State Street
Salem, OR 97310

Re: Proposed DR 1-102(D)

Dear Justices Gillette, Durham, and DeMuniz:

We greatly appreciated your willingness to meet with us on Monday, May 14, 2001 to discuss whether it was possible to draft an amendment to DR 1-102 to authorize lawyer advice on and supervision of covert activity designed to ferret out criminal conduct and other violations of the law.

Following our meeting, several of us drafted the attached proposed amendment. Our group during a meeting on Friday, May 18 felt it should be submitted to you for whatever input you might be able to provide. As we discussed at our meeting on May 14, we consider the amendment of the disciplinary rules to be a quasi-legislative activity without the same restrictions as apply to litigation pending before the court. We appreciate that each justice may have a different comfort level with providing the bar feedback concerning the attachment, especially in light of the U.S. Department of Justice’s lawsuit against the Oregon State Bar (copy attached). We want to stay well within the parameters of proper contact with the court and we leave it to you to decide whether to provide us with any feedback concerning the attachment and, if so, the nature of that feedback.

From the court’s prior discussions with the bar concerning the rejected amendment and our meeting on May 14, the major concerns of at least some of the justices appear to be as follows: 1) any proposed rule must be narrowly drawn to address specific situations were the rule against dishonesty, fraud, deceit and misrepresentation should be trumped to advance an objective that is of higher societal value than compliance with the existing rule; 2) that any such exception specify all the rules to which it would apply to ensure the intended scope of the exception is clear.

While the attachment would have to be approved by the Board of Governors, the House of Delegates, and the Supreme Court under established procedures, we are interested in a reaction from you as to whether the attachment comes any closer to satisfying the concerns expressed above than the previously rejected amendment.

The attachment narrows the exception to the listed rules to lawyer advice on and supervision of efforts to obtain information on unlawful activity through the use of misrepresentations or other subterfuge carried out by publicly funded law enforcement agencies and publicly funded civil rights agencies only. The exception only applies to the listed rules and it specifies that the lawyer’s conduct must otherwise be in compliance with the disciplinary rules. The exception also only applies when the lawyer has a good faith belief that there is a reasonable possibility that unlawful activity is taking place or will take place in the foreseeable future and there is no other reasonable or practical way to obtain the information.

The attachment is a working draft that we would be happy to massage to address any ambiguities or other concerns identified by you or others. The concept is to enact a narrow exception to the listed sections of DR 1-102 to permit lawyers to provide advice on and supervise lawful covert activity by law enforcement and civil rights enforcement agencies. While Justice Gillette at our meeting on May 14 voiced concerns about the meaning of 'lawful covert activity,' we believe that existing substantive law places adequate parameters on that term.

The higher good that justifies an exception to strict compliance with the current rule is that deception and subterfuge to uncover criminal law or civil rights violations is an unavoidable necessity considering the often nefarious and uniformly surreptitious nature of such conduct. The proposed exception requires lawyers to ensure there are no other reasonable or practical ways to obtain the information which is sought other than to use deception and subterfuge. The exception is not an open-ended authorization to engage in whatever dishonesty, fraud, deceit or misrepresentation a lawyer deems appropriate when advising clients or others about or when supervising lawful covert activities. If you believe additional language should be added to reinforce this intention, we would be happy to consider it.

As long ago as 1932 the United States Supreme Court in Sorrells v. United States, 287 U.S. 435, 53 S.Ct. 210, 77 L Ed. 2d 413 (1932) indicated that 'Artifice and stratagem may be employed to catch those engaged in criminal enterprises.' The question of the day is under what circumstances lawyers can advice and supervise that otherwise lawful activity without being subject to disciplinary charges for engaging in 'dishonesty, fraud, deceit or misrepresentation.' While this is concededly an extremely important, complex and difficult question with significant implications for the legal profession, a multitude of government agencies, and the public at large, we believe efforts must continue to try to find a solution. Lawyers throughout the country are on a daily basis being asked for advice, counsel and direction concerning a wide variety of covert activities to investigate and prosecute violations of the law. If our rules do not address the propriety of this conduct more clearly than they do now, we envision on-going disputes and remedial efforts, many of which could lead us to even worse predicaments than we now face.

