13 Years of Legal Ethics Developments as Reported in NYPRR (Part II)

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By Roy Simon
[Originally published in NYPRR May 2011]


In the last issue of NYPRR (April 2011), I noted that April 1st marked NYPRR’s 13th birthday, and I began reviewing some of the significant regulatory developments of the last 13 years. I reviewed the work of the Craco Committee; the Standards of Civility; mandatory continuing legal education; increased sanctions for frivolous conduct in litigation; the Krane Committee’s comprehensive review of the old Code of Professional Responsibility; mandatory fee arbitration; the mandatory written letter of engagement; the overwhelming rejection by New York of recommendations by the ABA Commission on Multidisciplinary Practice (MDP) that would have relaxed the prohibitions on fee sharing and partnership with nonlawyers; the work of the ABA’s Ethics 2000 Commission (including new Rules 1.18, 2.4, and 6.5); the Sarbanes-Oxley Act of 2002; and the SEC regulations pursuant to “Sarb-Ox” — and all of those important developments took us only into mid-2003.

This month I will pick up where I left off last month, discussing the fallout from the Sarbanes-Oxley Act.

The SEC, the ABA’s Cheek Commission, and Rule 1.13

In November of 2002 the SEC circulated proposed regulations for public comment that would have required lawyers to make a “noisy withdrawal” when a corporate client failed to make an appropriate response to remedy wrongdoing within the corporation. The regulations threatened both confidentiality and loyalty, the twin bedrocks of the attorney-client relationship. Public comments were mixed, so in January 2003 the SEC issued revised proposals, plus an alternative proposal regarding noisy withdrawal. New York lawyers, especially those who represent large corporate clients, took an active part in the debate over these proposals, and I wrote about the SEC proposals in my March 2003 NYPRR article, which was entitled Proposed SEC Standards — Round Two for the SEC Bar. Here are substantial excerpts from that article:

On Nov. 21, 2002, to comply with the Congressional mandate in §307 of the Sarbanes-Oxley Act of 2002, the SEC issued proposed Standards of Professional Conduct for Attorneys. Among other things, the November proposals would have required an attorney to make a so called “noisy withdrawal” if an issuer did not respond appropriately after an attorney reported evidence of a material violation of the securities laws.

On Jan. 30, 2003, after reviewing numerous comments on its November proposals, the SEC released “final rules.” These final rules will take effect around July 30, 2003 … in the same release, however, in response to the “vast majority” of those who commented on the November proposals (including the American Bar Association and the Association of the Bar of the City of New York), the SEC extended the comment period on the noisy withdrawal proposals …

The SEC’s Final Rules as Adopted

If the SEC does nothing further, the final rules that the SEC has already adopted will take effect in late July [2003]. Thus, the final rules are the official status quo against which the other options should be measured.

Basically, the final rules apply to any attorney who appears and practices before the SEC in the representation of issuers in any manner. If such an attorney discovers “evidence” that a “material violation” of the securities laws has occurred, is occurring, or is about to occur, then the attorney must report the evidence directly to the issuer’s chief legal officer (CLO). The attorney has the option of reporting the evidence to the CEO as well, but reporting to the CEO does not excuse reporting to the CLO. The mandatory reporting rules do not depend on whether the reporting attorney “knows” or “has knowledge” of a past, present, or future material violation — the trigger for a report is merely that the attorney has “evidence” of a material violation.

Once an attorney reports evidence of a material violation to the CLO, the CLO must do two things: (a) inquire into the evidence of the material violation, and (b) take reasonable steps to cause the issuer to adopt an “appropriate response,” unless the CLO reasonably believes based on this inquiry that no material violation has occurred, is occurring, or is about to occur.

If the CLO and/or CEO do not provide an appropriate response within a reasonable time, the attorney must (a) report the evidence “up the ladder” to an appropriate committee of the issuer’s board of directors or to the full Board, and (b) explain to the CLO, CEO, or Board why the response (or lack of any response) to her original report is inappropriate.

