|January 2002 Special House of Delegates Meeting|
14811 Kruse Oaks Dr.
Lake Oswego, Oregon
Friday, January 18, 2002, 2:00 p.m.
Dear OSB Member:
Enclosed is your agenda for the January 2002 Special OSB House of Delegates Meeting, which will be held on Friday, January 18, 2002, at the Crowne Plaza Hotel. It begins at 2:00 p.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 view on the resolutions. Delegates are listed on the bar’s web page(www.osbar.org).
The special meeting has been called to address two resolutions:
(1) A proposal to amend Disciplinary Rule 1-102. The proposed amendment is intended to clarify the scope of the prohibitions in DR 1-102(A)(1) and (A)(3) and DR 7-102(A)(5) involving deception in the context of lawful covert activity in the investigation of violations of the law. Discussions arose regarding the need for a clarification of the scope of these disciplinary rules following the Oregon Supreme Court’s decision in In re Gatti, 330 Or 517, 8 P.3d 966 (2000).
(2) The second resolution is a proposal to approve new DR 2-105 regarding compensation from non-lawyers.
The resolutions and their background material are in the enclosed agenda.
If you have any questions about the House of Delegates meeting, please contact Teresa Bowen, Executive Assistant, at 800-452-8260 or (503) 620-0222, ext. 386, or by e-mail at firstname.lastname@example.org.
I look forward to seeing you there. Angel Lopez, the new OSB President, will preside over this special meeting!
Edwin A. Harnden,
Oregon State Bar
OREGON STATE BAR
January 2002 Special House of Delegates Meeting
Crowne Plaza Hotel
14811 Kruse Oaks Dr.
Lake Oswego, Oregon
Friday, January 18, 2002, 2:00 p.m.
Presiding Officer: Angel Lopez, President
1. Call to Order
2. Overview of Parliamentary Procedure
3. Amends DR 1-102 - Misconduct; Responsibility Page *
for Acts of Others
BOG Resolution No. 1
Presenter: Charles R. Williamson III
4. Approves new DR 2-105 – Compensation from Non-lawyers Page 5
BOG Resolution No. 2
Presenter: David A. Hytowitz
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, that DR 1-102 be amended as follows:
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 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 has taken place, is taking place or will take place in the foreseeable future.
This resolution is intended to refine the amendment to DR 1-102 approved by the OSB House of Delegates on September 22, 2001, in response to the suggestion of the Oregon Supreme Court. During discussion of the September proposal at a public meeting in November 2001, the Supreme Court indicated it would adopt the new subsection (D) if the provision was applicable to all lawyers, and not only those employed by federal or state government or publicly funded organizations. This resolution deletes the language (italicized and bracketed) limiting the applicability of the rule only to certain lawyers.
In January 2001, the HOD approved the following amendment to DR 1-102:
(D) Notwithstanding subsections (A)(1) and (A)(3) of this rule or 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.
The HOD’s action in January 2001 was in response to the Supreme Court’s decision in In re Gatti, 330 Or 517, 8 P3d 966 (2000), in which the Court held that there are no exceptions to DR 1-102(A)(3) (the 'dishonesty rule') for prosecutors or other lawyers who advise and supervise others in connection with lawful undercover investigations.
In April 2001, the Supreme Court rejected the January 2001 proposal.
In May 2001, while a Board of Governors study group was working on a revised proposal for the September 2001 HOD meeting, the United States of America 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.'
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), which provides that the Supreme Court can discipline a lawyer for 'willful deceit in the legal profession.' This new law went into effect on June 28, 2001.
The Board of Governors submitted a revised DR 1-102 (D) to the Oregon State Bar House of Delegates on September 22, 2001. The language approved by the HOD in September 2001 was drafted with input from members of the Supreme Court and other interested parties to address the concerns expressed by the court in regard to the January 2001 proposal. Based on comments from the justices during the court's November 2001 public meeting, the court appears comfortable with the September 2001 formulation in general, provided it applies to all members of the bar. Because ORS 9.490 requires the BOG, with approval of the House of Delegates, to formulate rules of professional conduct for adoption by the Supreme Court, the BOG submits this modification of the September 2001 proposal for the HOD’s approval. If approved, it will be forwarded to the Supreme Court for adoption.
4. Approves new DR 2-105 - Compensation from Non-lawyers (BOG Resolution No. 2)
Whereas, the OSB Board of Governors has formulated the following new Disciplinary Rule 2-105 and recommends its approval by the OSB House of Delegates, pursuant to ORS 9.490(1).
Resolved, the House of Delegates approves the amendment of the Oregon Code of Professional Responsibility to add the following new rule:
DR 2-105 Compensation from
Except as provided in DR 2-107, a lawyer shall not accept a fee, commission or anything of value from a person to whom the lawyer refers a client for other professional services in exchange for such referral.
This rule was developed by the OSB Legal Ethics Committee (LEC) at the Board of Governors’ (BOG) direction in response to a proposed formal opinion submitted to the BOG in April 2001. The LEC had been asked about the propriety of a lawyer accepting a commission or referral fee from a securities broker in exchange for referring the lawyer’s client to the broker. The fee would be based on the value of the client’s assets under management by the broker, either as a one-time commission or on an on-going basis. After considerable discussion, the LEC concluded that the existing disciplinary rules do not prohibit such an arrangement per se, but that it creates a self-interest conflict requiring compliance with DR 5-101(A). That rule provides, in pertinent part that, '[e]xcept with the consent of the lawyer’s client after full disclosure, a lawyer shall not accept or continue employment if the exercise of the lawyer’s professional judgment on behalf of the lawyer’s client will be or reasonably might be affected by the lawyer’s own financial, business, property or personal interests.'
Although they conceded that the arrangement was not prohibited, a minority of the LEC felt strongly that it should be improper. The minority was concerned that clients would not recognize the extent or nature of the lawyer’s conflict. They also believe it is unseemly for a lawyer to receive what could be a sizeable and long-term 'cut' of the client’s assets merely for referring the client to the broker.
The BOG discussed the proposed opinion at its April 2001 meeting and, concurring with the LEC minority, voted to reject the opinion. The BOG then directed the LEC to draft a rule flatly prohibiting such referral arrangements.
The LEC developed a rule change to prohibit such referrals though a majority of the committee opposed the rule. The Board of Governors approved the preceding rule change on September 20, 2001 for presentation to the House of Delegates.
If this rule change is approved by the HOD, it will be forwarded to the Supreme Court for adoption pursuant to ORS 9.490 (1).