All posts by Stuart

I am the "CLE Performer." I give entertaining and important CLE seminars on ethics issues and and critical lawyering skills. My goal is to help lawyers stay out of trouble.

Chatbots: the legal marketing device that could get you into trouble

Chatbots are now being used in legal marketing to help lawyers find valuable clients. The technology is basically a computer program that is powered by artificial intelligence that simulates conversation with people.  Potential clients who visit a firm’s site can type questions and comments into a chatbox and, when doing so, they think they are speaking with a real person.  The bot collects contact info as well as other details about the potential client’s case, asks questions to the potential client, analyzes the data, and gives that information to the lawyer.  The chatbot companies say that their AI sifts out the tire kickers and identifies valuable prospects for the firm, thereby improving conversion rates. 

The chatbots are provided by tech vendors. A lawyer contracts with a vendor that offers the chatbot software, the vendor provides a bit of code that is inserted into the lawyer’s website, and a chat box becomes a part of the lawyer’s site. Someone coming to the website wouldn’t know that another vendor is involved at all— it simply looks like a chat box that is part of the lawyer’s website. 

Using a chatbot isn’t necessarily off limits. What you need to be concerned about is the nature of the exchange between the bot and the potential client.  It’s a problem, for instance, if a chat bot engages in conversation with a potential client and actually dispenses legal advice. But chatbots aren’t likely to be programmed to give advice. They are, however, programmed to engage in conversation. They talk to the potential client to learn about their case so they can weed out the garbage contacts from the good prospects. But it’s that conversation that could create problems.

During the conversation between the bot and the prospect, the prospect will be providing information about their case. What we need to worry about is the potential that people who visit the lawyer’s site and engage in a conversation with the chatbot end up being considered “prospective clients” under Rule 1.18. If they do attain that status, the lawyer could have conflict problems. To see what I mean, first understand how the rule works.

How Rule 1.18 Works

Rule 1.18 says that if a person “consults with a lawyer about the possibility of forming a client-lawyer relationship” they could be a prospective client. All they need to do is consult about the possibility of forming the lawyer client relationship.  But why should a lawyer care if someone is technically considered a “prospective client?” 

First, you can’t tell anyone about the information that the prospective client gave you.  Rule 1.18(b) explains that “Even when no client-lawyer relationship ensues, a lawyer who has learned information from a prospective client shall not use or reveal that information…” Second, you might be conflicted out of representing someone else in the future. Even if you don’t take the prospective client and you never work on their matter, subsection (c) says that if you received information from the prospective client that could be significantly harmful to that person, and some time in the future a different person approaches you to represent that different person against the prospective client in the same matter, you might not be permitted to do so. You would be conflicted out of the representation. 

That could be devastating. Think about it— if you have a consultation with someone about a lucrative matter and you decide not to take their case…but later you are approached by someone who wants you to represent them in that very case, you can’t take that other client. You could be forced to forego a lot of money in fees.

The problem with chatbots

When it comes to Rule 1.18, what’s important is the trigger for becoming a prospective client. As you saw in the rule above, that trigger is a consultation.  The key question, of course, is, when does an interaction rise to the level of a consultation?  The answer is that it depends on the circumstances. But the key circumstances to focus on are your website text and the content of the chatbot’s communications.

If your website just lists your contact information you’re going to be okay.  If you simply put your information out there and someone sends you information about a case, that’s not going create a prospective client relationship.  Comment [2] confirms that: “…a consultation does not occur if a person provides information to a lawyer in response to advertising that merely describes the lawyer’s education, experience, areas of practice, and contact information, or provides legal information of general interest.” Basically, that comment is saying that if you simply tell someone that you exist and that you are qualified, it’s not a “consultation.”  If someone replies in that situation, the person “communicates information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship.” That person, therefore, is not a prospective client.

However, you’re  going to have a problem if your website encourages people to offer information and your chatbot follows up by engaging with that person. The comment explains that “…a consultation is likely to have occurred if a lawyer…through the lawyer’s advertising in any medium, specifically requests or invites the submission of information about a potential representation without clear and reasonably understandable warnings and cautionary statements that limit the lawyer’s obligations, and a person provides information in response.”

If your site specifically requests or invites a person to submit information about a potential representation, and your chat bot provides information in response, then you are risking the creation of a prospective client relationship. Obviously, the ethical danger is dependent upon the responsiveness of the chatbot because the rule says that you have to “provide information in response.”  Well, the more lengthy, intense, and detailed the chatbot’s responses, the more likely there will be a problem.  

Oh, and don’t get hung up on the fact that your chatbot is not a “person” under the rules. If the bot provides information I think a tribunal will see the software as an extension of the lawyer.  Plus, if the AI software is doing its job correctly, the potential client should believe that they are actually communicating with a real person. For those reasons I wouldn’t be surprised if a tribunal concluded that the AI in the chatbot is the functional equivalent of a “person” for the purposes of the rule. 

