Samuel Stretton ()
Lawyers must be cautious about
conflicts to avoid disqualification.
What are the major reasons for disqualification motions filed against attorneys?
There is an interesting article about disqualification in the Georgetown Journal of Legal Ethics titled “The Practice and Theory of Lawyer Disqualification,” written by Keith Swisher in the 2014 winter volume. Swisher lists 10 areas that are frequently used as a basis for disqualification. These include the classic concurrent conflict, which is written in Rule of Professional Conduct 1.7, where a lawyer’s interest or a lawyer’s other clients’ interests are adverse to the client. The other areas include: personal interest conflicts; former client conflicts, which would be a Rule 1.9 issue; a lawyer as a potential witness; receipt of confidential or privileged information; violation of the no-contact rule with someone represented by counsel, which is Rule 4.2; misconduct by a lawyer with a witness; other forms of general misconduct; imputation, where the firm is disqualified due to the conduct of a lawyer; and the appearance of impropriety.
It is important to note that the appearance of impropriety is not a basis for disqualification of a lawyer in Pennsylvania and was long ago written out of the Pennsylvania Rules of Professional Conduct because the standard provided an easy way to order disqualification without the hard mental labor of actually pinpointing the conflict or basis for disqualification.
Therefore, in Pennsylvania, lawyers cannot be disqualified because of some supposed appearance of impropriety. There has to be some actual basis and not just a gut feeling that something is wrong.
Swisher suggests that the court system create qualification panels. The purpose would be for the lawyers on the panel to agree to accept either pro bono or low-cost representation if the lawyer were disqualified, so the client would not suffer any prejudice due to the delay of disqualification. Swisher also advocates that the court should stop “punishing the disqualified lawyer’s client by effectively imposing increased legal costs and should instead shift the cost of disqualification to the offending attorney.”
With all due respect to Swisher, both of those ideas seem somewhat idealistic and impractical. Particularly in civil litigation, it is hard to expect bar association members to step forward to take over a case unless the case has some great value. Therefore, the concept of the disqualification panel might sound good, but in practice would be of very little value. Second, the shifting of costs is grossly unfair unless the lawyer’s conduct is outrageous in creating the conflict or disqualification or the lawyer should have seen it from the beginning. Lawyers are burdened enough without having to pay additional money to a client or to the court system if they are disqualified.
Most disqualifications are due to a conflict of interest under Rules 1.7, 1.8 and 1.9. Disqualifications can occur because of the conflict and receipt of confidential information. An attorney with confidential information from a former client cannot then be involved in the representation against the former client unless confidential information was never given. The problem is the test of whether confidential information was or wasn’t given. These conflict rules are to prevent long, drawn-out hearings as to whether it is confidential information or not. The purpose is for a lawyer not to get involved if there is the possibility that confidential information may have been passed.
Every lawyer, in taking on a case, should clearly check any potential conflicts. In this modern world, the days of representing a driver and a passenger in a case should be long gone. Any lawyer worth his or her salt knows that if the driver is joined as an additional defendant, the lawyer obviously can’t continue to represent the driver and may well lose both driver and passenger, depending on confidential information and other aspects of the case.
Similarly, on criminal cases, the lawyer has to be very careful about taking on multiple representations because the lawyer may end up disqualified due to conflicts. Particularly in major criminal cases in federal court, it can be easily understood that the lawyer may have a conflict early on in a case because the interests of multiple clients may differ. One client may go to trial, while the other client may be testifying and cooperating. Particularly in expensive modern litigation, it can be devastating to a client if the lawyer is disqualified halfway through the discovery process.
Lawyers have to make a firm review of any potential conflicts and the lawyer must act immediately if a potential conflict arises. It is very unfair to a client to wait until the last possible second to seek to withdraw or to tell the client to get new counsel. Further, most clients develop a relationship with a lawyer and do not want to change to new counsel.
A lawyer can fall into a disqualification trap in many ways. The sensible test is really the gut test. If a lawyer feels there is something wrong with the representation that could create a conflict, the lawyer should decline it or give some time to get the conflict checked and reviewed. Never should a lawyer in this modern age ignore the warning signs or ignore the conflict and hope that he or she will skate through or be able to settle a case without the issue being raised. That would be a grave disservice to one’s client.
Attorneys must maintain clients’
financial records for five years.
What bank records and client financial records should I maintain and how long should I maintain them?
