Duties to prospective client (Rule 1.18)

Special Coverage

PROPOSED RULES OF PROFESSIONAL CONDUCT

Under Evidence Code Section 951 and Business and Professions Code Section 6068(e), the attorney-client privilege and the duty of confidentiality have long been interpreted to extend to communications with prospective clients. If adopted, Proposed Rule 1.18 will formalize these protections as a disciplinary rule where none previously existed.

The rule generally addresses an attorney's duties to prospective clients - persons who consult with an attorney for the purpose of retaining the lawyer or obtaining legal services or advice from the lawyer, even if no formal attorney-client relationship is established. Under the new rule, an attorney is prohibited from using or revealing confidential information learned as a result of the consultation, except under circumstances permitted under Rule 1.9 with respect to the information of former clients. The rule is accordingly broader than its Model Rule equivalent in that the Model Rule applies only to information learned from the prospective client, while Rule 1.18 also applies information a lawyer learns in any resulting investigation. Because this aspect of Rule 1.18 is consistent with existing law, lawyers seeking further guidance should look to State Bar Formal Opinions 2003-161 and 2005 168.

The rule further prohibits a lawyer from undertaking a representation materially adverse to a prospective client on the same or substantially related subject matter where the lawyer has obtained confidential information material to the matter without obtaining informed written consent from both the affected client and the prospective client. This prohibition is imputed to the lawyer's entire firm, such that no lawyer associated with the firm may knowingly undertake or continue representation in such a matter unless a rule-compliant ethical screen is created.

The term "materially adverse" derives from the Model Rules and is not used in the current rules, which refer only to "adverse" representations. The Rules Revision Commission's responses to public comment suggest that the addition of "materially" may not be a substantive change in the law, but also state that term will need to be clarified by future ethics opinions providing explanatory guidance about its application to specific factual circumstances. In the interim, lawyers seeking guidance regarding specific circumstances may look to the opinions and case law of other jurisdictions that have adopted the Model Rule.

A firm's ability to avoid imputation of the prohibition is subject to an important caveat: An ethical screen may be used only where the lawyer(s) who received the confidential information took reasonable measures to avoid exposure to more information than was reasonably necessary to determine whether to undertake the representation of the prospective client. If so, the firm may avoid imputation of the prohibition by timely screening the lawyer(s) from participation in the subsequent matter, apportioning the lawyer(s) no part of the fee from that matter, and providing the original prospective client with prompt written notice of the screen. The notice must include a general description of the subject matter for which the prohibited lawyer was consulted and of the screening procedures employed.

To be sufficient, the screen must use procedures adequate to protect the prospective client's confidential information and to prevent other firm personnel from communicating with the prohibited lawyer(s) about the subsequent matter. While the screening requirements of Rule 1.18 are broadly consistent with those contained in Rule 1.10(a)(2), which governs the imputation and screening of certain former client conflicts, unlike in Rule 1.10 there is no requirement for the firm to agree to respond to written inquiries or objections by the original potential client regarding the screening procedures. While the prophylactic measures necessary to adequately protect the confidential information will vary with the circumstances, existing case law favors but does not always require the physical isolation of the prohibited lawyer and of the confidential files from attorneys working on the matter and access restrictions on electronic confidential files. See Kirk v. First American Title Co., 183 Cal. App. 4th 776, 811-13 (2010).

The ability to take meaningful advantage of the rule's permissive screening provisions may hinge on a firm's size, culture and management structure. Kirk explains that physical or geographical distance and the existence of supervisory relationships between a screened lawyer and those working on the subject matter are relevant to determining whether an ethical screen in adequate. Small firms in a single office may find it more difficult to create a sufficient screen. Similarly, Rule 1.18(d)(2) appears to require screening of all lawyers who actually received the prospective client's confidential information, not merely the lawyer who directly communicated with the prospective client. This requirement could presumably extend to lawyers involved in any investigation of the potential matter, lawyers who discussed the potential matter or had access to the prospective client's data, or members of firm management involved in the decision whether to represent the prospective client. The degree to which a firm compartmentalizes its client intake process will likely impact its ability to create a rule-compliant screen down the road.