Of course, there is a huge get-out-of-trouble card. All you have to do is include the disclaimers set forth in the rule.  If your site has “clear and reasonably understandable warnings and cautionary statements that limit the lawyer’s obligations” as stated in Comment [2], you’re probably ok. This, however, is a situation where you can win the ethical battle, but lose the overall war. Here’s what I mean: what if this issue isn’t raised in the context of an ethics grievance? What if it is, instead, raised in a disqualification motion? Consider this hypothetical…

Win the ethical battle, but lost the disqualification war

Let’s say you’re in a medium sized firm that handles a variety of different types of matters. Your firm represents Business X and you’ve been their counsel on nearly all of their legal matters for years. Your firm has a website that utilizes a chatbot to evaluate the strength of new, potential clients. You have language on the website that properly disclaims Rule 1.18. Someone visits your site and explains that they have a workplace discrimination claim. They provide details of the case to the chatbot. The bot inquiries further and the prospect provides more information, in fact, the client wants to make sure that the lawyer with whom they are chatting has a complete understanding of the case so they provide a lot of details.

The chatbot sends the info to the attorney at the firm responsible for reviewing prospect data, and that lawyer thinks that the prospect has a great case.  After reviewing the information, t he attorney contacts the prospect and learns that the adverse party is Business X. However, the lawyer figures that the firm will probably be representing Business X in that matter because the firm does all of their work. As a result the firm doesn’t take the potential client.

The prospect finds another lawyer, and they file suit against Business X. As the lawyer anticipated, your firm is representing Business X. The prospect’s lawyer files a motion to disqualify you as counsel and you oppose it.  You claim that there is no violation of the rule—  the prospect never became a “prospective client” under Rule 1.18 because you had the  proper disclaimer. And you’re probably right. But there is a good chance that a judge will disqualify you anyway.

That’s because the judge isn’t deciding whether discipline should be imposed — the judge is deciding whether you should be disqualified. They don’t necessarily care about the technicalities of the rules, they care about two things — the two things that are at the core of every conflict— loyalty and confidential information.  

The critical question that the judge will ask was, during the interaction the firm had with the prospect, did you learn confidential information from the other party? And when the judge realizes that your chatbot gathered information that would ordinarily be considered confidential information and it was passed on to the lawyer in your firm for review, they’re going to say you have a conflict and kick you out of the case.  You’re not going to be saved by the disclaimers because those disclaimers only helped you avoid discipline under Rule 1.18. In the disqualification context the court cares about loyalty and confidential information. And when it finds out that you were privy to a slew of details from the potential client’s case, they will disqualify you.

How to make chatbots safer

This doesn’t mean that chatbots are forbidden, they just need to be used carefully. What can you do to make the chatbot safer? Here are 4 ideas:

  1. Use disclaimers that comply with the rules.
  2. Make sure the bot is just gathering information and not giving any information. And if it does give information, make sure it’s super limited. Keep Comment [4] to Rule 1.18 in mind which states, “In order to avoid acquiring disqualifying information from a prospective client, a lawyer considering whether or not to undertake a new matter should limit the initial consultation to only such information as reasonably appears necessary for that purpose.”
  3. Go over Rule 1.18 with the vendor supplying your chatbot. Make sure they understand it. Also explain the disqualification issue. Remember, most tech vendors have no idea about the details rules like 1.18.
  4. Train the staff/lawyers in your office who are responsible for following up on the leads developed by the bot. Let them know about Rule 1.18 and the issue of disqualification. 
  5. Create a process that limits the exposure of the lawyers who review the information provided by the chatbots. It is possible to screen those attorneys per 1.18(d)(2). Here’s what that section states, in part:
    • (d) When the lawyer has received disqualifying information…representation is permissible if…(2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and (i) the disqualified 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.
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The Duty to Update our Software

The ethics rules make it clear that lawyers have a continuing duty to understand the dangers associated with technology and that we need to take reasonable steps to avoid disclosing our client’s information.  Comment [8] to Rule 1.1 reminds us that, “To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology…”; Rule 1.6(c) states that lawyers are required to “make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to” our client information, and; Rule 1.3 requires that we act with reasonable diligence in representing a client.  Together those rules make it clear that lawyers need to constantly stay on top of changes in technology and take reasonable steps to protect client data. And that principle has ushered in a new responsibility —the duty to update our software.

The company that sells Norton anti-virus software explained recently that software updates are critical because they patch security flaws:

“Hackers love security flaws, also known as software vulnerabilities. A software vulnerability is a security hole or weakness found in a software program or operating system. Hackers can take advantage of the weakness by writing code to target the vulnerability. The code is packaged into malware — short for malicious software.

An exploit sometimes can infect your computer with no action on your part other than viewing a rogue website, opening a compromised message, or playing infected media.

What happens next? The malware can steal data saved on your device or allow the attacker to gain control over your computer and encrypt your files. Software updates often include software patches. They cover the security holes to keep hackers out.”

