Rules lawyers play by

New York University Law Review

Volumn 76, Issue 3, 2001, Pages 665-749

  Painter, Richard W ^a  

^a UNIVERSITY OF ILLINOIS AT URBANA CHAMPAIGN   (United States)

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EID: 26444518327     PISSN: 00287881     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (431)

1. The Ethics 2000 Commission's proposed revisions and public comments are at http:// www.abanet.org/cpr/ethics2k.html (last visited Apr. 16, 2001) [hereinafter Ethics 2000 Commission Web Page].
2. See Report of the ABA Commission on Multidisciplinary Practice (1999), http:// www.abanet.org/cpr/mdpreport.html (last visited Apr. 16, 2001). The American Bar Association (ABA) House of Delegates rejected this Commission's liberalization proposals in Recommendation 10 F, approved July 2000. See id.
3. Richard W. Painter, Proposal to Amend Model Rules to Provide for Advance Consent to Conflicts, at http://www.abanet.org/cpr/rpainter.html (last visited Apr. 16, 2001) [hereinafter Painter, Proposal to Amend Model Rules] (proposing that ABA amend conflicts rules to allow advance waiver of conflicts if independent counsel represents client).
4. Letter and Memorandum from Richard W. Painter, to the Ethics 2000 Commission (May 13, 1998), http://www.abanet.org/cpr/painter.html [hereinafter Painter, Ethics 2000 Letter] (proposing that ABA amend Model Rule 1.13 to require report of illegal or fraudulent conduct to corporate client's directors unless specified otherwise in client's articles of organization).
5. Richard W. Painter, Lawyers' Rules, Auditors' Rules and the Psychology of Concealment, 84 Minn. L. Rev. 1399, 1436-37 (2000).
6. See, e.g., Robert E. Scott, The Case for Market Damages: Revisiting the Lost Profits Puzzle, 57 U. Chi. L. Rev. 1155 (1990) (analyzing default rules for damages in contracts).
7. See, e.g., Charles R. O'Kelley, Jr., Filling Gaps in the Close Corporation Contract: A Transaction Cost Analysis, 87 Nw. U. L. Rev. 216 (1992) (analyzing default rules for close corporations).
8. See, e.g., Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 Yale L.J. 2359 (1998) (proposing that federal securities laws be default rules instead of immutable rules).
9. See, e.g., John C. Coffee, Jr., Understanding the Plaintiff's Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum. L. Rev. 669 (1986) (analyzing economic incentives of plaintiffs' attorneys in class and derivative actions);
10. Ronald J. Gilson & Robert H. Mnookin, Disputing Through Agents: Cooperation and Conflict Between Lawyers in Litigation, 94 Colum. L. Rev. 509 (1994) [hereinafter Gilson & Mnookin, Disputing Through Agents] (analyzing economic incentives for cooperative conduct in litigation);
11. Ronald J. Gilson & Robert H. Mnookin, Sharing Among the Human Capitalists: An Economic Inquiry into the Corporate Law Firm and How Partners Split Profits, 37 Stan. L. Rev. 313 (1985) [hereinafter Gilson & Mnookin, How Partners Split Profits] (analyzing economic incentives within law firms);
12. Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform, 58 U. Chi. L. Rev. 1 (1991) (analyzing economic incentives to file frivolous derivative and class action lawsuits).
13. See, e.g., Daniel R. Fischel, Lawyers and Confidentiality, 65 U. Chi. L. Rev. 1 (1998) (evaluating confidentiality rules);
14. Jonathan R. Macey & Geoffrey P. Miller, An Economic Analysis of Conflict of Interest Regulation, 82 Iowa L. Rev. 965 (1997) (evaluating conflicts rules);
15. Larry E. Ribstein, Ethical Rules, Agency Costs, and Law Firm Structure, 84 Va. L. Rev. 1707 (1998) (suggesting that many ethics rules protect vested interests, are inefficient, and should be default rules, instead of immutable rules).
16. See generally George M. Cohen, When Law and Economics Met Professional Responsibility, 67 Fordham L. Rev. 273 (1998) (discussing how ethics rules and other laws governing lawyers attempt to address various agency problems and suggesting ways in which legal rules can serve as complimentary solutions to agency problems).
17. Professor David Wilkins has written on the question of who should have authority to regulate lawyers, as well as the related question of what types of controls should be used. David B. Wilkins, Who Should Regulate Lawyers?, 105 Harv. L. Rev. 799, 805-09 (1992) (discussing four approaches to enforcing professional norms: disciplinary controls, liability controls, institutional controls, and legislative controls). This Article explores a separate question: Regardless of who makes and enforces the rules, what types of rules should be chosen in the first place?
18. Penalty default rules are rules that a majority of contracting parties would not prefer. Parties are thus encouraged to contract around the rule for their own tailored rule. One objective of penalty default rules is to force parties to negotiate their own contract terms, and to disclose important information to each other in the process. See Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87, 91-93 (1989) (explaining penalty default rules).
19. See Frederick Schauer, Playing by the Rules 135-66 (1991) (discussing debate over rules and standards as regulatory devices);
20. Kathleen M. Sullivan, The Supreme Court, 1991 Term - Foreword: The Justices of Rules and Standards, 106 Harv. L. Rev. 22, 57-69 (1992) (same). Rules are designed by generalizing information from prior experiences, and are therefore cheaper than standards, which require context-specific information to be considered each time they are applied. Arguably, rules minimize adjudication costs, whereas standards minimize the amount of error in adjudication. See Schauer, supra, at 147-48. Because the Model Rules include both rules and standards, the term "rules" is used in this Article to denote both rules and standards, and where a distinction between the two is made, the terms "defined rules" and "standards" are used respectively.
21. Canons of Prof'l Ethics (1908). From 1908 to 1969, the ABA's formal position on matters of legal ethics was embodied in the Canons.
22. Model Code of Prof'l Responsibility (1969). The ABA subsequently amended the Model Code a number of times during the 1970s, principally in response to Supreme Court decisions concerning advertising and group legal services. The ABA has not amended the Model Code since the adoption of the Model Rules, but many jurisdictions still maintain parts of the Model Code.
23. Model Rules of Prof'l Conduct (1983).
24. See Model Code of Prof'l Responsibility Canon 9 (1980) ("A lawyer should avoid even the appearance of impropriety."). The Model Rules contain no similar provision.
25. See Charles W. Wolfram, Former-Client Conflicts, 10 Geo. J. Legal Ethics 677, 686-87 (1997) (discussing fortunate demise of appearance of impropriety standard in conflicts jurisprudence).
26. Standards, for example, define required levels of competence, diligence, and communication with clients. The "reasonableness" standard is used, but with little guidance as to what conduct is and is not reasonable. See, e.g., Model Rules of Prof'l Conduct R. 1.1 (1998) ("A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation."); id. R. 1.3 ("A lawyer shall act with reasonable diligence and promptness in representing a client."); id. R. 1.4(a) ("A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.").
27. See, e.g., id. R. 1.5(a) (stating that lawyer's fee must be reasonable, and listing eight factors to be considered in determining reasonableness, without discussion of which factors are most important).
28. See, e.g., Model Code of Prof'l Responsibility DR 4-101(C) (1980) (providing that "[a] lawyer may reveal: . . . (3) The intention of his client to commit a crime and the information necessary to prevent the crime" (emphasis added)).
29. See, e.g., Model Rules of Prof'l Conduct R. 6.1 (1998) ("A lawyer should aspire to render at least (50) hours of pro bono publico legal services per year." (emphasis added)).
30. See infra text accompanying notes 156-63 (discussing broader range of contingent fee agreements and fee-splitting arrangements that are now permissible).
31. See infra text accompanying notes 50-51 (discussing immutable rules governing conduct that affects third parties).
32. See, e.g., Model Rules of Prof'l Conduct R. 1.13 (1998) (providing that lawyer for organization who knows that agent of organization has violated law "shall proceed as is reasonably necessary in the best interest of the organization").
33. See Painter, Ethics 2000 Letter, supra note 4 (defining "default rule"); see also infra text accompanying notes 271-73.
34. Cf. The American Lawyer's Code of Conduct R. 2.5 (The Roscoe Pound - Am. Trial Lawyers Found., Revised Draft 1982) [hereinafter American Lawyer's Code of Conduct] (allowing corporate clients to choose policies that their lawyers are required to follow in resolving conflicts of interest among board of directors, officers, and shareholders, but also requiring that chosen policies be disclosed to shareholders and corporate officers beforehand). The comment to Rule 2.5 points out that publication to shareholders puts the shareholders "in a position to approve or disapprove that policy, or to relinquish their shares." Id. R. 2.5 cmt.
35. See infra text accompanying notes 290-99 (discussing voluntary affirmative action commitments made by law firms in New York and San Francisco).
36. The Ethics 2000 Commission considered several proposals to revise the Model Rules, specifically Model Rule 1.7 (Conflict of Interest: General Rule), Model Rule 1.9 (Conflict of Interest: Former Client), Model Rule 1.10 (Imputed Disqualification: General Rule) and Model Rule 1.11 (Successive Government and Private Employment). Ethics 2000 Commission Web Page, supra note 1.
37. Although clients "opt out" of conflicts rules through informed consent, such consent is rarely obtained in advance of the time the conflict becomes known. See infra text accompanying notes 208-15 (suggesting that professional conduct rules should allow advance consent to conflicts by clients represented by independent counsel).
38. See John T. Noonan, Jr. & Richard W. Painter, Professional and Personal Responsibilities of the Lawyer, at vii, 13 (1997) (discussing distinction between professional standards set by bar associations and principles based on personal values).
39. The ABA's Model Rules, to a much larger extent than the Model Code, "openly invite the lawyer to bring [her] personal values into play." Ted Schneyer, Moral Philosophy's Standard Misconception of Legal Ethics, 1984 Wis. L. Rev. 1529, 1566. This "invitation" comes, however, without much encouragement and without any mechanism by which a lawyer can reinforce her personal values against client pressures by committing herself ex ante to a particular standard of conduct.
40. Model Rules of Prof'l Conduct R. 1.16(b)(3) (1998) (allowing withdrawal, even if client's interests will be adversely affected, if "client insists upon pursuing an objective that the lawyer considers repugnant or imprudent").
41. Id. R. 6.2 cmt. 2 (permitting lawyer to refuse court appointment to represent client whose character or cause lawyer regards as repugnant).
42. Id. R. 6.1 (aspirational pro bono rule).
43. Sometimes, however, lawyers do establish general reputations that are known to adversaries as well as to clients. See Gilson & Mnookin, Disputing Through Agents, supra note 9, at 546-48 (discussing evolution of cooperation within San Francisco Bay Area domestic relations bar).
44. Model Rules of Prof'l Conduct R. 1.2 cmt. 4 (1998) (discussing scope of representation).
45. Model Code of Prof'l Responsibility Canon 7 (1980). The Model Rules, however, substitute "reasonable diligence and promptness" for "zeal." Model Rules of Prof'l Conduct R. 1.3 (1998) ("A lawyer shall act with reasonable diligence and promptness in representing a client."); id. R. 1.3 cmt. 1 (stating: A lawyer should act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client's behalf. However, a lawyer is not bound to press for every advantage that might be realized for a client. A lawyer has professional discretion in determining the means by which a matter should be pursued).
46. See Richard A. Posner, Rational Choice, Behavioral Economics, and the Law, 50 Stan. L. Rev. 1551, 1556-57 (1998) (arguing that, assuming irrational smokers respond randomly to increase in tax on cigarettes, "[i]f the distribution of these random behaviors has the same mean as the rational smokers' reaction to the tax, [then] the effect of the tax on the quantity demanded of cigarettes will be identical to what it would be if all cigarette consumers were rational").
47. But see Christine Jolis et al., Theories and Tropes: A Reply to Posner and Kelman, 50 Stan. L. Rev. 1593, 1599 (1998) ("[Judge Posner's argument] is a common response to behavioral economics, and conceivably it could be true; but there is absolutely no reason to think it is . . . ."). Many of the rules discussed in this Article are based on the "rational actor" model. Others, however, such as the "sticky default rule," see infra text accompanying notes 114-16, draw on demonstrated cognitive biases. Cognitive biases do not always undermine the effectiveness of default rules and, indeed, rulemakers who understand cognitive biases can construct default rules that further public policy objectives. See infra text accompanying note 115 (discussing policy-preferred sticky default rules).
48. Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 Cornell L. Rev. 608, 611-12 (1998) (arguing that once contract term is established as default rule, it may be preferred simply because it is status quo).
49. Reciprocal interaction between lawyers sometimes is demonstrated with game theoretic models (usually prisoner's dilemma). See generally Gilson & Mnookin, Disputing Through Agents, supra note 9 (using prisoner's dilemma model to illustrate cooperation between opposing counsel in litigation);
50. Richard W. Painter, Game Theoretic and Contractarian Paradigms in the Uneasy Relationship Between Regulators and Regulatory Lawyers, 65 Fordham L. Rev. 149 (1996) (using prisoner's dilemma model to illustrate cooperation between regulatory lawyers representing private clients and governmental agencies).
51. The Ethics 2000 Commission considered attaching statements of "best practice" to the Model Rules. See infra note 187.
52. The written policies that many firms have for handling client conflicts are essentially law firm codes of professional responsibility. New York requires firms to have such policies. See N. Y. Code of Prof'l Responsibility DR 5-105(e) (2000) (providing that law firms "shall have a policy implementing a system by which proposed engagements are checked against current and previous engagements"); infra text accompanying notes 341-43.
53. See, e.g., Lon L. Fuller & John D. Randall, The Lawyer's Service in the Administration and Development of the Law, in Report of the Joint Conference on Professional Responsibility of the Association of American Law Schools and American Bar Association, 44 A.B.A. J. 1159 (1958) (discussing lawyer's role as advocate).
54. See Alexis de Tocqueville, On What Tempers the Tyranny of the Majority in the United States, in Democracy in America 250, 251 (Harvey C. Mansfield & Delba Winthrop eds., Univ. of Chi. Press 2000) (1835) (describing "the Spirit of the Lawyer in the United States" and "how it Serves as a Counterweight to Democracy"). Lawyers' influence in our democracy, however, is not always positive - for example, when lawyers make campaign contributions in order to receive government legal work. This Article suggests an opt-in rule that individual law firms could use to deal more effectively with this problem than by using the rules that the ABA has adopted. See infra text accompanying note 389.
55. See, e.g., Model Rules of Prof'l Conduct, Preamble (1998) ("A lawyer is a representative of clients, an officer of the legal system and a public citizen having special responsibility for the quality of justice.").
56. See id. R. 1.8(d) ("Prior to the conclusion of representation of a client, a lawyer shall not make or negotiate an agreement giving the lawyer literary or media rights to a portrayal or account based in substantial part on information relating to the representation.").
57. Id. R. 1.8(j) ("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 that the lawyer may: . . . (2) contract with a client for a reasonable contingent fee in a civil case.").
58. Id. R. 1.15.
59. Id. R. 1.2(d) (prohibiting lawyer from "counsel[ing] a client to engage, or assist[ing] a client, in conduct that the lawyer knows is criminal or fraudulent").
