Minutes of the State Bar of Nevada
Ethics 2000 Committee 1
Date of meeting: June 26, 2003
Time of meeting: 1:30 p.m.
Venue: Video conference hosted by
McDonald Carano Wilson LLP
2300 W Sahara Ste 1000 241 Ridge Street
Las Vegas, NV 89102 Reno, NV 89505
The meeting called to order at 1:45 p.m. and was video conferenced by hosts
McDonald, Carano, Wilson LLP, which continued as in the past to provide this
service free of charge. WOLFSON, KENNEDY, STEMPEL, and WILLICK attended in Las
Vegas. JUDGE SCHUMACHER, BRADSHAW, and PECK attended in Reno. Jedediah BODGER, a
law student and summer associate at the Beesley & Peck firm, also attended in
Reno. Reporter BARE and staff member MARZEC were present in Las Vegas. BEESELY
and RYE were unable to attend.
• Agenda item 1: new member S. Rye
WOLFSON took official note of new committee member STEPHEN RYE and advised
that RYE’S appointment came about because the Board of Governors wanted to have
rural interests represented on this Committee. RYE was approached and accepted
the appointment. MARZEC noted the appointment was only a few weeks before
today’s meeting and RYE’S office informed he was on vacation and thus unable to
participate today. All materials and notices distributed to date were forwarded
to RYE.
Moving on, WOLFSON asked BARE to act as moderator. BARE noted Agenda items
may be taken out of order.
1 Ratified August 4, 2003
• Agenda item 2: website
As communicated by staff’s prior e-mail, the www.nvbar.org site now has an
E2K section. Committee members were asked to monitor the section and advise of
any suggestions. Currently the section includes a brief introduction of the
genesis of this committee, ratified meeting minutes, ABA E2K materials, and a
committee roster. Materials will continue to be added. When the final E2K report
and recommendation is approved by committee (prior to the public hearings
phase), all other documents and research which may be on the site will be moved
to a RESEARCH ARCHIVE subsection to avoid confusion. [eg., the user will see the
following links upon “clicking” the E2K icon: introduction, Final Report and
Recommendation for Public Comment, public hearing notices, minutes, Committee
roster, and research archives.]
WOLFSON requested that Staff research the possibility of tracking hits on the
website.
WILLICK raised the issue of whether the committee’s research should be posted
to the site. The issue was debated, the main point of concern being how posting
might affect the work’s attraction to publishers in future, such as law review.
For example, some publications will not run a piece that has appeared anywhere
previously. Although this is generally limited to prior printed works, it could
still be a consideration.
The committee voted the default position will be any legal research submitted
to staff will be posted to the website unless otherwise directed by the author,
who shall retain discretion over his/her work. Copyrighting was discussed, but
not generally favored by the majority.
PECK noted for the record that BODGER prepared the legal research on today’s
agenda on behalf of herself and BEESLEY. She stated BODGER’S work was exemplary
and should be submitted to law review (or something similar). Accordingly, she
wouldn’t want the work to be diluted or less attractive to a publisher by virtue
of posting to the site. BODGER to advise staff of his wishes by the next
meeting.
• Agenda item 6: PECK’S report on SCR 158/ MR 1.8
PECK led the discussion on SCR 158, the conflict of interest rule. She took
official note that BODGER prepared the memorandum provided to the Committee and
commended his work.
In summary, BODGER’S memorandum is a genesis of new subsection (j) in
corresponding Model Rule 1.8, the “no sex with client” provision. Oregon is on
the cutting edge. It used to be this rule was only needed in the family law
area, where the greatest danger for this type of situation normally arises. The
ABA further extended the rule to private and organizational clients (at least in
the comments). The fiduciary relationship affects objectivity, consent, and the
ability to give consent. As such, the rule protects both the lawyer and the
balance of power in the lawyer-client relationship. With an individual client,
the attorney has the greater power, but with an organization as client the
organization is more powerful.
PECK recommended a definitional sentence for an organization as client based on Model Rule 1.8 comment [18] or [19]. Comment 19 reads, “When the client is an organization, paragraph (j) of this rule [the ‘no sex with client’ paragraph] prohibits a lawyer for the organization (whether inside counsel or outside counsel) from having a sexual relationship with a constituent of the organization who supervises, directs, or regularly consults with that lawyer concerning the organization’s legal matters.”
The Committee discussed whether to define “sex” in the rule as well. PECK
brought up the difference between “sexual” and “romantic” relationship. For
example, there was an appellate case in Texas where a client had a platonic
crush on a firm partner which the firm allegedly used to the client’s detriment
and she sued.