It should be pretty clear how this ties into a lawyer’s ethical duty.   If we have a continuing duty to understand the dangers in technology and we need to take reasonable steps to avoid disclosing client information, then we must take steps that ensure that the computer systems and software programs we use remain secure. Our duties of competence, confidentiality, and diligence require us to promptly install updates that are designed to repair vulnerabilities in the software we use in the practice. 

It’s this type of proactive effort that is so important to avoiding grievances in today’s dangerous technological age. Listen, chances are good that you’re going to get hacked. Chances are good that we are all going to get hacked.  The bad guys and gals are simply trying too hard — the odds are against us.  Many lawyers therefore wonder, If I’m going to get hacked, doesn’t that mean that I will get into ethical trouble? Not necessarily. You can save your ethical hide if you are proactive in taking steps to avoid the hack.

The disciplinary authorities aren’t likely to make a decision about someone’s ethical liability based solely on the consequences. They are likely to make a decision based on your actions. Remember that when it comes to attorney ethics, it’s all about your behavior. It’s all about whether you behaved reasonably. It’s all about whether you took reasonable steps to avoid the calamity. You will likely be judged not on whether you were hacked, rather whether you took reasonable steps to avoid that hack.  If you took every reasonable step possible to protect your client data and avoid the disclosure, then it’s likely that you won’t be disciplined even if something terrible happens. 

If you know the bad guys are trying to exploit vulnerabilities in our systems, and you know that software updates are specifically designed to fix those vulnerabilities, then it’s not reasonable to ignore those updates. It’s not reasonable to wait months before you install them. The reasonable effort is to diligently install those updates when they are released. Your duty to protect your client data means that you need to maintain the integrity of your computer systems, and that includes installing security updates promptly.

On the other hand, you might need to do the exact opposite when it comes to massive program upgrades

The duty to update that I discussed above applies to periodic updates that software manufacturers release to existing systems.  But every once in a while those same programmers completely overhaul a system and release a major update that ushers in a new generation of their software. In those instances it’s probably reasonable for a lawyer to wait and delay installing that update. Though that seems to contradict everything I discussed above, the  rationale is actually quite consistent.

New generations of software very often contain vulnerabilities that were not anticipated by the original programmers.  Often hackers exploit those bugs right after the new software is released, thus exposing the problems. The manufacturers then rush to develop and issue updates that close the holes in their code.  In those situations, then, prudent approach is probably for lawyers to delay installing updates that constitute massive overhauls or new generations of a software system. Wait until the bugs appear to be worked out, then update to the new generation of software.

Norton article can be found at: https://us.norton.com/internetsecurity-how-to-the-importance-of-general-software-updates-and-patches.html, last checked by the author on March 26, 2019. 

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Advance Conflict Waivers are on Life Support

A recent case about advance conflict waivers reveals that they are probably no longer viable, and here’s why. The issue revolves around the lawyer’s need to get informed consent.

The only way a lawyer can get around a conflict of interest is if (in addition to some other things) they get informed consent from the client. That phrase “informed consent” has a lot of depth and it is discussed in several places throughout the code. Much attention is given to the quality of the conversation between lawyer and client.  A lawyer needs to discuss a bunch of specific items in order to be said to have obtained proper informed consent. Rule 1.0 requires that the lawyer communicate “adequate information,” provide an “explanation about the material risks” and talk about the “reasonably available alternatives to the proposed course of conduct.” Rule 1.7 requires that the communication include: a disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client or other person of the material advantages and disadvantages of the proposed course of conduct, and a discussion of the client’s or other person’s options and alternatives.  

So where do advance conflict waivers come into play?  A law firm always has to get informed consent from the client in order to take a conflicting matter. The only question is whether the firm gets that informed consent during a contemporaneous consultation with the client once the conflict becomes apparent, or by advising the client of potential conflicts before they become apparent and obtaining that informed consent before the conflict even arises. That latter situation is essentially what an advance conflicts waiver is all about.  You’re getting your client’s informed consent in advance. But you can probably sense the problem with that. 

The inherent problem with blanket advance conflict waivers is that when you are negotiating the waiver, the future client is not yet known…which means that the exact risks that your client could face from the future conflicting representation are not yet known…which means that you can’t build those risks into the conversation you need to have with the client…which means that you can’t get proper informed consent because you can’t talk about all of the required details set forth in the rules.  So it seems that there is just no way to have an advance conversation that contains the requisite specificity needed to obtain proper informed consent.

This issue came to a head in 2018 in a critical case out of California.

The law firm Sheppard Mullin was asked to represent a client (J-M) who was defending a large False Claims Act suit. FN1 There were 200 plaintiffs suing J-M in that matter.  The problem was that one of those 200 plaintiffs was the City of South Tahoe, an entity that a Sheppard Mullin partner represented on and off for years. The firm had an advance conflict waiver in place with South Tahoe. 