If the issuer still fails to adopt an appropriate response at this juncture, the final rules permit (but do not require) the attorney to report confidential information to the SEC to the extent the attorney reasonably believes necessary for any of three purposes:

(i) to prevent the issuer from committing a material violation likely to cause substantial injury to the financial interest or property of the issuer or investors, or

(ii) to prevent the issuer, in a Commission investigation or administrative proceeding from committing perjury, suborning perjury, or perpetrating a fraud upon the Commission, or

(iii) to rectify the consequences of a material violation by the issuer that has caused, or may cause, substantial injury to the financial interest or property of the issuer or investors in the furtherance of which the attorney’s services were used. …

Noisy Withdrawal Comments Period Extended

The final rules as adopted do not include the SEC’s November 2002 proposal for mandatory “noisy withdrawal,” but the comment period on the noisy withdrawal proposal has now been extended until April 7 [2002]. The proposed noisy withdrawal provisions would apply whenever an attorney has reported evidence of a material violation but (1) has received a response that falls short of what is “appropriate” (i.e., the issuer admits a material violation but takes measures that are too weak, or the issuer unjustifiably denies any material violation), or (2) the attorney has not received any response at all within a reasonable time. Once this trigger is in place — either an inadequate response or no response at all — the proposed noisy withdrawal provisions would apply, but they would distinguish (a) past violations from ongoing violations and imminent future violations, and (b) “retained” (i.e., outside) counsel from “employed” (i.e., in-house) counsel.

The most controversial noisy withdrawal provisions relate to violations that are (1) either ongoing or about to occur, and are (2) likely to result in substantial injury to the financial interests or property of the issuer or its investors. In these situations, outside counsel would be required to take three steps:

(1) withdraw forthwith based on “professional considerations,” and

(2) notify the SEC of the withdrawal by the next business day, and

(3) promptly disaffirm to the SEC any opinion, document, representation, etc., that the attorney prepared and filed with the SEC that the attorney reasonably believes may be materially false or misleading.

An in-house attorney, in contrast, would not have to withdraw (because that would mean quitting her job, which is too heavy a burden), but the in-house attorney would have to notify the SEC by the next business day that a disaffirmance of opinions or documents will be forthcoming, and then promptly follow up with the actual disaffirmance.

If the violation has already occurred and has likely resulted in substantial injury to the financial interest or property of the issuer or its investors, but the violation is not ongoing, the identical steps would apply but would be discretionary (“may”) instead of mandatory (“must”). Thus, past violations would give the reporting attorney the option of reporting to the SEC, whereas ongoing or imminent violations would require the attorney to report to the SEC.

In addition, once an attorney withdrew, the issuer’s chief legal officer (CLO) would be required to inform any successor attorney that the previous attorney withdrew based on “professional considerations.”

(The SEC later extended the comment date on noisy withdrawal well beyond its original April 7th deadline.)

While the SEC was considering possible mandatory notification to it by lawyers whose corporate clients failed to address corporate wrongdoing appropriately, the ABA Task Force on Corporate Responsibility (generally known as the “Cheek Commission,” after its Chair, James Cheek of Tennessee) was examining similar issues in connection with ABA Model Rule 1.13 (Organization as Client). The key question was: what options were available to a lawyer whose corporate client refused to take adequate remedial measures after the lawyer had “climbed the ladder” within a corporation by “reporting up” to the highest authority in the company regarding wrongdoing by the company? The version of ABA Model Rule 1.13(c) in effect at that time, like New York’s DR 5-109(C), provided:

If, despite the lawyer’s efforts … the highest authority that can act on behalf of the organization insists upon action … that is clearly a violation of law and is likely to result in a substantial injury to the organization, the lawyer may resign … [Emphasis added.]

The Cheek Commission was examining these issues in the wake of some of the biggest corporate frauds in U.S. history — Enron, WorldCom, Global Crossing, and others. Those frauds had already led to the passage of the Sarbanes-Oxley Act, and the SEC let it be known that if the ABA did not amend its rules to allow a lawyer to “report out” in order to stop or rectify a corporate fraud, the SEC would adopt the pending “noisy withdrawal” proposal. In April 2003, therefore, the Cheek Commission recommended that the ABA adopt a new exception to confidentiality in Rule 1.13(c), which provided as follows:

… [i]f,

(1) despite the lawyer’s efforts [to climb the ladder by reporting up within the organization] …, the highest authority that can act on behalf of the organization insists upon or fails to address in a timely and appropriate manner an action, or a refusal to act, that is clearly a violation of law, and

(2) the lawyer reasonably believes that the violation is reasonably certain to result in substantial injury to the organization, then the lawyer may reveal information relating to the representation whether or not Rule 1.6 permits such disclosure, but only if and to the extent the lawyer reasonably believes necessary to prevent substantial injury to the organization.