The majority opinion was that the choice of the word “sex” as prohibited
rather than any other term connoting a relationship was deliberate. Much like
the pornography statutes, which are defined in case law under a “you know it
when you see it” philosophy, trying to define “sex” in the rule may cause more
problems than it solves as it is impossible to envision every scenario that may
arise.
BARE noted in practical effect, in Bar proceedings it always comes down to
overall facts of the case where the focus is really a much larger issue than the
sex in and of itself.
KENNEDY stated that in the ABA version the relevant subsection is not
waivable, where elsewhere in the rule it talks about consent. It is important
that as a notice rule, lawyers understand this is not a provision that can be
stipulated away. The Committee was split on whether “shall” was sufficient to
impart notice that the requirement is absolute.
Staff was instructed to ensure the record accurately detailed the Committee’s
discussions and intentional use of the term “sexual relationship” without
further definition.
WILLICK brought up the Bounds of Advocacy (applicable to the family law
sector) rule 2.16, which states a lawyer should never have sex with a client or
opposing counsel in a domestic relations case. He opined that since the Bounds
apply in Nevada, they should be referenced in any published article on the
subject as they fill in gaps and serve as an ethics guide.
PECK and WOLFSON both noted that while the Bounds may appropriately be
considered, EDCR 5.04 in its very limited application is an aspirational
requirement and furthermore only applies to family law matters in the eighth
judicial district.
KENNEDY noted that in the ABA model rule, the no sex subpart is an individual
prohibition and appears to be intentionally so. The Committee was unanimous that
this particular provision should not be imputed to the firm and voted the Nevada
rule will be structured accordingly.
PECK moved on to subsection 9, the counterpart to which was deleted in the
model rule. Noted that it is interesting the ABA changes expanded protection in
some areas but then deleted it in situations where the pertinent persons are
related. KENNEDY noted this is covered in other rules, such as 157.1. PECK
opined that while other rules may indeed apply, there should still be notice in
this rule and should be disclosed to the client. The Committee was unanimous
that there was not a compelling reason to delete subsection 9.
The Committee voted unanimously to approve PECK’s verbally preferred changes:
(1) define organizational client (2) keep subsection 9, add “informed” in front
of “consent” to comport with the same change in other sections, & renumber
accordingly, and (3) change wording in last subsection so that no sex
prohibition is not imputed to the firm.
NOTE: The Reporter was asked to make the appropriate changes and provide a
draft at next meeting with a view towards a final vote. The Reporter will also
ask the Committee at that time if the existing “shall” in the model rule is
strong enough to provide notice that the no sex rule is not waivable, since no
clear decision was reached today on that point.
• Agenda item 7: STEMPEL’S report on SCR 182/ MR 4.2
STEMPEL presented this rule for final vote. Recapping the detailed
presentation he made at the last committee meeting, he summarized the Committee
can codify Palmer or go with the ABA changes. STEMPEL noted the Palmer decisions
were unanimous and it is unlikely that the Court would approve any language
changes to the rule which would alter the impact of Palmer. Although a personal
supporter of Palmer, STEMPEL recommended against codification because the bench
and bar have essentially no experience in applying the managing-speaking agent
test and over time, the Court may modify the test in some fashion. Accordingly,
the recommendation is to adopt MR 4.2.
A motion was made and carried and the Committee unanimously voted to
recommend adopt of MR 4.2 as follows:
In representing a client, a lawyer shall not communicate about the subject of
the representation with a person the lawyer knows to be represented by another
lawyer in the matter, unless the lawyer has the consent of the other lawyer or
is authorized to do so by law or a court order.
• Agenda items 3 & 4: STEMPEL’S recommendation on Scope, Terminology, and
Preamble
STEMPEL recommended adopting a terminology section. The Scope and Preamble
are much like the comments, which the Committee has no appetite to adopt, in
that they are precatory and aspirational. As such, he recommended against
adopting the Preamble but did find four (4) sections of the Preamble which would
benefit Nevada, perhaps to exist as SCR 150.2 or subsection 2. Specifically, he
recommended adoption of Preamble 14, 17, 19, and 20:
o 14 talks about disciplinary rules being “rules of reason” and discusses “shall” vs. “may”
o 17 clarifies rules are not the last word-must also look to other authority
o 19 states violations must be fact specific
o 20 clarifies discipline violation does not necessarily warrant a
non-disciplinary authority (and vice-versa) but may be evidentiary in some cases
A motion was made and carried and the Committee unanimously voted to
recommend adoption of a terminology section and codification of Scope sections
14, 17, 19, and 20. The Committee unanimously voted against adopting the
Preamble.
