Abstracts of Responses to Letter Inquiries
The following abstracts of informal CBA Ethics Committee (Committee) letter opinions are offered as potential sources of guidance to the bar on matters of ethical concern. Because they abridge the letter opinions and omit facts and circumstances tending to identify the inquiring attorney, the abstracts are not exhaustive, and therefore should serve only as a starting point for, or supplement to, thorough research and analysis. Inquirers are advised in advance whether the opinion provided to them will be abstracted and published. The full letter opinions are not provided to persons other than the original inquirer. The letter opinions and these abstracts are issued for advisory purposes only and are not binding in any way on the Colorado Supreme Court or the Appellate Discipline Commission.
Abstract No. 2014–1
Contingency Fee Based on Receiving Equity Interest in Entity which is Subject of Contingency Litigation
Statement of Facts
A lawyer’s prospective client and his two partners each has a one-third interest in their company. The client has evidence that the other two partners have engaged in illegal conduct. The civil remedies available include the court’s power to divest the other partners’ interests in the company and award those interests to the client.
The client is unable to finance the litigation and requests a contingent fee. A favorable judgment would not result in money damages, but would result in the client obtaining his partners’ interests in the company.
Does Colo. RPC 1.8(i) permit an attorney to receive a reasonable contingent fee paid by means of (a) an equity interest in a company partially owned by the client or (b) a portion of the cash value of the equity interest awarded to the client in litigation, if the company is also the subject matter of the litigation?
The Committee believes that Colo. RPC 1.8(i) does not prohibit a lawyer from receiving as a contingent fee either an ownership interest in a client’s business that is also the subject matter of the litigation or a cash payment based on the valuation of the equity interest awarded to the client in the litigation, as long as the attorney complies with the applicable Colorado Rules of Professional Conduct, including Colo. RPC 1.8(a), 1.5, and 1.7.
Colo. RPC 1.8(i) states that:
A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may . . . contract with a client for a reasonable contingent fee in a civil case.
The Committee believes that both of the arrangements proposed fall within the contingent fee exception of Colo. RPC 1.8.
ABA Formal Opinion No. 00-418 (2000) provides that the Model Rules of Professional Conduct do not prohibit a lawyer from acquiring an ownership interest in a client, either in lieu of a cash fee for providing legal services or as an investment opportunity in connection with such services. The ABA stated in its opinion:
In our view, when the corporation has as its only substantial asset a claim or property right (such as a license), title to which is contested in a pending or impending lawsuit in which the lawyer represents the corporation, [Model] Rule 1.8(j) [which is identical to Colo. RPC 1.8(i)] might be applicable to the acquisition of the corporation’s stock in connection with the provision of legal services. If the acquisition of the stock constitutes a reasonable contingent fee, however, Rule 1.8(j) would not prohibit acquisition of the stock.
Id.at p. 9 (emphasis added). Although it did not address this issue specifically, the Committee endorsed ABA Formal Opinion No. 00-418 in its Ethics Opinion No. 109: Acquiring an Ownership Interest in a Client (2001). The ABA’s conclusion is consistent with Opinion No. 94-15 of the Arizona Committee on the Rules of Professional Conduct (1994), and Beatie v. DeLong,561 N.Y.S. 2d 448 (App.Div. 1990).
Although the Committee believes that Colo. RPC 1.8(i) does not prohibit either of the two proposed fee arrangements, the reasonableness and disclosure requirements of Colo. RPC 1.8(a) must be satisfied, because the proposed contingent fee involves acquiring an interest in the client’s business. See Colo. RPC 1.8, cmts. 1 and 4. The attorney also must comply with Colo. RPC 1.5, which requires that the fee charged must be reasonable in light of the factors listed in Colo. RPC 1.5(a) and must satisfy Chapter 23.3 of the Colorado Rules of Civil Procedure, “Rules Governing Contingent Fees.”
In evaluating whether the contingent fee is “reasonable” under Colo. RPC1.5(a) and 1.8(a), there must be at least a threshold determination or estimate of the market value of the equity interest at issue at the time the fee agreement is executed. Otherwise, it would be difficult to make the “reasonableness” determinations required by Colo. RPC 1.5(a) and 1.8(a). The reasonableness of the contingent fee agreement also must be assessed retrospectively at the conclusion of the matter. See Berra v. Springer & Steinberg, 251 P.3d 567 (Colo.App. 2010).