Sincerely yours,

George A. Riemer
Deputy Director and General Counsel
Ext.405, Fax: (503) 624-8326
Email griemer@osbar.org

Attachments

cc: Ed Harnden, OSB President
      Angel Lopez, OSB President-Elect
      Charlie Williamson, BOG Member
      Mike Greene
      Peter Shepherd
      Brad Tellam (all with attachments)

ATTACHMENT

Oregon Code of Professional Responsibility

DR 1-102 Misconduct; Responsibility for Acts of Others

(A) It is professional misconduct for a lawyer to:

(1) Violate these disciplinary rules, knowingly assist or induce another to do so, or do so through the acts of another;

(2) Commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness to practice law;

(3) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(4) Engage in conduct that is prejudicial to the administration of justice;

(5) State or imply an ability to influence improperly a government agency or official.

(B) A lawyer shall be responsible for another lawyer’s violation of these disciplinary rules if:

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

(2) The lawyer has direct supervisory authority over the other lawyer and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

(C) A lawyer is bound by the rules of professional conduct notwithstanding that the lawyer acted at the direction of another person.

(D) Notwithstanding DR 1-102(A)(1), (A)(3)

and (A)(4) and DR 7-102 (A)(5), it shall not be professional misconduct for a lawyer to advise clients or others about or to supervise lawful covert activity in the investigation of violations of civil or criminal law or constitutional rights, provided the lawyer’s conduct is otherwise in compliance with these disciplinary rules. 'Covert activity,' as used in this rule, means an effort to obtain information on unlawful activity through the use of misrepresentations or other subterfuge carried out by publicly funded law enforcement agencies including the federal and state departments of justice and district attorneys and publicly funded civil rights enforcement agencies including nonprofit organizations such as legal services offices and fair housing entities. 'Covert activity' may be commenced by a lawyer or involve a lawyer as an advisor or supervisor only when the lawyer in good faith believes there is a reasonable possibility that unlawful activity is taking place or will take place in the forseeable future and there is no other reasonable or practical way to obtain the information.

 

Text of Item (2) District Attorney Michael Schrunk’s letter to Angel Lopez and George Riemer dated June 22, 2001

June 22, 2001

MICHAEL D. SCHRUNK
District Attorney for Multnomah County
600 County Courthouse
Portland, OR 97204-1193
(503) 248-3162

Angel Lopez
Via FAX: 503-323-7356

George Riemer
Via FAX: 503-624-8326

Gentlemen:

Thank you for soliciting our views on how the disciplinary rules should be revised in light of legislation that is going before the Governor and the Supreme Court’s decision in Gatti. Attached you will find suggested changes to the draft rule.

We appreciate the opportunity to talk with you about this issue.

Very truly yours,

MICHAEL D. SCHRUNK

District Attorney

MDS:je

Attachment

ATTACHMENT

Oregon Code of Professional Responsibility
DR 1-102 Misconduct; Responsibility for Acts of Others

(A) It is professional misconduct for a lawyer to:

(1) Violate these disciplinary rules, knowingly assist or induce another to do so, or do so through the acts of another;

(2) Commit a criminal act that reflects adversely on the lawyer’s honest[y], trustworthiness or fitness to practice law;

(3) Engage in conduct involving dishonest[y], fraud, deceit or misrepresentation;

(4) Engage in conduct that is prejudicial to the administration of justice;

(5) State or imply an ability to influence improperly a government agency or official.

(B) A lawyer shall be responsible for another lawyer’s violation of these disciplinary rules if:

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

(2) The lawyer has direct supervisory authority over the other lawyer and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

(C) A lawyer is bound by the rules of professional conduct notwithstanding that the lawyer acted at the direction of another person.

(D) Notwithstanding DR 1-102(A)(1), (A)(3) and (A)(4) and DR 7-102(A)(5), it shall not be professional misconduct for a lawyer to advise clients or others about or to supervise or participate in lawful covert activity in the investigation of violations of civil or criminal law or constitutional rights, provided the lawyer’s conduct is other wise in compliance with these disciplinary rules. 'Covert activity,' as used in this rule, means an effort to obtain information on unlawful activity through the use of misrepresentations or other subterfuge carried out by publicly funded law enforcement agencies including the federal and state departments of justice and district attorneys and publicly funded civil rights enforcement agencies including nonprofit organizations such as legal services offices and fair housing entities. A lawyer may participate in 'covert activity' when the lawyer in good faith believes there is a reasonable possibility that unlawful activity is taking place or will take place in the foreseeable future.

