By David C. Carr
Lawyers owe many ethical duties to their clients. Most of these duties are bottomed on the fiduciary nature of the attorney-client relationship. But lawyers also owe ethical duties to the judicial system and other persons arising from their status as officers of the Court and agents of the justice system. The most exciting (sometimes too exciting) problems in legal ethics arise from conflicting duty situations. California’s Rule of Professional Conduct 1.2.1 provides the context for many conflicting duty scenarios. It has been a part of ethical controversies since it became part of the black letter law of legal ethics on its adoption by the Supreme Court in November 2018.
Rule 1.2.1 says:
(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. (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.
The California Rule is partly based on the American Bar Association (ABA) Model Rule 1.2(d)[1] but is not identical. The California Rule adds language bringing “a violation of any law, rule, or ruling of a tribunal” within the scope of the Rule, language from former California Rule of Professional Conduct 3-210 and broadens the potential application of the California Rule.
An example of the potentially broad application of Rule 1.2.1 is presented in California’s proposed formal opinion interim No. 19-0003 (Illegal Contract Provisions), which is now out for a second public comment period (deadline for comment December 22, 2021.)
The issue addressed in the opinion is the California lawyer’s ethical duty when advising a client regarding using a contract provision in a transaction with a third party that is illegal under the law of the jurisdiction applicable to the transaction. The opinion’s hypothetical deals with an illegal contract provision in an employment agreement promulgated by an employer’s Human Resources Department after vetting by an in-house lawyer. An example of this kind of provision might be the non-compete clause, such as the one found by the California Supreme Court in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 941, to violate Business and Professions Code section 16600.[2]
The proposed opinion’s digest states:
A California lawyer has a duty not to counsel 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. That conduct includes promulgating or enforcing a contract provision in a transaction with a third party that is illegal under the law of the jurisdiction applicable to the transaction. If the lawyer knows that the provision is illegal as applied to the transaction, the lawyer should advise the client accordingly, may not recommend the use of the provision, and must counsel the client not to use it. If the client insists on the use of the illegal provision against the lawyer’s advice, the lawyer may not participate in promulgating or enforcing the illegal provision against a third party. The lawyer is permitted to withdraw from the representation if the client insists on using the illegal provision and, depending on the client’s continued conduct, may be required to do so. If the lawyer concludes that the client’s conduct is a violation of law reasonably imputable to the organization and likely to result in substantial injury to the organization, the lawyer for an organization must report the actions of the client constituent to a higher authority within the organization, unless the lawyer reasonably concludes that it is not in the best lawful interest of the organization to do so.
The image of the lawyer as the client’s “hired gun” is so deeply ingrained in the culture that it might come as a shock to many clients (and more than a few lawyers) that saying “no, you can’t do that,” to the client is actually required of a lawyer under some circumstances. An overemphasis on the “zealous advocacy” aspect of lawyering is partly to blame. Another factor may be the practical difficulties in discharging that responsibility. Accepting that a lawyer must sometimes be a gatekeeper for the client’s behavior opens the door to necessary consideration of just how a lawyer does that and when.
The necessity and scope of such “gatekeeping” where the proposed conduct is criminal or fraudulent is more clearly understood and easier to articulate. ABA Formal Ethics Opinion 491 (July 29, 2020) articulates a very robust duty of inquiry where the lawyer knowledge of a potential crime or fraud is merely inferential:
Model Rule 1.2(d) prohibits a lawyer from advising or assisting a client in conduct the lawyer “knows” is criminal or fraudulent. That knowledge may be inferred from the circumstances, including a lawyer’s willful blindness to or conscious avoidance of facts. Accordingly, where facts are known to the lawyer establish a high probability that a client seeks to use the lawyer’s services for criminal or fraudulent activity, the lawyer has a duty to inquire further to avoid advising or assisting such activity. Even if information learned in the course of a preliminary interview or during a representation is insufficient to establish “knowledge” under Rule 1.2(d), other rules may require the lawyer to inquire further in order to help the client avoid crime or fraud, to avoid professional misconduct, and to advance the client’s legitimate interests.
California’s Rule goes beyond the ABA formulation that limits itself to crime and fraud. It also speaks of conduct that might not be criminal or fraudulent but merely illegal in being a violation of “any law, ruling or tribunal.” California’s proposed ethics opinion 19-0003 is an attempt to work out the answer in one particular context.
And context matters because Rule 1.2.1 lives at the intersection of conflicting duties, as the (b) part makes clear:
(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.
Any gatekeeping function is tempered by the lawyer’s duty to the client to advise of the consequences of a proposed course of conduct and make an effort to determine “in good faith” whether the law, rule, or ruling is sound. Moreover, the lawyer has at least a limited right to test the law in litigation matters as set forth in California Rule of Professional Conduct 3.1(a)(2): “A lawyer shall not:…present a claim or defense in litigation that is not warranted under existing law, unless it can be supported by a good faith argument for an extension, modification, or reversal of the existing law.” Where exactly is the dividing line between a clam “not warranted under existing law” and a “violation of the law.”
A recent example of the context-heavy environment surrounding Rule 1.2.1 is presented by the revisions to comment 6 to the Rule, which now reads:
[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, then 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).
The problem was the difference between California and Federal law in the treatment of cannabis after California legalized use through the initiative process in 2016. The original comment failed to adequately chart the lawyer’s course between violating Federal law and fulfilling the lawyer’s duties to advise the client under California’s new, cannabis commerce-friendly licensing scheme. The California Supreme Court asked the State Bar to re-draft comment 6 to address the changed context.
Rule 1.2.1 will probably enjoy more time in the sun as California addresses complaints made against lawyers about their advice and actions while representing a particular political candidate in the 2020 election.
In the meantime, California lawyers might think about when and why telling their clients, “no, you can’t do that,” might be right thing to do.
[1] “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.”
[2] One scholarly article finds the use of non-compete clauses to be pervasive and economically harmful. Starr, Prescott and Bishara The Behavoral Effects of Unenforceable Contracts, Journal of Law, Economics, and Organization, https://ssrn.com/abstract=2858637.