For several years now, there have been some rather specific requirements under Rule of Professional Conduct 1.15 and Pennsylvania Rule of Disciplinary Enforcement 221. At a minimum, pursuant to both of these rules, an attorney has to maintain records for each trust or IOLTA account and for any other account in which funds are being held in a fiduciary capacity.
All transaction records provided by the bank have to be maintained by the lawyer, including periodic bank statements, canceled checks in whatever form, deposited items and records of electronic transactions. There should also be a check register or separately maintained ledger, which has to include the payee, date and amount of each check, withdrawal and transfer, and the payer, date and amount of each deposit and amount involved for each transaction. These documents can be maintained in paper form or electronic form. Under Rule 221(f), if the records are kept in electronic form only, then these records have to be backed up each month for separate storage. Rule 1.15(c) has similar requirements.
The time to hold these financial records and preserve the financial records is for a period of five years after the termination of the attorney-client relationship.
Having said that, there has been a problem, because many lawyers do not maintain the records as required. By not maintaining the records, this often becomes a problem for the Office of Disciplinary Counsel if it is investigating a client’s complaint about funds or lack of timely payment. There is always a request for the escrow or IOLTA records. Most lawyers don’t have all the bank statements, let alone copies of canceled checks or deposit slips. It is amazing how many lawyers have no ledger sheet and how many lawyers are still using the back of a file folder to list expenses. As a result, then, the lawyer has to go to the bank and it takes a while to get the records from a bank, or the Office of Disciplinary Counsel has to get the records. The lawyer will ultimately be responsible for paying the bank fees, even if the Office of Disciplinary Counsel obtains the records, because the lawyer is responsible for paying all costs. These costs can be substantial.
An additional problem is if the lawyer does not maintain these records, sometimes it is difficult to obtain them from the bank. In this age of electronic record storage, one would think it would be easy get records from banks. But most banks don’t maintain the records for more than five or seven years it seems, and at times it is difficult to get all the records.
The record-keeping requirements are mandatory requirements under the rules. Therefore, a lawyer who does not maintain the records, even if the underlying complaint turns out to be of no value, could face potentially serious discipline for not having the records.
The Pennsylvania Supreme Court has not imposed major discipline in the context of failure to maintain all the required records unless there is a conversion or misuse of funds that is discovered. But that could change.
Recently, the Office of Disciplinary Counsel is starting to file more requests for emergency suspensions when lawyers do not produce the records requested after a complaint has been filed against them. It is not unheard of that the court would view the failure to maintain these records as a serious violation, which could cost the lawyer his or her law license, even though there has been no misuse of funds. But that has not happened yet.
The purpose of this article is to sound an alarm for all lawyers that they must maintain these records. Keep the bank statements or have an accountant keep the bank statements. Lawyers should maintain the deposit slips and have an envelope for each for a particular year and maintain those for five years. When canceled checks come back, they should be maintained. If the bank does not send them back, attempt to get the bank to provide canceled checks each month. It is better to have them than to have to look for them three or four years later through the bank.
Although one never likes to be overregulated, there is nothing wrong with a suggestion or rule that requires a lawyer to have an up-to-date ledger sheet on funds from clients. This makes it very easy to see what was paid and when and what the balance of the client’s funds are, and preserves the integrity of the attorney-client relationship.
Each firm should check to ensure it meets the five-year requirement to maintain these records and should ensure they are maintained. But in the future, the best practical advice is to save the deposit slips, have a ledger sheet that clearly reflects money going in and coming out, and then have a separate ledger sheet for each client that does the same. Maintain the bank statements. If that is done, then the required records have been met. If it is not done, the lawyer could face additional problems.
These record-keeping requirements are also for the benefit of the lawyer. It is much easier to show the lawyer acted appropriately if there are contemporaneously maintained records. The bottom line is that it is not only a good business practice, but it is also a requirement of professionalism to maintain these records for five years. This will ensure the client’s funds are properly maintained. Also, the maintenance is necessary for the Office of Disciplinary Counsel to do its job. Therefore, every lawyer must maintain these records.
Chester County lawyer Samuel C. Stretton has practiced in the area of legal and judicial ethics for more than 35 years. He welcomes questions and comments from readers. If you have a question, call Stretton directly at 610-696-4243 or write to him at 301 S. High St. P.O. Box 3231, West Chester, Pa., 19381.