Text of Item (3) General Counsel George Riemer’s letter to Justices Gillette, Durham, and DeMuniz dated June 25, 2001

 

June 25, 2001

Honorable W. Michael Gillette
Honorable Robert D. Durham
Honorable Paul J. DeMuniz
Oregon Supreme Court
1163 State Street
Salem, OR 97310

Re: Proposed DR 1-102(D)

Dear Justices Gillette, Durham, and DeMuniz:

Angel Lopez and I met with Multnomah County District Attorney Mike Schrunk and several members of his staff on June 18, 2001. We asked them to offer any suggestions they might have concerning the version of proposed DR 1-102(D) that I previously sent you by letter dated May 23, 2001.

 We received the attached letter from Mr. Schrunk on June 22, 2001. The following is proposed DR 1-102(D) showing the changes Mike would make to it.

DR 1-102 Misconduct;

Responsibility for Acts of Others

(A) It is professional misconduct for a lawyer to:

(1) Violate these disciplinary rules, knowingly assist or induce another to do so, or do so through the acts of another;

(2) Commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness to practice law;

(3) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(4) Engage in conduct that is prejudicial to the administration of justice;

(5) State or imply an ability to influence improperly a government agency or official.

(B) A lawyer shall be responsible for another lawyer’s violation of these disciplinary rules if:

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

(2) The lawyer has direct supervisory authority over the other lawyer and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

(C) A lawyer is bound by the rules of professional conduct notwithstanding that the lawyer acted at the direction of another person.

(D) Notwithstanding DR 1-102(A)(1), (A)(3) and (A)(4) and DR 7-102(A)(5), it shall not be professional misconduct for a lawyer to advise clients or others about or to supervise OR PARTICIPATE IN lawful covert activity in the investigation of violations of civil or criminal law or constitutional rights, provided the lawyer’s conduct is otherwise in compliance with these disciplinary rules. 'Covert activity,' as used in this rule, means an effort to obtain information on unlawful activity through the use of misrepresentations or other subterfuge carried out by publicly funded law enforcement agencies including the federal and state departments of justice and district attorneys and publicly funded civil rights enforcement agencies including nonprofit organizations such as legal services offices and fair housing entities. 'Covert activity' may be commenced by a lawyer or involve a lawyer as an advisor or supervisor only when the lawyer in good faith believes there is a reasonable possibility that unlawful activity is taking place or will take place in the forseeable future and there is no other reasonable or practical way to obtain the information. A LAWYER MAY PARTICIPATE IN 'COVERT ACTIVITY' WHEN THE LAWYER IN GOOD FAITH BELIEVES THERE IS A REASONABLE POSSIBILITY THAT UNLAWFUL ACTIVITY IS TAKING PLACE OR WILL TAKE PLACE IN THE FORSEEABLE FUTURE.

We are continuing to consider a prior comment of Justice Gillette’s that this proposal not be limited in application to government lawyers only.

I am sending this information to you at Charlie Williamson’s suggestion so as to keep you apprised of developments in our consideration of a further proposed rule change on this topic.

Sincerely yours,

George A. Riemer
Deputy Director and General Counsel
Ext.405, Fax: (503) 624-8326
Email griemer@osbar.org

 Attachments

cc: Ed Harnden, OSB President
      Angel Lopez, OSB President-Elect
      Charlie Williamson, BOG Member
      Mike Greene
      Peter Shepherd
      Brad Tellam
      Mike Schrunk (all with attachments)

 

Text of Item (4) House Bill 3857

A-Engrossed

House Bill 3857

Authorizes attorneys of public bodies to direct, provide legal advice for and participate in covert activities for purpose of enforcing laws.

Declares emergency, effective on passage.

A BILL FOR AN ACT

Relating to attorney for public bodies; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Section 2 of this 2001 Act is added to and made a part of ORS 9.460 to 9.542.