The attorney also needs to consider whether any concurrent conflicts of interest arise under Colo. RPC 1.7 as a result of the proposed arrangement. For example, litigation decisions impacting the management of the client’s business or a discrepancy between the value of the equity interest determined at the outset of the engagement and the client’s position in the litigation might present conflict issues that would have to be addressed under Colo. RPC 1.7. In addition, the attorney must continue to assess whether any conflicts of interest develop in the course of the representation as a result of future events and must remain in compliance with CRPC 1.7 and the other Colorado Rules of Professional Conduct.
No Duty for Appellate Counsel Appointed by Office of Alternate Defense Counsel to Review or Deliver Copies of Transcripts or Other Documents to Clients
Does appellate counsel appointed by the Office of Alternate Defense Counsel (OADC) violate his or her ethical duties to a present or former client by refusing to (1) review transcripts and documents contained in the client file when the purpose of the review is to identify and, if appropriate, redact material constituting contraband under the regulations of the Department of Corrections (DOC), or (2) deliver to the client information that is barred from disclosure by law, regulation, or court order?
Statement of Facts
A. OADC counsel. OADC appellate counsel are independent contractors. They are paid a flat hourly rate, and their appointment terminates when the mandate or other order terminating the appeal is issued. Clients are typically advised at the outset of the representation that OADC counsel will review the trial transcripts but see no reason why the client needs personal copies of transcripts and documents from the court file and, if copies are requested, payment must first be made by the client to the court reporter. Nevertheless, OADC counsel receive requests from current and former clients for copies of transcripts and other documents from their client files. Former clients routinely cite Colo. RPC 1.16 and this Committee’s Formal Opinion 104 in asserting that OADC counsel are ethically required to surrender such materials to them.
B. Incarcerated clients. DOC considers certain information frequently found in transcripts and the client file (whether in electronic or printed format) to be contraband and, by regulation, provides that it is the responsibility of the inmate’s counsel to redact such information before sending those materials to the inmate. However, OADC does not pay for client copies of transcripts or documents, nor does it pay appointed counsel to review and redact those transcripts and documents, both of which must be done before they can be forwarded to incarcerated clients.
DOC regulations prohibit:
[P]ersonal communications; personal pictures; maps; victim information; phone numbers, addresses, social security, SID, or FBI numbers of victims, witnesses or employees; . . . personal information regarding other incarcerated individuals; . . . training manuals, restricted regulations, security threat group identifications, etc.
Colo. DOC Admin. Reg. 750-03 (K) (L) (Jan. 15, 2011).
In addition, it is a criminal offense to introduce contraband into a correctional facility. “Contraband” is defined as:
[a]ny article or thing that poses or may pose a threat to the security of the detention facility as determined by the administrative head of the detention facility if reasonable notice is given that such article or thing is contraband.
CRS Ann. § 18-8-204(2)(l). Because notice has been given by DOC regulation that information of this type is contraband, introduction of such information in unredacted transcripts or documents may expose counsel to prosecution for second-degree introduction of contraband. CRS § 18-8-204(1). Knowing and unlawful introduction of such contraband is a class 6 felony. CRS § 18-8-204(3). Finally, counsel could be charged with introduction of contraband in the first degree, a class 4 felony, if the attorney sends materials under 1,000 pages in CD or DVD formats, whether redacted or not, because the disc, when broken, has sharp edges and can be used as a dangerous weapon. See CRS Ann. § 18-8-203.
C. Other clients. In addition, counsel may, by reason of a court protective order or otherwise, be prohibited from providing unredacted documents to a current or former client, whether incarcerated or not.
A. Former clients.Counsel’s duty to provide to a former client documents from the lawyer’s files for that client is addressed in Colo. RPC 1.16, which provides:
Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee or expense that has not been earned or incurred. The lawyer may retain papers relating to the client to the extent permitted by other law. (Emphasis added.)
The Committee has previously discussed the requirements of Colo. RPC 1.16 (d) in its Opinion 104, adopted April 17, 1999. Opinion 104 states that it does not address surrender of documents in circumstances where “lawyers are subject to court orders that prohibit the disclosure of certain documents or certain information to the client.” Opinion 104, footnote 5. Similarly, Opinion 104 does not expressly address the circumstance presented by an incarcerated former client’s request to be provided at no charge with client file documents that would require review and perhaps redaction to comply with DOC regulations. The Committee also notes that, following the adoption of Opinion 104, Crim.P. 16, Part V(c) was amended to provide that “copies of any discovery provided to a defendant by court appointed counsel shall be paid for by the defendant.”