The Reporter was directed to prepare a draft of the Terminology section.
STEMPEL will prepare a final draft of the scope sections for the next meeting,
but the final recommendation should be substantively similar if not exact to the
ABA language.
WILLICK asked for confirmation that the Committee voted against adopting the
comments, which was verified. There was some discussion about whether codifying
bits and pieces of the ABA comments may be confusing in future. KENNEDY opined
if you adopt some comments but not others it liquidates the effect of the other
comments which aren’t. PECK stated it should not be confusing in that either
something is part of the rule, or it isn’t law. The comments can still be used
as guidance. KENNEDY noted that the minutes should reflect the discussions the
Committee had about adopting portions of the comments in case it comes up in the
future. The Committee again voted against adopting the comments for the record.
WOLFSON noted just because a matter had been voted upon did not mean it couldn’t
be revisited in future if need be.
• Agenda item 5: BEESLEY’S presentation MR 1.17/ 5.7/ 7.6
BARE asked BODGER to present these rules since BEESLEY was not in attendance
and BODGER had prepared the written materials.
Model Rules 1.17(Sale of law practice), 5.7 (Responsibilities regarding
law-related services), and 7.6 (Political contributions) are newly adopted
rules.
o MR 1.17 (Sale of law practice)
This rule is adopted by 36 states and is beneficial to attorney and client.
The rule compensates the attorney for his work and effectuates continued
representation to the client. The only real concern is a potential breach of
fiduciary duties, however the sale of the practice overcomes that by enabling
continued representation rather than selling off clients as a commodity.
BARE noted this doesn’t happen often in Nevada. No other Committee members
were aware of a situation where a practice was sold and there were negative
ramifications. It was noted that upon death, an estate can sell a law practice
in Nevada under existing law. BARE noted that while the ethics rules don’t have
to be popular, it is his opinion lawyers like this rule.
WILLICK asked if subsection 1, the non-compete agreement, weren’t overly
harsh. BODGER noted it was the most important piece of the rule. If a lawyer
purchased a practice with thirty clients and then sold them off, this could
create huge conflicts. Others noted, however, that in that situation some other
rules would come into play.
WOLFSON brought up the unusual scenario where someone sold a practice due to
illness, then had a miraculous recovery. KENNEDY noted that isn’t unusual. Old
school of though was that attorney-client relationship is NOT a commodity. But,
this says there should be exceptions.
WOLFSON noted this subsection puts the lawyer on notice. WILLICK opined it
was outdated. KENNEDY stated it was important to look at the purpose of this
rule.
JUDGE SCHUMACHER opined that WILLICK’S point was a good one, and the Court
may be concerned about the duration of non-compete agreements. However,
subsection one does not appear to be that. It speaks to the conditions that must
be present at time of sale, i.e. the seller is not at the time in practice.
There is no contract here saying the lawyer can’t come back. There is a
significant difference between a covenant not to compete vs. conditions when you
can sell.
The Committee looked at the comments to MR 1.17, which specifically discuss
the various factors that might be exceptions sub 1. For example, comment 2 says
in part, “ Return to private practice as a result of an unanticipated change in
circumstances does not necessarily result in a violation.” The rule uses an
appointed judge who sells a private practice and then is defeated at election to
illustrate.
Some Committee members expressed concern that the Bar could be seen as being
in trade practice. PECK felt the rule seemed to imply the restriction is in
perpetuity. JUDGE SCHUMACHER suggested a duration provision. WILLICK stated
exceptions should not necessarily be extra-ordinary (illness, judge example).
PECK noted a practice may be less marketable if the purchasing lawyer has to
worry about the selling lawyer coming back. WILLICK commented the value is the
infrastructure of law practice, not the clients, i.e name recognition, trademark
value.
WILLICK suggested language that requires a reasonable specific time to be set
forth in writing between seller and buyer. PECK stated we should let people do
this themselves with freedom of contract, but absent one have a default period.
Time periods suggested varied from six months to 5 years. PECK Motioned that
the Committee agree in principle to the changes discussed and have the Reporter
formulate a draft recommendation for next meeting.
A motion was made and carried and the Committee unanimously voted to adopt
the changes discussed and review a draft to be prepared by the Reporter at the
next meeting.
o MR 5.7 (Responsibilities regarding law-related services)
• WOLFSON noted he doesn’t think this is a pressing problem in Nevada. There
are other rules that apply. The Committee concurred.
• KENNEDY noted this type of situation occurs when a law firm is set up with
an affiliate which provides legislative lobbying services. You usually have one
lawyer overseeing a group of nonlawyers. The lawyer only wants to be held to the
lobbying rules and not the ethics rules.