At its August 2003 Annual Meeting, by a vote of 239–147, the ABA House of Delegates adopted this amendment to Rule 1.13(c). The SEC never formally withdrew its pending noisy withdrawal proposals, but it also never adopted them. The Cheek Commission and the ABA had saved the day — and at no cost to New York lawyers, because New York has never adopted the “reporting out” provision in ABA Model Rule 1.13(c).

The Committee on Standards of Attorney Conduct (COSAC)

The SEC story that I’ve just finished began in 2002 with the passage of the Sarbanes-Oxley Act. The year 2002 was also personally significant to me and my work in legal ethics, because Steve Krane invited me to join the Krane committee, which he had renamed the committee on standards of attorney conduct, fondly known as “COSAC.” (I remember his e-mail very well. The subject line was “committee on standards of attorney conduct,” and the entire message was, “Wanna join?” I joined.) Steve later appointed me to serve as Vice-Chair of COSAC (a position I continue to hold today), and in 2003 I became the Chief Reporter for COSAC.

In October 2002, I attended a COSAC meeting at Proskauer to discuss, in a very preliminary fashion, whether New York ought to adopt a version of the ABA Model Rules of Professional Conduct. We were inclined to do it, but we knew that many lawyers and judges in New York opposed the ABA Model Rules (which is why the New York State Bar Association House of Delegates defeated a recommendation that New York adopt the Model Rules back in 1984), so I wrote an article for the March 2004 issue of NYPRR, Should New York Adopt The ABA Model Rules?, analyzing the pros and cons of a Model Rules format. I noted at the beginning that 43 jurisdictions had moved on to the ABA Model Rules format and most of its language, and that only five states (New York, Iowa, Nebraska, Ohio, and Oregon) still clung to the awkward tripartite format of the former ABA Model Code (Canons, Ethical Considerations, and Disciplinary Rules). I also noted that that ABA was constantly working to update the Model Rules to keep up with changing circumstances. Then I reached the main question: “Tradition or transformation?” Here is what I said:

The primary question today is whether to stick with New York’s 33-year-old tradition of the Code format or whether to transform the New York Code to the format of the ABA Model Rules of Professional Conduct. Which alternative is better for New York?

In my view — and again, I am speaking only for myself, not for COSAC — there are few reasons to stick with the current clumsy format of the New York Code, and many reasons to transform our Code to a Model Rules format. In particular, I think New York should adopt the format and numbering of the ABA Model Rules virtually without change. Moreover, I think New York should use the language of the ABA Model Rules as a working base, and then — in light of the rich history and special characteristics of the legal profession in New York — we should build and improve on the ABA Model Rules by: (1) using the ABA language where New York’s current language offers no significant advantage; (2) keeping any New York Code language that we like much better than the ABA language; and (3) improving both the ABA and the New York language where necessary to clarify the meaning, to fill gaps, to make the rules more practical, or to serve other purposes. The guiding philosophy in every instance is to produce the best possible ethics rules for the lawyers, judges, and people of New York State.

What are the advantages of adopting the ABA Model Rules format and building on its language and organization, rather than simply amending the New York Code of Professional Responsibility while retaining its present format and numbering scheme? I will suggest five important advantages to transforming our Code to a Model Rules format.

Easier to use. No matter what the ethics rules may say, they won’t serve their purpose unless attorneys can find the rules they need and understand their meaning. One serious problem with our current Model Code format is that the Ethical Considerations, which often explain the Disciplinary Rules, are not correlated with the Disciplinary Rules. For example, suppose you want to know the meaning of the phrase “reasonable advance notice” in New York’s unique DR 7-104(B). Where do you look? There is an Ethical Consideration that defines “reasonable advance notice,” but which one? Canon 7 contains 39 separate EC’s — nearly eight small-print pages in the State Bar’s edition of the Code — and nothing tells a lawyer which EC explains which provision of the DR.

Should a lawyer read through every EC until she finds the right one? (Maybe you can find the right one, since you are interested in legal ethics — but can your partner or associate find it without your help?) And some ECs relate to DRs in other Canons. For example, the last sentence of EC 7-8 states that if a client in a non-adjudicatory matter “insists upon a course of conduct that is contrary to the judgment and advice of the lawyer but not prohibited by Disciplinary Rules, the lawyer may withdraw from the employment.” That language relates directly to DR 2-110(C)(1)(e). What is this language doing in EC 7-8, without any cross-reference to DR 2-110?