The firm took on the J-M case, despite the fact that it was already representing South Tahoe. The firm included a conflict waiver in the J-M fee agreement, but they did not disclose that they were representing South Tahoe in an unrelated matter. FN2 When South Tahoe found out about the conflict, they moved to disqualify the firm. FN3

It appears that the firm never notified either client about the conflict because the firm thought they were covered already. The new matter wasn’t related to the False Claims Act matter, and the firm also had an advance conflict waiver in place with both clients.  According to a report, “Sheppard Mullin pointed to a provision in the engagement agreement that allowed the firm to engage in conflicting representations ‘provided the other matter is not substantially related to our representation of [J-M] and in the course of representing [J-M] we have not obtained confidential information of [J-M] material to representation of the other client.’” FN4 Regardless, the lower court invalidated the advance conflict waiver and disqualified the firm. The firm later sued J-M to collect the fees that were outstanding, but the client resisted and the court ultimately ruled in the client’s favor. 

The court held that since Sheppard Mullin engaged in an impermissible conflict, their fee agreement was unenforceable because it was contrary to public policy. As a result, the firm couldn’t get the balance of their fee. The court further ordered that the firm had to return the portion of the fee that was paid by J-M as of the date that the impermissible conflict started. The court “made clear that when the conflict surfaced, Sheppard Mullin had a duty to tell the client and obtain its informed consent rather than relying on a broad advance waiver in its engagement agreement.”  FN5 Finally, “The court rejected the firm’s reliance on that provision—or “boilerplate waiver,”…saying the firm’s argument ignored the reality that Rule 3-310(c)(3) requires truly informed consent from the client. ‘Written consent to all potential and actual conflicts in the absence of any knowledge about the existence of such conflicts cannot comply with the requirement of ‘informed written consent’ in Rule 3-310(C),’ the court said.” FN6

At the end of August in 2018, the California Supreme court upheld the lower court.  While the case was remanded for an issue that doesn’t concern us here, they stated:

…“because Sheppard Mullin knew of” its conflicting interest with South Tahoe and failed to inform J-M about it, J-M’s advanced blanket conflict waiver was not supported by consent that was “informed” within the meaning of the Rules of Professional Conduct.  Furthermore, since the consent was not informed, the entirety of the engagement agreement with J-M was unenforceable.

For a conflict waiver to be “informed,” the Court reasoned, “the client’s consent to dual representation must be based on disclosure of all material facts the attorney knows and can reveal.”  The Court stated that “An attorney or law firm that knowingly withholds material information about a conflict has not earned the confidences and trust the rule is designed to protect.”

Applying this standard, the Court noted that the Sheppard Mullin advanced waiver to J-M “did not disclose any particular conflict, or even any area of potential conflict, and did not mention” the Firm’s concurrent representation of South Tahoe.  Accordingly, the Firm’s advanced waiver was insufficient to inform J-M’s consent to the representation where, as here, the Firm was aware of a more specific and concrete conflict that already existed when the engagement agreement was executed.  The representation of South Tahoe “was not merely a future possibility; it was a present reality.”  Informed by this legal standard, the Court had no trouble concluding “the conflicts waiver here was inadequate.” FN7

Now, it’s true that the court said they were not invalidating all advance conflict waivers in this decision.  Defenders of advance conflict waivers will further argue that the Supreme Court’s decision is tailored. They will argue that the decision only relates to that category of conflicts where the conflict is known to the parties when they enter into the representation.  But I would not feel very comfortable relying on that narrow interpretation of the decision. 

I think the reason the court didn’t invalidate advance conflict waivers in general is because they didn’t have to go that far, given the facts of the case. They took the typical appellate court approach— limit the opinion to the facts before you.   I believe that the court narrowed their decision because of appellate court protocol, not because of the substance.  In fact, if one looks at the substance, one can see that advance blanket conflict waivers are very much on life support.  

This case is about a client feeling that they didn’t have adequate information about a conflict and that their advance waiver should be ineffective because of that lack of information.  This case is about a client who lacked enough information to provide adequate informed consent.  It is not going to be very difficult for a client in the future to extend the underlying logic in this decision from a case where the conflict is known at the time the representation commenced, to a case where a conflict is not known at the time the representation commenced.  That’s because the heart of the decision is about informed consent. 

Of course, one might think: But we’ve already had blanket waivers. They’ve been around forever. Why are they under attack now? 

The answer is money.

I’m guessing that past cases where a client disputed the efficacy of an advance conflict waiver were settled.  The lawyer and the client simply negotiated a settlement and they moved on with their lives. But this was very likely the first case where the fee was so high and the consequences of losing the case were so costly to both parties that there was no way for the parties to settle.

Here’s the takeaway: One day there is going to be a client who wants a lawyer out of a case really badly (and they’ll want to avoid paying the large legal fee, too). They are going to try to achieve their goal by arguing that the fee agreement with the lawyer should be void because of the firm’s failure to obtain genuine informed consent before entering into a blanket advance conflict waiver.  They will argue that a blanket advance waiver can not, by definition, confer the informed consent required in the rules. Mark my words— they will win. 

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FN1 Unless otherwise cited, the synopsis of the case throughout this section is summarized from the article found at https://www.bna.com/advance-conflict-waiver-n57982067178/, last checked by the author on March 8. 2019. 