Under the plain language of Colo. RPC 1.16, a lawyer’s otherwise broad duty to surrender client file documents to former clients is tempered by the Rule’s limitations that the surrender be “reasonably practicable” and that the documents be those “to which the client is entitled.” In the case of documents or information in documents subject to protective order or other prohibition against disclosure to the client, it would appear that the papers in question are not those “to which the client is entitled.” Similarly, in the case of documents or information in documents (or CDs or DVDs containing documents) from which incarcerated clients are barred by DOC regulation, it would appear that the papers (or property) are not those “to which the client is entitled,” nor would the surrender of those papers (or property) be “reasonably practicable.”
The former client may have a legitimate interest in receiving redacted versions of the documents in question where, for example, only a portion of the content of a document contains prohibited material. However, creating such redacted versions of the materials would require the lawyer to perform additional legal services for the former client. Nothing in Colo. RPC 1.16 requires a lawyer to provide such additional legal services, whether or not the client is willing and able to pay for those services. Once the representation has terminated, and absent some prior agreement, the lawyer is not required to enter into a new engagement, even if it would be beneficial to the client for the lawyer to do so.
Accordingly, Colo. RPC 1.16 does not require a lawyer to perform the services of review and redaction of documents in the client file to produce versions of the documents that are suitable for surrender to the client under the terms of applicable law, court order, or regulation. To the extent consistent with such law, order, or regulation, nothing in this letter is intended to suggest that the lawyer may not surrender the documents to successor counsel for the purpose of performing such review and redaction. Finally, his response does not address a circumstance in which the lawyer’s withdrawal or other termination of the representation occurs at a time when the client has an acutely time-sensitive need for the documents in redacted form.
B. Current clients. Colo. RPC 1.16 and Opinion 104 are inapplicable when a current client requests transcripts and documents from the client file.
With respect to the current client who is incarcerated, documents or information in documents (or CDs or DVDs containing documents) that are contraband under DOC regulations, the lawyer may not provide the relevant documents, information, or media storage devices to the client. See Colo. RPC 1.2 (d) (“A lawyer shall not . . . assist a client . . . in conduct that the lawyer knows is criminal . . . .”). While a lawyer is bound to promptly comply with a client’s reasonable requests for information (see Colo. RPC 1.4(a)(4)), that obligation is not without limits. As the comments to the Rule recognize, rules or court orders may preclude disclosure of particular information supplied to the lawyer. Id., cmt. 7.
Whether a lawyer is ethically required to perform the review and redaction necessary to produce versions of the documents that are suitable for surrender to the client under the terms of applicable law, court order, or regulation depends on the scope of representation. The Committee understands that the scope of representation provided by OADC does not include review and redaction services for this purpose. Accordingly, the Committee determines that the lawyer is not required to provide this service to the incarcerated client absent an agreement to do so.
Third-party payment of a defendant’s legal fees can raise professional, due process, and Sixth Amendment concerns. See Wood v. Georgia, 450 U.S. 261,268 (1981) (“inherent dangers” arise when defense counsel is hired and paid by a third party); Ariz. Ethics Op. 2001-06 (lawyers should not contract with county to represent indigent defendant if contract might induce lawyer to act contrary to clients’ interests). See also ABA Formal Opinion 87-355 (1987) (it is of “primary importance” that the payment of fees by a third party does not allow the third party to direct or regulate the lawyer’s professional conduct). The Colorado Rules of Professional Conduct prohibit a lawyer from allowing a third party who pays for legal services on behalf of a client to interfere with the lawyer’s exercise of independent professional judgment. Colo. RPC 1.8(f)(2) and 5.4(c).
The facts support the conclusion that the limitation of the scope of representation by OADC does not interfere with the exercise of independent judgment on behalf of clients. Accordingly, this limitation does not create a conflict prohibited by Colo. RPC 1.8(f) (2) or compromise the lawyer’s professional independence in violation of Colo. RPC 5.4(c).
Abstract No. 2014–3
Retaining Lien May Not be Asserted in Contingency Fee Case Prior to Completion of Case/Contingency
Statement of the Facts
Law firm represents the estate of a deceased personal injury attorney who had entered into contingent fee agreements with a number of clients. These cases were transferred from the deceased attorney to the firm.
On behalf of the estate, may the firm assert retaining liens on the clients’ papers prior to the completion of the contingency?
A retaining lien may not be asserted in a contingency fee case prior to completion of the case.
Colorado’s retaining lien statute, CRS § 12-5-120, provides that an attorney has a lien for a general balance of compensation upon any papers of his client that have come into his possession in the course of his professional employment. However, Colorado law provides that there must be fees or costs actually owed for the attorney to rightfully assert the lien and retain the client’s file. People v. Garnett, 725 P.2d 1149 (Colo. 1986). CRCP 1.16(d) provides that, upon termination of representation, a lawyer shall surrender papers and property to which the client is entitled, but may retain papers relating to the client to the extent permitted by other law. May the firm assert a claim in quantum meruit and thus invoke a retaining lien for services performed prior to the completion of the contingency?
