How to Avoid Common Ethics Problems

Small Firms and Solos Are Often Subject to Disciplinary Complaints and Malpractice Claims

Every year literally thousands of New York attorneys are recipients of client disciplinary complaints, and many are also sued for malpractice. The vast majority of these respondents (to use the disciplinary parlance) are small firm and solo practitioners. Even more ominously, the numbers have been steadily rising over the past decade, although they may now be leveling off. But whatever the trend, responding to any bar complaint or malpractice claim involves time, money and emotional stress.

Some complaints are plainly off the wall, and emanate solely from a client’s frustration with a poor legal outcome, or inherent personal problems. But many complaints are valid, and can be avoided. They can be avoided because relatively few involve truly venal conduct, i.e., dishonesty, theft of trust funds, or illegal conduct. Rather, most result from a lawyer’s carelessness, laziness, stubbornness, ignorance of legal or ethical requirements, law office failure, poor judgment, or plain stupidity.

Here are some of the most common, and avoidable, problem areas giving rise to client complaints.

Poor Communication

This is the number one offense. Anyone associated with ethics and disciplinary practice will confirm that a direct correlation exists between failure to communicate and disciplinary complaints or malpractice claims. Poor communication habits also relate directly to getting paid. Lawyers’ services are not like doctors’ care: we do not provide tangible medical treatment, but expect instead to be paid solely for our time, judgment, experience, advocacy skills, and knowledge of the law. The only way to convince a new client that the very high fee (from the client’s perspective) is worth the money is to demonstrate the value of the work, and apprise the client of its cost, on a regular basis.

Specifically, this entails a clear initial agreement detailing, inter alia, the scope of the engagement and a reasonable estimate of the overall fee; regular detailed bills; copying the client on all correspondence and pleadings or other work product; returning all phone calls within a reasonable time; making sure your staff is courteous; keeping the client informed of all major developments in the matter; apologizing to the client for any minor misunderstandings should they occur; and, at the conclusion of the representation, carefully explaining how the matter was resolved and providing a full accounting where relevant.

Neglect

Next to poor communication, this is the other major offender, and, indeed, is related to the problem of poor communication. Every year numerous lawyers are sanctioned, admonished, and/or sued because they fail to work diligently on client engagements despite the clear disciplinary rule stating that a lawyer shall not neglect a legal matter entrusted to the lawyer (Disciplinary Rule (DR) 6-101(A)(3) of the New York Lawyer’s Code of Professional Responsibility).

Neglect entails more than mere negligence; it involves not doing the work. Why?

Lawyers neglect matters for various reasons: overload, lack of expertise, mental block, and substance abuse, among others. The best solution is to get help before it is too late. Ask a colleague or friend to take over the case (with the client’s consent); seek professional assistance if necessary; refer the case to someone who has the competence or expertise to handle it. Just do not let the problem fester.

Saying ‘No’ to Representation

Agreeing to represent the wrong client often has disastrous consequences. Yet lawyers, especially young ones in search of business, do it all the time, especially where the client is ready and able to provide an initial retainer. But as any more experienced lawyer will confirm, this is most frequently a big mistake.

When a prospective client’s case is not right for you – for whatever reason – the first principle is to decline employment in a clear and decisive manner, preferably in writing. This should be done so that the client cannot later accuse you of neglecting her matter or causing a loss of rights. It is especially important to document a declination in any situation where the statute of limitations is approaching shortly, to remind the client of that fact, and to strongly encourage the client to seek legal counsel.

Whenever legal employment becomes untenetable, it is also advisable – though not always permissible – to withdraw. Any attorney seeking to withdraw from an engagement should carefully review DR 2-110, and pay particular attention to three basic tenets: (1) always minimize prejudice to the client; (2) promptly return the unearned portion of any advance fee; (3) seek leave to withdraw whenever a matter is pending before a court or tribunal, or make sure substitute counsel will promptly appear.

Become familiar with the concepts of statutory charging liens (by reviewing Judiciary Law 475) and common law retaining liens (by reviewing, for example, In Re Cooper, 291 N.Y. 255 (1943)).

Supervision

DR 1-104 of the New York Code, a relatively recent provision, in effect makes all partners or legal employers vicariously liable to the misconduct or mistakes of subordinate employees that the senior lawyer could or should have prevented. It also incorporates a new concept, law firm discipline, which, simply stated, means that an entire firm can be held responsible, and be disciplined, for ethical misdeeds which the firm could or should have prevented. The simple lesson: take supervision seriously.