60. See, e.g., Restatement (Third) of the Law Governing Lawyers § 23 (2000) (stating: As between client and lawyer, a lawyer retains authority that may not be overridden by a contract with or an instruction from the client: (1) to refuse to perform, counsel, or assist future or ongoing acts in the representation that the lawyer reasonably believes to be unlawful; (2) to make decisions or take actions in the representation that the lawyer reasonably believes to be required by law or an order of a tribunal).
61. See, e.g., Model Rules of Prof'l Conduct R. 3.3. Rule 3.3(b) of the Model Rules modified the Model Code, which had qualified this duty to reveal perjury with the language "except when the information is protected as a privileged communication." Model Code of Prof'l Responsibility DR 7-102(B)(1) (1980).
62. Model Rules of Prof'l Conduct R. 3.3 cmt. 12 (1998).
63. See United States v. Long, 857 F.2d 436, 445 n.5 (8th Cir. 1988) ("Because of the gravity of a decision to notify a court of potential client perjury, a reasonable lawyer would only act on a firm factual basis.").
64. See Commonwealth v. Jermyn, 620 A.2d 1128, 1131 (Pa. 1993) (holding that trial counsel acted reasonably when he asked his client, who was on trial for murder, to make general statement to jury but refrained from asking his client questions that he believed would be answered untruthfully). The ABA previously endorsed this narrative approach, see ABA Defense Function Standard 7.7 (1971), but it has since rejected it. See Model Rules of Prof'l Conduct R. 3.3 cmt. 9 (1998) (stating that narrative approach undermines lawyer's duty to client and lawyer's duty to tribunal); ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 353 (1987) (stating that narrative approach is no longer justifiable).
65. Model Rules of Prof'l Conduct R. 3.8 (1998) (requiring, among other things, that prosecutor in criminal case "make timely disclosure to the defense of all evidence or information known to the prosecutor that tends to negate the guilt of the accused or mitigates the offense").
66. See Carter and Johnson, [1981 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 82,847 (Feb. 28, 1981) (announcing prospectively obligations of securities lawyer whose client is failing to satisfy disclosure requirements).
67. See Notice of Charges and Hearing, Fishbein, OTS AP-92-19 (Mar. 1, 1992) (setting forth obligations of counsel to federally-insured thrift institution and indicating how Kaye, Scholer, Fierman, Hays, and Handler (Kaye, Scholer) and several of its partners breached these obligations in representing Lincoln Savings and Loan); Order to Cease and Desist and for Affirmative Relief, Fishbein, OTS AP-92-24 (Mar. 11, 1992) (settling charges and imposing restrictions on Kaye, Scholer's future representation of depository institutions).
68. See SEC Appearance and Practice Before the Commission, 17 C.F.R. § 201.102(e)(1)(ii) (2000) (providing that SEC may, for "unethical or improper professional conduct," temporarily or permanently deny to any person privilege of practicing before Commission after notice and opportunity for hearing).
69. An "institution-affiliated party" is defined to include, inter alia: (1) any director, officer, employee, or controlling stockholder (other than a bank holding company) of, or agent for, an insured depository institution; (2) any other person who has filed or is required to file a change-in-control notice with the appropriate Federal banking agency[;] (3) any shareholder (other than a bank holding company), consultant, joint venture partner, and any other person as determined by the appropriate Federal banking agency (by regulation or case-by-case) who participates in the conduct of the affairs of an insured depository institution; and (4) any independent contractor (including any attorney, appraiser, or accountant) who knowingly or recklessly participates in - (A) any violation of any law or regulation; (B) any breach of fiduciary duty; or (C) any unsafe or unsound practice, which caused or is likely to cause more than a minimal financial loss to, or a significant adverse effect on, the insured depository institution. 12 U.S.C. § 1813(u) (1994).
70. See, e.g., Am. B. Ass'n, Working Group on Lawyers' Representation of Regulated Clients Report to the House of Delegates 2 (1993) (responding to OTS action in Kaye, Scholer matter);
71. ABA Report to the House of Delegates, Section on Corporation, Banking and Business Law Recommendation, reprinted in Statement of Policy Adopted by American Bar Association Regarding Responsibilities and Liabilities of Lawyers in Advising With Respect to the Compliance by Clients With Laws Administered by the Securities and Exchange Commission, 31 Bus. Law. 543, 545-46 (1975) (responding to SEC initiatives to enhance disclosure obligations of lawyers).
72. See David B. Wilkins, How Should We Determine Who Should Regulate Lawyers? - Managing Conflict and Context in Professional Regulation, 65 Fordham L. Rev. 465, 482-91 (1996) (discussing "why context counts");
73. see generally David B. Wilkins, Making Context Count: Regulating Lawyers After Kaye, Scholer, 66 S. Cal. L. Rev. 1145 (1993) [hereinafter Wilkins, Making Context Count] (same).
74. But see Martha Minow & Elizabeth V. Spelman, In Context, 63 S. Cal. L. Rev. 1597 (1990) (discussing problems with context-specific rules generally);
75. Thomas D. Morgan & Robert W. Tuttle, Legal Representation in a Pluralist Society, 63 Geo. Wash. L. Rev. 984, 998-99 n.77 (1995) (arguing that context-specific "middle-level principles," like those suggested by Professor Wilkins, suffer from following problems: They do not adequately take into account fact that much of legal practice cuts across practice area boundaries; they do not specify which middle-level principles will regulate such conduct; they run risk of being captured by lawyers in particular practice area; and, finally, they may not adequately accommodate significant commonalities cutting across profession).
76. See, e.g., Del. Code Ann. tit. 8, § 102(b)(7) (1991) (providing that certificate of incorporation may contain provision eliminating or limiting personal liability of directors to corporation for breach of fiduciary duty in some circumstances); cf. Model Bus. Corp. Act § 2.02(b)(4) (1999) (allowing for exculpation of directors in even broader range of circumstances).
77. See, e.g., Del. Code Ann. tit. 8, §§ 341-56 (1991) (codifying special opt-in provisions for close corporations); cf. Model Bus. Corp. Act Ann. §§ 7.32(a)-(d) (Supp. 1999) (providing that shareholders of corporation may, by unanimous agreement effective for ten years, eliminate or restrict discretion of board of directors, but that such agreements shall cease to be effective when shares of corporation are listed on exchange or are publicly traded); Model Bus. Corp. Act Ann., Model Statutory Close Corp. Supp. § 20 (Supp. 1999) (providing for similar agreements).
78. Roberta Romano, The Genius of American Corporate Law 1, 48-51 (1993) (discussing efficiency of corporate law based primarily on default rules).
79. Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law (1991) (discussing corporate law in context of contractarian economics).
80. See, e.g., William W. Bratton, Jr., The New Economic Theory of the Firm: Critical Perspectives from History, 41 Stan. L. Rev. 1471 (1989) (criticizing contractarian view of law firm and overemphasis on default rules);
81. William W. Bratton, Jr., The "Nexus of Contracts" Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407 (1989) (same).
82. Tamar Frankel, Fiduciary Duties as Default Rules, 74 Or. L. Rev. 1209, 1267 (1995).
83. See Model Rules of Prof'l Conduct R. 1.5(a) (1998) (reasonableness of fees).
84. See id. R. 1.15 (safekeeping of client and third-party funds).
85. See, e.g., id. R. 1.7 (concurrent conflicts); id. R. 1.9 (successive conflicts).
86. For example, a referring lawyer ordinarily is not responsible for a matter that has been turned over entirely to another law firm. Id. R. 5.1(a) (making partner in law firm responsible for supervising conduct of lawyers in her own firm); id. R. 5.1(b) (imposing responsibilities on lawyer having direct supervisory authority over another lawyer). Under Model Rule 1.5(e), however, two lawyers not practicing in the same firm may not share a fee in a matter unless each lawyer assumes joint responsibility for the matter. A referring lawyer, in order to share the fee in a matter, must opt up to a higher level of responsibility for the matter. Id. R. 1.5(e).
87. See, e.g., id. R. 1.7 (concurrent conflicts); id. R. 1.9 (successive conflicts). With client consent after consultation, the lawyer can accept a conflicting representation that she otherwise would have to turn down.
88. For example, conflicts rules require that client consent be informed and that the lawyer reasonably believe that she can represent both clients. See infra text accompanying notes 194-95 (discussing Model Rules 1.7 and 1.9).
89. Although the relationship created by an opinion letter is not technically a contract, the third party may have legal recourse against the lawyer if the opinion is incorrect or misleading. See Richard R. Howe, The Duties and Liabilities of Attorneys in Rendering Legal Opinions, 1989 Colum. Bus. L. Rev. 283, 291-92 (1989) (discussing cases in which lawyers were held liable to third-party recipients of opinion letters for misrepresentations in such letters);
90. Ronald E. Mallen, Duty to Nonclients: Exploring the Boundaries, 37 S. Tex. L. Rev. 1147, 1157 (1996) (same).
91. Another example would be an arrangement whereby a lawyer agrees to hold third-party funds.
92. See infra note 97 (discussing efforts by federal banking regulators to induce depository institutions and their lawyers to opt into professional responsibility standards through attorney letter). Another example would be a more general opt-in lawyer whistleblowing rule. See infra Part II.D (discussing whistleblowing rules).
93. Model Rules of Prof'l Conduct R. 1.7(a) (1998). If the lawyer agrees to represent both clients and both clients consent, Rule 1.7 states that the lawyer may represent the second client, but only if the lawyer "reasonably believes the representation will not adversely affect the relationship with the other client." Id. R. 1.7(a)(1). This part of the rule is immutable because the lawyer cannot represent the new client - with or without the first client's consent - unless this minimum condition is satisfied.
94. Id. R. 1.15(b).
95. Id. R. 2.2(c).
96. The principal exception is a representation carried out under court appointment. See id. R. 6.2(c) (providing that lawyer can avoid court appointment to represent person if lawyer believes client or cause is so repugnant as to impair representation).
97. Some corporate law scholars, however, sharply criticize "incomplete" ex ante contracts in corporate governance. See William W. Bratton, Corporate Finance: Dividends, Noncontractibility, and Corporate Law, 19 Cardozo L. Rev. 409, 410 (1997) ("[T]he incomplete contracts models suggest that information asymmetries - in particular problems of ex post observation and verification - structurally delimit the class [of] subject matter suited to travel on this track of evolutionary improvement.").
98. Critics of the shift toward the primacy of contract in corporate law also have pointed out this problem with ex ante contracting. See id. at 422-23 (stating: [T]o have 'contract' terms that govern future states, those contingent states must be specified and the future outcomes must be computable. Since some future states of nature clearly are not computable, transacting parties as a result will lack the technology necessary to enable the negotiation and composition of a contract term ex ante).
99. See infra text accompanying notes 197-205 (discussing problems of enforcing conflict waiver). Conflict of interest problems in corporate law also are generally resolved with ex post contracting. See Model Bus. Corp. Act §§ 8.60, 8.62, 8.63 (1999) (providing for approval of director's self-dealing transaction by majority of disinterested directors or shareholders, but only after full disclosure by director of existence and nature of conflicting interest).
100. See Restatement (Third) of the Law Governing Lawyers § 54(2) (2000) ("An agreement prospectively limiting a lawyer's liability to a client for malpractice is unenforceable."); infra note 161 (discussing this rule).
101. See id. § 18(1)(a) (providing that "if [a] contract or modification is made beyond a reasonable time after the lawyer has begun to represent the client in the matter (see § 38(1) [governing lawyers' fees]), the client may avoid it unless the lawyer shows that the contract and the circumstances of its formation were fair and reasonable to the client"); see also id. cmt. d (noting that while Section 38 does not independently limit enforceability of contracts made at outset of representation, other law may protect clients who enter into such contracts); id. reporter's note to cmt. d (stating that there is conflicting authority on whether lawyer-client contracts reached before representation should be treated as arm's-length contracts).
102. See, e.g., Model Rules of Prof'l Conduct R. 1.5 (1998) (requiring fees to be reasonable). Fee contracts are more likely to be enforceable against the client if concluded early in the representation. See Restatement (Third) of the Law Governing Lawyers § 38(1) (2000) (requiring lawyer "[b]efore or within a reasonable time after beginning to represent a client in a matter," to communicate basis for fee unless lawyer has previously represented client on same basis or rate); id. § 42 reporter's note to cmt. c (citing authority holding that lawyer has burden of showing reasonableness of fee contract made during representation).
103. See Lester Brickman, Contingent Fees without Contingencies: Hamlet Without the Prince of Denmark?, 37 UCLA L. Rev. 29, 127 (1989) (criticizing widespread price gouging in contingent fee contracts);
104. Richard W. Painter, Litigating on a Contingency: A Monopoly of Champions or a Market for Champerty?, 71 Chi.-Kent L. Rev. 625, 668-87 (1995) [hereinafter Painter, Litigating on a Contingency] (describing incentives that can arise out of contingent fee arrangement and prospect of overcharging);
105. Richard W. Painter, The New American Rule: A First Amendment to the Client's Bill of Rights, Civ. Just. Rep., Mar. 2000, at 1, 2-5, http://www.manhattan-institute.org/html/cjr_1.htm (recommending that contingent-fee lawyers be required to choose for each case, and then disclose to client, dollars-per-hour limit on how high contingent fee can go).
106. See Model Rules of Prof'l Conduct R. 1.2(c) (1998) (permitting limitation of objectives of representation if client consents after consultation).
107. See infra text accompanying notes 206-15 (discussing possible framework for enforceable ex ante conflict waivers); see also infra Part II.D.
108. See Model Rules of Prof'l Conduct R. 2.3 (1998) (allowing lawyer, with client's permission, to "undertake an evaluation of a matter affecting a client for the use of someone other than the client"); id. R. 2.3 cmt. 1 (pointing out that, while such evaluation is performed at client's direction, it may be "for the primary purpose of establishing information for the benefit of third parties"). The lawyer undertaking such an evaluation opts out of the default rule that lawyers generally are not liable for negligence to persons who are not their clients.
109. See id. R. 1.15 (requiring lawyer to render accounting for such funds on demand).
110. See infra Part II.C (discussing whether covenants not to sue are enforceable). But see Model Rules of Prof'l Conduct R. 5.6(b) (1998) (prohibiting contractual restrictions on lawyer's practice).
111. See Model Rules of Prof'l Conduct R. 4.2 (1998) ("In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized by law to do so.").
112. See infra Part II.E.
113. See Model Rules of Prof'l Conduct R. 1.7(a)(2) (1998) (providing that client may consent to concurrent conflicts after consultation); id. R. 1.9(b) (same as to successive conflicts).
114. From July 1994 to August 1995, OTS required a depository institution to send to its attorney a "revised attorney letter" asking the lawyer to confirm that the attorney would respond in accordance with applicable rules of professional conduct to any issue that might arise in connection svith conflicts of interest, the institution's compliance with laws or regulations, and fiduciary duties or principles of safety and soundness. The attorney legally was not required to agree to the letter's terms, but the letter specifically provided that if the attorney did not provide the requested confirmations, the examiner would take this failure into account in its evaluation of the institution. See Revised Attorney Letter, OTS Transmittal No. 113, at 3 (June 24, 1994), reprinted in Ad Hoc Comm. on OTS Attorney Inquiry Letters, Guidance for Lawyers Responding to the OTS Revised Attorney Letter, 50 Bus. Law. 607 app. at 629 (1995).
115. For example, the opt-in affirmative action goals established by San Francisco and New York City bar associations require law firms to observe a level of responsibility to minority lawyers that is higher than that required by immutable nondiscrimination laws. See infra text accompanying notes 290-99.