Finally, one issue to watch as the Supreme Court reviews the rule for adoption is the limitation that screening is only available where the prohibited attorney has taken reasonable measures to avoid exposure to more information than is reasonably necessary to decide whether to accept the representation. The rule and its comments provide no specific guidance regarding the scope of such reasonably necessary information. One member of the commission dissented on this issue, pointing out that such information could presumably include a prospective client's financial information or information regarding the prospective client's motivations and credibility as a witness. The dissent argued that allowing a firm that has obtained such information to undertake a representation adverse to the prospective client on the same or substantially related matter would be tantamount to prohibited side-switching. The Supreme Court could narrow or clarify this language in adopting the rule in order to address the dissent's concerns, which could significantly impact the scope of the rule's screening provisions.

Rule 1.18 Duties To Prospective Client

(Proposed Rule Adopted by the Board on March 9, 2017)

(a) A person* who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from the lawyer in the lawyer's professional capacity, is a prospective client.

(b) Even when no lawyer-client relationship ensues, a lawyer who has communicated with a prospective client shall not use or reveal information protected by Business and Professions Code § 6068(e) and rule 1.6 that the lawyer learned as a result of the consultation, except as rule 1.9 would permit with respect to information of a former client.

(c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received from the prospective client information protected by Business and Professions Code § 6068(e) and rule 1.6 that is material to the matter, except as provided in paragraph (d). If a lawyer is prohibited from representation under this paragraph, no lawyer in a firm* with which that lawyer is associated may knowingly* undertake or continue representation in such a matter, except as provided in paragraph (d).

(d) When the lawyer has received information that prohibits representation as provided in paragraph (c), representation of the affected client is permissible if:

(1) both the affected client and the prospective client have given informed written consent,* or

(2) the lawyer who received the information took reasonable* measures to avoid exposure to more information than was reasonably* necessary to determine whether to represent the prospective client; and

(i) the prohibited lawyer is timely screened* from any participation in the matter and is apportioned no part of the fee therefrom; and

(ii) written* notice is promptly given to the prospective client to enable the prospective client to ascertain compliance with the provisions of this rule.

Comment

[1] As used in this rule, a prospective client includes a person's authorized representative. A lawyer's discussions with a prospective client can be limited in time and depth and leave both the prospective client and the lawyer free, and sometimes required, to proceed no further. Although a prospective client's information is protected by Business and Professions Code § 6068(e) and rule 1.6 the same as that of a client, in limited circumstances provided under paragraph (d), a law firm* is permitted to accept or continue representation of a client with interests adverse to the prospective client. This rule is not intended to limit the application of Evidence Code § 951 (defining "client" within the meaning of the Evidence Code).

[2] Not all persons* who communicate information to a lawyer are entitled to protection under this rule. A person* who by any means communicates information unilaterally to a lawyer, without reasonable* expectation that the lawyer is willing to discuss the possibility of forming a lawyer-client relationship or provide legal advice is not a "prospective client" within the meaning of paragraph (a). In addition, a person* who discloses information to a lawyer after the lawyer has stated his or her unwillingness or inability to consult with the person,* (People v. Gionis (1995) 9 Cal.4th 1196 [40 Cal.Rptr.2d 456]), or who communicates information to a lawyer without a good faith intention to seek legal advice or representation, is not a prospective client within the meaning of paragraph (a).

[3] In order to avoid acquiring information from a prospective client that would prohibit representation as provided in paragraph (c), a lawyer considering whether or not to undertake a new matter must limit the initial interview to only such information as reasonably* appears necessary for that purpose.

[4] Under paragraph (c), the prohibition in this rule is imputed to other lawyers in a law firm* as provided in rule 1.10. However, under paragraph (d)(1), the consequences of imputation may be avoided if the informed written consent* of both the prospective and affected clients is obtained. See rule 1.0.1(e-1) (informed written consent*). In the alternative, imputation may be avoided if the conditions of paragraph (d)(2) are met and all prohibited lawyers are timely screened* and written* notice is promptly given to the prospective client. Paragraph (d)(2)(i) does not prohibit the screened* lawyer from receiving a salary or partnership share established by prior independent agreement, but that lawyer may not receive compensation directly related to the matter in which the lawyer is prohibited.

[5] Notice under paragraph (d)(2)(ii) must include a general description of the subject matter about which the lawyer was consulted, and the screening procedures employed.