April 2002

Recent RPC Informal Opinions

by Christopher Sutton
WSBA Professional Responsibility Counsel

The Rules of Professional Conduct (RPC) Committee receives, researches and prepares responses to written ethical inquiries submitted by bar members. Upon receipt, each written inquiry is assigned to two committee members for research. If the response to an inquiry could have wide impact, additional information from knowledgeable experts may be sought. Those assigned to the inquiry present a written response memo to the entire RPC Committee for discussion. Specific language is proposed and voted on by the committee, and a response letter is directed to the inquirer. The response letter is redacted to remove identifying information and is designated an informal opinion. If the inquirer acts in accordance with the response letter, a rebuttal presumption arises that the action is ethical. Informal opinions are based on the specific facts of the inquiry and reflect only the opinion of the RPC Committee and not the official opinion of the WSBA.

While informal opinions are generally concerned with situations specific to the inquiry, many of the recently issued informal opinions may be of interest to bar members. Below are summaries of these opinions.

Informal Opinion 1931 concerns possible conflicts of interest when acting as a construction consultant and as an attorney. The inquiring lawyer owns a substantial interest in and is employed by a consulting company, and in his lawyer capacity represents clients of that company. The inquiring lawyer asks if another employee of the company may testify as an expert witness for the inquiring lawyer when the lawyer is the legal representative of a client of the company in an action involving the findings of the consulting company, and may informed consent allow an otherwise impermissible representation?

The committee stated that the inquirer partly owns a consulting business with a nonlawyer. The inquirer proposes to identify potential legal clients from among the consulting business clients, advise the consulting clients to hire the inquirer as their attorney, and use the inquirer's consulting partner as an expert witness to avoid possible difficulties with RPC 3.7.

The committee opined that using either the consulting business to refer legal business to the inquirer's law practice or the law practice to refer business to the consulting business, including expert testimony, is a violation of RPCs 1.7(b) and 1.8(a). See Formal Opinion 187 and Informal Opinion 1926. There may also be a violation of RPCs 1.6 and 7.3, depending on circumstances. The committee believes these conflicts may not be waived because they are likely to occur.

Informal Opinion 1941 concerns the RPCs and neglect of a client. The inquiring lawyer poses a question about his obligation to a former client who is now represented by new counsel, regarding the subject matter of new counsel's representation. The inquiry focuses on whether the inquirer should contact the former client about possible legal malpractice by the new lawyer committed during the resolution of the matter that was the subject of both lawyers' representation of the same client.

The committee response is based upon the fact that the inquirer no longer represents the client; the matters that are the subject of the inquiry occurred after the new lawyer took over representation of the client; the client chose another lawyer; and the inquirer appears to have met his obligations as withdrawing counsel by briefing new counsel about the case, including the claim for reasonable attorney's fees.

The committee opined that absent authorization by law, which the inquirer has not provided, the inquirer is precluded from making unilateral contact with the former client that forms the substance of the inquiry. Such unilateral contact is not required by RPC 1.15. More importantly, such contact would undermine the attorney-client relationship that RPC 4.2 serves to protect.

The inquiry also seems to presume that the new lawyer has probably committed malpractice and may not have consulted with and been guided by the decisions of the client. Since the purview of the committee is limited to dealing with inquiries concerning the inquirer's own conduct and not that of other lawyers, the committee may not respond to that matter.

Informal Opinion 1922 concerns the hiring out of nonlawyer computer and information-technology (IT) employees as consultants to other law firms. The inquiring law firm wrote that several of its nonlawyer employees are skilled in computer and IT, and that other law firms are interested in hiring these employees for their administrative projects. The inquiring firm would like to provide the services of its computer and IT employees to the inquiring firm for profit.