116. For example, immutable nondiscrimination laws apply whether or not a firm opts into an affirmative action program. See infra text accompanying notes 302-08.
117. See Model Rules of Prof'l Conduct R. 2.2 (1998) (indicating when lawyer may act as intermediary).
118. American Lawyer's Code of Conduct, supra note 27, R. 2.5.
119. See Model Rules of Prof'l Conduct R. 1.16 (1998) (permitting lawyer to withdraw from representation in wide range of circumstances).
120. For example, lawyers in other jurisdictions should be allowed to opt into the mandatory whistleblowing rules adopted in New Jersey and Florida, if the client is advised of the choice when the lawyer is retained. See infra text accompanying notes 279-81; see also Fla. Stat. Ann. §§ 4-1.6(b)(1)-(2) (West 1994) (requiring lawyer to reveal client's intent to commit crime); N.J. Ct. R. app. RPC 1.6(b)(1) (same). New Jersey and Florida, on the other hand, would probably object - and for good reason - if a lawyer practicing in those states tried to opt into the narrower disclosure rule in Model Rule 1.6. See Model Rules of Prof'l Conduct R. 1.6 (1998) (prohibiting disclosure unless client crime is likely to result in death or serious bodily harm).
121. Macey & Miller, supra note 10, at 997-1004 (discussing client conflict provisions in Model Rules and Model Code).
122. Model Rules of Prof'l Conduct R. 1.11 (1998). There are "unique problems presented in cases of public employment," including the fact that a lawyer will not agree to work for the government ishe is subject to broad disqualification rules that "spread to the firm with which [she] becomes associated." United States v. Standard Oil Co., 136 F. Supp, 345, 362-63 (S.D.N.Y. 1955). A rule permitting law firms to screen former government lawyers is presumably something a government lawyer would bargain for in advance if she knew that imputed disqualification could seriously harm his future employment chances. On the other hand, the government would probably bargain for a rule barring congruent as well as adverse interest representations because a former government lawyer could undermine the government's credibility, and cast doubt on its motivations for bringing lawsuits, by representing a private plaintiff in matters related to matters she worked on while in government service (for example, leaving the Justice Department Microsoft team to represent a private plaintiff suing Microsoft under the antitrust laws).
123. Compare Model Rules of Prof'l Conduct R. 1.10 (1998) (Imputed Disqualification: General Rule) (giving no allowance for screening), with id. R. 1.11 (Successive Government and Private Employment) (permitting lawyer's firm to participate in matter if disqualified lawyer is properly screened, receives no portion of fee therefrom, and appropriate government agency is given written notice to allow it to ascertain compliance with rule).
124. Compare id. R. 1.9 (Conflict of Interest: Former Client) (prohibiting lawyer who has formerly represented client in matter from representing another person in "a substantially related matter in which that person's interests are materially adverse to the interests of the former client"), with id. R. 1.11 (providing that "a lawyer shall not represent a private client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee" regardless of whether subsequent representation is adverse to government).
125. See id. R. 1.9 (providing that representation may proceed with consent of former client after consultation); id. R. 1.11 (providing that representation may proceed with consent of government agency after consultation).
126. See Ayres & Gertner, supra note 12, at 91 (discussing how penalty default rules can force contracting parties to share information).
127. See Model Rules of Prof'l Conduct R. 1.7(a) (1998) ("A lawyer shall not represent a client if the representation of that client will be directly adverse to another client" unless lawyer reasonably believes it will not adversely affect relationship with other client and each client consents after consultation).
128. The Coase theorem holds that, assuming certain conditions are met - including no transaction costs, perfect information, and rationality - it does not matter which default rule is chosen. Ronald H. Coase, The Problem of Social Cost, 3 J.L. & Econ. 1, 15-16 (1960).
129. See, e.g., Wieder v. Skala, 609 N.E.2d 105 (1992) (N.Y. 1992). In Wieder, the New York Court of Appeals found an implied-in-fact covenant between a law firm and an associate prohibiting the firm from firing the associate for the associate's refusal to violate rules of professional responsibility. This is probably the rule that most associates and firms would agree upon in hypothetical bargaining, but others might agree instead upon employment-at-will in order to diminish the firm's exposure to strike suits by dismissed associates. Before Wieder, this issue was unresolved in New York, but few, if any, firms contracted with their associates for a less ambiguous rule, whether the pure employment-at-will rule or assurance that an associate would not be fired for refusal to violate rules of professional conduct. Either rule easily could have been inserted in an employee manual or hiring letter, but was not. After Wieder, law firms have made no discernable attempt to contract around New York's new exception to employment-at-will (some may believe it to be an immutable rule). At the same time, in jurisdictions such as Illinois where courts have rejected the Wieder approach in favor of pure employment-at-will (which is not an immutable rule), few, if any, law firms are contracting with their associates into the Wieder rule, even though, once again, a simple assurance in a letter or employee manual would suffice. See Balla v. Gambro, Inc., 584 N.E.2d 104, 109-10 (Ill. 1991) (finding that lawyer fired for insisting that his client's manufacture of defective dialyzers be reported when human life was endangered - as required by Illinois's version of Model Rule 1.6(b) - has no cause of action for wrongful discharge). Regardless of what rule the courts give on this issue, very little effort is thus made to contract around it. See Richard W. Painter, Professional Responsibility Rules as Implied Contract Terms, 34 Ga. L. Rev. 953, 960-63 (1999) (discussing reluctance of lawyers to contract on this issue).
130. Edward Bernstein defines "attitudinal negotiation cost" as "a decrease in value or increase in cost that results from an attitudinal change that either causes a party to revise his expectation of the probability of performance or the assertion of invalid claims, or that in fact affects one of these probabilities." Edward A. Bernstein, Law & Economics and the Structure of Value Adding Contracts: A Contract Lawyer's View of the Law & Economics Literature, 74 Or. L. Rev. 189, 229 (1995). For example, when a couple chooses not to enter into a prenuptial agreement, "it is often because the attitudinal negotiation cost exceeds the benefit of doing so." Id. at 231-32.
131. Parties bargaining over legal rules may ask more to give up a legal right, such as the impossibility excuse to performance on a contract, than they would pay to gain that right. See Russell Korobkin, The Status Quo Bias and Contract Default Rules, 83 Cornell L. Rev. 608, 642-44 (1998).
132. More likely than not, this status quo bias also causes the initial assignment of a legal entitlement to be the outcome of bargaining over that entitlement. See Elizabeth Hoffman & Matthew L. Spitzer, Willingness to Pay vs. Willingness to Accept: Legal and Economic Implications, 71 Wash. U. L.Q. 59, 99 (1993).
133. While sticky default rules are now widely recognized, see Korobkin, supra note 114, at 673-75, to this author's knowledge sticky default rules selected by rulemakers for public policy reasons have not yet been discussed in the contractarian literature.
134. Although one could interpret the Wieder rule, see supra note 112, to be immutable, it could also be a highly effective policy-preferred sticky default rule. To date, no New York law firm has publicized a policy of contracting around the rule, even though pure employment-at-will remains the controlling rule in other jurisdictions. See Painter, supra note 112, at 961 (indicating that almost no firms have "contracted with their associates for a less ambiguous rule, whether in the form of a pure employment-at-will rule or assurance that an associate would not be fired for refusal to violate rules of professional conduct").
135. See supra note 13 (contrasting rules with standards in general).
136. Model Rules of Prof'l Conduct R. 1.5(c) (1998).
137. Model Rules of Prof'l Conduct R. 1.5(a) (1998) ("A lawyer's fee shall be reasonable."); see also Model Code of Prof'l Responsibility DR 2-106(A) (1980) (providing that lawyer shall not charge a "clearly excessive fee"); id. DR 2-106(B) (providing that "[a] fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee" and listing eight factors to be weighed in determining reasonableness of fee). The tailored standard for securities class-action lawyers links reasonableness to the amount of damages. See Private Securities Litigation Reform Act § 101(b), 15 U.S.C. § 77z-1(a)(6) (Supp. II 1996) (requiring that fees must be "reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class").
138. Compare Model Rules of Prof'l Conduct R. 1.5(a) (1998) (stating: The factors to be considered in determining the reasonableness of a fee include the following: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent), with Model Code of Prof'l Responsibility DR 2-106(B) (1980) (listing substantially similar factors for determining reasonableness).
139. See, e.g., McKenzie Constr. v. Maynard, 823 F.2d 43, 45, 48-49 (3d Cir. 1987) (holding contingent fee not unreasonable where attorney earned $790 per hour rather than his usual hourly rate of $60 per hour); Anderson v. Kenelly, 547 P.2d 260, 260-61 (Colo. Ct. App. 1975) (holding that lawyer unreasonably charged one-third contingent fee to assist widow in collection of claim from life insurance company in which lawyer's only action was to inform insurer of date widow's deceased husband enlisted in Air Force). The Third Circuit looks for reasonableness both ex ante and ex post. "Although reasonableness at the time of contracting is relevant, consideration should also be given to whether events occurred after the fee arrangement was made which rendered a contract fair at the time unfair in its enforcement." McKenzie Constr., 823 F.2d at 45.
140. See N.J. Ct. R. 1:21-7(c) (providing for schedule of contingent fees allowing "(1) 33 1/3% on the first $500,000 recovered; (2) 30% on the next $500,000 recovered; (3) 25% on the next $500,000 recovered; (4) 20% on the next $500,000 recovered" and on all additional amounts reasonable fee by application to court).
141. See Am. Trial Lawyers Ass'n v. N.J. Supreme Court, 330 A.2d 350, 355 (N.J. 1974) (holding, against challenge by state bar, that New Jersey Supreme Court had constitutional authority to establish schedule for contingent fees).
142. See Brickman, supra note 88, at 127 (stating that ex post judicial decisionmaking under reasonableness standard fails to protect clients from excessive contingent fees). Professor Brickman and his colleagues have proposed a more clearly defined rule: When a defendant makes an early settlement offer that is subsequently rejected by a plaintiff, the plaintiff's lawyer should be permitted to charge only an hourly rate on work done before the settlement offer, plus a percentage of any recovery in excess of the offer. Lester Brickman et al., Rethinking Contingency Fees 28 (1994). Brickman's proposal was included in a California ballot measure, but was opposed by plaintiffs' lawyers and rejected by voters. California, like most jurisdictions, thus fell back on the reasonableness standard. See B. Drummond Ayres, Jr., Cougars and Lawyers Win in California Ballot Measures, N.Y. Times, Mar. 28, 1996, at B12.
143. Model Rules of Prof'l Conduct R. 1.8 (a)(1) (1998). Model Rule 1.8(a)(1)-(3) does have some defined rule components - for example, the requirement that the disclosure to the client be in writing, that the client be "given a reasonable opportunity to seek the advice of independent counsel in the transaction," and that the client's consent to the transaction be in writing.
144. Or. Code of Prof'l Responsibility DR 5-110(A)-(C) (1992) (stating: (A) A lawyer shall not have sexual relations with a current client of the lawyer unless a consensual sexual relationship existed between them before the lawyer/client relationship commenced. . . . . . . (C) For purposes of DR 5-110 'sexual relations' means: (1) Sexual intercourse; or (2) Any touching of the sexual or other intimate parts of a person or causing such person to touch the sexual or other intimate parts of the lawyer for the purpose of arousing or gratifying the sexual desire of either party).
145. "Presumably" because there is always room to argue over what constitutes "sexual relations." See White House Response to Report of the Office of Independent Counsel, Sept. 11, 1998, reprinted in Excerpts From White House Response to Starr Report, L.A. Times, Sept. 12, 1998, at S11 (reprinting White House statement that President Clinton's encounters with Monica Lewinsky "did not consist of 'sexual relations' as [President Clinton] understood that term to be defined at his [Paula] Jones deposition on January 17, 1998"). Oregon's definition includes some subjective components (e.g., "arousing or gratifying the sexual desire of either party"). Or. Code of Prof'l Responsibility DR 5-110(C)(2) (1992).
146. See N.Y. Code of Prof'l Responsibility DR 5-111 (2000) ("A lawyer shall not: . . . [i]n domestic relations matters, enter into sexual relations with a client during the course of the lawyer's representation of the client.").
147. See Model Rules of Prof'l Conduct R. 1.7(b) (1998) ("A lawyer shall not represent a client if the representation of that client may be materially limited by . . . the lawyer's own interests, unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation."); see also id. R. 1.7 cmt. 11 ("Relevant factors in determining whether there is potential or adverse effect include the duration and intimacy of the lawyer's relationship with the client . . . .").
148. See infra text accompanying notes 145-55 (discussing specific examples).
149. Model Rules of Prof'l Conduct R. 1.5 (1998) (setting forth factors to be weighed by lawyer in determining reasonableness of fees).
150. Id. R. 1.1 ("A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation."); id. R. 1.3 ("A lawyer shall act with reasonable diligence and promptness in representing a client.").
151. Id. R. 1.13(b) (setting forth obligation to lawyer when she knows of potential illegal activities by employee of organization).
152. See id. R. 1.15(a) (providing that if lawyer comes into possession of property of client or third person, lawyer must hold property separately from lawyer's own property; that funds shall be kept in separate account in state where lawyer's office is situated, or elsewhere with consent of client or third person; that other property shall be identified as such and appropriately safeguarded; and that record of such accounts and property shall be kept by lawyer for period of five years after termination of representation). With the exception of the requirement that the account be in the state where the lawyer's office is situated, this rule is immutable.
153. Model Code of Prof'l Responsibility Canon 9 (1980).
154. See, e.g., Model Rules of Prof'l Conduct R. 1.7, 1.9 (1998) (establishing functional tests for conflicts without "appearance of impropriety" standard); id. R. 1.9 cmt. 5 (criticizing Model Code "appearance of impropriety" standard because "the appearance of impropriety can be taken to include any new client-lawyer relationship that might make a former client feel anxious[,]" and "since 'impropriety' is undefined [in the Code], the term 'appearance of impropriety' is question-begging").
155. The Model Rules themselves recognize these three categories of enforcement. Id. scope 14 ("Compliance with the Rules, as with all law in an open society, depends primarily upon understanding and voluntary compliance, secondarily upon reinforcement by peer and public opinion and finally, when necessary, upon enforcement through disciplinary proceedings."). Nonetheless, with the exception of Model Rule 6.1, all of the Model Rules are designed, at least in principle, to be legally enforced.
156. The drafters of the Model Rules insisted that "[v]iolation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached[,]" and that "nothing in the Rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such a duty." Id. scope 18. This language, however, does not preclude use of the Rules as evidence that a lawyer has complied with requisite standards in her profession. Furthermore, rules of professional responsibility are regularly used for offensive and defensive purposes in malpractice litigation. See John Leubsdorf, Legal Malpractice and Professional Responsibility, 48 Rutgers L. Rev. 101, 117-20, 157-59 (1995) (discussing relevance of professional responsibility rules in malpractice actions);
157. Gary A. Munneke & Anthony E. Davis, The Standard of Care in Legal Malpractice: Do the Model Rules of Professional Conduct Define It?, 27 J. Legal Prof. 33, 81-84 (1997-1998) (same);
158. Charles W. Wolfram, The Code of Professional Responsibility as a Measure of Attorney Liability in Civil Litigation, 30 S.C. L. Rev. 281, 291-95 (1979) (same);
159. Note, The Evidentiary Use of the Ethics Codes in Legal Malpractice: Erasing a Double Standard, 109 Harv. L. Rev. 1102, 1118-19 (1996) (same).
