Board of Governors acts on recent supreme court case
By Peter R. Jarvis, David J. Elkanich & René C. Holmes
Effective Jan. 1, 2005, Oregon will join the more than 40 states that have already adopted a version of the ABA Model Rules of Professional Conduct. For the most part, the change to the new Oregon rules (the "Oregon RPCs") will be a matter of old wine in new bottles. In general, things that are prohibited by the present Oregon rules ("the Oregon DRs") will still be prohibited and things that are permitted by the Oregon DRs will be permitted by the Oregon RPCs as well. Nonetheless, there are significant changes to both the substantive content and the terminology employed in a number of instances.
This article addresses changes relating to conflicts of interest and confidentiality. A separate article, appearing next month, will address additional changes. We understand that the bar is currently preparing a mailer to members which will include a study guide to the new RPCs and a conversion chart.1
Current Client Conflicts
For the last two decades, the most critical aspect of Oregon’s ethics rules regarding conflicts of interest involving multiple current clients has been the definition of actual and likely conflicts under Oregon DR 5-105(A).2 By definition and in light of Oregon DR 5-105(E) and (F), actual conflicts could not be waived but likely conflicts could be waived with client consent based on full disclosure as defined in Oregon DR 10-101(B).3
The Oregon RPCs will no longer use the terms "actual" and "likely," and new definitions of "confirmed in writing" and "informed consent" will take the place of the present "full disclosure." Thus, Oregon RPC 1.7 will provide:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a current conflict of interest. A current conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client;
(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; or
(3) the lawyer is related to another lawyer, as parent, child, sibling, spouse, or domestic partner, in a matter adverse to a person whom the lawyer knows I represented by the other lawyer in the same matter.
(b) Notwithstanding the existence of a current 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 obligate the lawyer to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client; and
(4) each affected client gives informed consent, confirmed in writing.
And Oregon RPC 1.0(b) and 1.0(g) will provide that:
(b) "Confirmed in writing," when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent. See paragraph (g) for the definition of "informed consent." If it is not feasible to obtain or transmit the writing at the time the person gives informed consent, then the lawyer must obtain or transmit it within a reasonable time thereafter.
(g) "Informed consent" denotes the agreement 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. When informed consent is required by these Rules to be confirmed in writing or to be given in a writing signed by the client, the lawyer shall give and the writing shall reflect a recommendation that the client seek independent legal advice to determine if consent should be given.
Although the categories are somewhat differently expressed, the new rules, like the old, will divide the world of current client conflicts into non-waiveable conflicts, waiveable conflicts and all others.
Those current client conflicts that are actual or non-waiveable under Oregon DR 5-105, such as the simultaneous representation of buyer and seller or lender and borrower in the same transaction at the same time, will continue to be non-waiveable under Oregon RPC 1.7(b)(3). The new category of non-waiveable current client conflicts in Oregon RPC 1.7(b)(2) for representations "prohibited by law" is unlikely to have much effect. While it is possible that additional non-waiveable current client conflicts may be found to exist under Oregon RPC 1.7(b)(1), regarding situations in which a lawyer cannot "reasonably believe that the lawyer will be able to provide competent and diligent representation to each affected client," we think it unlikely that this language will result in a significant increase in findings of non-waiveable conflicts. In short, the old category of non-waiveable actual conflicts emerges pretty much intact but without the name "actual."
With regard to waiveable conflicts, it is again fair to say that most of the likely or waiveable current client conflicts under Oregon DR 5-105 will remain waiveable under Oregon RPC 1.7. On the other hand, there may be differences too. In order for a waiveable conflict to exist under Oregon RPC 1.7(a), the representation of one of the clients must be "directly adverse to another client" under Oregon RPC 1.7(a)(1), or there must be a "significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client" under Oregon RPC 1.7(a)(2). These terms have been borrowed from ABA RPC 1.7 and will presumably be given the same meaning as in other ABA Model Rule jurisdictions. See, e.g., In re Cendant Corp Sec Litig, 124 F Supp 2d 235 (DNJ 2000) (discussing ABA RPC 1.7, its commentary and ethics opinions, in interpreting the "directly adverse" language in NJ RPC 1.7).