The committee opined that it would be permissible under the Rules of Professional Conduct for the inquiring firm to hire out computer and IT employees of the inquiring firm for profit to other firms, provided that the inquiring firm complies with RPCs 5.4(a) and (b), 5.3 and 1.8(a). RPC 5.3 requires the inquiring firm to put in place measures giving reasonable assurance that its computer and IT employees maintain confidences under RPC 1.6 and, more generally, to ensure that their conduct is consistent with the professional obligations of lawyers in the firm. Confidentiality and nondisclosure agreements, mentioned in the inquirer's second question, are among the steps that the inquiring firm may take to address confidentiality in the context of RPC 5.3. However, the committee does not opine on the adequacy of these measures under the RPCs. Because the third and fourth questions are predicated on a negative response to the first question, the committee does not consider them. Finally, the committee offers no opinion based on the inquiry as to the obligations of the hiring firm.

Informal Opinion 1932 concerns fee-splitting and RPC 5.4(a). The inquirer asked about the propriety of an attorney's payment of administrative charges to a for-profit lawyer-referral service. The service arranges attorney-client relationships, and imposes certain charges on the attorney for, in part, management of invoices for the attorney's fees to client.

The committee stated that unlike a lawyer's relationship with a "not-for-profit" lawyer-referral service, RPC 7.2(c) bars an attorney from entering an agreement with a "for-profit" lawyer-referral service that provides for the lawyer's payment of charges to the service. The committee believes that under Rules 5.4(a) and 7.2(c), a lawyer may not pay charges of a "for-profit" lawyer-referral service for administrative or other charges associated with the service's activities.

Informal Opinion 1935 deals with percentage cost recovery. The inquirer asked if a lawyer may ethically add a flat percentage amount to a client's bill (e.g., two or three percent in lieu of specific itemized charging of costs, such as long-distance phone calls, postage, copying and faxes).

The committee opined that a lawyer may charge a flat percentage to a client's bill in lieu of itemization of costs if there is full prior disclosure to the client, the client agrees, and the amount of the charge is reasonable pursuant to RPC 1.5.

Informal Opinion 1937 concerns advertising to the Hispanic community using the inquirer's mother's maiden name in addition to the inquirer's legal last name. (Editor's note: All names used in this opinion are fictitious.) The inquiring lawyer asks whether it is ethical to advertise his legal services under the name "John Doe Gonzales" or "John Doe-Gonzales," where his legal name is "John Doe." The inquirer states that it is customary in many Hispanic cultures to use the first part of the father's surname with the first part of the mother's surname. Because his mother's maiden name is "Maria Gonzales Rodriguez," the inquirer would like to advertise his legal services in the Hispanic community under the name "John Doe Gonzales" or John Doe-Gonzales."

The committee believes that the inquiring lawyer's use of the "John Doe Gonzales" or "John Doe-Gonzales" in advertisements is false and misleading in violation of RPCs 7.1(a) and 7.5(a). The use of more than one name at the same time in a lawyer's practice is false and inherently misleading. Lawyers should use the name under which they are licensed to practice with the WSBA. This allows the public at large to make accurate inquiries to the WSBA regarding a lawyer's good standing and disciplinary history.

Informal Opinion 1940 deals with ethical considerations of a Web site. The inquiring lawyer asks several questions about Web sites, including whether it is ethical for a Web site to link to other Web sites for the purpose of providing more detailed educational information; whether it is ethical for a Web site to link to other Web sites for the purpose of providing information that, although not necessarily purely educational to a particular area of practice, would potentially be useful to the reader; whether it is ethical to provide a disclaimer; and whether it is ethical to have one or more Web search engine links to embedded words, or purchase the use of words in a search engine that are not exactly contained in the site.

The committee opined that it is ethical for a Web site to link to other Web sites for providing educational information only or other information related to an area of law as long as it has the disclaimer discussed in the inquirer's letter and has complied with RPCs 7.1 and 7.2. In accordance with the requirements of RPC 7.2(b), the inquirer should keep copies of all advertisements for at least two years following the last date the advertisement is used; maintain a list of all linked Web sites and the dates the links appeared; and, as some commentators have suggested, maintain copies of hypertext mark-up language of the Web site to establish META-tag honesty. Where possible, a list of "hits" to the site to establish the level of dissemination of the information, and backup or archive copies of every material change to the site should also be kept.

