Ethics update

By JONATHAN BISHOP and MARK TAXY

CAL 2002-159

The State Bar has issued a formal opinion concluding that a lawyer may refer potential clients to a broker for a real property loan to pay for attorney's fees and costs "so long as the lawyer does not provide legal representation or receive compensation with regard to the referral or the resulting loan or escrow transactions and has no undisclosed business or personal relationship with the broker."

CAL 2002-160

The State Bar has issued a formal opinion identifying the ethical constraints on settlement decisions and collection of fees when a client disappears or communication becomes impossible. An attorney has an ethical obligation to act competently and avoid reasonably foreseeable prejudice to the client. If the client has specifically authorized settlement without litigation, an offer at variance with the authority given by the client or unanticipated conditions may render that settlement beyond the attorney's authority. In addition, if the attorney is authorized to be paid from the settlement, then the proceeds must be placed in the attorney's client trust account and attorney's fees promptly withdrawn from the account.

Los Angeles County Bar Formal Opinion No. 507

The LA County Bar has issued a formal opinion addressing the acceptance of a percentage of prospective profits as attorney fees for preparing and prosecuting patent applications. The opinion finds that it is not unethical for a lawyer to accept a percentage fee instead of an hourly flat rate fee, and the committee does not regard such a fee agreement as requiring compliance with Rule 3-300 of the California Rules of Profession-al Conduct (Avoiding Interests Adverse to a Client). However, when entering into such an agreement, it must be in writing and "[the] lawyer should be mindful of Rule 4-200 (Unconscionable Fees for Legal Services) and, because a lawyer's fees in such an arrangement are also inherently contingent in nature, must comply with California Business & Professions Code §6147 (Contingency Fee Contracts)."

Recently Enacted Legislation:

Legislature passes SB 1459, B&P §6126 amended [Effective Jan. 1] - On Sept. 5, 2002, the governor approved Senate Bill 1459, which amends §6126 of the Business & Pro-fessions Code, relating to the practice of law. This law provides for in-creased penalties, making the practice or attempted practice of law without a license a misdemeanor punishable by six months to a year in county jail and a fine of $1,000, or both. It also creates a mandatory minimum punishment of 90 days in jail for subsequent convictions. The ability to charge an offender with a felony was deleted from an earlier version of the bill due to Three Strikes law considerations.