The flip side concerns supervisees. Junior lawyers cannot avoid ethical responsibility by claiming I was only following orders. Rather, a subordinate lawyer may well be ethically liable, and subject to serious discipline, for any act of misconduct in which he/she participates, regardless of choice, unless the subordinate lawyer acts in accordance with a supervisory lawyer’s reasonable resolution of an arguable question of professional duty. See DR 1-104(F).

Fees

Fee disputes constitute a major source of friction between lawyers and clients. They are readily avoidable by better communication, especially at the outset, but throughout any representation fee disputes will invariably arise whenever the client becomes frustrated by lack of information, i.e., tangible evidence of a work product demonstrating that the legal services are indeed valuable.

All lawyers should be acquainted with certain general, ethical concepts related to fees. These include familiarity with: the factors under DR 2-106 by which a fee may be evaluated as reasonable or excessive; the special rules that apply to contingent fee arrangements; the fact that non-refundable retainers are forbidden in New York per Matter of Cooperman, 83 N.Y.2d 465 (1994); and the three requirements for fee-splitting under DR 2-107, including that the fee split between lawyers need no longer be proportionate to the services rendered (following the 1990 amendment to the Code) so long as the referring lawyer remains responsible for the case.

Finally, there are two new fee requirements to which New York attorneys must adhere. The first relates to alternative dispute resolution, and specifically, to the mandatory arbitration of most fee disputes in accordance with 22 N.Y.C.R.R. Part 137. The second concerns the requirement of written engagement letters for all first-time representations in excess of $3,000. The details pertaining to this new rule are set forth in 22 N.Y.C.R.R. Part 1215.

Advertising and Solicitation

The regulation of lawyer advertising and solicitation has had an uneven history in the last 100 years, marked by the stringent efforts of the establishment bar to suppress most forms of aggressive marketing and by the Supreme Court’s counter adherence to First Amendment principles in overriding the bar’s traditional hostility to such commercial speech.

At the present juncture, the basic rules to keep in mind are quite simple:

Ads or solicitations that are false, deceptive, or misleading will not be tolerated. See, generally, DR 2-101, DR 2-102, DR 2-103.

In-person solicitation remains unethical and criminal in New York (see Judiciary Law, 479, 481, 482).

Lawyers are not permitted to give anything of value to a third person/nonlawyer in order to obtain a referral of a law client (this includes quid pro quid referral arrangements with other professionals). See DR 2-103(B)(1).

Advertising and solicitation over the Internet, while permitted, raise various ethical issues, including potential unauthorized practice in jurisdictions where the lawyer is not admitted; maintaining confidentiality and inadvertent disclosures; and avoiding conflicts of interest.

Notarial Abuses

Many lawyers get into disciplinary hot water because they abuse the notarial privilege. The grievance and disciplinary authorities have strict policies of vigorously prosecuting such cases.

Following a few simple guidelines will avoid this common yet potentially very serious pitfall. Never notarize a document unless the person whose signature is being notarized signs in front of you, the person acknowledges having reviewed the document to be notarized, and you are reasonably certain of the person’s identification. Never let someone else use your notary stamp. Do not accommodate clients or friends by diverging from the foregoing practice. A lawyer falsely swears under oath when he/she notarizes a document attesting that it was sworn to before me on a certain date when in fact it was not.

Nonpayment of Debts

The disciplinary and grievance committees do not serve as collection agencies, and thus generally will not pursue complaints against attorneys who allegedly owe civil debts and have failed to pay. However, lawyers violate DR 1-102(A)(5) [barring conduct prejudicial to the administration of justice] by willfully ignoring validly entered money judgments. In New York’s First Department, lawyers can be temporarily suspended without a hearing in cases involving unpaid civil judgments obtained by clients and in circumstances demonstrating a lawyer’s wilful disregard of such judgments. See 22 N.Y.C.R.R. 603.4(e)(1) (iv).

Nonlawyer Employees

The rules here are relatively straightforward. Do not employ disbarred or suspended lawyers in any capacity. Do not allow paralegals or non-lawyers (especially law graduates awaiting admission) employed by you to practice law, give legal advice, or in any way hold themselves out as lawyers. Do not split fees with, or form partnerships with nonlawyers – e.g., real estate brokers, insurance brokers, accountants – where one of the activities of the partnership is the practice of law. See DR 3-102. The new rules regarding the formation of so-called strategic alliances and ancillary businesses – DR 1-106 and DR 1-107 – should be carefully reviewed. They contain many limitations and conditions.

Conflicts of Interest

This is a very large topic in legal ethics, but one that often ensnares lawyers insensitive to conflicts or eager to take on business regardless of conflicts. In essence, all conflicts take three basic forms: interest conflicts, multiple representation conflicts, third party conflicts. The most common conflicts problems that have resulted in disciplinary complaints or malpractice claims arise in the first two categories, as discussed below. Third-party conflicts, which involve potential interference by a non-client in the representation, do not come up as often.

