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In re Petition of State Bar

Supreme Court of Montana

March 7, 2019

IN RE PETITION OF THE STATE BAR OF MONTANA FOR REVISION OF THE MONTANARULES OF PROFESSIONAL CONDUCT

          Petition in Support of Revision of the Montana Rules of Professional Conduct

          An Original Proceeding

          Eric Nord, President State Bar of Montana

          Peter Habein, Chair State Bar of Montana Ethics Committee

          ERIC EDWARD NORD, PRESIDENT JUDGE.

         TABLE OF CONTENTS

         PETITION.................................................................................................................1

         MEMORANDUM IN SUPPORT OF PETITION...............................................1

         1. The Court has the exclusive authority to establish, rules governing the professional conduct of attorneys...................................................................................................1

         2. Twenty-first Century Developments Mandate Amendment of Montana's Current Rules of Professional Conduct...................................................................................2

         3. Rules Revised to Correspond to the ABA Model Rules........................................ 5

         A. Rule 1.6 Confidentiality...................................................................................5

         B. Rule 1.13 Organization as a Client...................................................................8

         C. Rule 1.20 Duties to Prospective Clients (ABA Rule 1.18)...............................9

         D. Rule 3.8 Special Responsibilities of a Prosecutor...........................................10

         E. Rule 5.7 Responsibilities Regarding Law-Related Services............................ 12

         F. Rules on Limited Scope Representation: Rule 1.2, 4.2 and 4.3....................13

         G. Rule 5.5 Unauthorized Practice of Law; Multi jurisdictional Practice of Law.. 15 1

         H. Rule 7.2 Advertising....................................................................................... 17

         I. Rule 7.4, Communication of Fields of Practice and Specialization................18

         A. Rule 1.0 Terminology.....................................................................................19

         B. Rule 1.5 Fees...................................................................:.............................19

         C. Rule 1.8 Conflicts: Specific Rules..................................................................20

         D. Rule 1.10 Imputation of Conflicts.................................................................20

         E. Rule 1.15 Safekeeping Property....................................................................21

         F. IOLTA-Rule 1.18 Montana's Interest on Lawyer Trust Accounts (IOLTA) Program) and Rule 1.15 on Safekeeping Property................................................22

         G. Rule 8.5 Jurisdiction and Certification............................;...............................23

         5. Unique Montana Rules Requiring No Additional Modification..........................25

         A. Rule 1.16 Declining or Terminating Representation.....................................25

         B. Rule 1.17. Government Employment............................................................25

         C. Rule 1.19 Saleof Practice(ABA Rulel.17)..................................................26

         D. Rule 3.1 Meritorious Claims and Contentions...............................................26, E. Rule 3.5 Impartiality and Decorum of Tribunal............................................26

         F. Rule 5.1 Responsibilities of Partners, Managers............................................26

         G. Rule 6.1 Voluntary Pro Bono..........................................................................26

         H. Rule 7.1 Communications Concerning a Lawyer's Services..........................27

         I. Rule 7.3 Direct Contact with Prospective Clients..........................................27

         J. Rule 7.5 Firm Names and Letterheads..........................................................28

         6. Preamble.......................................................................'......................................28

         7.ABA Rule Specifically Rejected......'.....................................................................30

         A. Rule 7.6 Political Contributions......................................................................30

         CONCLUSION.....................................................................................................30

         ATTACHMENT A.................................................................................................31

         ATTACHMENT B is a separate document

         Petition in Support of Revision of the Montana Rules of Professional Conduct

         COMES NOW, the State Bar of Montana together with its Ethics Committee, and respectfully petitions this Court to revise eighteen rules and a portion of the preamble of the Montana Rules of Professional Conduct.

         MEMORANDUM IN SUPPORT OF PETITION

         1. The Court has the exclusive authority to establish rules governing the professional conduct of attorneys.

         Article VII, section 2(3) of the 1972 Montana Constitution grants the Supreme Court the authority to make rules governing the conduct of the members of the State Bar. The Montana Supreme Court has construed this provision to give the Court "exclusive authority to promulgate such rules." Matter of Petitions of McCabe and Zemen, 168 Mont. 334, 339, 544 P.2d 825, 827-828 (1975). The Court acknowledged the importance of this responsibility in In the Matter of the Application of Kimberly A. Kradolfer v. Ed Smith, 246 Mont. 210, 805 P.2d 1266 (1990) stating "Even before the adoption of Article VII, Section 2, Clause 3, we had held that the admission and regulation of attorneys in Montana is a matter peculiarly within the inherent power of this Court."

         The Montana Supreme Court has reaffirmed its Constitutional duty to govern and control the practice of law and the members of the Bar in In re the Petition of the State Bar of Montana for a Dues Increase, 2001 MT 108, 53 P.3d 854, 305 Mont. 279 (2001); In re: Revising the Montana Rules of Professional Conduct, (Feb. 12, 2004) No. 03-264; Cross v. Van Dyke, 2014 MT 193, 332 P.3d 215 (2014); In re the Rules of Professional Conduct (Sept. 22, 2016) No. 09-0688; and most recentiy in In re the Dues of the State Bar of Montana (Feb. 20, 2018) No. 00-329.

         2. Twenty-first Century Developments Mandate Amendment of Montana's Current Rules of Professional Conduct.

         The, explosive dynamics of modern law practice and anticipated developments in the future of the legal profession mandate the proposed updates. In addition to technological advances beyond the internet and e-mail, many state-line barriers to practice have been removed. Some attorneys consider themselves "national" practitioners. Montana's rules require adjustment to absorb these and other developments.