160. Reputational penalties for breach of legally enforced rules are likely to be higher if enforcement proceedings are public.
161. See Benjamin Klein & Keith B. Leffler, The Role of Market Forces in Assuring Contractual Performance, 89 J. Pol. Econ. 615, 629-33, 635-36 (1981) (developing reputational capital paradigm as economic model).
162. See Karl S. Okamoto, Reputation and the Value of Lawyers, 74 Or. L. Rev. 15, 32-33 (1995) (discussing importance of reputational capital to securities lawyers).
163. See Gilson & Mnookin, Disputing Through Agents, supra note 9, at 543-46, 547 (describing evolution of cooperative relationships among lawyers in San Francisco Bay Area domestic relations bar).
164. Model Rule 6.1, for example, contains an aspirational pro bono
165. Rules prohibiting sexual relations with clients are a good example. See supra notes 126-29.
166. Model Code of Prof'l Responsibility Canon 9 (1969) ("A lawyer should avoid even the appearance of impropriety[.]").
167. See, e.g., Gen. Motors Corp. v. City of New York, 501 F.2d 639, 648-52 (2d Cir. 1974) (applying "appearance of impropriety" standard to disqualify former government lawyer who substantially participated in bringing of antitrust suit by Justice Department from representing private plaintiff in similar antitrust suit against same defendant).
168. See Wolfram, supra note 18, at 686-87 ("[T]he mostly dead dog of appearance of impropriety[ ] . . . plays only a minor, if irritating and potentially distorting, role in modern conflicts opinions."); see also Model Rules of Prof'l Conduct R. 1.9 cmt. 5 (1998) (stating that, although Canon 9 was formerly used to deal with motions to disqualify lawyer because of conflicts, "since 'impropriety' is undefined, the term 'appearance of impropriety' is question-begging"); id. R. 1.9 cmt. 6 (stating that "a rule based on a functional analysis is more appropriate for determining the question of disqualification").
169. Canons of Prof'l Ethics Canon 6 (1908) (providing that "a lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose"). Canon 6 provided that "[i]t is unprofessional to represent conflicting interests, except by express consent of all concerned given after full disclosure of the facts." Id.
170. Model Code of Prof'l Responsibility DR 5-105(A) (1980) (providing that "[a] lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C)" (footnotes omitted)); id. DR 5-105(C) (providing that "a lawyer may represent multiple clients if it is obvious that [she] can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each").
171. See Model Rules of Prof'l Conduct R. 1.7 (1998) (concurrent conflicts). The comment provides some guidance as to what adversity means. Id. R. 1.7 cmt. 3 (stating: Thus, a lawyer ordinarily may not act as advocate against a person the lawyer represents in some other matter, even if it is wholly unrelated. On the other hand, simultaneous representation in unrelated matters of clients whose interests are only generally adverse, such as competing economic enterprises, does not require consent of the respective clients).
172. Model Code of Prof'l Responsibility DR 5-104(A) (1969) (providing that lawyers "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 his professional judgment therein for the protection of the client, unless the client has consented after full disclosure"). The Code's Ethical Considerations provide that "[a] lawyer should not seek to persuade his client to permit him to invest in an undertaking of his client nor make improper use of his professional relationship to influence his client to invest in an enterprise in which the lawyer is interested." Id. EC 5-3.
173. Model Rules of Prof'l Conduct R. 1.8(a)(1)-(3) (1998).
174. Canon 11, for example, provided that client funds or other trust property "should be reported promptly, and except with the client's knowledge and consent should not be commingled with [the lawyer's] private property or be used by him." Canons of Prof'l Ethics Canon 11 (1908).
175. The Model Code specifically requires, among other things, that client funds be kept in "one or more identifiable bank accounts maintained in the state in which the law office is situated[,]" that no funds belonging to the lawyer be deposited therein except those necessary to pay bank charges and funds belonging in part to the client, and that the lawyer "[m]aintain complete records of all funds, securities, and other properties of a client coming into the possession of the lawyer[.]" Model Code of Prof'l Responsibility DR 9-102(A), 9-102(B)(3) (1980). Model Rule 1.15 extends many of these requirements to property belonging to third persons and requires the lawyer to keep records for a specific period of time (five years is suggested) after termination of the representation. Model Rules of Prof'l Conduct R. 1.15(a) (1998).
176. Restatement (Third) of the Law Governing Lawyers § 38 (2000) (providing: (1) Before or within a reasonable time after beginning to represent a client in a matter, a lawyer must communicate to the client, in writing when applicable rules so provide, the basis or rate of the fee, unless the communication is unnecessary for the client because the lawyer has previously represented that client on the same basis or at the same rate. . . . (3) Unless a contract construed in the circumstances indicates otherwise: (a) a lawyer may not charge separately for the lawyer's general office and overhead expenses; (b) payments that the law requires an opposing party or that party's lawyer to pay as attorney-fee awards or sanctions are credited to the client, not the client's lawyer, absent a contrary statute or court order; and (c) when a lawyer requests and receives a fee payment that is not for services already rendered, that payment is to be credited against whatever fee the lawyer is entitled to collect).
177. See Painter, Litigating on a Contingency, supra note 88, at 639-40 (discussing repeal, in New York's 1848 Field Code, of statutes prohibiting contingent fees).
178. See Model Rules of Prof'l Conduct R. 1.5(c) (1998) (requiring fees to be reasonable and stating that fee may be contingent upon outcome of matter, provided agreement is in writing and states method by which fee shall be determined). The Restatement takes the same position as the Model Rules. Restatement (Third) of the Law Governing Lawyers § 35 (2000) (same). In the absence of a fee contract, the default rule under the Restatement is that a lawyer shall be compensated for "the fair value of the lawyer's services." Id. § 39.
179. Compare Model Code of Prof'l Responsibility DR 5-103(B) (1980) (requiring that client ultimately be responsible for costs and expenses), with Model Rules of Prof'l Conduct R. 1.8(e)(1) (1998) (stating that lawyer may advance costs and expenses, repayment of which is contingent on the outcome of litigation), and Restatement (Third) of the Law Governing Lawyers § 36(2) (2000) (substantially similar to Model Rule 1.8(e)(1)).
180. Compare Model Code of Prof'l Responsibility DR 2-107(A)(2) (1980) (prohibiting unaffiliated lawyers from dividing fees except in proportion to work they actually perform for client), with Model Rules of Prof'l Conduct R. 1.5(e)(1) (1998) (permitting fee division either on basis of services actually performed or if "by written agreement with the client, each lawyer assumes joint responsibility for the representation").
181. Model Code of Prof'l Responsibility DR 6-102(A) (1980) ("A lawyer shall not attempt to exonerate himself from or limit his liability to his client for his personal malpractice.").
182. Model Rules of Prof'l Conduct R. 1.8(h) (1998). Contra, Restatement (Third) of the Law Governing Lawyers § 54 (2000) ("An agreement prospectively limiting a lawyer's liability to a client for malpractice is unenforceable."). In this area, the ABA's contractarianism has gone ahead of prevailing law, and the ALI Reporter points out that the Restatement provision states "essentially the rule that would result in every jurisdiction from application of ABA Model Rule 1.8(h)." Id. reporter's note to cmt. b. However, comment b also points out that "[a] client and lawyer may agree in advance . . . to arbitrate claims for legal malpractice, provided that the client receives proper notice of the scope and effect of the agreement and if the relevant jurisdiction's law applicable to providers of professional services renders such agreements enforceable." Id.
183. See, e.g., Model Rules of Prof'l Conduct R. 1.5(c) (1998) (requiring that contingent fee agreement be in writing); Restatement (Third) of the Law Governing Lawyers § 38 cmt. b (2000) (observing that "[m]ost states require that contingent-fee contracts be in writing" and that "[e]ven when there is no such requirement, tribunals are reluctant to uphold oral contingent-fee contracts"). The Ethics 2000 Commission has recommended that client consent to conflicting representations under Model Rule 1.7 be in writing. See Proposed Rule 1.7 (Public Discussion Draft 1999), http://www.abanet.org/cpr/e2k/ rule17draft.html (striking limitation that lawyer shall not represent client if there is conflict of interest, in favor of language allowing such representation "if each affected client gives informed consent in writing").
184. See, e.g., Model Rules of Prof'l Conduct R. 1.7 (1998) (requiring consent after consultation); id. R. 1.8(f) (same); id. R. 1.9 (same); id. R. 1.11 (same).
185. Restatement (Third) of the Law Governing Lawyers § 19 (2000); see also id. § 21 (providing that lawyer and client may agree which of them will make specified decisions in representation, subject to other provisions of Restatement governing enforcement of lawyer-client contracts and allocation of authority between lawyer and client in representation).
186. Id. § 19 cmt. a (Scope and Cross References) (citations omitted).
187. Specific examples of Restatement provisions to which Section 19 is subject are listed in comment a. Id. Illustration 1 in comment c involves the inside legal counsel of a corporation who wants to litigate a case within a limited budget, and agrees with outside counsel to conduct limited discovery, even though this could materially lessen the chances of success. Illustration 2 involves a legal clinic that, for a small fee, offers a half-hour consultation with a client about the client's tax return, after disclosure that this limited review may not find important tax matters and that clients can have a more complete consideration of their returns only if they arrange for a second meeting for an additional fee. Both of these arrangements are permissible according to the comment. Illustration 3 involves a lawyer who offers to provide inexpensive tax advice even though she has little knowledge of tax law, and asks occasional tax clients to waive the requirement of reasonable competence. This arrangement, according to the comment, is impermissible. Id. § 19 cmt. c. Section 19 thus gives qualified support for so-called "limited performance agreements," at least if they cover the scope of legal services (i.e., which tasks the lawyer will perform) rather than the quality of the services to be provided (i.e., how well the lawyer will perform a particular task). Because strict interpretations of competence and diligence requirements arguably cut off persons of limited means from any legal services at all, limited performance agreements have received considerable support in the academic literature. See David A. Hyman & Charles Silver, And Such Small Portions: Limited Performance Agreements and the Cost/ Quality/Access Trade-Off, 11 Geo. J. Legal Ethics 959, 973 (1998) (proposing that ethics rules only require that nature of services to be performed be described accurately and completely to client);
188. Fred C. Zacharias, Limited Performance Agreements: Should Clients Get What They Pay For?, 11 Geo. J. Legal Ethics 915, 915-17 (1998) (proposing abolition of disciplinary rules that discourage lawyers from providing services in accordance with clients' willingness to pay).
189. Another related issue is "ghostwriting" arrangements whereby a lawyer agrees to assist a pro se party with drafting pleadings, but does not sign the pleadings herself. Many courts are hostile to agreements of this sort. See Laremont-Lopez v. Southeastern Tidewater Opportunity Ctr., 968 F. Supp. 1075, 1075 (E.D. Va. 1997) (holding that "attorneys' practice of ghostwriting complaints was inconsistent with procedural, ethical and substantive rules of the Court"); Somerset Pharm., Inc. v. Kimball, 168 F.R.D. 69, 72-73 (D. Fla. 1996) (finding that filing of pro se pleadings that are actually prepared by attorneys "taints" legal practice); see also Elizabeth J. Cohen, Afraid of Ghosts: Lawyers May Face Real Trouble When They "Sort Of Represent Someone, A.B.A. J., Dec. 1997, at 80 (raising ethical questions about practice of ghostwriting).
190. Restatement (Third) of the Law Governing Lawyers § 19 cmt. b (2000) (citations omitted).
191. Comment b continues: In the long run, moreover, a restriction could become a standard practice that constricts the rights of clients without compensating benefits. The administration of justice may suffer from distrust of the legal system that may result from such a practice. Those reasons support special scrutiny of noncustomary contracts limiting a lawyer's duties, particularly when the lawyer requests the limitation. Id.
192. As comment e explains: The general principles set forth in this Section apply also to contracts calling for more onerous obligations on the lawyer's part. A lawyer or law firm might, for example, properly agree to provide the services of a tax expert, to make an unusually large number of lawyers available for a case, or to take unusual precautions to protect the confidentiality of papers. Such a contract may not infringe the rights of others, for example by binding a lawyer to aid an unlawful act (see § 23) or to use for one client another client's secrets in a manner forbidden by § 62. Nor could the contract contravene public policy, for example by forbidding a lawyer ever to represent a category of plaintiffs even were there no valid conflict-of-interest bar (see § 13) or by forbidding the lawyer to speak on matters of public concern whenever the client disapproves. Id. § 19 cmt. e (Contracts to increase lawyer's duties) (citing id. § 23 (providing that lawyer retains "authority that may not be overridden by a contract" to refuse to perform, counsel, or assist conduct lawyer believes to be unlawful, and to take action that lawyer reasonably believes to be required by law or an order of tribunal); id. § 13 (providing that lawyer may not enter into law firm agreement or settlement of claim that restricts right of lawyer to practice law, including right to take action on behalf of other clients); id. § 62 (providing that lawyer may use or disclose client information only when client consents after being adequately informed)); see infra text accompanying notes 250-54 (discussing and criticizing this last restriction on lawyer contracting).
193. Proposed Rule 1.4 (Public Discussion Draft 1999), http://www.abanet.org/cpr/e2k/ rule14draft.html.
194. The Restatement defines "informed consent" in Section 122(1), its provision governing conflicts of interest in representations. Restatement (Third) of the Law Governing Lawyers § 122(1) (2000) ("Informed consent requires that the client or former client have reasonably adequate information about the material risks of such representation to that client or former client.").
195. Proposed Rule 1.4(c) (Public Discussion Draft 1999), http://www.abanet.org/cpr/e2k/ rule14draft.html.
196. The Ethics 2000 Commission states that the change is for clarification purposes. See Model Rule 1.4, Reporter's Explanations of Changes, http:// www.abanet.org/cpr/e2k/rule14memo.html (Mar. 23, 1999) (stating: The Commission recommends that throughout the Rules, the phrase "consent after consultation" be replaced with "gives informed consent." The Commission believes that "consultation" is a term that is not well understood and does not sufficiently indicate the extent to which clients must be given adequate information and explanation in order to make reasonably informed decisions. The term "informed consent," which is familiar from its use in other contexts, is more likely to convey to lawyers what is required under the Rules. The definition is largely based on . . . the Restatement).
197. Proposed Rule 1.4 cmt. 5 (Public Discussion Draft 1999), http://www.abanet.org/cpr/ e2k/rule14draft.html (stating: Many of the Rules of Professional Conduct require the lawyer to obtain the informed consent of a client or other person before accepting or continuing representation or pursuing a course of conduct. See, e.g., [Model Rules of Prof'l Conduct R.] 1.6-1.12. The communication necessary to obtain such consent will vary according to the Rule involved and the circumstances giving rise to the need for disclosure. The lawyer must make reasonable efforts to assure that the client possesses information reasonably adequate to make an informed decision. Ordinarily, this will require communication that includes a disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client of the material advantages and disadvantages of the proposed course of conduct, and a discussion of the client's options and alternatives. In some circumstances it may be appropriate for a lawyer to advise a client to seek the advice of other counsel . . .).
198. See supra text accompanying notes 145-55 (discussing general shift in professional responsibility codes toward defined rules).