SECTION 2. (1) Notwithstanding ORS 9.527(4), the attorneys listed in subsection (2) of this section:

(a) May provide legal advice and direction to the officers and employees of a public body, as defined in ORS 192.410, or to the officers and employees of the federal government, on conducting covert activities for the purpose of enforcing laws, even though the activities may require the use of deceit or misrepresentation; and

(b) May participate in covert activities that are conducted by public bodies, as defined in ORS 192.410, for the purpose of enforcing laws, or in covert activities that are conducted by the federal government for the purpose of enforcing laws, even though the participation may require the use of deceit or misrepresentation.

(2) The provisions of this section apply to the Attorney General, the Deputy Attorney General, assistant attorneys general, district attorneys, deputy district attorneys and any other attorney employed by, or working on behalf of, a public body, as defined in ORS 192.410, or the federal government.

 SECTION 3. This 2001 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2001 Act takes effect on its passage.

Presenter: Charles R. Williamson, III

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10. Changes to the Process Used to Elect the Oregon State Bar’s ABA Delegates (BOG Resolution No. 4)

Whereas, the Oregon State Bar has three delegates to the American Bar Association (ABA) House of Delegates who are currently elected by the OSB membership at large for two-year terms.

Whereas, the rules and regulations of the ABA permit each state bar to determine the method of selection of its delegates to the ABA House of Delegates.

Whereas, the Board of Governors believes that only a small fraction of the membership knows of the duties, functions, and activities of the state bar’s ABA delegates and that a statewide election of these delegates fails to effectively connect the state bar’s ABA delegates to the leadership of the Oregon State Bar.

Whereas, the Board of Governors recommends that the House of Delegates consider whether it should elect the state bar’s ABA delegates.

Resolved, that effective in 2002 and thereafter, the OSB House of Delegates shall elect the state bar’s ABA delegates by majority vote at its annual meeting.

Resolved, the Board of Governors is authorized to establish by rule the process and timelines for filing nominating petitions, campaigning, including the distribution of campaign materials, and voting to elect the appropriate number of ABA delegates by the OSB House of Delegates each year.

Resolved, OSB ABA delegates shall be, at the time of their election and during the full term of their service, active members of the Oregon State Bar in good standing.

Resolved, the term of office of OSB ABA delegates shall be for two years from the date of their election by the OSB House of Delegates. The Board of Governors shall fill any vacancy in the office of OSB ABA delegate for the remainder of the prior delegate’s term.

Background

The Oregon State Bar has had a longstanding practice of selecting its delegates to the ABA House of Delegates by statewide election. OSB ABA Delegates are the only OSB representatives elected by a vote of the general membership. The lawyers in six in-state regions elect OSB Board of Governors members. The lawyers in six in-state regions and one out-of-state region elect the elected members of the OSB House of Delegates. The Board of Governors elects the officers of the Board of Governors.

The Board of Governors is asking the OSB House of Delegates to consider taking on the responsibility of electing the OSB’s ABA Delegates each year at its annual meeting.

The Oregon State Bar currently has three ABA delegates (Marilyn Harbur, Mark Johnson, and Adrienne Nelson). Two are elected one year and one the next. The bar’s ABA delegates serve two-year terms. If the OSB House of Delegates approves the proposed resolution, the Board of Governors would establish the procedures used by the OSB House of Delegates to elect the OSB’s ABA Delegates in September 2002 and each year thereafter.

The board believes it would be advantageous to connect the bar’s ABA Delegates to the leadership of the Oregon State Bar by requiring that they be elected by the OSB House of Delegates. Candidates would make their case for election to the OSB House of Delegates instead of to the membership at large. The bar would save a considerable amount of money by eliminating a statewide mailing of election materials to the entire membership (only approximately 30% of the OSB membership are ABA members and only approximately 30% of the membership votes in ABA Delegate elections). Candidates would also save a considerable amount of money by not having to try to reach the entire membership with their campaign messages.

The ABA’s rules provide that state bars can establish whatever procedure they deem appropriate to select their ABA Delegates. Most state bars have their boards of governors/directors appoint their ABA Delegates. The Board of Governors believes the current system of electing the OSB’s ABA Delegates by statewide election is more process than is needed to select the state bar’s representatives to the policy-making body of the American Bar Association.