The ABA Model Rules format helps solve these problems. First, the ABA format prints a Comment right after each rule. Some Comments contain many paragraphs, but the ABA uses headings to provide guidance. Second, many Comments refer to specific paragraphs of the rules they are explaining. For example, Comment 15 to ABA Model Rule 1.7, which is in a series of Comments headed “Prohibited Representations,” notes that “under paragraph (b)(1), representation is prohibited if in the circumstances the lawyer cannot reasonably conclude that the lawyer will be able to provide competent and diligent representation.” Those cross-references to specific paragraphs are enormously helpful in understanding the rules.

More topics. The ABA Model Rules cover many topics that the New York Disciplinary Rules do not cover. For example, ABA Model Rule 1.18 (Duties to Prospective Client), which was added to the ABA rules in 2001, deals in detail with the obligations of a lawyer and a lawyer’s law firm to people who discuss the possibility of forming an attorney-client relationship but then hire a different lawyer (or don’t hire anyone). New York has no equivalent, unless you count the first sentence of EC 4-1, which says that a lawyer has an obligation to preserve the confidences and secrets of one who has employed “or sought to employ” the lawyer. Or consider ABA Model Rule 1.6(b)(4), which permits a lawyer to reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary “to secure legal advice about the lawyer’s compliance with these Rules.” New York has no equivalent, even though New York lawyers have for years contacted bar association ethics committees or lawyers outside their firms to get advice on ethics issues. Or consider ABA Model Rule 1.2(a), which flatly states that a lawyer “shall abide by a client’s decision whether to settle a matter.” New York relegates that important concept to a clause in EC 7-7 (“it is for the client to decide whether to accept a settlement offer”). Shouldn’t our rules of ethics govern issues that arise frequently? Shouldn’t our rules reflect the customs of our profession, especially when those customs foster ethical professional conduct?

Expanded research database. Adopting the ABA Model Rules format would vastly increase our access to useful research sources regarding legal ethics. Today, the database for researching the New York Code of Professional Responsibility is thin. Although four different ethics committees in New York State have issued ethics opinions for decades (the ethics committees of the New York State Bar Association, the Association of the Bar of the City of New York, the New York County Lawyers’ Association, and the Nassau County Bar), their total output remains miniscule. All of the ethics opinions ever published by the four active ethics committees fit on less than half of a standard law library bookshelf — about the volume of opinions the New York Appellate Division puts out in a single year. Judicial opinions also occasionally address legal ethics questions, but most of these opinions address ethics questions that arise during litigation. Even combining the judicial opinions and the ethics opinions, therefore, New York lawyers don’t have a large enough database to answer many of the questions that arise about professional conduct.

If we converted to a Model Rules format, however, we could access up-to-date cases and ethics opinions from nearly every Model Rules jurisdiction, plus the ABA itself. This is a substantial body of ethics law. As mentioned above, nearly all other jurisdictions currently use a Model Rules format and most of the ABA Model Rules language, and four of the states that still use the Model Code format are in various stages of moving to the Model Rules format. If New York follows this trend and joins the Model Rules bandwagon, looking for cases and ethics opinions from other states will be relatively easy. Searching by rule number is usually easier than searching for specific words on an online research service… Any lawyer who knows the ABA Model Rules numbering system can easily search for rules, ethics opinions, and commentary on any given rule from nearly every state. … It is true that states have adopted their own variations on the ABA Model Rules, but most of these variations retain enough of the Model Rules language to make it worthwhile to read cases and ethics opinions construing them.

If New York stays with the Model Code format, on the other hand, we will become increasingly isolated from the national research databases for legal ethics. Precedents from other states will be of little relevance and New York lawyers will have to be content with the small database of New York cases and ethics opinions, many of which are already out of date due to amendments in the Code language over the years.