FN2 https://biglawbusiness.com/sheppard-mullin-conflict-waiver-case-puts-4m-fee-at-stake, last checked nether author on March 8, 2019. 

FN3 https://www.ipethicslaw.com/leaving-south-tahoe-will-your-advance-conflict-waiver-survive-sheppard-mullin-v-j-m-manufacturing/, last checked by the author on March 8, 2019. 

FN4 https://www.bna.com/advance-conflict-waiver-n57982067178/, last checked by the author on March 8, 2019. 

FN5 https://www.bna.com/advance-conflict-waiver-n57982067178/, last checked by the author on March 8, 2019. 

FN6 https://www.bna.com/advance-conflict-waiver-n57982067178/, last checked by the author on March 8, 2019. 

FN7 https://www.ipethicslaw.com/leaving-south-tahoe-will-your-advance-conflict-waiver-survive-sheppard-mullin-v-j-m-manufacturing/, last checked by the author on March 8, 2019.

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What Johnny Depp’s multi-million dollar lawsuit against his lawyer teaches about fee agreements

You’re going to think I’m crazy when I write this, but there are amazing lessons that we can learn from celebrities. Right now I’m working on a program called “Everything I know about attorney ethics I learned from the Kardashians.”  And while doing research for that program, I got a bonus— there was a connection to Johnny Depp…and attorney ethics.  According to papers that were filed in a recent lawsuit, Johnny Depp paid $7,000 for a couch that appeared on the TV show, “Keeping up with the Kardashians.” FN1  But it’s not that couch that provides the ethics lesson— it’s Depp’s underlying litigation. And the lesson is about the perils of failing to adhere to the requirements for our fee agreements. 

The Hollywood Reporter explained that Johnny Depp is suing his former management and legal team and he is seeking the return of some $30 million in fees paid to his lawyer over the years. FN2  The way he’s doing it is by attacking the fee agreement.  And that’s sort of the problem. You see, there wasn’t any fee agreement. More precisely, there wasn’t any written fee agreement. 

Apparently this is the sort of thing that happens in the entertainment industry.  The article quoted an agent who explained that, “There is a culture of informality in this world.”  In Depp’s case, he had an oral agreement with his lawyer that went back to 1999.  The problem is that the judge in this case found that the agreement between Depp and his lawyer was a contingency agreement…and contingency agreements need to be in writing.  The Hollywood Reporter stated,

…Judge Green found Depp’s deal is a contingency fee agreement because Bloom’s fees were “directly linked” to the actor’s success, which isn’t guaranteed. “That is the very definition of a performance-based incentive,” he wrote in his opinion…”This is a contingency fee agreement. There is nothing else it can be.”

Since the contingency agreement was not in writing, he ruled that the contract was voidable [Note: Even though the lawyer could still be entitled to a reasonable fee based on quantum meruit, that would mean that the court has to determine what is “reasonable.” Who knows how that will end up]. 

As you could imagine, this is causing a lot of lawyers to worry.  The Hollywood Reporter quoted an entertainment litigator at a major firm who confirmed that, “Everybody’s concerned because most people have handshake deals.” It seems that lawyers in that industry are now wondering whether they should be seeking retroactive written fee agreements from their clients.

Granted, the litigation involving Depp is at the trial level and the ruling was issued by a lower level state court. So one might argue that the opinion might not have much impact outside of the geographical area and industry where it was decided. But I think the article contains a cautionary tale for all lawyers — the formalities required for fee agreements must be taken seriously.  In that regard, let’s review the details of the relevant rule.

Rule 1.5(b) addresses the technical requirements of fee agreements. However, there is an important note here— that subsection applies to non-contingency cases. So if you charge a flat fee or an hourly fee, for instance, you’d need to comply with 1.5(b). That section requires…

Rule 1.5(b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.

Lawyers, therefore, have a mandate to communicate the fee and expenses and it must be done within a reasonable time after starting the representation.  But does a flat fee or hourly fee need to be communicated “in writing”?  If your jurisdiction follows the bargain struck in the ABA version of the rules, then no.  It’s preferred, but not required. Of course, one should consult the rules in your jurisdiction because that’s been changed in many states and a writing is often required, not just preferred.  Here’s my feeling: for the love of everything holy— do me a favor and put it in writing, okay? How else can you safely document that you communicated the necessary information?

The temporal requirement in 1.5(b) is also a dangerous formality.  What exactly is a “reasonable” time after the relationship has commenced? That invokes the two most often used words in the ethics world— it depends. It depends on the circumstances of your individual lawyer/client relationship. Practice note: if it seems that there is a relatively long period between the commencement of your relationship and the communication of your fee, make sure to memorialize/document the reason for that delay.  It might very well be a reasonable delay under the circumstances, but someone looking at the facts later might not appreciate why that’s so.  A memo to the file would go a long way in justifying your actions.

The requirements of our fee agreements take on a whole new level of formality when we get to contingency agreements.  There appears to be universal acceptance that a fee agreement in contingency matters must be in writing. The relevant rule is 1.5(c):

(c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be liable whether or not the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination.