Presenter: Agnes Sowle

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Old Business

11. Amends DR 5-103(B) – Recovery of Costs from Clients (Delegate Resolution No. 2)

Whereas, the current Disciplinary Rule 5-103 prohibits forgiveness of costs advanced to a client when a contingent-fee case is unsuccessful, thereby limiting access to the legal system for economically disadvantaged litigants;

Now Therefore, Be It

Resolved, that the Oregon State Bar House of Delegates approves the following disciplinary rule change for submission to the Oregon Supreme Court:

Disciplinary Rule 5 - Conflicts of Interest and Mediation

* * *

DR 5-103 Avoiding Acquisition
of Interest in Litigation

(A) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except the lawyer may:

(1) Acquire a lien to secure payment of fees or expenses due or to become due.

(2) Contract with a client for a reasonable contingent fee in a civil case, subject to the limitations imposed by DR 2-106.

(B) While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to the lawyer’s client, except that: a lawyer may advance or guarantee the expenses of litigation, provided the client remains ultimately liable for such expenses to the extent of the client’s ability to pay.

(1) a lawyer may advance reasonable court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and

(2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client;

(3) however, a lawyer shall not encourage public knowledge of any such payments or advancements to promote the lawyer’s employment by any client.

Background

This resolution was on the HOD agenda in September 2000. After some discussion about the merits of the proposed amendment, the HOD voted to refer the proposed amendment to the OSB Legal Ethics Committee for study and a recommendation. The report of Legal Ethics Committee is set out below, followed by the statement of the presenter, which includes a statement of financial impact.

Report and Recommendation of the OSB Legal Ethics Committee

The Legal Ethics Committee discussed the proposal at several meetings and ultimately concluded that an amendment to DR 5-103 is not necessary. The Committee agreed unanimously that proposed (B)(3) was unconstitutional and inappropriate on policy grounds. The Committee also agreed unanimously that perceived competitive advantages and other market issues are not appropriate factors in the consideration of disciplinary rule amendments.

The Committee noted that a virtually identical proposal was defeated at the HOD in 1997. (The 1997 resolution did not include the prohibition on promotion but was otherwise identical.) The arguments for and against the 1997 proposal were much the same as those made at the September 2000 HOD meeting. The Committee is generally supportive of the idea that a lawyer representing an indigent client should be able to pay the costs of litigation, but also found no principled distinction between indigent clients and other clients who are unable to pay the expenses of litigation. In fact, the Committee believes that indigent clients may have more access to no-cost litigation than moderate- and middle-income clients may. In studying the text of DR 5-103 carefully, it also became apparent to the Committee that the idea of 'contingent' costs is already a part of Oregon’s rule.

Prior to 1986, DR 5-103(B) followed the ABA Model Code and allowed a lawyer to advance the expenses of litigation 'provided the client remains ultimately liable for such expenses.' In 1986, as part of a large-scale overhaul of the disciplinary rules (partly in response to the ABA’s adoption of the Model Rules of Professional Conduct), DR 5-103(B) was amended to qualify the client’s ultimate liability for litigation expenses 'to the extent of the client’s ability to pay.' Since that amendment, Oregon lawyers have been permitted to waive the client’s obligation for costs if the client is unable to pay at the conclusion of the case. Whether the client is able to pay is left to the sole determination of the lawyer and is not, by its terms, limited to situations in which there is no recovery. It is also not limited to indigent clients.

Under the current rule, in the absence of a recovery (in most cases), the client will be unable to reimburse the costs advanced by the lawyer. The Committee concluded that the risk of abuse is minimal because few lawyers want to bear the costs of litigation if the client is able to pay. Clients who have the means to pay their own litigation costs are generally required to do so and, in many cases, they are required to advance the costs. The Committee is satisfied that the current rule appropriately balances the interests of the proponents of contingent costs with the sound policy of having clients share the financial risk of litigation. Amending DR 5-103(B) as proposed would only change the words by which this is accomplished. Accordingly, the Legal Ethics Committee recommends no change in DR 5-103(B).