This question was determined in Melat, Pressman & Higbie LLP v. Hannon Law Firm, LLC, 287 P.3d 842 (Colo. 2012), which held that, prior to completion of a contingency, the reasonable value of the attorney’s services is too uncertain, and so the right to recover fees, if there is a recovery, does not accrue until the case is completed. The Committee believes this is tantamount to a holding that an attorney whose representation terminates during the pendency of a contingent fee case is not entitled to fees for the reasonable value of the services until the completion of the case and then only if there is a recovery. On this basis, the Committee concludes that it would be a violation of CRCP 1.16(d) to assert a retaining lien prior to the completion of the contingency.
Abstract No. 2014–4
Propriety of “Replying to All” Recipients of E-Mail from Opposing Counsel Who Include Opposing Counsel’s Client
Statement of Facts
A lawyer receives an e-mail from opposing counsel, who has copied his client and other office personnel as a “cc.” The lawyer responds using the “reply all” function.
Does a “reply to all” e-mail, which includes a transmission of the communication to opposing counsel’s client, ipso facto violate Colo. RPC 4.2? Can opposing counsel’s consent to the communication with his client be inferred because he initiated the communication, and can he revoke that consent? What are the professional responsibilities of a lawyer in responding to future e-mails in which the opposing counsel’s client is copied?
Absent consent by opposing counsel, any communication made to a represented party, even if inadvertent, likely would violate Colo. RPC 4.2. No bright-line rule exists for inferring consent, and implied consent should rarely, if ever, be presumed. Obtaining express consent is preferable. To avoid the risk of violating Colo. RPC 4.2, the best practice is to discontinue the use of “reply all” e-mails if the other lawyers in the subject matter of the engagement continue “cc” e-mails to their clients on group e-mails.
Colo. RPC 4.2 provides that, 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.
Absent consent by opposing counsel, any communication made to a person the lawyer knows to be represented in the subject matter of the representation, even inadvertent, likely would violate the first part of Colo. RPC 4.2.
The second part of Colo. RPC 4.2, however, allows a lawyer to communicate with a represented party if the lawyer representing the party consents to the communication. Neither the rule nor the comments discuss whether the “consent of the other lawyer,” as the rule provides, must be express or may be implied. The Committee believes that Colo. RPC 4.2 permits a lawyer’s consent to be implied. Therefore, if a lawyer does not want to risk the chance of impliedly consenting to opposing counsel’s communication with his client by “cc-ing" his client on the e-mail communication, then the sending lawyer should be explicit. The Committee cautions, however, that because no bright-line rules exist for inferring consent, implied consent should rarely, if ever, be presumed, and obtaining express consent is far preferable for the careful practitioner.
Consent may be revoked at any time by a clear statement to that effect. Without the consent of opposing counsel—or in the event such consent is withdrawn—a lawyer should avoid knowingly communicating with a represented party and thus should not send “reply to all” e-mails that include the opposing counsel’s client as a recipient. The Committee therefore suggests that if a lawyer sends e-mails to opposing counsel using the “reply all” function, then the lawyer should pay particular attention to the e-mail addresses listed in the “cc” field in all such outgoing e-mails. If an e-mail address is identified as belonging to a represented party, that e-mail address should be deleted or the lawyer should obtain explicit consent from the party’s lawyer before replying to all. The Committee believes the best practice is to discontinue the use of “reply all” e-mails even if opposing counsel continues to copy their client in e-mails. Doing so eliminates a potential Colo. RPC 4.2 violation for inadvertent disclosures of attorney–client communications.
Abstract No. 2014–5
Propriety of Insurance Defense Counsel Filing Answer to Protect Rights of Insured with Whom Counsel Has Not Been Able to Make Contact
Statement of Facts
A lawyer is engaged by an insurance carrier to serve as defense counsel to represent an insured. The answer is due, but the lawyer cannot make contact with the client.
Is it ethical for retained counsel to take action to protect the interest of the client (the insured), if the client cannot be contacted?
Conclusion and Analysis
Yes, subject to certain limitations. The lawyer must first determine whether the insurance contract permits the insurer, on behalf of its insured, to establish an attorney–client relationship between the lawyer and the insured. This is a question of substantive law.
Assuming that an attorney–client relationship is formed, the lawyer should make reasonable efforts to locate the client. If, despite such reasonable efforts, the client still cannot be contacted, the lawyer may take steps to avoid reasonably foreseeable prejudice to the client, without breaching the ethical duty of communication or violating the requirement of informed consent.