Although most of what have been called likely conflicts between current clients will trigger the directly adverse or significant risk tests, it is possible to imagine that there may be some circumstances in which a representation may only be indirectly adverse and in which the risk of harm to another client is not significantly great that the "significant risk" standard will be triggered. In such circumstances, conflicts waivers may not be necessary for multiple current clients under the Oregon RPCs that are presently necessary under the Oregon DRs. Absent further clarification from the Oregon State Bar Legal Ethics Committee, disciplinary panels or the Oregon Supreme Court, it would certainly be safer for Oregon attorneys to assume that Oregon RPC 1.7(a) will require current client conflicts waivers whenever Oregon DR 5-105 would have done so.4
With regard to the change in conflicts waiver requirements from "full disclosure" to "confirmed in writing" and "informed consent," the principal substantive components of the required disclosure are unchanged. Consequently, the conflicts waiver letter forms available on the bar’s website should still be acceptable. On the other hand, there is also a significant change. While Oregon DR 10-101(B) could be met by an email or letter from the lawyer to the client, the new definitions also require a written client acknowledgement to be obtained within a "reasonable time" from the commencement of the representation. In fact, obtaining written client acknowledgement, whether by letter or email, has long been the preferred method. Thus, this change should prove relatively uncontroversial in practice.
Former Client Conflicts
Unlike current client conflicts, all former client conflicts are and will remain waiveable. In addition, the situations in which representations adverse to a former client will require conflicts waivers will effectively remain the same. Present Oregon DR 5-105(C) defines what are called matter-specific and information-specific former client conflicts.5 These same categories are effectively incorporated in Oregon RPC 1.9:
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless each affected client gives informed consent, confirmed in writing.
(b) A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client:
(1) whose interests are materially adverse to that person; and
(2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter, unless each affected client gives informed consent, confirmed in writing.
(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or
(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.
One could argue that the deletion of the words "would, or would likely, inflict injury or damage" (which are requirements for violations under Oregon DR 5-105(C) but which are not contained in Oregon RPC 1.9(a) and (b)) suggests that many circumstances that did not constitute former client conflicts before will constitute former client conflicts under the new rules.6 We do not believe that this should or will be so. The legislative history suggests that no such change was intended. In addition, the requirement that the current and former representations be "materially adverse" should serve the same purpose.
The comments above with respect to the content and documentation of current client conflicts waivers apply equally to former client conflicts waivers.
Personal or Business Conflicts
Although there are also other potentially applicable categories, most personal or business conflicts are covered by Oregon DR 5-1017 and 5-104(A).8 These two principal rules are replaced in part by Oregon RPC 1.7 (a)(2) and (b), which are quoted in the current client section above, and in part by Oregon RPC 1.8(a):
(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.
The new rules will change the old law in several respects:
- All personal or business conflicts under present Oregon DR 5-101(A) and 5-104(A) have generally been regarded as waiveable. Under Oregon RPC 1.7(a) (2) and (b), and under Oregon RPC 1.8(a), there will be some such conflicts that cannot be waived because the lawyer will not be able to meet the required levels of reasonableness or fairness.
- Under Oregon RPC 1.8(a), both a substantive fairness test and an augmented conflicts waiver requirement must be met when a lawyer enters into a business transaction with a client or knowingly acquires a possessory, security or other pecuniary interest adverse to a client — including, it would seem, a contract-based lien or security interest in client property to secure the lawyer’s bill.
- On the other hand, and due to the language of Oregon RPC 1.10(a), a conflict based on an individual lawyer’s "personal interest [which] does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm" will not result in firm-wide disqualification. This is a sensible and reasonable relaxation of present requirements, which contain no such exception.
There are other categories of personal or business conflicts under both the Oregon DRs and the Oregon RPCs but only one additional category deserves mention here. Under Oregon DR 6-102(A), it was generally assumed that Oregon lawyers could not prospectively limit their malpractice liability to clients because such a limitation was not "permitted by law." By contrast, Oregon RPC 1.8(h)(1) suggests that as long as the client is independently represented, such an agreement may be made. Whether, or to what extent, such waivers will be held enforceable in some or all circumstances and whether, or to what extent, such waivers may be able to cover wrongs in addition to "mere" malpractice are questions that will have to be resolved another day.
