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Should Big Law Firms Be Given a Waiver of the Rules of Professional Responsibility?

By April 22, 2011

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Should the Rules of Professional Responsibility dealing with lawyer ethical issues be waived for Big Law firms representing corporate clients? That is the essence of a proposal made to the ABA Commission on Ethics 20/20 by the Law Firm General Counsel Roundtable, a group representing the interests of large law firms that represent multinational clients.

The Law Firm General Counsel Roundtable presented part of its proposal in the form of asking for special rules to be adopted for lawyers dealing with "sophisticated clients," which they say are more capable of making intelligent decisions about whether it is ok for their attorneys to violate the Rules of Professional Conduct than the ordinary consumer of legal services. The proposal even goes as far as to request the right to demand indemnification agreements from clients, and to be able to include liability waivers in their terms of representation. The group proposed that the ABA adopt the following principle:

"A sophisticated client should be able to agree with lawyers that it engages to limit the liabilities of such lawyers or to indemnify them in connection with the engagement, including with respect to the nature or extent of such lawyers' liability towards the client, the time within which the client may assert any claims against the lawyers, the forums where any disputes should be heard and determined, and the extent or kinds of damages for which the lawyers should be liable."

Additionally, the group seeks a modification of the conflict of interest rules which are more strict in the United States than in some other countries. Some of the rule changes that the Big Law firms seek on behalf of their sophisticated clientele include:
  1. A sophisticated client should have the right, at any time during or in connection with any engagement of outside counsel, to consent to the advance waiver of any, all, or some specified future conflicts of interest on the part of outside counsel, including but not limited to direct adversity both during or after the conclusion of the engagement, provided that the client's confidences and secrets are protected by effective screening measures.
  2. In a new matter that is not the same or substantially related to a matter for which a law firm is currently engaged by a sophisticated client, the firm should be permitted to be adverse to such client without the client's consent, so long as the law firm (i) holds no material confidential information of the client regarding the new matter and (ii) provides effective measures to screen the lawyers working on the two matters from each other.
  3. A law firm that hires a lateral lawyer who currently represents or who has formerly represented a client (the "lateral lawyer's client") that is adverse to a current client of the law firm should not be disqualified from continuing to represent its client, and the lateral lawyer should not be disqualified from continuing to represent the lateral lawyer's client, in each case without the consent of the respective clients, if both the law firm's client and the lateral lawyer's client are sophisticated clients, so long as (i) the concurrent representations are not in the same or substantially related matters and (ii) the law firm timely establishes and maintains effective measures to screen the lateral lawyer from other lawyers in the firm.
  4. For conflict of interest purposes, when a law firm is engaged to represent a sophisticated client, absent express language to the contrary in the engagement agreement or other writing between the law firm and the client, the law firm should be deemed to represent only the particular legal entity that engaged it and for which it is providing legal services, and should not be deemed to represent any parent, subsidiary, or affiliated entity of the client.
  5. A sophisticated client should not be permitted to assert an ethical conflict of interest in order to disqualify a law firm, if such conflict is caused either: a. Solely by an action of the client in altering the relationship of the law firm to the client (as, for example, through a merger or acquisition); or b. By the merger or acquisition of other parties; provided in each case that the law firm establishes and maintains effective screening measures to protect each affected client's confidences as soon as it discovers that such a conflict exists.

Perhaps less controversially, the group called on the ABA to adopt new rules on lawyer mobility. While designed to benefit the Big Law firms in the representation of their large corporate clients, these rule modifications would also benefit small law firm practitioners too. The current system in which lawyers are restricted in their movement from state to state is antiquated, and it would be sensible for there to be more of a national system to the practice of law. The group has asked for the following rules:

  1. Freedom of Movement. Any lawyer (broadly defined) should be free to practice across jurisdictional boundaries on behalf of a client and in the course of the lawyer's practice, and to relocate and apply for simple recognition in a new jurisdiction based on admission and good standing in their home and other practice jurisdictions.
  2. Defining Who Is Authorized to Practice as a Lawyer. Any individual who has been admitted as a lawyer in a jurisdiction recognized as one that appropriately regulates the legal profession - whether foreign or domestic - should be entitled to operate under the first guiding principle as to freedom of movement.
  3. Creating a Uniform Regulatory Structure to Assure Professional Practices and Mete Out Discipline When Needed. A simple and uniform set of regulations is needed to facilitate the practice of law across jurisdictional lines, perhaps overseen by a single clearinghouse/agency invested with determining who is authorized to practice as a lawyer across borders.

In an article called Ethics 20/20 Pitch: Law Firms That Serve 'Sophisticated' Clients Need Own Regulatory System, commission members expressed skepticism about the proposal, with one member even calling the request "dead on arrival." Attorney Frederic S. Ury offered the opinion that the proposal would be viewed as an effort to carve out special treatment for larger firms "and another system for the rest of us peons."

You can read the report in its entirety by clicking here. To learn more about the responses to the proposal, see Ethics 20/20 Pitch: Law Firms That Serve 'Sophisticated' Clients Need Own Regulatory System.

What are your thoughts about the requests being made by the Law Firm General Counsel Roundtable? Should Big Law firms be allowed to evade the ethical rules dealing with conflicts of interest and waivers of liability when they can designate their clients as "sophisticated clients" under the guise of providing clients with better service, or is this just a way to increase their own profitability while reducing risk? Are there too many obstacles in place when attorneys attempt to engage in multi-jurisdictional practice or to relocate from one state to another? Most attorneys who have ever contemplated moving their practice to another state would answer that question with an emphatic yes. Share your thoughts on this proposal in the Comments section below, or discuss the issue in our Forum.

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