         Montana's Rules of Professional Conduct were last comprehensively amended in 2004, using the ABA Model Rules as their guide. While several rules have been amended in the intervening period to address technological advances[1], eighteen rules do not adequately address the current state of practice and should be updated.

         The State Bar is recommending that ten unique Montana rules remain as currently adopted, eleven rules be amended to directly (or with minimal adjustment) correspond to the ABA Model Rules, seven unique Montana rules be amended slighdy to absorb ABA language, rejection of one ABA rule in its entirety, and one unique addition to the Preamble.[2] A summary page of the recommendations is attached as A. If a rule is not included in this Petition, it means that Montana's rule is identical to the Model Rule. Attached as B is a side-by-side comparisons of the ABA Model Rules and the Montana Rules.

         The Ethics Committee began reviewing the 29 Montana rules that are not identical to the ABA's Model Rules in April 2017. The ABA initiated its comprehensive review, titled Ethics 20/20, in 2009. The ABA's House of Delegates in 2018 completed its review and has adopted the Model Rules referenced in this Petition.

         The ABA's decade-long 20/20 effort, and in turn Montana's Ethics Committee, respond to the needs of clients, their attorneys and firms, to address twenty-first century developments, including:

• Legal advice and information about legal services are increasingly communicated through electronic media - includes e-mail, texts, podcasts, blogs, tweets, and websites - reaching easily across jurisdictional lines, both domestically and globally;
• Client confidences are no longer kept just in file cabinets, but on laptops, smart-phones, tablets, and in the cloud; connections with' potential clients are sought not just through print advertisements but via social networks, lead-generation services, "pay-per-click" ads, and "deal of the day" coupon sites;
• Legal and non-legal services are increasingly outsourced and "unbundled," both domestically and internationally, raising questions for lawyers working with other people and entities about who is responsible for the work that is being outsourced;
• Lawyers in all practice settings increasingly need to cross state and national borders - virtually and physically - in order to serve their clients. They need to know what rules apply to them;
• Non-U.S. lawyers increasingly seek to practice in the United States, and U.S. lawyers increasingly need to practice internationally in order to meet their clients' needs;
• Lawyers change jobs regularly, triggering potential conflicts of interest and other ethics issues that need to be addressed.

         The State Bar's Ethics Committee was not in a position to duplicate the ABA efforts; however, it reviewed all the departures between the two sets of rules. The proposed rules retain a distinctly "Montana flavor." Of the 29 departures from the Model Rules, eighteen of the ABA Model Rules were absorbed in whole or part.

         The State Bar's Board of Trustees unanimously approved the Ethics Committee's recommendations, having had the opportunity to review the Committee's progress at their quarterly meetings. 3. Rules Revised to Correspond to the ABA Model Rules

         A. Rule 1.6 Confidentiality

         The State Bar recommends that Montana adopt the ABA's Model Rule on Confidentiality, with a slight modification-adding commas in the ABA's 1.6(3) ("reasonably certain to result or has resultedi from the client's commission of a crime....").

         The time has come to adopt the ABA's additional exceptions to the client confidentiality rule permitting (but not requiring) disclosure of information where necessary to "prevent, mitigate, or rectify substantial injury to the financial interests or property of another" reasonably certain to result from client crimes or fraud "in furtherance of which the client has used the lawyer's services....". The additional exceptions are necessary to protect Montana's citizens from unlawful client behavior. Fidelity to the legal system must trump fidelity to the client.

         Montana's current rule is more restrictive than those of the majority of states, a source of confusion for the nearly 800 active bar members admitted here but practicing from out-of-state. While most states have not adopted the ABA's Model Rule verbatim, it is because many permit more disclosures and qualify the disclosures differently than provided in the Model Rule[3].

         The ABA Model Rule's 2002 amendments included the disclosure exceptions for crime or fraud when the State Bar and the Court considered the confidentiality rule in the 2002-2004 review. At that time in Montana there was considerable disagreement over whether to relax the tighter Montana confidentiality restrictions. Ultimately, the State Bar (by the narrowest of margins) recommended that Montana continue with its more restrictive rule.

         Times have changed, and the State Bar now endorses the need to permit the disclosures set out in the rule proposed below. Developments on the national stage, particularly the corporate malfeasance leading to the recession of 2008, showcase the damage that might have been prevented or mitigated had the Rules afforded lawyers an applicable exception to the duty of confidentiality. An additional exception in (7) simply recognizes that lawyers change jobs regularly and provides structure for identifying and resolving conflicts that arise from that practical reality.

         The proposed rule, with new language underlined, reads:

Rule 1.6: Confidentiality of Information
(a) A lawyer shall not reveal information relating to the representation Of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:
(1) to prevent reasonably certain death or substantial bodily harm;
(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services;
(3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result, or has resulted, from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services;
(4) to secure legal advice about the lawyer's compliance with these Rules;
(5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client;
(6)to comply with other law or a court order; or
(7)to detect and resolve conflicts of interest arising, from the lawyer's change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client.
(c) A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.

         B. Rule 1.13 Organization as a Client

         The Committee unanimously recommends adopting the ABA's Model Rule 1.13. The ABA language provides more flexibility for attorneys and eliminates the Hobson's choice[4] of Montana's current rule requiring resignation in the face of inappropriate client or organization behavior. Further, given current regional and national practice demands on Montana attorneys, alignment with national resources and jurisprudence is appropriate and necessary.

         The proposed rule, with proposed new language underlined, reads:

Rule 1.13 Organization as Client
(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.
(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably: might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher ...

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