A motion was made and carried and the Committee unanimously voted not to
adopt this rule.
o MR 7.6 (Political contributions)
BODGER did a verbal presentation on this rule and noted he liked it but for
the phrase “for the purpose.” If a lawyer donates money to a campaign and is
then granted a contract there is a substantial loophole. KENNEDY agreed, but
stated there isn’t a way to improve on it and still maintain the integrity of
the rule. If a lawyer gives money to an elected official and then gets a counsel
job, OK. If you want to prohibit that, don’t adopt this rule at all.
There was some discussion about the burden of proof on disciplinary
enforcement of the rule. KENNEDY illustrated the rule’s application with the NY
bond firms contributing to the Secretary of State. PECK noted if there is a
special niche with a few competitors vying with each other only, she is more
concerned with the effect it might have on litigation. KENNEDY stated this isn’t
a compelling concern in Nevada.
A motion was made and carried and the Committee unanimously voted not to
adopt this rule.
WOLFSON recapped the Committee is to revisit 1.17 with a view to adopt with
modified language, “no” votes on adopting MRs 5.7 and 7.6. The Committee thanked
BODGER for his excellent work on the legal briefing.
A motion was made and carried and the Committee unanimously voted to approve
the minutes of the May 2003 meeting, on the condition that the members review
the minutes and submit any substantive changes to staff within two (2) weeks.
• Renumbering of rules
The issue of renumbering all the disciplinary rules to comport with the model
rules was again raised. BARE noted the matter had been informally discussed with
the court in the past and there did not seem to be an appetite for it. WILLICK
suggested that may be because of how the proposal was presented.
KENNEDY suggested that maybe we can make the recommendation to the court that
renumbering might make sense in principle, but not actually do the renumbering
in the ADKT.
WOLFSON made a motion which PECK seconded not to vote on renumbering at next meeting, but rather to have staff prepare a chart or table illustrating what the new numbering scheme might look like, with a few rules set forth as illustrative. WOLFSON also invited WILLICK to submit a proposal. The Motion carried with WILLICK the only ‘nay.’
• Agenda item 9- Vote on rules not changed by E2K.
A motion was made and carried and the Committee unanimously voted not to make any changes to the rules not affected by E2K: SCRs 151, 153, 167, 171, 173, 181, 186,192.
MARZEC asked that any submissions for the next committee be received no later
than two days prior to the meeting. An update Reporter’s Work File will be
prepared incorporating today’s changes for next meeting. BARE noted his goal is
to have a recommendation ready for presentation to the membership after the next
meeting.
Meeting adjourned at 6:20 p.m
ACTION ITEMS:
• Staff to schedule and notice the next meeting and prepare minutes
• Staff to make changes to Reporter’s Work File
• Kennedy to prepare presentation on Rule 160
• Staff to make sure E2K article continues to run in Nevada Lawyer until further notice
• Reporter to prepare “terminology” section
• Staff to prepare “renumbering conversion charts”
• Staff to research tracking hits to E2K website section
[1] MARZEC noted Microsoft WORD is preferred. Documents created in all other programs will be scanned in Adobe ‘pdf’ format. Converted to .htm for the web.
[2] 2.16 An attorney should never have a sexual relationship with a client or opposing counsel during the time of the representation.
Comment
Persons in need of a matrimonial lawyer are often in a highly vulnerable emotional state. Some degree of social contact (particularly if a social relationship existed prior to the events that occasioned the representation) may be desirable, but a more intimate relationship may endanger both the client’s welfare and the lawyer’s objectivity.
Attorneys are expected to maintain personal relationships with other attorneys, but must be sensitive to the threat to independent judgment and the appearance of impropriety when an intimate relationship exists with opposing counsel or others involved in the proceedings.
[3] EDCR 5.04 (Standards of Conduct) states, “All lawyers and pro se litigants involved in matters before the family division should aspire to compliance with the American Academy of Matrimonial Lawyer’s standards of conduct, the Bounds of Advocacy (1991 Edition). “
[4] See May 6, 2003 Minutes, p. 4.
[5] Palmer v, Pioneer Inn Assoc, 19 Fed.Supp.2d 1157 (D.Nev. 1998) , modified by Palmer v. Pioneer, 59 P.3d 1237 (Dec. 27, 2002).
[6]
April 10, 2003 minutes, p. 4.
[7] Subsection 1 states, “The seller ceases to engage in the private practice of law, or in the area of practice that has been sold, in the geographic area or jurisdiction in which the practice has been conducted.”