Presenter’s Statement

(from September 2000 agenda)

The proposed amendment is based upon the ABA’s Model Rules of Professional Conduct 1.8(e), which allows the repayment of costs, like fees, to be contingent.

Contingent fee arrangements often 'provide the only practical means by which one having a claim against another can economically afford, finance, and obtain the services of a competent lawyer to prosecute a claim, and a successful prosecution of the claim produces a fund out of which the fee can be paid.' The Lawyer’s Code of Professional Responsibility, 66 PLI/NY 7, 19 (December 1999).

The rules against lawyers’ providing financial assistance are based on the doctrines of maintenance and champerty. 'A champertous agreement is one in which a person lacking an interest in another’s litigation finances the suit for personal gain. Champerty is officious intermeddling in litigation in which one has no interest by assisting its prosecution with the intent to derive compensation from the proceeds of the suit.' Dissent, State Ex Rel Okl. Bar Ass’n v. Smolen, 1992 OK 116, 837 P2d 894 (1992)(attorney gets public censure for loaning client living expenses). The prohibition against financial assistance was to 'prevent the churning up of litigation, the clogging of the courts, and to protect the people.' Id.

Rule 11 is in place to combat frivolous claims and, in any contingent case, the lawyer already has a financial stake in the outcome, which would not be affected by being able to forgive advanced expenses if the case is unsuccessful.

The risk that the wealthiest firms will get all the clients is slim, because the firm cannot advance anything beyond reasonable court costs. Unlike rules in other states, this draft does not include an option to advance or loan living expenses.

Instead of protecting the client from opportunists, the current disciplinary rule prevents economically disadvantaged clients from pursuing resolution in the legal system. These clients have to agree to go into debt if the case is unsuccessful, and that economic risk prevents legitimate claims from being pursued.

Under the current rule, the client remains liable for the costs and, thus, the lawyer is required to pursue the unsuccessful client for recovery of costs and expenses advanced, or face punishment for violation of an ethical rule.

The current provisions of DR 5-103 do not acknowledge the reality that already exists and must exist to allow people with limited resources to have access to the legal system.

Financial Impact/Tax Implications

The proposed amendment would not have any financial impact upon the Oregon State Bar. However, it may affect the tax burden of Oregon’s lawyers by allowing the deduction of those costs as business expenses, pursuant to 26 USC §§161-162.

Lawyers’ reimbursable costs are not deductible and the expectation of reimbursement likens such advances to loans. Canelo v. Commissioner, 447 F2d 484, 485 (9th Cir 1971). In Boccardo v. United States, 12 Cl Ct 184, 188 (1987), when the client is required to reimburse the attorney for cost advances made under a contingent fee contract, the advances were in the nature of loans and could not be deducted as business expenses.

In one case the district court denied a deduction for litigation expenses advanced by the lawyer under a net fee contract because, under the state bar code of responsibility, the lawyer had a right to be reimbursed by the client, regardless of the outcome of the litigation. Milan, Miller, Berger, Brody and Miller v. U.S., 679 F Supp 692, 61 AFTR 2d 88-695, 88-1 USTC P 9209 (1988, DC MI).

In 1995, the Ninth Circuit, in Boccardo v. C.I.R., 56 F.3d 1016, decided that such advances to clients for litigation costs were deductible when the fee agreement is a gross fee contract and 'there is no obligation on the part of the client to repay the money expended.' Id. at 1018.

In 1999, the United States Tax Court held that litigation costs paid on behalf of clients and then reimbursed are nondeductible loans rather than business expenses where the repayment was not contingent upon the outcome of the underlying case. Pelton & Gunther v. C.I.R., 1999 WL 801399 (US Tax Ct), 78 TCM (CCH) 578, TCM (RIA) 99, 339 (Oct 8, 1999).

Summary

The amendment follows the ABA’s Model Rule that allows repayment to be contingent upon the outcome of the case. The amendment allows clients with limited resources access to Oregon’s legal system. The amendment permits lawyers to forgive costs if there is no recovery in the client’s case. The amendment does not affect lawyers’ loyalty any more than the existence of contingent fees. The correct ethical rule would be to allow attorneys to pay these costs for the client without any expectation of reimbursement other than the potential recovery in the client’s case itself.

Presenter: Nancy M. Cooper

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