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The American Bar Association’s House of Delegates shot down a proposed change in the Model Rules of Professional Conduct Tuesday that would have permitted attorneys to disclose information to law enforcement officials for the purpose of preventing client crimes or frauds. The house, the ABA’s policy-making body, rejected the proposed change to Model Rule 1.6, one day after passing the first in a series of recommendations from the organization’s Ethics 2000 commission — which was asked to analyze the model rules for the first time since they were adopted in 1983. Facing likely defeat, leaders of the divisive effort to overhaul legal ethics rules canceled a vote on the most contentious issue, which dealt with disclosing privileged information to authorities to rectify the financial losses resulting from a client’s crime or fraud in which a lawyer’s services were used. “It’s unfortunate and it’s a setback,” said E. Norman Veasey, chief justice of the Delaware Supreme Court and the commission’s chair. Veasey said he may try again at the ABA’s next gathering in February in Philadelphia. Opponents, led by Philadelphia-based Drinker Biddle & Reath partner and commission member Lawrence Fox, said that the changes represented a dangerous violation of the rule of secrecy between lawyers and clients. Veasey’s group withdrew the second proposal after losing overwhelmingly on the related issue. The policy-making House of Delegates voted 255-151 not to change the rules for reporting fraud or crime in which the client enlists the lawyer’s help. Tuesday’s action means the ABA’s recommendations stay the same: A lawyer should try to talk a client out of committing a crime and withdraw if the client refuses. Forty-one states, including Pennsylvania, have laws that go further in encouraging or requiring lawyers to report wrongdoing. Fox authored a minority report and led the opposition by trying to thwart the proposed changes with a series of suggested amendments. On Monday, the house voted 243-184 to modify Paragraph b (1) of the model rules, which loosened ethics rules on when lawyers can report risky behavior by clients. The rule change potentially makes it easier for lawyers to stop the release of harmful chemicals or defective products. Until now, lawyers could only turn in a client if the lawyer feared the client was about to kill or harm someone. The rule change approved Monday means lawyers can report things that may not be a crime, such as suicide, or that may cause harm a long time down the road, such as release of a harmful product. “What this does is give a lawyer more flexibility to deal with a situation,” said Philadelphia-based Fox Rothschild O’Brien & Frankel partner Scott Vernick, who counsels attorneys on professional responsibility and legal ethics. “If a client was going to dump toxic waste into a town’s water supply, this would deal with that. And I think it says that you don’t want a lawyer engaging in analysis about whether something’s a criminal act or not. In this instance, life and physical integrity wins out over privilege.” With that change out of the way, the house then settled in for the lengthier fight on more contentious questions about disclosing information to prevent possible fraud or to rectify a fraud after the fact. The house voted to reject changes to Paragraph b (2), which deals with disclosing information to prevent fraud, Tuesday morning. By doing so, the group lent its support to Fox’s call to delete this particular change. The commission recommended that a lawyer be permitted to reveal information relating to his or her representation of a client when it is necessary to prevent the client from committing a crime or fraud reasonably certain to result in substantial economic loss. But this would only be deemed acceptable when the lawyer’s services had been or were being used in furtherance of the crime or fraud. “The client’s entitlement to the protection of the rule must be balanced against the prevention of the injury that would otherwise be suffered and the interest of the lawyer in being able to prevent the misuse of the lawyer’s services,” the commission wrote. “Moreover, with respect to future conduct, the client can easily prevent the harm of disclosure by refraining from the wrongful conduct.” Because Pennsylvania adopted a policy in 1988 that is similar to the one rejected by the ABA, Fox Rothschild partner Abraham Reich said the house’s decision will have little impact on local practitioners. Reich, one of two delegates representing the Philadelphia Bar Association (the other is Clifford Haines), was a supporter of the commission’s stance. “One thing that surprised me was that [house delegates who rejected the commission's views] ignored historical precedent concerning ethics,” Reich said. “Lawyers have always had the right to reveal whether a client is committing a crime — any crime. In Pennsylvania, you have the right to disclose intent to inflict financial injury on another party.” Fox agreed that the house’s rejection of the proposed changes is a “non-issue” in Pennsylvania and that the ultimate decision would lie with the state supreme court. But he said maintaining the core value of lawyer-client confidentiality “creates far more good and helps the client to do the right thing.” “This would have poisoned the relationship because the client would be less apt to share information that might help his case,” Fox said. With changes to Paragraph b (2) defeated, the commission quickly pulled changes to Paragraph b (3) off the table, being that they were even more controversial. That change would have permitted disclosure to prevent, mitigate or rectify substantial economic loss resulting from client crime or fraud in which a client has used a lawyer’s services. The rationale for this exception was the same as in Paragraph b (2), with the only difference being that the client no longer can prevent disclosure by refraining from the crime or fraud. More debate was scheduled for Tuesday afternoon concerning more proposed changes to the model rules, including doing away with what amounts to a client’s veto power over lawyers who change jobs in the middle of a dispute. The change would most affect lawyers representing commercial clients, especially in long-running cases where the roster of lawyers may change numerous times before the case concludes. Now, if a lawyer wants to quit one firm and join another that represents the opposing side in an ongoing case, the lawyer must get permission from all sides or the firm that hires the lawyer must withdraw from the case. The change would allow lawyers to switch sides so long as they had nothing further to do with the case. Opponents, such as Fox, say there is no real way to wall off the job-switching lawyer, and that even innocent hallway chatter could harm the lawyer’s previous client. The ABA also voted Monday not to change its rules on whether lawyers should put all fees in writing up front. The ABA will continue to recommend written fee agreements. Fox said whatever proposed changes the house does not cover during this meeting, it will pick up when the body reconvenes at the midyear meeting in Philadelphia in February.

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