The comments in the current client conflicts section about the required form and substance of conflicts waivers generally apply as well to the personal or business conflicts discussed in this section. Please note, however, the potential for additional disclosure requirements in Oregon RPC 1.8(a).
The present dichotomy between confidences and secrets and the lawyer’s duty to protect both have been with Oregon lawyers for a long time.9 The new rules do not use either of these terms but instead provide in Oregon RPC 1.6(a) that: "A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b)."
In effect, Oregon RPC 1.6(a) places both confidences and secrets within the single new category of "information relating to the representation of a client" and then leaves it to the substantive law of evidentiary attorney-client privilege to sort out what lawyers may or may not be compelled by courts to disclose over their clients’ objections. Although there may, at the margins, be some kinds of information that would not be client secrets under the DRs but that would constitute information relating to the representation of a client under the RPCs, we do not believe that any distinction that may exist will often prove to be material.
Oregon RPC 1.6(a) permits a lawyer to disclose "information relating to the representation of a client" when disclosure is "impliedly authorized in order to carry out the representation." Although this appears broader than 4-101(C)(1), which provides that the lawyer may disclose "secrets which the lawyer reasonably believes need to be revealed to effectively represent the client," there will likely be little difference after DR 7-101(B)(1) is taken into consideration, which allowed a lawyer, in the exercise of the lawyer’s professional judgment, to waive or fail to assert a right or position of the lawyer’s client.
The principal exceptions to the duty to protect information relating to the representation of a client are contained in Oregon RPC 1.6(b)(1) through (5):
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:
(1) to disclose the intention of the lawyer’s client to commit a crime and the information necessary to prevent the crime;
(2) to prevent reasonably certain death or substantial bodily harm;
(3) to secure legal advice about the lawyer’s compliance with these Rules;
(4) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer’s representation of the client;
(5) to comply with other law, court order, or as permitted by these Rules.
As can be noted, these exceptions generally track the language of DR 4-101(C). The new RPC would, however, permit disclosure to prevent reasonably certain death or substantial bodily harm even when no criminal conduct appeared likely — because, for example, the diminished mental capacity of the individual likely to perform the acts in question. The exception that permits a lawyer to secure legal advice about the lawyer’s compliance with his or her duties is generally regarded as declaratory of present law and not as a change in law.
An additional change relates to prospective clients who do not then become actual clients. Under present and future law, Oregon lawyers will generally be required to treat such conversations as privileged and confidential. And under present law, the receipt by a single lawyer at a firm of material confidences or secrets disqualifies the entire firm from taking an adverse position. Under Oregon RPC 1.18(d), however, firm-wide disqualification can be avoided in prospective client situations if the lawyer who met with the prospective client is screened from the matter adverse to the prospective client. As stated in Oregon RPC 1.18(d):
(d) Representation is permissible if both the affected client and the prospective client have given informed consent, confirmed in writing, or:
(1) the disqualified lawyer is timely screened from any participation in the matter; and
(2) written notice is promptly given to the prospective client.
Finally, the Oregon RPCs clarify and expand somewhat on the available options when attorneys represent clients with diminished capacities. Oregon RPC 1.14(c) provides that:
Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to (Oregon RPC 1.14,) paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests.
This new formulation would appear in this context to give greater discretion to attorneys than the language of DR 7-101(C)10 which required attorneys to take only those actions that are "least restrictive with respect to a client."
ABOUT THE AUTHORS
Peter R. Jarvis, David J. Elkanich and René C. Holmes are the Oregon-based representatives of the Lawyers for the Profession (sm) practice group of Hinshaw & Culbertson LLP. They provide professional responsibility and risk management services to lawyers, law firms and corporate legal departments. The authors can be reached via email at pjarvis@hinshawlaw. com, firstname.lastname@example.org and email@example.com, or by phone at (503) 243-3243.
1. Please note that we will not attempt in this or the following article to address each and every change made by the Oregon RPCs but will limit our comments to those that we believe are most likely to prove significant. For a complete copy of the Oregon RPCs as they will become effective on Jan. 1, see http:// www.osbar.org/_docs/discipline/ disciplinechanges/ORPC.pdf. For a complete copy of the present Oregon DR’s see http://www.osbar.org/_docs/rulesregs/ cpr.pdf.