National practice. When New York lawyers litigate outside New York, they are subject to the rules of the jurisdiction where the action is pending. New York’s own DR 1-105(B)(1) provides that if New York disciplinary authorities charge a New York lawyer with improper conduct in connection with a proceeding in a court before which the lawyer has been admitted to practice (either generally or pro hac vice), “the rules to be applied shall be the rules of the jurisdiction in which the court sits …” Thus, New York lawyers who litigate in state or federal courts in other states have to learn the ABA Model Rules format, because most states are Model Rules states. Why should New York lawyers who litigate in Connecticut, Massachusetts, New Jersey, Pennsylvania, Vermont, or anywhere else have to learn a whole new ethics language? I don’t think they should.

Greater influence outside New York. Adopting the Model Rules format would also give New York courts and ethics committees increased influence on the development of the law nationally. We want that influence so that New York lawyers who litigate in other states will encounter interpretations of the ethics rules similar to New York’s interpretations. Even today, New York opinions can be highly influential in other jurisdictions when New York’s Code language is close to the Model Rules language used in most states. See, e.g., Niesig v. Team I, 76 N.Y.2d 363 (1990), a leading case interpreting DR 7-104 (the “no-contact” rule), and Lord, Day & Lord v. Cohen, 75 N.Y.2d 95 (1989), a leading case limiting penalties for lawyers who compete with their former firms. The closer New York’s Disciplinary Rules are to the rules of other jurisdictions, the more influential New York’s interpretations will be outside New York. But if New York continues to follow the Model Code format and rejects the Model Rules language, New York will have less and less influence on the way other states interpret their ethics rules.

COSAC worked constantly over the next two-and-a-half years, holding more than 10 plenary meetings and 70 lengthy subcommittee conference calls (usually two hours or longer). I participated in every one of them. It was one of the most educational and professionally rewarding experiences of my life.

New Pro Bono Guidelines: Amended EC 2-25

In 2004 and 2005, COSAC participated actively in revising ethical consideration 2-25, which addressed pro bono work. For the May 2005 issue of NYPRR, I wrote an article entitled New York’s Amended Pro Bono Guidelines that began as follows:

What is a New York lawyer’s obligation to perform pro bono legal services? The answer to that question changed on April 2, 2005, when, for the first time since 1990, the New York State Bar Association House of Delegates voted to amend EC 2-25, the main Ethical Consideration addressing pro bono work. This article talks about the amended version of EC 2-25 and its background.

I began with a long essay on the background behind pro bono in New York. I discussed the original 1970 version of EC 2-25; the 1990 amendments to EC 2-25; the OCA’s 1997 survey showing a shortage of pro bono lawyers; the resulting OCA Resolution (lawyers are “strongly encouraged to provide pro bono legal services to benefit poor persons” and “[e]very lawyer should aspire (1) to provide at least 20 hours of pro bono legal services each year to poor persons, and (2) to contribute financially to organizations that provide legal services to poor persons”); the OCA’s 2002 survey showing a continued shortage of pro bono lawyers; and the 2004 OCA report estimating that more than one million households in New York live in poverty and cannot afford to hire a lawyer to handle their legal problems. I then described the features of the April 2005 version of EC 2-25:

The new version borrows heavily from both the 1990 version of EC 2-25 and the OCA’s 1997 resolution, but makes some significant changes. The main changes are:

• Amended EC2-25 marks the first time that the Code of Professional Responsibility has recommended a specific number of pro bono hours. The number chosen, 20, is the same number specified by the OCA in its 1997 resolution.

• Amended EC2-25 puts the spotlight squarely back on free legal services to the poor. The first paragraph of the rule looks much like the 1990 version of EC 2-25, but the three-part menu of acceptable vehicles for fulfilling the annual 20-hour aspirational minimum is aimed entirely at providing free legal services directly or indirectly to “persons of limited financial means.”

• Amended EC 2-25 semantically upgrades the status of financial contributions to organizations that provide legal services to persons of limited means. The 1990 version “encouraged” lawyers to contribute to such organizations. The new version says lawyers “should” contribute.

• Amended EC 2-25, like the OCA’s 1997 resolution, articulates a “two-tier” approach to pro bono work, making it clear that lawyers “should” render other types of public interest and pro bono legal service “[i]n addition to” 20 hours of annual free legal services to the poor.

• Amended EC2-25 defines in greater detail the kinds of organizations that qualify for pro bono services not directed to the poor. These include (a) “organizations seeking to secure or protect civil rights, civil liberties or public rights,” and (b) “not for profit, government or public service organizations.”