1. Interest conflicts (see, especially, DR 5-101 and DR 5-104). These stem principally from the failure to limit business relations with clients. It is most unwise either to lend to or borrow from clients, to accept substantial gifts from clients, or to prepare trust or fiduciary instruments in which you are named as beneficiary. These transactions are prescriptively conflicted. At a minimum, the transaction must be fair to the client, full disclosure must be made as to the risks and advantages of going forward with you in light of your financial or economic interest, the client must be advised to seek independent counsel to review the transaction and all of the above must be reduced to a writing signed by the client. One more thing: no sex with clients (see DR 5-111).
2. Multiple client conflicts (see, especially, DR 5-105, DR 5-108 and DR 9-101). These involve simultaneous or successive representations of two or more clients whose interests are or may become adverse. A typical scenario arises from the representation of a partnership or close corporation and then siding with one of the principals against the others when a dispute arises. This cannot be done unless clear consent is obtained from all of the affected parties. It is also improper to sue or represent in litigation a current client adverse to another current client, even if the two representations are wholly unrelated, without full disclosure and informed consent.

Additionally, all New York lawyers must install and implement an effective conflicts check system for identifying the parties (and affiliates) at least directly involved in all current and prior representations. The failure to have such a system in place is in and of itself a disciplinary violation (see DR 5-105(e)).

Advocacy

Although some clients think they need Rambo as their lawyer, the sensible ones know better. Rambo never achieves good results in the end. Professionalism is always the best way to avoid trouble with courts and disciplinary authorities, and, not coincidentally, the best strategy. This includes candor towards a tribunal or opposing side. It also includes courtesy and civility. Incivility is not merely unprofessional; it can also be unethical. See, for example, Matter of Schiff, 190 A.D. 2d 293 (1st Dept. 1993).

Lawyers have often gotten in trouble because they confused loyalty to a client, or maintaining client confidences or secrets, with aiding or participating in a client’s illegal or fraudulent conduct (see DR 7-102(A)(7). Overzealousness is sometimes a reflection of simple ignorance. Many lawyers do not know that to threaten criminal prosecution solely to gain a civil advantage (e.g. collection of a debt) violates DR 7-105. Some lawyers are also unfamiliar, to their later regret, with the basic tenets of the anti-contact rule, DR 7-104, which prohibits contact on the merits of a case with a represented party, or giving legal advice to an unrepresented party.

There are many more rules of proper advocacy set forth in Canon 7, involving, inter alia, proper relations with witnesses, jurors and judges, pre-trial statements to the press, and the special obligations of government prosecutors. Any advocate should become intimately familiar with all of them, if for no other reason then to stay out of trouble.

Trust Accounting

The failure scrupulously to adhere to the basic principles of client/fiduciary trust accounting is the single major reason today why lawyers are disbarred or suspended from practice. Every attorney must read and absorb the provisions of DR 9-102.

These are essentially no fault rules. In a nutshell, lawyers must: properly segregate and label client and third party funds; not commingle personal or business funds with trust funds; keep careful records of the source of every deposit and purpose of every disbursement of trust funds in accordance with the required record keeping rule, DR 9-102 (D); never draw checks on escrow accounts to cash; promptly pay over to the client or a third party all funds or property held in trust, when due. As noted, the consequences of noncompliance with trust accounting rules can be devastating.

Sources of Ethical Guidance

Since ethics rules and the basic tools for avoiding malpractice are not always self-evident, lawyers should be aware of the numerous sources that can supply answers, or at least guidance, in New York. Listed below are the ones most frequently used:

New York Judiciary Law, 475 – 489, 90

22 New York Code of Rules and Regulations (N.Y.C.R.R.),

Parts 603 and 605 (First Department)

Part 691 (Second Department)

Part 806 (Third Department)

Part 1022 (Fourth Department)

22 N.Y.C.R.R. Part 1200 (The New York Code)

Simon’s New York Code of Professional Responsibility Annotated (West, 2002 ed.)

Wolfram, Modern Legal Ethics (West, 1986)

Restatement, The Law Governing Lawyers, American Law Institute (2000)

The ABA Model Rules of Professional Conduct Annotated, American Bar Association (2001)

The New York Professional Responsibility Reporter (http://www.nyprr.com)

The ABA/BNA Manual on Professional Conduct

Ethics hotlines (the New York State Bar Association, the New York County Lawyers’ Association, the Association of the Bar of the City of New York, the Nassau County Bar Association)

Law professors and ethics practitioners