199. Model Rules of Prof'l Conduct R. 1.8(d) (1998) ("Prior to the conclusion of representation of a client, a lawyer shall not make or negotiate an agreement giving the lawyer literary or media rights to a portrayal or account based in substantial part on information relating to the representation."); Restatement (Third) of the Law Governing Lawyers § 36(3) (2000) (same); cf. Model Code of Prof'l Responsibility DR 5-104(B) (1980) (referring to "publication rights" instead of "literary or media rights").
200. Canon 11 states that "[t]he lawyer should refrain from any action whereby for his personal benefit or gain he abuses or takes advantage of the confidence reposed in him by his client." Canons of Prof'l Ethics Canon 11 (1956). Canon 38 states that "a lawyer should accept no compensation, commissions, rebates or other advantages from others without the knowledge and consent of his client after full disclosure." Id. Canon 38.
201. Or. Code of Prof'l Responsibility DR 5-110(A) (1992).
202. The Commission proposes to add a new paragraph (k) to Rule 1.8 that prohibits "sexual relations" between a lawyer and a client, unless a consensual sexual relationship existed at the time the client-lawyer relationship began. Proposed Rule 1.8 (Public Discussion Draft 1999), http://www.abanet.org/cpr/e2k/rule18draft.html.
203. Most state codes simply do not specifically regulate attorney-client sex. New York's rule is narrowly tailored to cover domestic relations clients only. N.Y. Code of Prof'l Responsibility DR 5-111 (2000).
204. See Roger C. Cramton, Delivery of Legal Services to Ordinary Americans, 44 Case W. Res. L. Rev. 531, 559-60 (1994) (citing growing body of caselaw on sexual relations between lawyers and individual clients, including People v. Gibbons, 685 P.2d 168, 175 (Colo. 1984), In re Marriage of Kantar, 581 N.E.2d 6, 15-16 (Ill. App. Ct. 1991), and Drucker's Case, 577 A.2d 1198, 1203 (N.H. 1990), all of which found conflict of interest in relationship).
205. See supra note 137 (observing that only one of Model Rules is aspirational).
206. See, e.g., Model Rules of Prof'l Conduct R. 6.1 (1983) (amended 1993) (providing that lawyer should "aspire to render at least (50) hours of pro bono publico legal services per year").
207. See, e.g., Rules Regulating the Florida Bar R. 4-6.1 (1994) (containing aspirational rule encouraging twenty hours of pro bono work each year or annual donation of $350 to legal aid organization, and requiring lawyers to report their annual pro bono service or payments made in lieu of service).
208. See, e.g., Painter, Ethics 2000 Letter, supra note 4 (proposing default rule that lawyer must report organizational client's prospective crime or fraud to its board of directors);
209. Written Testimony of Robert E. O'Malley (May 26, 1998), http://www.abanet.org/cpr/omalley.html (proposing that comment 15 to Model Rule 1.6 be amended to provide: If the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes is criminal or fraudulent, or if the client has used the lawyer's services to perpetrate a crime or a fraud, the lawyer may (but is not required to) withdraw, as stated in Rule 1.16(b)(1) and (2)).
210. See, e.g., Painter, Proposal to Amend Model Rules, supra note 3 (proposing that lawyers and clients be permitted contractually to waive conflicts ex ante under certain circumstances).
211. See, e.g., Written Testimony of Richard Zitrin (May 29, 1998), http:// www.abanet.org/cpr/zitrin.html (proposing that each law firm be required to spend forty hours per year per lawyer to serve needs of people who otherwise would not be represented).
212. See Minutes of October 17-18, 1997 Ethics 2000 Meeting, Ethics 2000 Commission Web Page, supra note 1 (stating: The Committee also discussed whether the Reporters should continue to draft a "best practice" section in the Comment section of the Rules. Some members questioned how much value a "best practice" section adds to the rules and expressed concern about the effect of such standards on malpractice standards of care. The Committee agreed that looking at "best practice" is helpful and a good exercise, and agreed to reconsider the issue after looking at a few more rules); Minutes of July 31 to August 1, 1998 Ethics 2000 Meeting, id. ("The Commission tentatively decided to abandon attempts to include a 'best practice' section in the Rules in light of comments made at the Advisory Council meeting. Discussion of 'best practice' in a separate document remains a possibility.").
213. Macey & Miller, supra note 10, at 972-73, 997 (stating that, in many cases, "efficiency considerations suggest that the government's role should ordinarily be to supply reasonable 'gap-filling' or default terms that the parties likely would have agreed to if they had bargained over the issue ex ante" (footnote omitted)). The rules governing former government attorneys, however, are more precisely described as tailored majoritarian default rules that are in some respects more stringent and in other respects more lenient than the rules governing conflicts between private sector clients. See supra text accompanying notes 105-08 (comparing Model Rule 1.11 with Model Rules 1.9 and 1.10).
214. Model Rules of Prof'l Conduct R. 1.7 (1998).
215. See supra text accompanying note 110.
216. Model Rules of Prof'l Conduct R. 1.9 (1998) (Conflict of Interest: Former Client); Wolfram, supra note 18, at 681, 727-28 (discussing ambiguities in "substantial relationship" standard used to evaluate former client conflicts).
217. Model Rules of Prof'l Conduct R. 1.7 (1998) (requiring that representation be "directly adverse" to trigger impermissible conflict); id. R. 1.9 (requiring that representation be "materially adverse" to trigger impermissible conflict).
218. Jason Scott Johnston observes that a contingent ex post entitlement bestowed by an ambiguous default standard in some instances will facilitate bargaining around the default because the party possessing the entitlement has less incentive to hold out and delay, if not permanently stall, negotiations than does a party holding a definite ex ante entitlement from a defined default rule. The risk of losing the right entirely through erroneous judicial interpretation of a standard instead creates an incentive to negotiate. Jason Scott Johnston, Bargaining Under Rules Versus Standards, 11 J.L. Econ. & Org. 256, 267-69 (1995). The ambiguous standards used in conflicts rules illustrate this point well. Lawyers have a contingent ex post entitlement to represent a client whose interests are not "adverse" to another client, and (in conflicts with former clients) if the second matter is not "substantially related" to the first. In close cases, however, these ambiguous default standards facilitate bargaining around the default through consultation with clients who either agree to affirm the default rule (give consent), or seek to change it (persuade the lawyer not to go ahead with the representation although it appears that the lawyer is entitled to proceed). Lawyers who do not seek client consent in close cases risk an erroneous ex post judicial determination that their assessment of factors such as adversity or substantial relationship was wrong.
219. Model Rules of Prof'l Conduct R. 1.7 (1998) (requiring "consent after consultation"); id. R. 1.9 (same).
220. Id. R. 1.7 (requiring that "the lawyer reasonably believes that the representation will not adversely affect the relationship with the other client").
221. For several decades, it has been recognized that "disqualification motions have become 'common tools of the litigation process, being used . . . for purely strategic purposes[.]'" Allegaert v. Perot, 565 F.2d 246, 251 (2d Cir. 1977) (quoting Judge Van Graafeiland, Lawyer's Conflict of Interest - A Judge's View (Part II), N.Y. L.J., July 20, 1977, at 1). Firms practicing in specialty areas, such as mergers and acquisitions, are particularly likely to be subjected to these motions. See George D. Raycraft, Conflicts of Interest and Effective Representation: The Dilemma of Corporate Counsel, 39 Hastings L.J. 605, 607 (1988) (observing that "the [mergers and acquisitions] specialty firm inevitably faces frequent and recurring conflicts of interest between present and former clients with adverse or potentially adverse interests. These conflicts often result in lawsuits to disqualify the law firm and, in some instances, in actions for malpractice." (citations omitted)). Parties to these lawsuits in turn often retain expert witnesses. See Monroe Freedman, Crusading for Legal Ethics, Legal Times, July 10, 1995, at 25 ("Expert witnesses on lawyers' and judges' ethics charge as much as $500 an hour for their time, and some law professors double and triple their academic salaries by consulting and testifying about ethics.").
222. For a more detailed discussion on this subject, see generally Richard W. Painter, Advance Waiver of Conflicts, 8 Geo. J. Legal Ethics 289 (2000).
223. See generally Note, Prospective Waiver of the Right to Disqualify Counsel for Conflicts of Interest, 79 Mich. L. Rev. 1074 (1981) (discussing caselaw on enforceability of advance consents).
224. Westinghouse Elec. Corp. v. Gulf Oil Corp., 588 F.2d 221, 229 (7th Cir. 1978) (refusing to enforce alleged understanding between Gulf and law firm hired by Gulf that firm could continue to represent another longstanding client with potentially adverse interests to Gulf if dispute between two should arise); In re Boone, 9 F. 793, 794-95 (N.D. Cal. 1898) (refusing to honor claimed agreement in disbarment proceeding in circumstances in which lawyer's trustworthiness also had been brought into question).
225. See Fisons Corp. v. Atochem N. Am., Inc., No. 90 Civ. 1080 (JMC), 1990 WL 180551, at *8 (S.D.N.Y. Nov. 14, 1990) (approving of advance consent).
226. See, e.g., Unified Sewerage Agency of Wash. County v. Jelco Inc., 646 F.2d 1339 (9th Cir. 1981) (holding that client's "longstanding" consent to conflict coupled with reliance by others can amount to estoppel).
227. See, e.g., Interstate Prop. v. Pyramid Co. of Utica, 547 F. Supp. 178, 183 (S.D.N.Y. 1982) (finding that there was little evidence that client communicated confidential information to law firm and that terms of client's waiver itself "can be read to eliminate any possibility, however slight, that confidential information might have been acquired from [client] during its relationship with [law firm] that will now be used to [client's] disadvantage"). These and other cases on advance waivers are discussed more extensively in Painter, supra note 197, at 297-311.
228. ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 93-372 (1993) (Waivers of Future Conflicts of Interest).
229. The Opinion states: It is the view of the Committee that it is not ordinarily impermissible to seek such prospective waivers; that the mere existence of a prospective waiver will not necessarily be dispositive of the question whether the waiver is effective; that such waiver will ordinarily be effective only in circumstances in which the lawyer determines that there is no adverse effect on the first representation from undertaking the second representation and that the particular future conflict of interest as to which the waiver is invoked was reasonably contemplated at the time the waiver was given; and that consent to a conflicting representation does not in itself constitute consent to the lawyer's disclosure, or use against the client's interest, of information relating to the representation under Rule 1.6. It is also the Committee's view that any such waiver should be in writing. Id.
230. Id.
231. The Restatement provides: Client consent to conflicts that might arise in the future is subject to special scrutiny, particularly if the consent is general. A client's open-ended agreement to consent to all conflicts normally should be ineffective unless the client possesses sophistication in the matter in question and has had the opportunity to receive independent legal advice about the consent. . . . On the other hand, particularly in a continuing client-lawyer relationship in which the lawyer is expected to act on behalf of the client without a new engagement for each matter, the gains to both lawyer and client from a system of advance consent to defined future conflicts might be substantial. A client might, for example, give informed consent in advance to the types of conflicts that are familiar to the client. Such an agreement could effectively protect the client's interest while assuring that the lawyer did not undertake a potentially disqualifying representation. Restatement (Third) of the Law Governing Lawyers § 122 cmt. d (2000). The ALI approach is preferable to the current approach of the ABA, although it still does not clearly specify when advance consents are and are not enforceable.
232. Proposed Rule 1.7 cmt. 13 (Public Discussion Draft 1999), http://www.abanet.org/ cpr/e2k/rule17draft.html.
233. See Painter, Proposal to Amend Model Rules, supra note 3.
234. It is often not clear whether parent, subsidiary, and sibling corporations should be treated as a single entity for conflicts purposes. Similar problems can arise in the context of joint ventures and other complex business arrangements. It is usually preferable for these problems to be worked out ex ante contractually rather than through ex post judicial determination.
235. For example, a client could waive "positional" conflicts of interest by agreeing that the lawyer would not be deemed to represent an adverse interest simply by making legal arguments on behalf of another client that contradict arguments made on behalf of the first client. See Wolfram, supra note 18, at 696-702 (discussing ambiguities in "attack own work" prohibition).
236. See id. at 703-06 (discussing ambiguity surrounding "sunset concepts" that are used to determine when representation ends and when more permissive former client conflict rules apply instead of current client conflict rules).
237. See Model Rules of Prof'l Conduct R. 1.9 (1998) (specifying no time period after which conflicts created by former client representations expire). "Substantial relationship" between two matters, however, is improbable if the matters are separated by a longer period of time.
238. See Wolfram, supra note 18, at 681, 727-28 (favoring "factual-reconstruction test" for applying "substantial relationship" standard, although acknowledging uncertainties and other practical difficulties with this approach). Lawyers and clients could reduce the uncertainties inherent in ex post application of the factual-reconstruction test by agreeing ex ante as to what is or is not a "substantially related" matter.
239. For example, in a co-client representation, one or both clients could agree ex ante that the lawyer could subsequently represent the other client in a substantially related matter.
240. See Painter, Proposal to Amend Model Rules, supra note 3. This proposal requests that the Committee consider making the following revisions to the Model Rules of Professional Conduct: Model Rule 1.7 should be amended to add a paragraph (c) providing: [A] lawyer and a client independently represented by separate counsel, including an in-house counsel, may enter into a written agreement specifying one or more of the following: (i) a definition of who the "client" is for purposes of this rule; (ii) a time when a representation ends for purposes of this rule; (iii) a definition of what is or is not "directly adverse" for purposes of this rule; (iv) that conflicts between two concurrent clients shall only be grounds for disqualification if the matters are "substantially related" as well as a definition of what is or is not a "substantially related" matter; and (v) that the client consents in advance to a specific type of conflict. Model Rule 1.9 should be amended to add a paragraph (d) providing: [A] lawyer and a client independently represented by separate counsel, including an in-house counsel, may enter into a written agreement specifying one or more of the following: (i) a definition of who the "client" is for the purposes of this rule; (ii) a time after termination of the representation when the restrictions set forth in this rule shall cease to apply; (iii) a definition of what is or is not a "substantially related" matter; (iv) a definition of what is or is not a "materially adverse" interest; and (v) that the client consents in advance to a specific type of conflict. Model Rule 1.10 should be amended to add a paragraph (d) providing: A lawyer and a client independently represented by separate counsel, including an in-house counsel, may enter into a written agreement that imputed disqualification of a law firm will be avoided if the lawyers involved in a matter are screened from any participation in another matter to which this rule would otherwise apply. The comment to Model Rule 1.10 should state that lawyers and clients can agree ex ante on what the appropriate screening procedures will be. Id.
241. Model Code of Prof'l Responsibility DR 4-101(B)(3) (1980) (providing that lawyer shall not knowingly "[u]se a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure").
242. Model Rules of Prof'l Conduct R. 1.8(b) (1998). The Ethics 2000 Commission has proposed replacing the words "consents after consultation" with "gives informed consent," the general consent language that the Commission recommends be used throughout the Model Rules. Ethics 2000 Commission Web Page, supra note 1; see also supra note 172 (discussing definition of informed consent in Model Rule 1.4).
243. Restatement (Third) of the Law Governing Lawyers § 111 (Tentative Draft No. 3, 1990).
244. Id. § 112(2) (Proposed Final Draft No. 1, 1996) (adding requirement that lawyer account to client for profits from use of client information); Restatement (Third) of the Law Governing Lawyers § 60 (2000) ("Except as stated in § 62, a lawyer who uses confidential information of a client for the lawyer's pecuniary gain other than in the practice of law must account to the client for any profits made."); id. § 62 ("A lawyer may use or disclose confidential client information when the client consents after being adequately informed concerning the use or disclosure.").