• Amended EC2-25, unlike the former versions of EC 2-25 and the OCA’s 1997 resolution, recognizes that pro bono work also includes uncompensated “activities for improving the law, the legal system or the legal profession,” such as service on bar committees.

• Amended EC2-25 goes beyond both the 1990 version of EC 2-25 and the OCA’s 1997 resolution by recognizing that “services as an arbitrator, mediator or neutral in court-annexed alternative dispute resolution,” as well as other legal services “in aid or support of the judicial system,” qualify as pro bono services.

Today, EC 2-25 remains alive in the form of Rule 6.1 of the New York Rules of Professional Conduct.

The State Bar’s Excellent Task Force on Lawyer Advertising

An even bigger event in 2005 was the formation of the New York State Bar Association Task Force on Lawyer Advertising, chaired by Bernice Leber, who later became President of the Association. I did not write about the Task Force at the time it began its work.

However, I did write about the Task Force in the April 2010 issue of NYPRR (Second Circuit Declares Ad Rules Unconstitutional), which explained the background and holding of Alexander v. Cahill, 598 F.3d 79 (2nd Cir. 2010, Guido Calabrese, J.). The holding affirmed a 2007 N.D.N.Y. decision striking down various provisions in New York’s rules governing lawyer advertising as unconstitutional. I will leave out my description of the way the Courts went about adopting unconstitutional rules so that I can focus on the exemplary work of the Task Force. I explained its work as follows:

The State Bar Task Force worked thoroughly and assiduously. It collected and reviewed 300 print and electronic ads, randomly selected from Department Disciplinary Counsel and from TV and the Internet. It provided written analysis of each ad and assessed which of the ads appeared to violate the rules and which appeared to satisfy them. It prepared a 50-state survey of advertising rules and reviewed any recorded cases concerning the rules. The survey was incorporated in the final report of the Task Force.

The Task Force interviewed Disciplinary Counsel in key states in which advertising rules were being contested. it also reviewed 30 years of ethics opinions and cases in all the states. In addition to Bernice Leber, two lawyers at Arent Fox supplied the research, which was reviewed by five subcommittees of the Task Force. The subcommittees considered various aspects of the rules in order to develop the rules and commentary submitted by the Task Force to the House of Delegates.

By October 2005, the Task Force had published its report (with a massive appendix), recommending numerous changes and additions to the advertising rules. The Task Force then actively reached out to various bar association ethics committees and to the State Bar’s Committee on Standards of Attorney Conduct (COSAC), which was comprehensively reviewing the entire New York Code of Professional Responsibility and had proposed its own version of the advertising rules, a version much closer to the ABA Model Rules. its members also met with each of the Presiding Justices of the four Appellate Division Departments to discuss their recommendations.

In my role as Vice Chair and Chief Reporter for COSAC, I personally participated in several lengthy conference calls with the Task Force, and I helped draft detailed written comments that the Task Force solicited from COSAC. The discussions with the Task Force were sometimes heated — few topics raise more hackles than lawyer advertising — but Bernice Leber listened to every word. The Task Force took all of the comments and criticisms seriously and revised many of its proposals, sometimes significantly, before submitting a final report to the State Bar’s House of Delegates for consideration. At the State Bar’s Annual meeting in late January of 2006, the House of Delegates held a vigorous debate on the proposed advertising rules (which I attended), and some proposals were further amended based on the debate.

The Task Force story embodies a great recipe for rulemaking, featuring these key ingredients: (a) a diverse core task force from around the State; (b) an intensive theoretical and empirical study; (c) draft proposals circulated to other bar groups with relevant expertise; (d) serious consideration by the task force of all comments and criticisms; (e) a coherent final report with recommendations supported by rational explanations; and (f) a vigorous debate in the State Bar’s House of Delegates, the most diverse and representative body of lawyers in New York.

This is how rules ought to be made. But that is not in fact how they ultimately were made. Instead, they were made by the Courts in secret, with scant attention to the thoughtful and carefully crafted recommendations by the State Bar.