Did you catch how 1.5(c) said that the fee agreement “shall” be in writing? You’ll recall that the earlier section we reviewed Rule 1.5(b) which states that our fee agreements in hourly billing circumstances should “preferably” be in writing. But in contingency matters, the agreement is required to be in writing.  The reason? Conflicts.

A contingency agreement, at its heart, contains an inherent conflict of interest.  The idea that a lawyer’s fee will be dependent upon the amount of the award received by the client pits the lawyer’s interest against that of the client.  Sure, those interests could be aligned, but they aren’t always.  A lawyer might be compelled to advise the client to make some tactical decision that is more likely to benefit the lawyer, rather than serving the best interest of the client.  In that situation the lawyer’s loyalty to the client is compromised. And that’s the main issue in conflicts of interest. The drafters imposed more formalities on fee agreements in contingency situations specifically because of that danger.

Back to the Johnny Depp case…

The question you might have asked yourself earlier is, “How did the industry develop this culture of not getting a writing?”  I’m sure there’s a complicated answer, but at least one motivating factor is clear.  The Hollywood Reporter article quoted a top talent lawyer who said, “You sign the client and it’s an uncomfortable moment to thrust a legal agreement in front of them when you’re the person who’s supposed to be advising them on whether it’s appropriate to sign legal agreements…A lot of people make the decision it’s not worth the effort.” But that excuse isn’t going to cut it.  

The fact that it might be uncomfortable to ask the client to sign a fee agreement does not absolve you of the responsibility to get that fee agreement in writing. And it doesn’t matter if that’s how it’s been done for generations. The common practice is in violation of the rules. 

Of course, one might wonder— how did lawyers get away with doing it this way for so long? It’s simple — there was never a matter worth enough money to litigate. Usually what happens in these type of cases is that some “way of doing business” evolves in a particular area of law.  That way of doing business doesn’t comply with the rules, but lawyers nonetheless continue to engage in that behavior because “it’s always been done that way.” The conflict between the behavior and the rules never gets tested because there’s usually not a case that’s worth enough to justify litigating. The reality is that whenever there is an argument between a lawyer and client that raises the troubling issue, the matter gets settled and the issue is never explored in court.  As a result, the troubling behavior becomes part of the way of doing business. Lawyers get comfortable with the behavior and it becomes part of the culture of the industry. But then a case comes along that is worth enough money to justify litigation. The conflict between the behavior and the rules is then considered in court and that’s when we learn the lesson. 

That’s what seems to have happened here. It appears that Johnny Depp is in some serious financial straits. He apparently made some very bad financial decisions and now he’s trying to recoup money wherever he can. In this case he’s making a $30 million claim against his former lawyer — and that’s a lot of money. He’s seeking so much money that there was no way the parties could settle…and that ensured that the legal issue would be explored in court. When the matter was, in fact, brought before the court, the age-old way of doing business was exposed for what it always was— behavior that violated the rules.

The lesson here is clear. Adhere to the technicalities of the rules. Forgo the temptation to comply with conventions in your industry that conflict with the rules. Because what we learn from Johnny Depp is that when the rules conflict with your culture, the rules will win.   

 

 


Footnotes:

  1.  https://www.vanityfair.com/hollywood/2017/07/johnny-depp-kim-kardashian, last checked by the author on June 5, 2019.
  2.  https://www.hollywoodreporter.com/thr-esq/johnny-depps-court-win-lawyers-question-handshake-contracts-1139459, last checked by the author on June 5, 2019.
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LAWYERS CAN’T ETHICALLY USE AMAZON ALEXA ANYMORE

A short while ago I told lawyers that we had to stop using gmail. I said that because Google is allowing its contractors to read through users’ messages for the purpose of software improvement.  According to a 2008 ethics opinion out of New York, that meant that  lawyers no longer had a reasonable expectation of privacy in the gmail system.  The same problem now applies to Amazon Alexa.

Recently Bloomberg reported that Amazon is recording some peoples’ use of Alexa-powered devices and it’s providing those recordings to employees and contractors.  Those personnel are then reviewing the recordings for the purposes of improving the algorithms and correcting software errors. But if lawyers are now aware that human beings are listening to recordings from these devices, then it follows that we no longer have a reasonable expectation of privacy in the product. 

Watch the video for the full explanation. And when you’re on YouTube, subscribe to my channel if you want to see more of these videos. Click the “bell” icon to get notifications when they’re posted!

 

 

 

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Links to my on-demand programs in (almost) 50 states

My on-demand programs are approved in almost all 50 states (and some territories). Below are the links I’ve got together so far.

Alabama

Alaska

Arizona

California

Colorado

Connecticut

Delaware

Florida

Georgia

Guam

Hawaii

Idaho

Illinois

Indiana

Iowa

Maine

Missouri

Montana

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Oklahoma

Oregon

Pennsylvania

Puerto Rico

Rhode Island

South Carolina

Tennessee

Texas

United States Virgin Islands

Utah

UK-BSB

UK-SRA

Vermont

West Virginia

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The Hidden, but Fixable Danger with PDFs

Imagine this hypo: You’re working on a transaction for a client, and the lending institution needs to send money to your trust account on your client’s behalf.  

