By David C. Carr
There are many fraught areas of legal ethics, but few that match the tension that is reflected in California Rule of Professional Conduct 1.2.1, which prohibits a lawyer from advising or assisting a violation of the law. The Rule states:
(a) A lawyer shall not counsel a client to engage, or assist a client in conduct that the lawyer knows is criminal, fraudulent, or a violation of any law, rule, or ruling of a tribunal.*
Now the tension part:
(b) Notwithstanding paragraph (a), a lawyer may: (1) discuss the legal consequences of any proposed course of conduct with a client; and (2) counsel or assist a client to make a good faith effort to determine the validity, scope, meaning, or application of a law, rule, or ruling of a tribunal.*
Comment 1 of the Rule outlines the contours of that tension:
There is a critical distinction under this rule between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity. The fact that a client uses a lawyer’s advice in a course of action that is criminal or fraudulent* does not of itself make a lawyer a party to the course of action.
Unfortunately, the Rule does not (and probably cannot) offer specific guidance on how that “critical distinction” line is drawn in practice. The client is coming to lawyer seeking advice on how to meet the client’s objectives (Rule Prof. Cond. 1.2). Lawyer is eager is suggest means to achieve those goals. Lawyer has a duty to advise the client that certain means are illegal and to explain the potential consequences of using those means. In that process, the line between analysis and recommendation is easily blurred. Moreover, a savvy client and a cagey lawyer can frame the analysis in a way that alerts the client to an illegal means but does not suggest it; clearly showing the client what that path is and what toll might be paid for going down it. The client is left to decide if the cost/benefit analysis presents an acceptable risk. As long as the lawyer never says, “you should,” is this conduct acceptable?.
Some would like lawyers to be “gatekeepers” of the client’s conduct. The American Bar Association (ABA) Model Rule of Professional Conduct 1.2 is similar to our California rule , ABA Formal Ethics Opinion 463 (“Client Due Diligence, Money Laundering, and Terrorist Financing”) discusses the contours of a lawyer’s ethical obligations under the ABA Model Rules with regard to efforts to deter and combat money laundering, in light of calls from intergovernmental standards-setting organizations and government agencies to perform as “gatekeepers” to the financial system.
The Opinion, citing to the ABA’s published “best practices” guidelines states the Model Rules do not require a lawyer to function as a “gatekeeper” in preventing crimes such as money laundering but it would be prudent for lawyers to undertake client due diligence in appropriate circumstances to avoid facilitating illegal activity or being drawn unwittingly into a criminal activity, consistent with the ABA’s prior opinion 1470 (1981) that stated “[a] lawyer cannot escape responsibility by avoiding inquiry. A lawyer must be satisfied, on the facts before him and readily available to him, that he can perform the requested services without abetting fraudulent or criminal conduct and without relying on past client crime or fraud to achieve results the client now wants.”
This may require further inquiry. The opinion continues: “An appropriate assessment of the client and the client’s objectives, and the means for obtaining those objectives, are essential prerequisites for accepting a new matter or continuing a representation as new facts unfold. Rule 1.2(d) prohibits a lawyer from knowingly counseling or assisting a client to commit a crime or fraud.[1]“
“Know” is defined term under California Rule of Professional Conduct 1.0.1(f): “Knowingly,” “known,” or “knows” means actual knowledge of the fact in question. A person’s* knowledge may be inferred from circumstances.” California Rule of Professional Conduct 1.16(b) allows a lawyer to withdraw if (2) the client either seeks to pursue a criminal or fraudulent course of conduct or has used the lawyer’s services to advance a course of conduct that the lawyer reasonably believes was a crime or fraud; [or] (3) the client insists that the lawyer pursue a course of conduct that is criminal or fraudulent” but not mandate withdrawal. Knowledge is a higher standard than “reasonable belief.” But even knowledge of a client’s intent does not compel withdrawal so long as the lawyer does not assist the client in the criminal conduct. Even bad people need good lawyers. Maybe especially bad people, so long as the lawyer fulfills their primary mission as officers of the justice system.
The situation that lawyers in the budding cannabis industry find themselves has shown a different light on the “critical distinction.” As long as it remains illegal under federal law, meeting the client’s objectives by any means assistance in violating the law. Trying to square the circle, the California Supreme Court rejected one of the original comments to Rule 1.2.1 and adopted this gloss on Rule 1.2.1(b):
[6] Paragraph (b) permits a lawyer to advise a client regarding the validity, scope, and meaning of California laws that might conflict with federal or tribal law. In the event of such a conflict, the lawyer may assist a client in drafting or administering, or interpreting or complying with, California laws, including statutes, regulations, orders, and other state or local provisions, even if the client’s actions might violate the conflicting federal or tribal law. If California law conflicts with federal or tribal law, the lawyer must inform the client about related federal or tribal law and policy and under certain circumstances may also be required to provide legal advice to the client regarding the conflict (see rules 1.1 and 1.4).
Emphasis added. The State Bar’s Committee on Professional Responsibility and Conduct (COPRAC[2]) has proposed an ethics opinion the expands on the gloss in Comment 4. The digest of opinion 17-0001 provides:
A lawyer may ethically advise a client concerning compliance with California’s cannabis laws and may assist the client in conduct permitted by those laws, despite the fact that the client’s conduct may violate federal law. Such advice and assistance may include the provision of legal services to the client that facilitate the operation of a business that is lawful under California law (e.g., incorporation of a business, tax advice, employment advice, contractual arrangements and other actions necessary to the lawful operation of the business under California law). However, a lawyer may not advise a client to violate federal law or provide advice or assistance in violating state or federal law in a way that avoids detection or prosecution of such violations. The lawyer must also inform the client of the conflict between state and federal law, including the potential for criminal liability and the penalties that could be associated with a violation of federal law. Where appropriate, the lawyer must also advise the client of other potential impacts upon the lawyer-client relationship, including the attorney-client privilege, that may result from the fact that the client’s conduct may be prohibited under federal law.
[Emphasis added.]
The last two points in the digest tempers the duty of reasonable inquiry by suggesting that any such inquiry should begin with the lawyer advising the client of the limitations on the lawyer’s ability to advise under Rule 1.2.1 (see Rule 1.4) as well as a warning that certain types of information might fall under the crime-fraud exception to privilege in the California Evidence Code section. These points are applicable to all cases where the client may be engaged in criminal or fraudulent conduct, not just cannabis industry practice.
The practice of law is largely about drawing lines. Attorneys are sometimes good at drawing them for their clients but not so good at drawing for themselves. Rule 1.2.1 describes a critical line that attorneys should have in mind when approached by certain clients.
[1] “A lawyer also is subject to federal laws prohibiting conduct that aids, abets, or commits a violation of U.S. anti-money laundering laws (e.g., 18 U.S.C. Sections 1956 and 1957) or counter-terrorist financing laws.”
[2] The author is currently a member of COPRAC
David C. Carr is the owner of the Law Office of David C. Carr.
This article was originally published on the SDCBA website. Click here to view.
**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**