COSAC Recommends a Model Rules Format

Perhaps the biggest event in 2005 was COSAC’s issuance of its 479-page report (Sept. 30, 2005). Here in one volume was a version of the ABA Model Rules of Professional Conduct tailored to New York law practice, with its combination of mammoth Wall Street firms with their national practices and small and solo firms with their mostly main Street practices. The COSAC proposals — which I nicknamed “The Big Book of COSAC”— contained a paragraph-by-paragraph Commentary written by COSAC’s Reporters explaining why COSAC had accepted, rejected, or modified each ABA Model Rule. Over the next two years, this thick set of proposals was the focal point for public comment from bar associations and lawyers around the state and the subject of intense and intelligent debate within the New York State Bar Association. The appellate divisions, however, played no part in the rich debate over the COSAC proposals. They refused even to discuss the proposals with COSAC (publicly or privately) until they were formally presented to the Courts early in 2008. In the interim, after circulating draconian and unrealistic proposed advertising rules for public comment in the summer of 2006, and after making some adjustments based on the overwhelmingly negative public comments, the Appellate Divisions adopted radical new advertising rules, which they drafted mainly on their own, effective Feb. 1, 2007.

Legislative Change Leads to New Rule on Litigation Expenses

In 2006, the New York Legislature got into the professional responsibility act by amending Judiciary Law §488 to make clear that a lawyer could “advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter.” That was a sea change for plaintiff’s attorneys, and it led the Courts to amend DR 5-103(B) in 2007. I wrote about the change in the April 2007 issue of NYPRR in an article entitled Amended DR 5-103(B): Advancing And Paying Litigation Expenses. Here are brief excerpts:

Amidst all the press and distress about the new and amended lawyer advertising rules that took effect on Feb. 1, 2007, little has been said about a part of the rules package that has no obvious relationship to advertising and solicitation: DR 5-103(B). Nor has the legal press said much about the significant August 2006 amendments to New York Judiciary Law §488, which the courts have incorporated verbatim in DR 5-103(B). This article discusses the context and potential impact of the amendments to § 488 and DR 5-103(B). …

[T]he amended version of DR 5-103(B), permits a lawyer to advance court costs and expenses of litigation and to make repayment by the client “contingent on the outcome of the matter.” This is exactly what the old version prohibited. Under the old version, a lawyer could not make repayment contingent on how much money the client recovered in the action. The old version required a lawyer’s retainer agreement or letter of engagement to say that the client would remain “ultimately liable” for the costs and expenses of litigation no matter how the case came out. Win or lose, the old version demanded that the client stay on the hook for every dollar of litigation expense.

The House of Delegates Approves the COSAC Proposals

Nov. 2, 2007 was a red-letter date for lawyer ethics in New York. On that date, after eight consecutive meetings focusing on the COSAC proposals, the New York State Bar House of Delegates approved the last “wave” of COSAC proposals and then voted to forward the entire package of proposed rules to the Appellate Divisions, which are the ultimate authority over rules of professional conduct in New York. Steve Krane and his team at Proskauer put the rules together in bound booklets and delivered them by hand to each Appellate Division Presiding Justice in January and February 2008. While we were waiting for the courts to review the COSAC proposals, I wrote four articles describing the proposed rules — but I will not excerpt those here.

The Courts, meanwhile, had plans of their own and were not waiting for COSAC. On Nov. 9, 2007, the courts suddenly released a new rule, DR 5-101-a (today Rule 6.5), to address limited service pro bono programs. I analyzed the new rule in the May 2008 issue of NYPRR in an article entitled Conflicts of Interest & “Limited Service” Pro Bono Programs: New DR 5-101-a. Here are brief excerpts:

On Nov. 9, 2007, effective immediately, the four Presiding Justices of the Appellate Divisions issued a new Disciplinary Rule, §1200.20-a, entitled “Participation in Limited Pro Bono Legal Service Programs.” … In contrast to the new advertising Rules, which were prompted by a lengthy study by a N.N. State Bar Association Task Force and were circulated for a six-month public comment period (an initial 90-day comment period followed by a 90-day extension), §1220.20-a came out of the blue, without any warning to the bar or any opportunity for advance comment before its adoption. It is not a model of draftsmanship, but if you are a lawyer at a big Wall Street firm (or even a medium-sized one), the Rule should make it much easier for you and other lawyers at your firm to participate in short-term, limited legal services programs — but the new Rule has one potentially serious flaw. …

Background: The Problem

For many years, legal services organizations, courts and various nonprofit organizations have been organizing pro bono programs designed to help people solve their legal problems with only limited, one-shot representation. For example, from October through July, on specific nights each month, the New York City Bar runs a free program called the “Monday Night Law Clinic.” The City Bar’s website describes the program as follows: “At the clinic, attorneys will meet with clients for one-half hour appointments to discuss a variety of legal topics, such as bankruptcy, consumer issues, matrimonial, basic employment and landlord-tenant. … A client must schedule an appointment for the Monday Night Clinic. … Walk-ins are not permitted.”