Informal Opinion 1951 concerns a law firm's compensation plan for a nonlawyer lobbyist. The inquirer wrote that his law firm wished to hire a nonlawyer lobbyist who has an office in Washington, D.C. The firm would like to compensate this individual with a compensation plan based in part on fees the firm collects from clients referred by this individual.

The committee opined that RPC 5.4 prohibits lawyers from sharing legal fees with nonlawyers. In addition, RPC 7.2 prevents a lawyer from paying referral fees for channeling professional work. Any profit-sharing arrangement that includes nonlawyers must be based on the firm's overall profits and not on a particular referral.

Informal Opinion 1952 deals with a company that provides loans to clients secured by a lien on the client's lawsuit. The inquirer asks whether an advertisement from a company that appears to provide loans for lawsuits, including client expenses, is ethical under Washington's ethics rules. The committee stated that, since the advertisement had been issued by a nonlegal entity, the inquiry does not present an issue upon which the committee can opine.

Informal Opinion 1939 concerns a conflict of interest with a former client. The inquiring lawyer asks if he may ethically represent a client in an action against a former client. The lawyer states that he collected debts that had been assigned to a collection agency and prosecuted an unlawful detainer action for a property management firm. The debts were owed by patients to hospital A, and the detainer action was taken with respect to rental property owned by the hospital. The lawyer states he had no contact with the hospital but only with the collection agency and the property-management firm. The lawyer is no longer engaged by the collection agency and he has not handled any unlawful detainer actions for more than six months. The hospital is part owner of a medical clinic that employs a doctor or contracts with the doctor as an independent contractor. The lawyer asks if he may represent a client in a malpractice action against the doctor, the clinic and the hospital.

The committee opined that for purposes of responding to the inquiry, the committee does not determine whether the hospital was the inquirer's client, either as to the collections or the unlawful detainer work described, because there is insufficient information to make that determination. The committee simply assumes, without deciding, that such a relationship existed. Based upon the facts presented, we conclude that RPCs 1.7, 1.8 and 1.9 would not preclude the inquirer from representing the client in the malpractice action described.

RPCs 1.7 and 1.8 would not apply because the hospital is not a current client. RPC 1.9 addresses conflicts regarding former clients, and requires disclosure and consent of the former client when a lawyer who has formerly represented that client in a matter represents another person in the same or substantially related matter in which that person's interests are materially adverse to the interests of the former client.

Based upon the information provided, there is no basis for concluding that the collections and unlawful detainer matters are substantially related to the malpractice claim of the current client. Accordingly, the inquirer may proceed without the consent of the hospital. Note, however, that RPCs 1.6 and 1.9(b) prohibit the inquirer from revealing secrets or confidences relating to the hospital that may have been acquired in the unlawful detainer or collection actions, and from using those confidences or secrets to the hospital's disadvantage, except as RPCs 1.6 would permit.

Informal Opinion 1943 concerns application of the Rules of Professional Conduct to lawyers in nonlawyer jobs. The inquirer is a lawyer employed by the Department of Social and Health Services Medical Assistance Administration to defend client appeals of adverse denials of Medicaid medical services. The inquirer appears before administrative law judges in hearings that result in a decision binding on the department unless appealed. Occasionally the inquirer believes that a case should not, in good faith, be appealed. The position does not require a lawyer, although legal expertise is helpful in the job.

The committee opined that the RPCs apply to all lawyers licensed in Washington, regardless of the characterization of the position with the employer. As to the inquirer's defense of cases as directed by the employer, RPC 3.1 addresses the inquirer's responsibilities upon the determination by the inquirer that the matter cannot be defended in good faith. RPCs 1.2 and 1.4(b) require disclosure to and consultation with the client.