2.Oregon DR 5-105(A) provides in pertinent part that:
(1) An "actual conflict of interest" exists when the lawyer has a duty to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client.
(2) A "likely conflict of interest" exists in all other situations in which the objective personal, business or property interests of the clients are adverse. A "likely conflict of interest" does not include situations in which the only conflict is of a general economic or business nature.
3. Oregon DR 10-101(B) provides:
(1) "Full disclosure" means an explanation sufficient to apprise the recipient of the potential adverse impact on the recipient, of the matter to which the recipient is asked to consent.
(2) As used in (conflict of interest situations), "full disclosure" shall also include a recommendation that the recipient seek independent legal advice to determine if consent should be given and shall be contemporaneously confirmed in writing.
4. In fact, the Oregon State Bar Legal Ethics Committee is hard at work preparing a new set of formal ethics opinions under the Oregon RPCs to replace the existing set under the Oregon DRs. Present plans are to make these new opinions available to all attorneys during the first half of 2005.
5. DR 5-105(C) provides:
(C) Except as permitted by DR 5-105(D) (which permits former client conflicts to be waived), a lawyer who has represented a client in a matter shall not subsequently represent another client in the same or a significantly related matter when the interests of the current and former clients are in actual or likely conflict. Matters are significantly related if either:
(1) Representation of the present client in the subsequent matter would, or would likely, inflict injury or damage upon the former client in connection with any proceeding, claim, controversy, transaction, investigation, charge, accusation, arrest or other particular matter in which the lawyer previously represented the former client; or
(2) Representation of the former client provided the lawyer with confidences or secrets as defined in DR 4-101(A), the use of which would, or would likely, inflict injury or damage upon the former client in the course of the subsequent matter.
6. With regard to the change from confidences and secrets in DR 5-105 to information relating to the representation of a client under Oregon RPC 1.6, see the discussion in Section V below.
7. DR 5-101 provides:
(A) Except with the consent of the lawyer’s client after full disclosure,
(1) 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 may be affected by the lawyer’s own financial, business, property, or personal interests. As used in this rule, "a lawyer’s own financial, business, property, or personal interests" does not include serving in a pro tem capacity on any court, board or other administrative body where such service is occasional or for a limited period of time and compensation therefor is incidental to the lawyer’s other sources of income;
(2) a lawyer related to another lawyer as parent, child, sibling, spouse or domestic partner shall not represent a client in a matter adverse to a person who the lawyer knows is represented by the other lawyer in the same matter.
(B) A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee.
8. DR 5-104(A) provides:
A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise the lawyer’s professional judgment therein for the protection of the client, unless the client has consented after full disclosure.
9. See, e.g., Oregon DR 4-101, which provides in part:
(A) "Confidence" refers to information protected by the attorney-client privilege under applicable law, and "secret" refers to other information gained in a current or former professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.
(B) Except when permitted under DR 4-101(C), a lawyer shall not knowingly:
(1) Reveal a confidence or secret of the lawyer’s client.
(2) Use a confidence or secret of the lawyer’s client to the disadvantage of the client.
(3) Use a confidence or secret of the lawyer’s client for the advantage of the lawyer or of a third person, unless the client consents after full disclosure.
(C) A lawyer may reveal:
(1) Confidences or secrets with the consent of the client or clients affected, but only after full disclosure to the client or clients.
(2) Confidences or secrets when permitted by a Disciplinary Rule or required by law or court order or secrets which the lawyer reasonably believes need to be revealed to effectively represent the client.
(3) The intention of the lawyer’s client to commit a crime and the information necessary to prevent the crime.
(4) Confidences or secrets necessary to establish a claim or defense on behalf of a lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations concerning the lawyer’s representation of the client.
10. DR 7-101(C) provides that
A lawyer may seek the appointment of a guardian or take other protective action which is least restrictive with respect to a client only when the lawyer reasonably believes that the client cannot adequately act in the client’s own interest, whether because of minority, mental disability or for some other reason.