The City Bar also runs a program called the “Legal Hotline,” which offers “legal information, advice and referrals” to low-income New Yorkers who could not afford a private attorney or have access to legal representation. …

In these programs, lawyers typically meet with clients only one time, for a relatively brief period. The lawyers give rudimentary advice, help clients complete legal forms, and refer clients to other resources (e.g., psychologists, credit counselors, tenants’ rights groups) all with the aim of assisting clients to address their legal problems without needing further legal assistance. The lawyers who participate in these programs establish a lawyer-client relationship, but the program organizers make clear to the client that the lawyer’s representation of the client will not continue beyond the limited consultation.

Establishing an attorney-client relationship, however, creates the potential for conflicts — and therefore the obligation to check for conflicts. Lawyers need to make sure that a short-term, one-shot pro bono client is not seeking advice on how to sue one of the pro bono lawyer’s current clients, or defend against a suit by a current client, or oppose one of the lawyer’s past clients in a substantially related matter. … But few lawyers know the names of all of their firm’s current clients, much less all of the firm’s past clients, and checking thoroughly for conflicts takes time. Therefore, an on-the-spot conflict check isn’t a realistic option.

I then explained that the new rule excused on-the-spot conflict checks for these short-term, limited service programs, and I analyzed each paragraph of the new rule. Then I concluded:

The new Rule is well intentioned, and should significantly reduce a law firm’s anxiety about encouraging its lawyers to participate in short-term, limited pro bono programs. The Rule certainly relieves the pro bono lawyer and her firm of the heavy burden of performing a full-bore conflicts check before meeting with a short-term client. But subparagraph (E) of the new Rule appears to take away all of the benefits of the Rule if a lawyer happens to learn, during the course of the representation, that a conflict precludes further representation. In that instance, the conflict will be imputed to the entire firm. To avoid that risk, small as it might be, some firms may decide not to participate in short-term, limited service pro bono programs. That would be a sad result, and I doubt it is a result the courts intended. I hope the courts will quickly amend the Rule to avoid that result.

The Courts have never amended the rule, and the flaw remains — but so far, it has not caused any harm.

The Courts Adopt the New York Rules of Professional Conduct

On Dec. 16, 2008, the story of the decade broke — the Courts announced that they were adopting the New York Rules of Professional Conduct, effective April 1, 2009. I wrote 10 consecutive articles about the new Rules, and that story is still evolving. The Courts adopted the Rules without interpretive Comments. Since they were adopted, the New York State Bar Association has added its own Comments explaining the Rules. Several of the Association’s Comments were amended at two recent meetings of its House of Delegates.


NYPRR is exciting because it’s there when professional responsibility stories break. It devotes enough space to a story to provide not only the news but also the background and perspective we need to understand the news. I am grateful to Lazar Emanuel for his vision, energy, talent, and commitment to this outstanding publication.

Professor Roy Simon is the author of Simon’s New York Rules of Professional Conduct Annotated. The brand new 2015 edition analyzes more than 100 new cases, ethics opinions, and other developments critical to New York practice. It’s the legal ethics bible for all New York-area lawyers. To purchase, click here.

In addition, Professor Simon advises lawyers and law firms on questions of professional conduct and serves as an expert witness in cases raising issues of lawyer conduct. You may reach Professor Simon at 516-463-5289 or

DISCLAIMER: This article provides general coverage of its subject area and is presented to the reader for informational purposes only with the understanding that the laws governing legal ethics and professional responsibility are always changing. The information in this article is not a substitute for legal advice and may not be suitable in a particular situation. Consult your attorney for legal advice. New York Legal Ethics Reporter provides this article with the understanding that neither New York Legal Ethics Reporter LLC, nor Frankfurt Kurnit Klein & Selz, nor Hofstra University, nor their representatives, nor any of the authors are engaged herein in rendering legal advice. New York Legal Ethics Reporter LLC, Frankfurt Kurnit Klein & Selz, Hofstra University, their representatives, and the authors shall not be liable for any damages resulting from any error, inaccuracy, or omission.

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