— Stay with me — this is not going where you think —  

The lender sends you a fillable PDF form where you’re supposed to provide your wiring information (routing number, account number, etc). You open the document, type all of the information in the fields as required, and email it to the lender.  Obviously there’s the danger of someone intercepting these types of messages so a host of precautionary measures have been put into place and you comply with each.  Let’s say that such precautions even include that the lending representatives call you after receiving the document and read back the wiring instructions to ensure that everything’s kosher.  Despite all of these efforts, you were still scammed — the money never made it to your trust account and no one knows why.  Here’s how it happened: 

Remember that I said the document was a “fillable” PDF? You opened the PDF on your computer, typed in the required information in the fields, then sent the file as a “document” to the lender.  Well, when you sent the document that way, you left all of those “fillable” sections as, well…”fillable.”  Those fields could still be changed by someone because you didn’t lock the document.  

So here’s what happened in the hypo above: after making the call to you and confirming the account information, someone in the bank opened the file, changed that account number/routing number and diverted the money into some other account.  They were able to do that because the document you filled out was a “fillable” PDF and you simply emailed it as a document to the other party.  By emailing it as a “document” the information in the fields could still be changed.  So even after all of the protocols at the lending institution were adhered to, there was still an opportunity for someone with access to the document to change the numbers on the PDF.

The good news? There is a way to avoid this.   

Instead of sending the form as a “document” you should have “flattened” the document. Flattening a document basically locks all of those fillable sections. There are a few ways you could do that.  First, if you get a drop down menu when you try to send the file you might have the option to mail the attachment as a “flattened” document. Another alternative is to save the document as flattened before you email it (you may have to “Print” the document to a PDF then save a “flattened” version of the form). Disclaimer: I’m no tech expert— my job is to point out the dangers, but I don’t claim to be an expert on how to fix them.  I think the procedures I outlined above are correct, but talk to your IT people to ensure that I’m right in that regard.  

Obviously this goes beyond just bank account information.  People can modify any fields in a fillable PDF if the document isn’t locked before transmitting.  That’s why every time you send a fillable PDF you need to flatten it or otherwise lock it to ensure that no one else can change it’s contents after emailing.  

This sort of knowledge is the type of thing that our ethics rules demand. Specifically, it’s about competence.  Rule 1.1 requires that lawyers have the, “legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” The commentary to that rule explains that, “Competent handling of a particular matter includes…[the] use of methods and procedures meeting the standards of competent practitioners. Rule 1.1, Comment [5]. In addition, the new California Rule on Competence requires that lawyers apply the learning and skill that is reasonably necessary for the performance of the legal service. CA RPC 1.1(b) 

Is understanding the dangers of fillable PDFs considered to be part of the “methods and procedures,” or part of the skill that is “reasonably necessary for performance” of the legal services?  It is now. Maybe it wasn’t last year, but it is today. That’s because our duty of competence evolves. We are required to understand the ethical implications of technology as these new technologies become integrated with the practice. See, State Bar of California, Standing Committee on Professional Responsibility and Conduct, Formal Opinion 2015-193. I don’t think there’s any question that PDFs are integrated with the practice of law. Of course, if my opinion doesn’t convince you, also consider that the issue of fillable PDFs was recently part of a best practices update that was sent to attorneys who work for the federal government.  And you know what I always say about the government…if they’re thinking about it, you need to be thinking about it.  

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Lawyers Need to Stop Using Gmail Immediately

Lawyers need to stop using gmail for their practice right now.  An article in the Wall Street Journal made it very clear that lawyers who use the system are doing so at their ethical peril.

(Watch the video, or continue reading below)

To understand why I feel this way you need a slight history lesson. Go back to the 90s when email first became popular.  For those of use who are old enough to recall, lawyers couldn’t use email in their practice because it was unencrypted. Our duty to safeguard client confidences per Rules 1.1 and 1.6 prohibited us from using the tool.  The ABA and state bars across the country deemed that unencrypted email was too insecure and that lawyers who used it weren’t taking the necessary steps to fulfill their duty of protecting clients’ confidential information.  So what changed? Today email is generally still unencrypted, but lawyers use it every day (yes, there have been recent opinions which question whether we should continue to use unencrypted email, but it is permitted in a variety of instances). Here’s the change— Congress criminalized the interception of email.  

