Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association.

Lawyers and their Counsel 

Sometimes lawyers need counsel. Many firms maintain an in-house “ethics counsel.” These attorneys serve a vital role in advising other attorneys about their ethical responsibilities. But are there limits to the advice in-house counsel may render?  Is there a significant difference between a lawyer seeking advice from outside counsel and a lawyer seeking advice from in-house counsel? A proposed COPRAC opinion, Formal Opinion Interim 12-0005 — now in its public-comment period — takes on these issues. The Opinion offers useful guidance in scenarios where a lawyer may seek outside counsel. In its current form, however, the Opinion muddies the waters with respect to the duty of loyalty that a lawyer owes to a client. Specifically, the Opinion goes too far in advocating for suspension of a core tenet of client loyalty — the imputation rule — in the interest of lawyer convenience.

The formal issue in the opinion reads as follows:

What ethical obligations arise when lawyers in a law firm consult with outside counsel concerning matters related to the firm’s representation of a current client, such as the lawyer’s ethical compliance or a possible error by the law firm, and do those ethical obligations change if the lawyer consulted is a member of the same law firm as the consulting lawyer and serves as law firm in-house counsel? (Formal Opinion Interim 12-0005, at 1).

The Opinion summarizes the ethical obligations of an attorney (Lawyer) seeking ethical advice from outside counsel (Outside Counsel) under two different fact scenarios. In Hypothetical One, Lawyer seeks advice from Outside Counsel regarding discovery obligations and rules regarding disclosure to the client (Client). Hypothetical Two involves Lawyer seeking advice from Outside Counsel in relation to a potential malpractice claim by Client against Lawyer for failing to file a cross complaint within the limitations period. The Opinion then presents Hypothetical Three, which analyzes the same issues as Hypothetical One and Hypothetical Two, but assumes that the lawyer seeks advice from in-house counsel (In-House Counsel) at Lawyer’s firm (Law Firm).

While the Opinion provides a useful analysis of rules governing Lawyer’s ethical obligations, one piece of the Opinion is troubling. In part two of Hypothetical Three, where Lawyer consults with In-House Counsel regarding Lawyer’s malpractice in the representation of a current client of Law Firm, the Opinion concludes — in my view erroneously — that there is no difference between Lawyer consulting Outside Counsel and Lawyer consulting In-House Counsel. 

In-House Counsel provide as a valuable service to lawyers, law firms and clients. There are some scenarios, such as those presented in Hypothetical One, where the interests of Lawyer, Client, and Law Firm are aligned, and there is no conflict of interest when Lawyer seeks advice from In-House Counsel.

Where there is a potential claim by Client against Lawyer for malpractice, In-House Counsel, as a member of Law Firm, has a conflict of interest. In fact, the Opinion recognizes this conflict, but in a surprising move, adopts the position that the conflict of interest does not exist where Lawyer consults In-House Counsel. The error emerges with the following statement:“Because we conclude that the act of seeking advice regarding a lawyer’s ethical obligations does not create a conflict, we do not believe imputation applies.” (Formal Opinion Interim 12-0005, at 9).

The authorities referenced by the Opinion do not support a conclusion that there is no conflict of interest when a lawyer consults in-house counsel about a malpractice claim involving the firm’s current client. In support of the conclusion, the Opinion refers to a series of cases that examine the “fiduciary exception” to the attorney-client privilege. (Formal Opinion Interim 12-005, at footnote 11 [listing cases reaching different conclusions under the fiduciary exception issue]). Most of the referenced decisions, however, arise from a posture where there is a clear conflict — where litigation has commenced, and where the lawyer has asserted the attorney-client privilege in response to the client’s demand for disclosure of communications between the lawyer and in-house counsel. In Palmer v. Superior Court (2014) 231 Cal. App. 4th 1214, the court found some communications privileged and others not privileged under a strict application of the Evidence Code. But in reaching its determination, the court took the extra step of stating that its analysis did not cover the issue of whether the actions of the attorneys violated ethical rules. (Palmersupra, 231 Cal.App. 4th at footnote 8). “We do not intend to condone, or minimize the significance of, an attorney’s violation of the Rules of Professional Conduct.” (Palmersupra, 231 Cal. App. 4th at 1233). Moreover, the court cited numerous other cases noting that the issue of an ethical breach was separate and apart from the evidentiary privilege question at issue. (Palmersupra, 231 Cal. App.4th at 1233). 

The Opinion states “there is no reason to treat differently a consultation by Lawyer with Firm In-House Counsel.” But there are very good reasons to treat the analysis differently: the personal interests of In-House Counsel as a member of Law Firm, and the duty of loyalty owed by In-House Counsel to Client. The potential liability in Hypothetical Two pits Client against Lawyer, and by extension, Client against Law Firm and Client against In-House Counsel. Whose interests should In-House Counsel favor, those of Law Firm or Client? Is the judgment of In-House Counsel — a lawyer who not only owes a duty to the client, but also has “skin in the game” — really the same as the unbiased judgment of Outside Counsel? Would there be no temptation to find Lawyer’s acts excusable, or to pursue a course of action favorable to Lawyer and Law Firm, but detrimental to Client?

The Opinion recognizes this conflict. In response, the Opinion seeks to suspend the imputation rule where it is most needed — where the interests of Law Firm and In-House Counsel are pitted against the interests of Client. 

One of the measures of a profession is the degree to which ethical norms favor the interests of the client above the interests of the professional. As lawyers, we have an obligation to protect our clients. That obligation does not end when we make an error — if anything, that’s where the rubber meets the road, and where we are forced to put our client’s interests above our own. Certainly, a bright line rule allowing lawyers to freely consult with in-house counsel would make things easier for lawyers. And lawyers would benefit from the changes suggested by the Opinion. But lawyer convenience is not a sufficient justification for the suspension of an ethical rule.

In conclusion, Opinion 12-0005 offers a solid explanation of the reasons why a lawyer may seek the advice of outside counsel where the lawyer is unsure of the ethical obligations. But the opinion errs when it suggests there is no difference between consultation with outside counsel and in-house counsel. And the Opinion goes too far in suggesting the solution to potential conflicts that arise with an in-house consultation is an abandonment of the imputation rule. Whether a lawyer may consult in-house counsel is a more complicated matter, and a bright line rule either approving or disapproving of in-house consultation would be a mistake. In-house ethics counsel can serve a vital role in assisting lawyers with questions about their ethical obligations. But in-house counsel cannot provide advice where doing so creates a conflict of interest. For the reasons above, the Committee should either modify or remove Hypothetical Three from  Opinion 12-005.

In this article, I’ve provided my opinion. If yours differs from mine, I’d be delighted to hear from you. An open discussion of this issue is both timely and relevant. The public comment period for the Opinion remains open until 5:00 p.m. on December 11, 2017.

-- Timothy Casey

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**