Generally speaking, the lawyer should stay in the case as long as it is feasible to do so. If the lawyer’s inability to contact the client significantly compromises the lawyer’s ability to effectively carry out the representation, the lawyer should withdraw. The lawyer should not mislead the court into believing that any pleadings were prepared with the client’s input, but at the same time, should not disclose the client’s unavailability if such disclosure would prejudice the client. The determination of what actions, if any, may be taken on the absent client’s behalf will be highly dependent on the facts and circumstances of the case.
Abstract No. 2014-6
Propriety of Using Celebrity to Record Radio Advertisement Not Containing Explicit Endorsement or Testimonial
Statement of Facts
An attorney wants to record a radio advertisement in which a local sports or radio celebrity provides listeners with his practice area(s) and contact information. The advertisement would not contain an explicit endorsement or testimonial; rather, it would simply provide information about the attorney’s practice.
May an attorney record a radio advertisement using a celebrity spokesperson to provide listeners with the attorney’s or law firm’s name, practice area(s), and contact information? If so, may an attorney or law firm pay the celebrity directly or through the marketing department of the radio station?
A radio advertisement where a celebrity provides information about an attorney’s practice area and contact information is permissible, unless it misleads consumers into thinking that the celebrity is a former client, or creates an unjustified expectation about the results that will be achieved. Because that type of radio advertisement is permissible under the rules, an attorney or law firm may pay the celebrity directly or through the marketing department of the radio station.
The First Amendment protects commercial speech, including attorney advertisements. See Bates v. State Bar of Arizona, 433 U.S. 350, 382 (1977); Crowe v. Tull, 126 P.3d 196, 202 (Colo. 2006). Neither the federal courts in the Tenth Circuit nor the Colorado appellate courts have addressed the issue of attorneys using celebrity spokespersons in advertisements. However, federal courts in the Fifth Circuit recently granted broader First Amendment protection to attorney advertisements containing testimonials and spokespersons. See Pub. Citizen Inc. v. Louisiana Attorney Disciplinary Bd., 632 F.3d 212, 223 (5th Cir. 2011) (holding that a blanket prohibition against any communications containing a testimonial about or a reference to past successes violates the First Amendment); Pub. Citizen, Inc. v. Louisiana Attorney Disciplinary Bd., 642 F. Supp. 2d 539, 557 (E.D.La. 2009) (holding that requiring a spoken or written disclosure that the spokesperson is not a lawyer and is being paid violates the First Amendment because the state did not show that such ads are inherently misleading), aff’d in part and rev’d in part on other grounds, 632 F.3d 212 (5th Cir. 2011).
Consistent with First Amendment jurisprudence, Colo. RPC 7.1, cmt. 2 describes the balance between protecting truthful communications and preventing misleading statements:
Truthful communications regarding a lawyer’s services provide a valuable public service and, in any event, are constitutionally protected. False and misleading statements regarding a lawyer’s services do not serve any valid purpose and may be constitutionally proscribed.
In Colorado, attorney advertisements must not be false or misleading about the lawyers or their services. Colo. RPC 7.1(a). The Colorado rules consider the following types of statements misleading:
implications that the client does not have to pay a fee if there is no recovery, unless there is a disclosure that the client may be liable for costs. Colo. RPC 7.1(d).
characterizations of a lawyer’s fees such as “cut-rate,” “lowest,” and “cheap,” unless those statements can be factually substantiated. Colo. RPC 7.1, cmt. 5.
statements that a law firm has a vast number of years of experience, by aggregating the experience of all members of the firm. Colo. RPC 7.1, cmt. 6.
Conversely, the rules explicitly permit attorney advertisements containing a lawyer’s name or firm name, address, and telephone number. Colo. RPC 7.2, cmt. 2.
Although an attorney may not pay someone to recommend his or her legal services (see Colo. RPC 7.2(b)), attorneys may “pay the reasonable costs of communications” permitted by the advertising rules. Colo. RPC 7.2(b)(1). See also Pub. Citizen, Inc., 642 F.Supp. 2d at 557-56. Permissible advertising costs include television and radio airtime, and compensation of “agents and vendors who are engaged to provide marketing or client-development services, such as publicists, public-relations personnel, business-development staff and website designers.” Colo. RPC 7.1, cmt. 5. Although not specifically enumerated in the Colorado rules, based on Public Citizen, Inc., which permits the use of paid spokespersons, an attorney or law firm may pay the celebrity directly or through the marketing department of the radio station.