Once Congress made the interception of email a crime, the powers that be agreed that lawyers had a reasonable expectation of privacy in using the medium. The key phrase is a “reasonable expectation of privacy.”  The ABA issued a formal opinion in 1999 confirming that idea:

“The Committee believes that e-mail communications, including those sent unencrypted over the Internet, pose no greater risk of interception or disclosure than other modes of communication commonly relied upon as having a reasonable expectation of privacy. The level of legal protection accorded e-mail transmissions, like that accorded other modes of electronic communication, also supports the reasonableness of an expectation of privacy for unencrypted e-mail transmissions. The risk of unauthorized interception and disclosure exists in every medium of communication, including e-mail. It is not, however, reasonable to require that a mode of communicating information must be avoided simply because interception is technologically possible, especially when unauthorized interception or dissemination of the information is a violation of law. The Committee concludes, based upon current technology and law as we are informed of it, that a lawyer sending confidential client information by unencrypted e-mail does not violate Model Rule 1.6(a) in choosing that mode to communicate. This is principally because there is a reasonable expectation of privacy in its use.”

So what about the Gmail connection? Well, that standard — the reasonable expectation of privacy — was a key consideration for the New York State Bar Association when it opined about the permissibility of free email services like Gmail.  In its Opinion 820, the New York State Bar Association voiced concern about systems like Gmail because Google used advertising to keep the service free. In return for providing the email service, “the provider’s computers scan e-mails and send or display targeted advertising to the user of the service. The e-mail provider identifies the presumed interests of the service’s user by scanning for keywords in e-mails opened by the user. The provider’s computers then send advertising that reflects the keywords in the e-mail.”  The obvious problem is that if we’re using the email system for client work, then we’re allowing the provider to scan confidential information. 

The NY authorities, however, said that all of this was okay.  Even though the email messages are scanned humans don’t actually do the scanning.  Rather, only computers engage in that task.  Thus, they stated that “merely scanning the content of e-mails by computer to generate computer advertising…does not pose a threat to client confidentiality, because the practice does not increase the risk of others obtaining knowledge of the e-mails or access to the e-mails’ content.”  In other words, lawyers had a reasonable expectation of privacy when using the service.

Today there’s been a big change. 

Big.

On September 21, 2018 the Wall Street Journal reported that Google shares Gmail information with its app developers. But what’s important is the type of information that’s being shared and who view it (remember something— here we’re not worried about privacy issues related to data sharing…this is different…this is about the lawyer’s duty to protect confidential information).  The WSJ article revealed that:

Google Inc. told lawmakers it continues to allow other companies to scan and share data from Gmail accounts…the company allows app developers to scan Gmail accounts…outside app developers can access information about what products people buy, where they travel and which friends and colleagues they interact with the most. In some cases, employees at these app companies have read people’s actual emails in order to improve their software algorithms. [emphases added]

Did you get that last part? There are real human beings who are reading the contents of Gmail messages.  What we know from NY Opinion 780 is that if human beings are reading the lawyer emails, then lawyers no longer have a reasonable expectation of privacy in Gmail.  

Sure, we lack some specific data about which emails are read, but that doesn’t change the conclusion.  We might not know if lawyers’ messages in particular were included in the messages that were scanned.  But that’s sort of exactly the problem — we don’t know.  And we don’t have any way to control or restrict the app developers from reading anyone’s emails, including our practice-related emails.  Because of that reality I don’t think that lawyers have a reasonable expectation of privacy in using Gmail any more.  Our duty to protect client confidences set forth in Rule 1.6 precludes us from using the service.  I’ll tell you the truth, it actually looks like no one — lawyer or otherwise — has a reasonable expectation of privacy with the platform.  That’s why I think lawyers need to stop using Gmail for practice related matters immediately.

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I have no idea why they wrote this opinion…

In 2018 there as was opinion issued by the American Bar Association and — for the life of me — I don’t understand why they wrote this opinion.

Formal Opinion 481 entitled, “A Lawyer’s Duty to Inform a Current or Former Client of the Lawyer’s Material Error” was issued on April 17, 2018.

There’s nothing so earth shattering about requiring a lawyer to notify a client when there is material error. In fact, it’s obvious and basic. In fact, the drafters of this opinion go through a bunch of advisory opinions from across the country and confirm that the requirement has been around for a while. At one point they even admit that they’re really not presenting anything new.  In addressing those other opinions they state, “These opinions provide helpful guidance to lawyers, but they do not—just as we do not—purport to precisely define the scope of a lawyer’s disclosure obligations.” 

Um…okay. 

So why are you wasting this paper? 

The next sentence sorta tells us: “Still, the Committee believes that lawyers deserve more specific guidance in evaluating their duty to disclose errors to current clients than has previously been available.” ABA Op. 481 at 4

If there’s any value to the opinion, it’s in the definition of when an error is considered to be “material.”  They state, “…a lawyer must inform a current client of a material error committed by the lawyer in the representation. An error is material if a disinterested lawyer would conclude that it is (a) reasonably likely to harm or prejudice a client; or (b) of such a nature that it would reasonably cause a client to consider terminating the representation even in the absence of harm or prejudice.” ABA op. 481 at 4.

Oh, but this only applies if the client is a “current” client. That’s because even though a lawyer must inform a current client of a material error, “Rule 1.4 imposes no similar duty to former clients.” ABA Op. 481, at 7. 

Thanks for this guidance.  I think. 

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