245. The Restatement also provides that the lawyer may not use confidential information if the client has instructed the lawyer not to use or disclose such information. Id. § 60(1)(a) (2000). This part of the Restatement is an opt-up default rule, in which client choice is the operative rule selection mechanism - the client specifically can instruct the lawyer not to use the information, in which case the "disadvantage to the client" criteria is inapplicable and the lawyer's use of the information is prohibited.
246. See Stephen M. Bainbridge, Insider Trading Under the Restatement of the Law Governing Lawyers, 19 J. Corp. L. 1, 16-19 (1993). Bainbridge points out that trading in the stock of a tender offer target, for example, could help the tender offeror by putting stock in friendly hands. Model Rule 1.8(b) and the Restatement provision thus appear ambiguous at best when applied to an attorney representing a tender offeror. Id. at 7-16.
247. See Securities Exchange Act of 1934 § 10(b), 15 U.S.C. § 78j(b) (1994). The Supreme Court found, in United States v. O'Hagan, 521 U.S. 642 (1997), that the misappropriation theory of insider trading prohibits deception "in connection with" the purchase or sale of a security within the meaning of Section 10(b) because trades by misappropriators are simultaneous with their underlying breach of duty. As the Court in O'Hagan held: [The "in connection with" element under Section 10(b) of the 1934 Exchange Act] is satisfied because the fiduciary's fraud is consummated, not when the fiduciary gains the confidential information, but when, without disclosure to his principal, he uses the information to purchase or sell securities. The securities transaction and the breach of duty thus coincide. O'Hagan, 521 U.S. at 656. O'Hagan affirmed the conviction of a lawyer for trading on advance information from a client tender offeror. The lawyer's trades, however, unless they harmed his client tender offeror, did not unequivocally violate either Model Rule 1.8(b) or Section 60 of the Restatement. The lawyer later breached his duty under Section 60 of the Restatement by failing to account to the client for his profits, but this breach is probably not "in connection" with the trade because it does not coincide with the trade. See Richard W. Painter et al., Don't Ask, Just Tell: Insider Trading After United States v. O'Hagan, 84 Va. L. Rev. 153, 191-92 (1998) (discussing ABA Model Rule 1.8(b) and draft Restatement § 112(2)).
248. The Reporter for the Restatement states that "[a] clear instance of lawyer liability for use of confidential information even in the absence of harm to a client is insider trading in a client's stock." Restatement (Third) of the Law Governing Lawyers § 60 reporter's note to cmt. j (2000). The Reporter does not acknowledge, however, that the federal law on insider trading requires the court to find a breach of duty to the client at or about the time of the trade and that the Restatement's failure to return to the Model Code approach of requiring disclosure to the client and consent prior to the trade - whether or not it harms the client - contributes to lack of clarity in this area of the law.
249. See supra note 216 and accompanying text.
250. Use of nonpublic client information for securities trading still could be illegal under Section 14(e) of the 1934 Act if the information concerns a tender offer, even if the client's permission to trade relieves the lawyer of liability under Section 10(b). See O'Hagan, 521 U.S. at 672-73 n.17 (applying Section 14(e) to misappropriated information but leaving open question of whether trading with client's permission would be violation).
251. If the majority of clients would not care whether lawyers traded in the securities markets with their confidential information, the default rule could be set to give the lawyer an ex ante entitlement to use the information unless instructed otherwise. If this were the default rule, however, some lawyers might try to surcharge clients for contracting out of the default rule, and a "lemons problem" could arise when unscrupulous lawyers promise not to trade in order to charge higher fees and then break their promises. See Bainbridge, supra note 221, at 38.
252. The Restatement provision requiring a lawyer to account to the client for profits made is limited to uses of confidential information outside the practice of law. Restatement (Third) of the Law Governing Lawyers § 60(2) (2000).
253. None of these uses is likely to disadvantage the client and thus violate the standard under Model Rule 1.8(b), and most would not use a "confidence" or "secret" of the client, the operative language in DR 4-101(B)(3), as opposed to more general information.
254. For example, a lawyer might suggest to a second client that she buy real estate in a particular location based on information learned from the first client. If confidential client information is not disclosed and the second client's purchase of the real estate does not disadvantage the first client, this use of the information is probably permitted. See Model Rules of Prof'l Conduct R. 1.6, 1.8(b) (1998). A default rule prohibiting such use also probably would be very difficult to enforce because the lawyer's communications with the second client would be privileged. A default rule prohibiting the lawyer herself from purchasing the real estate, on the other hand, would be easier to enforce so long as the lawyer's access to the confidential information could be established.
255. See Painter et al., supra note 222, at 179-81 (explaining that classical insider trading law governing information obtained from corporate insiders requires trading fiduciary to get permission from issuing corporation before trading, although misappropriation theory applicable to information obtained from outsiders only requires source of information to be told that fiduciary intends to trade). Client consent to the trades does not relieve the lawyer of liability in the case of a tender offer. See supra notes 221-22.
256. See Painter et al., supra note 222, at 163 (discussing "equality of access theory" that underlay much of federal insider trading jurisprudence until early 1980s).
257. See Model Rules of Prof'l Conduct R. 5.6(a) (1998) ("A lawyer shall not participate in offering or making: (a) a partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement . . . ."); see also Model Code of Prof'l Responsibility DR 2-108(a) (1980) (same); Restatement (Third) of the Law Governing Lawyers § 13 (2000) (same).
258. See Model Rules of Prof'l Conduct R. 5.6(b) (1998) (stating that "[a] lawyer shall not participate in offering or making . . . an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between private parties"); see also Model Code of Prof'l Responsibility DR 2-108(b) (1980) (same); Restatement (Third) of the Law Governing Lawyers § 13 (2000) (same). The ABA Ethics 2000 Commission proposes no substantive changes to Model Rule 5.6. See Ethics 2000 Commission Web Page, supra note 1.
259. See, e.g., Robert W. Hillman, Law Firm Breakups 29 (1990) (discussing prohibitions on noncompetition agreements);
260. Serena L. Kafker, Golden Handcuffs: Enforceability of Non-Competition Clauses in Professional Partnership Agreements of Accountants, Physicians, and Attorneys, 31 Am. Bus. L.J. 31, 32 (1993) (discussing noncompetition agreements among professionals).
261. Cohen v. Lord, Day & Lord, 550 N.E.2d 410, 410 (N.Y. 1989) (holding that law firm partnership agreement that conditioned payment to withdrawing partner of earned but uncollected partnership revenues in return for partner's promise not to practice law in competition with firm violated DR 2-108(A) and was therefore unenforceable as against public policy). But see Howard v. Babcock, 863 P.2d 150, 151 (Cal. 1993) (upholding covenant forfeiting departure benefits of withdrawing partner who practiced in same geographic area as firm on grounds that this "forfeiture-for-competition clause" did not restrain retiring partner's ability to practice, but only required him to pay his firm for lost clients).
262. Compared with the amount of litigation over noncompetition agreements, most of which are prohibited under Model Rule 5.6(a), there are relatively few reported cases concerning covenants not to sue prohibited under Model Rule 5.6(b).
263. Cynthia Cotts, May a Lawyer Deal Away Right to Practice?, Nat'l L.J., Mar. 30, 1998, at 1.
264. Id.
265. Id. (quoting Stephen Gillers).
266. See N.Y. Code of Prof'l Responsibility DR 2-108(B) (2000) ("[I]n connection with the settlement of a controversy or suit, a lawyer shall not enter into an agreement that restricts the right of a lawyer to practice law.").
267. Cotts, supra note 237, at 1.
268. 658 N.Y.S.2d 614 (App. Div. 1997).
269. Specifically, the text of the agreement stated that: As an inducement to the settling defendants [including Haber] to enter into this Settlement Agreement, and as a material condition thereof, [the Beigel firm] warrants and represents to the settling defendants that neither such firm nor any of its employees, agents, or representatives will assist or cooperate with any other parties or attorneys in any such action against the settling defendants arising out of, or related in any way to the investments at issue in the actions or any other offerings heretofore or hereafter made by the settling defendants . . . nor shall they encourage any other parties or attorneys to commence such action or proceeding. Id. at 615.
270. Id. at 616.
271. Id. at 617.
272. Id. at 616-17.
273. Id. at 617.
274. Id.
275. Professor Gillers notes: "These untested assumptions are dubious. They ignore the market. If a claim has merit and elimination of one lawyer creates a vacancy, the market will produce a replacement. Undoubtedly, some lawyers will accept a restriction, but surely not enough to deprive worthy claimants of all counsel." Id. at 617 (quoting Professor Gillers).
276. See Model Rules of Prof'l Conduct R. 3.1 (1998) (providing that lawyer may not bring action, assert defense, or controvert issue "unless there is a basis for doing so that is not frivolous").
277. See, e.g., Fed. R. Civ. P. 11(b) (providing that signing, filing, or submitting paper to court certifies that legal contentions are not frivolous).
278. See supra Part II.B (discussing default rules concerning use of client information).
279. See Model Rules of Prof'l Conduct R. 1.9 (1998) (disqualifying lawyer from representing another client in substantially related matter only if second client's interest is adverse to that of first client).
280. See Susan P. Koniak, When Courts Refuse to Frame the Law and Others Frame It to Their Will, 66 S. Cal. L. Rev. 1075, 1079-91 (1993) (discussing judicial equivocation on lawyers' obligations in face of client crime or fraud, bar's refusal to recognize its obligations, and regulators' use of coercion to assert their own view as law).
281. Corporations can instruct their lawyers ex ante to conduct a representation in any way that is consistent with applicable ethics rules. These instructions, however, cannot opt out of immutable ethics rules.
282. See Sissela Bok, Secrets: On the Ethics of Concealment and Revelation 119-24, 131-35 (1982) (discussing justifications and limits of confidentiality and asserting that values protected by confidentiality are sometimes undermined by practices of secrecy);
283. Stanley Cavell, The Claim of Reason: Wittgenstein, Skepticism, Morality, and Tragedy 330 (1979) (stating that "[a] private conversation is one that I do not want others to hear, not one they necessarily cannot hear");
284. see also Anthony T. Kronman, Mistake, Disclosure, Information, and the Law of Contracts, 7 J. Legal Stud. 1, 13, 18 (1978) (arguing that cases in contracts distinguish between "deliberately acquired information" requiring effort to discover, and therefore usually protected from duty to disclose, and "casually acquired information" that is given less protection);
285. Richard A. Posner, The Right of Privacy, 12 Ga. L. Rev. 393, 397-400 (1978) (arguing that legal rules governing secrecy and assigning property rights to information are designed to achieve efficiency).
286. But see Kim L. Scheppele, Legal Secrets: Equality and Efficiency in the Common Law 31-35, 57-85 (1988) (disagreeing with Posner's and Kronman's analysis and arguing that secrecy rules are designed to promote fundamental fairness to individuals rather than collective social utility).
287. Model Rules of Prof'l Conduct R. 1.2(d) (1998).
288. E.g., id. R. 1.13 (stating: [A L]awyer shall proceed as is reasonably necessary in the best interest of the organization. In determining how to proceed, the lawyer shall give due consideration to the seriousness of the violation and its consequences, the scope and nature of the lawyer's representation, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters and any other relevant considerations).
289. Id. Model Rule 1.13 also states that "referring the matter to higher authority in the organization" is one of several measures that the lawyer may take. Id. The Restatement takes a similar approach. Restatement (Third) of the Law Governing Lawyers § 96 (2000) (Representing an Organization as Client).
290. See Working Group on Lawyers' Representation of Regulated Clients, ABA, Report to the House of Delegates 6-7 (1993) (stating that among "novel theories of professional responsibility" developed by OTS was notion that lawyers have obligation to report misconduct to superiors, going "all the way to the client's board of directors" and declining to take that position themselves).
291. See Carter, Exchange Act Release No. 34-17597, [1981 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 82,847, at 84,172 (Feb. 28, 1981) (announcing very broad standard: When a lawyer with significant responsibilities in the effectuation of a company's compliance with the disclosure requirements of the federal securities laws becomes aware that his client is engaged in a substantial and continuing failure to satisfy those disclosure requirements, his continued participation violates professional standards unless he takes prompt steps to end the client's noncompliance). The Release states that the lawyer could: (1) approach the client's independent directors, or (2) resign. Id. But nowhere does the Release clearly state what the lawyer is or is not required to do.
292. SEC Procedural Rule 102(e), 17 C.F.R. § 201.102(e)(1)(ii) (2000) (providing that SEC may temporarily or permanently deny to any person privilege of practicing before Commission who is found after notice and hearing to be lacking in character or to have engaged in improper professional conduct).
293. See Stephen J. Friedman, Reflections on Carter-Johnson, in Thirteenth Annual Institute on Securities Regulation 297 (Arthur Fleischer, Jr. et al. eds., 1982) (discussing two issues raised by Carter-Johnson case: first, what happens if lawyer gives wrong advice and client acts on it; second, what happens if lawyer gives correct advice that client persistently ignores);
294. Werner Kronstein, SEC Practice: The Carter-Johnson Case - A Higher Threshold for SEC Action Against Lawyers, 9 Sec. Reg. L.J. 293 (1981) (same).
295. See Richard W. Painter & Jennifer E. Duggan, Lawyer Disclosure of Corporate Fraud: Establishing a Firm Foundation, 50 SMU L. Rev. 225, 244-55 (1996) (discussing how SEC, in construing terms "improper professional conduct" in Rule 102(e), has articulated ambiguous standards for both lawyers and accountants, and how these standards have been arbitrarily applied in Rule 102(e) case law).
296. See Painter, supra note 41, at 186 (discussing inconsistent SEC enforcement efforts); Painter & Duggan, supra note 264, at 244-55 (same).
297. See supra note 97 (describing "Revised Attorney Letter" in which OTS in early 1990s asked lawyers for depository institutions to confirm that they would respond in accordance with "applicable rules of professional conduct" to any issue that might arise in connection with conflicts of interest, institution's compliance with laws or regulations, fiduciary duties, or principles of safety and soundness).
298. The OTS Revised Attorney Letter was withdrawn after "three years of wrangling with the bar about requiring attorneys to 'confirm' their agreement with certain OTS views of professional responsibility," and after the OTS decided it was cheaper and easier to obtain the required information directly from the depository institutions. OTS Cancels "Attorney Letter," Citing Examiners' Lack of Need, Bank Law. Liability, Oct. 1995, Lexis, News Group File.
299. The ABA used voluntary mechanisms when it sought to standardize opinion language and procedures. See ABA Comm. on Legal Opinions, Third-Party Legal Opinion Report, Including the Legal Opinion Accord, of the Section of Business Law, American Bar Association, 47 Bus. Law. 167, 169, 170 (1991) [hereinafter Silverado Accord] (sometimes referred to as the "Silverado Accord"). While a legal opinion does not have to conform to the guidelines set forth in the Silverado Accord, the Accord defines preferred opinion-writing practice, and an opinion letter may incorporate provisions of the Accord by reference. Id. at 170.