Informal Opinion 1947 concerns a lawyer's participation with a for-profit Internet entity that provides users access to a list of lawyers willing to provide services for fixed fees or lower rates. The committee stated that, under RPCs 5.4(a) and 7.2(a), a lawyer is not prohibited from entering into an agreement such as that required by the for-profit Internet entity that operates a Web site providing users of the site access to lawyers who are willing to provide legal services for fixed fees or lower hourly rates. Such an agreement does not entail fee-sharing with a nonlawyer, and/or indirect payment of a referral fee to a for-profit referral service.

Informal Opinion 1949 deals with use of partners' names as the firm name when the firm is registered as a PLLC under a different name. The inquiring lawyer asks the committee if it is ethical for a law firm to use, as the firm name, a name different from the legal, professional limited liability company name. The committee opined that a law firm may not, consistent with the mandate of RPCs 7.1s and 7.5(a), use as its primary name to the public, to the courts and opposing counsel a name different from their legal name.

Informal Opinion 1950 concerns conflicts of interest that may arise when representing both an employer and an employee. The inquirer asks two questions:

(1) In the event a lawyer determines that joint representation of an employer and an employee is possible, may a lawyer seek engagement letters that provide that one client defers case control and strategy decisions to the client who is paying for the defense?

(2) In the event of such joint representation, may one client enter into an advance waiver of a conflict if a conflict arises during the dual representation, such waiver allowing the lawyer to continue representation of the other client?

The committee opined that the Rules of Professional Conduct do not prevent a lawyer from joint representation of civil co-defendants. RPC 1.7 requires that in the event of conflict, the joint representation will not adversely affect the relationship with either client, and there is written consent to the representation after consultation and disclosure of material facts. In authorizing the joint representation, a lawyer may theoretically limit the objectives of the representation of one client under RPC 1.2(c) "if the client consents after consultation." However, the limitation on the representation of one client cannot adversely affect the relationship with that client. See RPC 1.7(a)(1). In the event of an initial joint representation of civil co-defendants, the ability of a lawyer to withdraw from representation of only one client is governed by RPC 1.9.

Informal Opinion 1953 concerns a lawyer/CPA who works for a CPA firm that requires the lawyer/CPA to sign a termination agreement limiting future employment. The inquirer is a lawyer/CPA employed by a CPA firm. The firm has asked that he sign an employment agreement with a noncompete clause. The clause would preclude him, if he terminates employment with the CPA firm, from providing similar tax-related services for 12 months from termination, as a lawyer, to any of the CPA firm's clients or prospective clients. The lawyer declined to sign the agreement, but suggested a proviso acknowledging restrictions of RPC 5.6 prohibiting noncompetition agreements and exempting the practice of law from the scope of the noncompete clause.

The committee opined that the employer's proposed noncompetition agreement would violate RPC 5.6's explicit direction that "… a lawyer shall not participate in … making a[n] … employment agreement that restricts the rights of a lawyer to practice after termination of the relationship." The fact that the lawyer might only be subject to damages if he should violate the agreement still amounts to a restriction. The proposed additional clause that "these provisions shall in no way limit or restrict employee's right to practice law" would cure the violation.

Informal Opinion 1955 concerns use of out-of-state Internet lawyer-referral services that operate in a similar fashion to Martindale-Hubbell legal directory, which charges a monthly or yearly fee for a listing, but not on a per-referral or per-client basis.

RPC 7.2, which deals with advertising generally, does not contain rules specific to the Internet. Rather, the scope of RPC 7.2 is defined broadly enough to include all "public media." Therefore, Web-based legal directories should fall under RPC 7.2, just as their print counterparts do. Further, because RPC 7.2(a) incorporates RPC 7.1 by reference, this provision should apply to Web-based directories as well.