300. Id. at 190.
301. Id. at 228.
302. Painter, Ethics 2000 Letter, supra note 4.
303. Id.
304. A similar rationale underlies the American Lawyer's Code of Conduct, which allows a corporate client to choose policies that its lawyers will be required to follow in resolving conflicts of interest among the directors, officers, and shareholders, but which also requires that the chosen policies be disclosed to shareholders beforehand so shareholders can decide "to approve or disapprove that policy, or to relinquish their shares." American Lawyer's Code of Conduct, supra note 27, R. 2.5.
305. Model Rules of Prof'l Conduct R. 1.6 (1998). A minority of jurisdictions have adopted this more restrictive approach. See Proposal of Professor Roger C. Cramton to the ABA Ethics 2000 Commission to Amend Model Rule 1.6, http://www.abanet.org/cpr/ cramton.html (last visited Apr. 16, 2001) (suggesting that Rule be revised to permit disclosure of client crime or fraud in broader range of circumstances).
306. See Model Code of Prof'l Responsibility DR 4-101(C) (1980) (providing that "lawyer may reveal: . . . (3) the intention of his client to commit a crime and the information necessary to prevent the crime" (emphasis added)).
307. The Ethics 2000 Commission's revised Model Rule 1.6 would allow a lawyer to reveal client information to the extent the lawyer reasonably believes necessary, among other things: (1) to prevent reasonably certain death or substantial bodily harm [whether or not on account of an act of the client]; (2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services; [or] (3) to prevent, mitigate, or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services. Proposed Revisions to Model Rule 1.6, http://www.abanet.org/cpr/e2k-rule16.html.
308. Section 66 of the Restatement (Using or Disclosing Information to Prevent Death or Serious Bodily Harm) provides that disclosure is discretionary in a broad range of circumstances. The information need not concern a crime or fraud, need not concern an act of the lawyer's client, and the lawyer's services need not be involved. Legal conduct may still be disclosed by the lawyer if necessary to prevent death or serious bodily harm. For example, if information about a dangerous but legal product is known by the lawyer and the manufacturer but not by regulators and consumers, the lawyer may disclose. See Restatement (Third) of the Law Governing Lawyers § 66 (2000). Section 67 of the Restatement (Using or Disclosing Information to Prevent, Rectify, or Mitigate Substantial Financial Loss), on the other hand, allows disclosure by the lawyer in a narrower range of circumstances. An act of the client must be involved, the act must be a crime or fraud, and the lawyer's services must have been used in the matter in which the crime or fraud is committed. Section 67, however, is considerably broader than the current Model Rule 1.6. Id. § 67 cmt. b (noting: [O]ver 40 jurisdictions have rejected [Model Rule 1.6] and have broadened the rule so as to permit use or disclosure to prevent substantial financial injury. Seventeen states also permit use or disclosure to rectify past and completed client fraud . . . Lawyer codes in seven states mandate disclosure in at least some circumstances of client fraud . . .). Perhaps to reassure lawyers worried about legal liability for failure to disclose, Sections 66 and 67 both contain the same provision stating that "[a] lawyer who takes action or decides not to take action permitted under this Section is not, solely by reason of such action or inaction, subject to professional discipline, liable for damages to the lawyer's client or any third person, or barred from recovery against a client or third person." Id. §§ 66(3), 67(4). Neither Section 66 nor Section 67 requires disclosure, although other law may require it in some circumstances.
309. The text of Section 96 of the Restatement (Organization as Client) does not address disclosure outside the organization, and in the comment simply refers to other provisions of the Restatement, including Sections 66 and 67. Id. § 96 cmt. f. The comment also recognizes that: [I]t may clearly appear that limited disclosure to prevent or limit harm would be in the interests of the organizational client and that constituents who purport to forbid disclosure are not authorized to act for the organization. Whether disclosure in such circumstances is warranted is a difficult and rarely encountered issue, on which this Restatement does not take a position. Id.
310. See Richard W. Painter, Toward a Market for Lawyer Disclosure Services: In Search of Optimal Whistleblowing Rules, 63 Geo. Wash. L. Rev. 221, 267-74 (1995) (proposing that lawyers be permitted to choose ex ante, from limited number of alternatives, which whistleblowing rules they will be bound to follow, so long as their choice is publicly disclosed).
311. Id. at 267-74 (suggesting that chosen rule would signal to third parties - such as regulators, transaction participants, and investors - probability that lawyer will blow whistle should client misconduct occur; that rational third parties would adjust their expectations accordingly and sometimes reward clients whose lawyers have chosen expansive whistleblowing rules; and that rational clients would choose their lawyers in anticipation of third-party responses).
312. See Ayres & Gertner, supra note 12, at 95-107. (discussing penalty default rules).
313. This rule is immutable for auditors under the securities laws. See 15 U.S.C. § 78j-1 (Supp. IV 1998) (requiring auditors to implement procedures designed to detect illegal acts, to report illegal acts to management, and if problem is not remedied, to make report to full board and to SEC).
314. See American Lawyer's Code of Conduct, supra note 27, R. 2.5 (applying similar rationale).
315. See Jeffrey Rachlinski, A Positive Psychological Theory of Judging in Hindsight, 65 U. Chi. L. Rev. 571, 572 (1998) (discussing effect of hindsight bias on legal decisions, including assessments of foreseeability in tort cases).
316. Model Rules of Prof'l Conduct R. 1.2(d) (1998); see also John H. Cushman Jr., Paul, Weiss Law Firm to Pay U.S. $45 Million, N.Y. Times, Sept. 29, 1993, at D1. Suits brought by the OTS and Resolution Trust Corporation in the early 1990s alleged that attorneys who represented failed institutions facilitated their clients' efforts to mislead federal regulators. Almost all of these actions against law firms were settled prior to trial, and settlements totaled over $200 million. These include settlements with Jones, Day, Reavis & Pogue ($50 million), Paul, Weiss, Rifkind, Wharton & Garrison ($45 million), Kaye, Scholer, Fierman, Hays & Handler ($41 million), and Troutman, Sanders, Lockerman & Ashmore ($20 million). Id.
317. It is possible that standards would be preferable to defined rules, if courts and agencies would build valuable precedent interpreting the standards as they have in contract and corporate law. A number of factors, however, distinguish the law governing lawyers from contract and corporate law. First, because the underlying issues are so controversial and legal precedent on lawyer liability accumulates relatively slowly, ambiguous standards have stayed ambiguous for a long time. Second, a standard is often construed ex post by an administrative agency - usually the same agency that claims it was misled by the lawyer - and only reviewed by a court on appeal. The ambiguity of the standard, coupled with the extraordinary power of the agency, is likely to create an accurate impression on the part of lawyers that the standard is unfair.
318. See Hishon v. King & Spalding, 467 U.S. 69, 77 (1984) (rejecting arguments made by defendant law firm that Title VII did not prohibit sex discrimination in its selection of partners); Lucido v. Cravath, Swaine & Moore, 425 F. Supp. 123, 128 (S.D.N.Y. 1977) (denying defendant's motion to dismiss complaint alleging discrimination on basis of religion and ethnicity, where defendant had argued in its motion that Title VII did not apply to law firm's partnership decisions).
319. The extent of compliance or noncompliance is difficult to measure because discrimination is difficult to prove. The enactment of Title VII and subsequent caselaw applying Title VII to partnership decisions, see supra note 287, however, surely led to some improvement.
320. There is, of course, considerable debate over whether such numerical goals are a good policy or are themselves discriminatory. Even if firms decide to move away from quantitative goals, they may still retain some of the qualitative rules in the ex ante affirmative action commitment (equality of work assignments, not holding firm functions at discriminatory clubs, refusing to represent clients that discriminate, etc.).
321. See David Margolick, 35 Law Firms in New York Pledge More Minority Hiring, N.Y. Times, Sept. 26, 1991, at B1 ( Two years ago, for instance, 90 law firms and corporate legal departments in San Francisco pledged that by 1995, 15 percent of all their associates and 5 percent of their partners would be members of minority groups. By the year 2000, the numbers would be 25 percent and 10 percent.).
322. See Edward A. Adams, City Bar Panel Considers New Goals on Minorities, N.Y. L.J., Mar. 14, 1995, at 1 (discussing report on retaining minorities at major New York law firms).
323. See Daniel Wise, 35 Law Firms Sign Minority Hiring Pledge, N.Y. L.J., Sept. 26, 1991, at 1.
324. Id. See also Cyrus Vance, Letter to the Editor, Clarification Offered By Panel Chairman, N.Y. L.J., June 5, 1991, at 2.
325. Wise, supra note 292.
326. Margolick, supra note 290, at B1.
327. Michael A. Cardozo, A Letter From the President of the Association of the Bar of the City of New York, The Metropolitan Corp. Couns., Dec. 1997, at 46.
328. Id.
329. Id. ("Only ten of New York's 25 largest firms have one or more African American partners. . . . Only 2.4% of lawyers in this country's 250 largest firms are black; yet over 4.5% of law school graduates 8, 9 and 10 years ago were black.").
330. Id.
331. Id. ("Women are three times less likely to make partner in large New York City law firms than men [and i]n 1987, 41% of law school graduates were women; yet in 1996-97 only 22% of new partners in large firms were women.").
332. Presumably, if these policies were efficient, a law firm would have an incentive to adopt them regardless of what other law firms do. However, some policies that discriminate disproportionately against women lawyers may increase firm profits, at least in the short term, and a law firm may be reluctant to change unless other firms also promise to bear the costs of making the same change. Nonpromising firms might thereby gain a cost advantage, but at least the promising firms would not be undercut in cost competition with each other.
333. Richard A. Epstein, Forbidden Grounds: The Case Against Employment Discrimination Laws 9 (1992) (arguing that competitive markets offer better protection against discrimination than any antidiscrimination law).
334. Richard H. McAdams, Cooperation and Conflict: The Economics of Group Status Production and Race Discrimination, 108 Harv. L. Rev. 1003, 1034-36 (1995) (arguing that status-production theory of race discrimination is more faithful to economics than Epstein's associational preference model).
335. But see Richard A. Epstein, The Status-Production Sideshow: Why the Antidiscrimination Laws Are Still a Mistake, 108 Harv. L. Rev. 1085, 1091-92 (1995).
336. Such a market-based approach has been deployed in environmental laws that allow pollution permits to be traded. See Clean Air Act §§ 403(a), (b), (d), 42 U.S.C. §§ 7651b(a), (b), (d) (1994) (providing system of exchangeable sulfur emission allowances). Market-based regulations of this sort, however, usually measure compliance with numerical quotas, which may not be a legally acceptable response in the context of race and sex discrimination.
337. See Epstein, supra note 302, at 41-47 (discussing economic incentives not to discriminate).
338. See supra text accompanying note 72 (discussing opt-up default rules).
339. Critics of these opt-in affirmative action programs would argue that participating firms that agree to numerical quotas are observing a lower level of responsibility to minority lawyers who are hired on the basis of factors unrelated to ability, putting them at a competitive disadvantage in the workplace, and that the firms are also observing a lower level of responsibility to nonminority lawyers who are put at a competitive disadvantage in the hiring process. Firms that make these affirmative action commitments presumably disagree.
340. 11 Hen. 7, c. 12 (1494) (Eng.) (providing that for every poor person having cause of action against any person, the justices shall appoint attorney and attornies [sic] for the same poor person or persons, and all other officers requisite and necessary to be had for the speed of the said suits to be had and made, which shall do their duties without any reward for their counsels, help, and business in the same); see also 2 William S. Holdsworth, A History of English Law 491 (4th ed. 1936) (discussing these statutes);
341. David L. Shapiro, The Enigma of the Lawyer's Duty to Serve, 55 N.Y.U. L. Rev. 735, 740-49 (1980) (same).
342. Model Rule 6.2 provides that a lawyer shall not seek to avoid a court appointment to represent a person, but provides an exception if "representing the client is likely to result in an unreasonable financial burden on the lawyer." Model Rules of Prof'l Conduct R. 6.2(b) (1998). Courts that appoint attorneys to represent indigent litigants generally compensate the lawyer. This work is not distributed evenly. Some lawyers are given such appointments regularly, and rely on them for a significant portion of their income, while many lawyers are rarely if ever asked by a court to accept such a representation.
343. Model Rules of Prof'l Conduct R. 6.1 (1983) (amended 1993).
344. Model Rules of Prof'l Conduct R. 6.1 (1998).
345. In re Amendments to Rules Regulating the Florida Bar - 1-3.1(a) and Rules of Judicial Admin. - 2.065 (Legal Aid), 573 So. 2d 800, 801, 806 (Fla. 1990).
346. Rules Regulating the Florida Bar R. 4-6.1(b) (1994).
347. Id. R. 4-6.1(d).
348. This proposal might work even more effectively if the first pro bono commitment were irrevocably made upon application to law school, considered in law school admissions, and then filed by schools with the bar of the state where each student is admitted after graduation. Indeed, at least one major law school already solicits ex ante public service commitments from applicants by reserving a certain number of slots for students who check a box on the application form requesting a "public interest" law course package. Although future public interest work is not part of the binding commitment, the course package and participation in the School's clinical program apparently are. Public Interest Law and Policy, http://www.law.ucla.edu/students/admissions/AcademicPrograms/Special-Programs/ PublicInterest.html (last visited Apr. 16, 2001).
349. See Wieder v. Skala, 609 N.E.2d 105, 110 (N.Y. 1992) (finding plaintiff has claim for breach of contract where defendant firm fired plaintiff for compliance with professional ethics standards deemed implicit in employment contract). The more difficult problem would be protecting high pro bono lawyers in the competition for partnership, although presumably a firm that does not like high pro bono lawyers would avoid hiring them in the first place.
350. A focal point, also referred to as a "Schelling Point," is "the combination of strategies that players are likely to choose because it is especially prominent under the conditions and culture in which the players find themselves." Douglas G. Baird et al., Game Theory and the Law 307 (1994); see generally Thomas C. Schelling, The Strategy of Conflict (1980). Focal points can steer players toward mutual cooperation even in situations in which there is no contract or binding rule. Legal rules, whether or not they deter conduct with sanctions, can become focal points. See Richard H. McAdams, A Focal Point Theory of Expressive Law, 86 Va. L. Rev. 1649, 1679-88 (2000).
351. See Model Rules of Prof'l Conduct R. 1.15 (1998). This is not to say that a lawyer cannot use a client's money for the lawyer's own purposes, so long as the client agrees in writing to loan the lawyer the money and the loan otherwise meets the requirements for lawyer-client transactions. See id. R. 1.8(a).
352. Id. R. 1.8(c).
353. Id. R. 1.8(d).
354. See supra text accompanying note 126 (discussing Or. Code of Prof'l Responsibility DR 5-110(A)-(C)).
355. See supra text accompanying note 128 (discussing N.Y. Code of Prof'l Responsibility DR 5-111).
356. See supra notes 209-15.
357. Model Rules of Prof'l Conduct R. 1.8(h) (1998) ("A lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement.").
358. Id. R. 1.8(a)(3).
359. Id. R. 1.8(a).
360. See id. R. 3.3(a)(2), (4).
361. See id. R. 3.3(a)(1).
362. See id. R. 3.1.
363. See id. R. 1.2(d).
364. See id. R. 2.3 (allowing lawyer to undertake evaluation for use by third persons).
365. See Painter, supra note 279, at 267 (advocating use of disclosure warranties by lawyers and their clients ex ante to prevent crime and fraud, and to protect third parties from potential consequent harm).
366. See supra text accompanying note 272.
367. See supra text accompanying notes 130-33 (discussing how immutable rules dealing with controversial subject matter, such as organizational clients' crime or fraud (Model Rule 1.13), or reasonableness of legal fees (Model Rule 1.5), are usually standards rather than defined rules).
368. See generally Wilkins, Making Context Count, supra note 62.
369. But see Morgan & Tuttle, supra note 62, at 998-99 n.77 (pointing out difficulties with "middle-level principles," particularly when applied to lawyers whose practice cuts across several different areas).
370. See supra note 187 (discussing Ethics 2000 Commission's debate on statements of best practices).
371. Ethical considerations could easily be turned into reputationally enforced rules by making information about complaints against lawyers publicly available. Two examples of Model Code considerations that could be addressed by publicly available information are Ethical Considerations 1-5 and 2-23. Model Code of Prof'l Responsibility EC 1-5 (1980) (stating that lawyer should avoid "even minor violations of the law"); id. EC 2-23 (stating that lawyer should avoid controversies over fees with clients and attempt to resolve those controversies amicably).
372. See, e.g., Gilson & Mnookin, Disputing Through Agents, supra note 9, at 514-15 (using prisoners' dilemma to illustrate evolution of cooperation among lawyers in domestic relations bar).
373. See supra notes 308-15 and accompanying text.
374. N.Y. Code of Prof'l Responsibility DR 1-102(A), DR 1-104(A), (C), DR 5-105(E) (2000); see also Karen B. Burrows & Richard W. Painter, Discipline of Law Firms, Report of the Committee on Professional Responsibility, 48 Rec. Ass'n B. City N.Y. 628, 637-42 (1993) (proposing rules substantially similar to those adopted by Appellate Division three years later);
375. Ted Schneyer, Professional Discipline for Law Firms?, 77 Cornell L. Rev. 1, 37-46 (1991) (suggesting that rules be adopted to impose discipline on law firms).
376. N.Y. Code of Prof'l Responsibility DR 5-105 (2000) (providing that law firm "shall have a policy implementing a system by which proposed engagements are checked against current and previous engagements").
377. See Stephen R. Volk et al., Law Firm Policies and Procedures in an Era of Increasing Responsibilities: Analysis of a Survey of Law Firms, 48 Bus. Law. 1567, 1570-71 (1993) (describing broad range of policies and procedures adopted by fifty law firms surveyed by authors).
378. See id. at 1571-72.
379. See id. at 1572-74.
380. See id. at 1580; see also N.Y. Code of Prof'l Responsibility DR 5-105 (2000).
381. See Volk et al., supra note 343, at 1568-70; see also William K.S. Wang & Marc I. Steinberg, Insider Trading 901-09 (1996) (reprinting securities trading policy of anonymous Washington, D.C. law firm).
382. Volk et al., supra note 343, at 1574-75.
383. Id. at 1580.
384. In some instances, these policies have been imposed on law firms in litigation with OTS. See Ted Schneyer, From Self-Regulation to Bar Corporatism: What the S&L Crisis Means for the Regulation of Lawyers, 35 S. Tex. L. Rev. 639, 645 n.27 (1994) (discussing OTS consent decrees requiring law firms to implement detailed policies on representation of depository institutions).
385. See Model Rules of Prof'l Conduct R. 1.1 (1998) (competent representation); id. R. 1.3 (reasonable diligence and promptness in representing clients).
386. Cf. Report of the AALS Special Committee on Problems of Substance Abuse in the Law Schools, 44 J. Legal Educ. 35, 36 (1994) (reporting that substance abuse may be involved in as many as fifty to seventy-five percent of major disciplinary cases). A law firm code of professional responsibility could: (1) require the firm's lawyers to report substance abuse by themselves or other lawyers to a committee that would facilitate treatment; (2) provide that a lawyer could take a leave of absence to get treatment without penalty; and/ or (3) place limitations on the consumption of alcohol on the firm's premises and at firm functions.
387. Model Rules of Prof'l Conduct R. 1.8(b) (1998).
388. Id. R. 1.6, 1.13.
389. Id. R. 6.1.
390. See supra text accompanying notes 63-64 (discussing provisions in Model Business Corporation Act and Delaware corporation code).
391. Model Rules of Prof'l Conduct R. 1.16 (1998).
392. Id. R. 5.2.
393. Id. R. 6.4.
394. See supra note 342.
395. Other "gaps" in the Model Rules include policies for billing travel expenses and office overhead to clients, rendering opinion letters, and ownership of equity stakes in clients. Some of these issues are addressed elsewhere by the ABA or the ALI, but these pronouncements are not always easily translated into rules in a particular jurisdiction, particularly absent a local bar association opinion or judicial opinion addressing the issue. See Restatement (Third) of the Law Governing Lawyers § 38 (2000) (providing default rule that clients will not be billed for office expenses and overhead unless otherwise agreed); ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 00-418 (2000) (approving of equity in lieu of cash fee arrangements but providing that they must be fair and reasonable to client in accordance with Model Rule 1.5 and must not interfere with lawyer's independent professional judgment on behalf of client under Model Rule 2.1); Silverado Accord, supra note 268 (setting forth rules for legal opinions which lawyers can opt into by incorporating Accord by reference). Many firms have policies on these and other similar issues, but these policies usually are not publicized and are sometimes not enforced. Law firm codes of professional responsibility could address these issues with clearly defined rules, modeled where appropriate after ABA or ALI provisions, that then could be publicized and enforced by the firm.
396. See generally Gilson & Mnookin, How Partners Split Profits, supra note 9; Ribstein, supra note 10.
397. A law firm's reputation is a substantial determinant of the firm's market power (the fees it can charge, the clients it can attract, and the associates it can hire), and this reputational capital is eroded when one of the firm's partners is caught in unethical conduct.
398. The lawyer-client collusion problem has been discussed extensively in the literature on agency problems in law firms. See Cohen, supra note 10, at 281-83, 289-90 (describing generally collusion problem); Ronald J. Gilson, The Devolution of the Legal Profession: A Demand Side Perspective, 49 Md. L. Rev. 869, 899-903 (1990) (suggesting reasons why lawyers no longer police clients' demands for inappropriate "strategic litigation").
399. See Manuel R. Ramos, Legal Malpractice: The Profession's Dirty Little Secret, 47 Vand. L. Rev. 1657, 1661 (1994) ("Since 1970 there has been an unprecedented growth in legal malpractice claims and lawsuits."); see also supra note 285 (discussing multimillion-dollar settlements).
400. See Susan Saab Fortney, Are Law Firm Partners Islands Unto Themselves? An Empirical Study of Law Firm Peer Review and Culture, 10 Geo. J. Legal Ethics 271, 280-81, 287-89 (1997) (describing increasing use of ethics committees, ethics counsel, and peer review and discussing firms' motivation for doing so).
401. See Richard H. Thaler, The Psychology and Economics Conference Handbook: Comments on Simon, on Einhorn and Hogarth, and on Tversky and Kahneman, in Rational Choice: The Contrast Between Economics and Psychology 95, 96 (Robin M. Hogart & Melvin W. Reder eds., 1987) ("Accurate learning takes place only when the individual receives timely and organized feedback.");
402. Russell Korobkin & Chris Guthrie, Psychology, Economics, and Settlement: A New Look at the Role of the Lawyer, 76 Tex. L. Rev. 77, 86 (1997)
403. (explaining psychologists' argument that learning effective decisionmaking requires proper feedback (citing Amos Tversky & Daniel Kahneman, Rational Choice and the Framing of Decisions, 59 J. Bus., S251, S274-75 (1986))).
404. See Donald C. Langevoort & Robert K. Rasmussen, Skewing the Results: The Role of Lawyers in Transmitting Legal Rules, 5 S. Cal. Interdisc. L.J. 375, 421 n.97 (1975) ("Researchers frequently point out that for learning to occur, feedback must be sufficiently salient and unambiguous to convince the actor, who is motivated to find confirmation rather than disconfirmation, that there was an error attributable to judgment processes.").
405. Id. (noting that, in real life, feedback that is sufficiently salient and unambiguous to convince actor that she has erred "is not particularly common").
406. See Ramos, supra note 365, at 1696-97 (reporting that "[t]he only available statistics indicate that eighty percent of those disciplined are solo practitioners," and that "[i]n one study, no disciplinary cases were found in firms of over seven lawyers").
407. See Gilson & Mnookin, Disputing Through Agents, supra note 9, at 525-27 (discussing reputational incentives for cooperative conduct).
408. See supra note 370.
409. See supra text accompanying notes 362-66.
410. Model Rules of Prof'l Conduct R. 5.1(c)(2) (1998) (providing that lawyer shall be responsible for another lawyer's violation if "the lawyer is a partner in the law firm in which the other lawyer practices, or 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").
411. See Bohatch v. Butler & Binion, 977 S.W.2d 543, 544-45, 547 (Tex. 1998) (holding that law firm did not breach its fiduciary duty to one of its partners by firing her for reporting to firm's managing partners apparent overbilling by another partner).
412. See Jacobson v. Knepper & Moga, P.C. 706 N.E.2d 491, 492, 494 (Ill. 1998) (denying recovery to lawyer who was fired from law firm for insisting that firm stop filing consumer debt collection actions in wrong venue in violation of fair debt collection practices laws).
413. A written firm policy prohibiting discharge in these circumstances would become an implied-in-fact covenant in the employment contract or partnership agreement. See supra notes 112, 316 (discussing implied-in-fact covenants in employment contracts).
414. Model Rules of Prof'l Conduct R. 8.3 (1998) (requiring that lawyer having knowledge of another lawyer or judge violating Rules that raises substantial question of fitness "shall inform the appropriate authority"); see also Committee on Prof'l Responsibility, The Attorney's Duties to Report the Misconduct of Other Attorneys and to Report Fraud on a Tribunal, 47 Rec. Ass'n B. City N.Y. 905, 907 (1992) (discussing ineffectiveness of mandatory reporting rules in New York).
415. This and the preceding provision opt into defined rules tailored to specific uses for client information. Securities transactions get the highest level of scrutiny (veto by the client or by one of two firm committees) while business and commercial real estate transactions get an intermediate level of scrutiny (prior notice to the client, which gives the client a chance to complain if he or she believes that he or she might be disadvantaged by the transaction).
416. This provision combines the text of Model Rule 1.8(b) with a requirement that the ethics committee be informed so it can assure compliance with the consent requirement of the rule.
417. This provision opts up by requiring remedial measures (including referral of the matter to the highest authority within the organization) that are permitted but not required under Model Rule 1.13. Model Rules of Prof'l Conduct R. 1.13(b), (c) (1998) (requiring lawyer with such knowledge to "proceed as is reasonably necessary in the best interest of the organization" but only suggesting, not requiring, specific measures to be taken); see also Painter, Ethics 2000 Letter, supra note 4 (proposing adding similar language to Model Rule 1.13).
418. This provision opts up by requiring the withdrawal that is permitted but not required in a client crime or fraud situation under Model Rule 1.16(b)(1), (2)-(3). Model Rules of Prof'l Conduct R. 1.16(b) (1998) (allowing lawyer to withdraw from representation if no "material adverse effect on the interests of the client" will result or client either persists in criminal or fraudulent action involving lawyer's services, uses lawyer's services to perpetrate crime or fraud, or persists in objective "lawyer considers repugnant or imprudent").
419. This provision requires the "noisy withdrawal" that is permitted under Comment 16 to Model Rule 1.6. Id. R. 1.6 cmt. 16 ("Neither this rule nor Rule 1.8(b) nor Rule 1.16(d) prevent the lawyer from giving notice of the fact of withdrawal, and the lawyer may also withdraw or disaffirm any opinion, document, affirmation, or the like.").
420. The rule requires the lawyer to give corporate clients an opportunity to opt into the ex ante contracting allowed by Rule 2.5 of the American Lawyer's Code of Conduct. American Lawyer's Code of Conduct, supra note 27, R. 2.5. The provision also requires that Rule 2.5's requirement of shareholder and officer notification be observed. See supra text accompanying note 27 (discussing Rule 2.5).
421. This provision makes the aspirational Model Rule 6.1 into a "legally enforceable" rule within the firm. See supra notes 22, 310-12, and accompanying text (describing Model Rule 6.1).
422. This provision addresses the "glass ceiling" problem by opting into a substitute for the rule, described in Justice Powell's concurring opinion in Hishon v. King & Spalding, 467 U.S. 69 (1984), that Title VII does not apply to race and sex discrimination in the relationship among partners. Id. at 79 (Powell, J., concurring) (emphasizing that relationship among partners is not employer-employee and therefore does not implicate Title VII). Liability concerns, however, might cause many firms to delete the last sentence of this provision.
423. These provisions are designed to assure that the ethics committee is informed of a lawyer's intent to accept a directorship and has an opportunity to check for possible conflicts or other ethical problems as well as to decide whether the firm ought to render legal services for the same entity. These provisions also help prevent the firm's lawyers from accepting or retaining directorships with entities that are most likely to get them into trouble because they are not in compliance with the law.
424. These provisions are designed to assure that investments by the firm's lawyers in clients comply with the Model Rules and with the firm's own rules on use of client information. These provisions, like the provisions in the preceding section governing lawyer directorships, are also designed to prevent the firm from being captive to a client in which one of its lawyers has an investment interest.
425. This rule opts up by adding a defined rule to the unenforceable standard imposed by new Model Rule 7.6 (adopted by the ABA House of Delegates on February 14, 2000). Model Rule 7.6 provides: "A lawyer or law firm shall not accept a government legal engagement or an appointment by a judge if the lawyer or law firm makes a political contribution or solicits political contributions for the purpose of obtaining or being considered for that type of legal engagement or appointment." Model Rules of Prof'l Conduct R. 7.6 (1998).
426. This provision provides at the firm level the same discretion that individual lawyers have to resign from representing clients on grounds specified in Model Rule 1.16. See supra note 33 (describing Model Rule 1.16).
427. This provision provides a subordinate lawyer with an alternative to continuing to work on the matter and relying on the safe harbor in Model Rule 5.2 that shields the lawyer from discipline if she resolves an arguable question of professional responsibility as directed by her superior. See supra text accompanying note 358 (describing Model Rule 5.2 and explaining benefits of alternative rule).
428. This provision provides at the firm level the same discretion concerning outside law reform organizations that an individual lawyer has under Model Rule 6.4. See supra note 359 and accompanying text (describing Model Rule 6.4).
429. This provision opts up by adding a "knew or should have known" standard to Model Rule 5.1(c)(2), which only imposes responsibility if the partner or supervisory lawyer knew of the conduct in question. Model Rules of Prof'l Conduct R. 5.1(c)(2) (1998).
430. This provision is a firm-level version of Model Rule 8.3 (imposing affirmative duty to report violations of applicable rules, unless information was obtained while serving as member of approved lawyers' assistance program and disclosure would violate attorney-client privilege).
431. These provisions opt out of the default rule in Texas, Illinois, and some other jurisdictions that a lawyer who is fired for obeying rules of professional responsibility has no case for retaliatory discharge. See supra notes 375-78 (discussing Bohatch v. Butler & Binion, 977 S.W.2d 543 (Tex. 1998) and Jacobson v. Knepper & Moga, 706 N.E.2d 491 (Ill. 1998)).