Under RPC 7.1, all communications concerning lawyer's services for which the lawyer is responsible must be truthful and complete. Therefore, a lawyer is responsible for ensuring that all communications made in a Web-based directory concerning the lawyer and the lawyer's services are truthful and are otherwise in compliance with the RPCs, just as with more traditional printed directories, including any material that may purport to "recommend" the lawyer or the lawyer's services. However, the committee is of the opinion that recommendations such as identifying the lawyer as among the highest caliber should contain an appropriate disclaimer that reasonably allows the reader to understand that past performance does not guarantee future performance. See RPC 7.1(b). Furthermore, the basis upon which a lawyer is identified as being among the highest qualified must be reasonably verifiable. See RPC 7.1(c). The manner in which the RPCs apply to Internet advertising and solicitation in multijurisdictions are currently being examined by the ABA and various states, including Washington. Changes may occur in the future.

Finally, the committee cautions the inquirer that this analysis applies only to the Washington State Rules of Professional Conduct and the interpretation of those rules.

Informal Opinion 1956 concerns whether a lawyer-referral service's lawyer may initiate a call to a referral client. The inquirer asks whether or not it is permissible under RPC 7.3(a) for attorneys participating in the King County Bar Association Lawyer Referral Service to initiate telephone contact with prospective clients who have been referred to them by the lawyer-referral service. Such contact is made after receipt by the attorneys of a written conformation of referral and before any attempt by the prospective clients to initiate contact with the attorneys.

The committee opined that it is not permissible under RPC 7.3(a) for the participating attorneys to initiate telephone or personal contact with prospective clients who have been referred to them by the King County Bar Association Lawyer Referral Service. This is because, as is the expectation of the prophylactic prohibition of RPC 7.3(a), the attorneys will usually have pecuniary gain as a significant motivation in making such contact. The attorney-client relationship does not properly exist unless and until the potential client has first made contact with the attorney. Attorneys administering the Lawyer Referral Service must also take care not to risk violating the provisions of RPC 8.4(a) by facilitating conduct known to be outside the bounds of RPC 7.3(a).

Informal Opinion 1958 concerns deposit of client funds in an account not federally insured and situations where trust account funds exceed the FDIC limit of $100,000. The inquirer asked two questions related to the interpretation of RPC 1.14.

(1) May an attorney, at the direction and with the consent of his client, place trust funds of the client in a higher interest-bearing account, not federally insured, as required under 1.14?

(2) When trust account funds exceed FDIC limit ($100,000), is an attorney required to open multiple accounts to provide full coverage for individual clients?

The committee opined, in answer to the first question, that according to Informal Opinion No. 86-3, the requirements of RPC 1.14(c) are mandatory and cannot be waived by the client. Per RPC 1.14, trust funds must be deposited in "qualified public depositories," and "each trust account referred to in section (a) shall be an interest-bearing trust account in any bank, credit union or savings and loan association selected by a lawyer in the exercise of ordinary prudence, authorized by federal or state law to do business in Washington and insured by the Federal Deposit Insurance Corporation, the National Credit Union Share Insurance Fund, the Washington Credit Union Share Guaranty Association, or the Federal Savings and Loan Insurance Corporation (which is a qualified public depository as defined in RCW 39.58.010(2))."

Accordingly, it is the committee's opinion that client funds cannot be deposited into accounts at institutions lacking the insurance specified in RPC 1.14, unless the institution is a "qualified public depository" as defined. Client consent does not waive this requirement.

As to the second question, the committee opined that RPC 1.14 does not require multiple accounts in multiple institutions or otherwise to guarantee insurance for the full amount of the deposit so long as RPC 1.14 is followed. The committee does not opine on other legal requirements such as fiduciary duties, standards of legal negligence, or statutory duties that may apply to a question.

To submit an ethical inquiry, contact Christopher Sutton at 206-727-8284 or chriss@wsba.org.