Ethics update
By Sandra Boerio
Check 21 Act – Public
Law 108-100
Under California Rules of Professional
Conduct Rule 4-100 and the accompanying standards, lawyers have a duty to maintain
complete records of all client funds including bank statements and cancelled
checks. A new federal law that took effect Oct. 28, 2004, changed the way that
banks are permitted to handle original checks. The Check Clearing for the 21st
Century Act, Public Law 108-100, gives banks the option to abandon the practice
of returning original checks to customers with their monthly statements.
Under the new law, banks are allowed
to destroy original checks and use a special digital image called a substitute
check. This substitute check is a negotiable instrument and is deemed to be
the legal equivalent of the original check. Banks must notify customers concerning
changes in policy due to Check 21. The new law also expressly supersedes any
contrary state law. To remain in compliance with the rule 4-100 record- keeping
obligations, lawyers should make every effort to determine their bank’s
policy regarding the availability of original cancelled check and/or the new
substitute checks.
In Re North, (Aug. 25, 2004, 9th Cir. Ariz.) 2004 C.D.O.S.
7835, 2004 WL 1886398, 2004 U.S. App. Lexis 18029
The appellant, Mr. North, was suspended
twice from the practice of law in Arizona. Because of his suspension, he was
also not allowed to practice in the federal district court. When eligible for
reinstatement, he elected not to reinstate active status and remained on inactive
status. Due to his inactive status, the federal district court determined that
he was ineligible to practice in the district courts. North objected to the
determination of his ineligibility based solely on his inactive status.
The federal district court entered a formal order rejecting North’s objection,
stating that under local rule 1.5(a) an attorney must be an active member of
the Arizona bar in order to practice in the district courts in that state.
The 9th Circuit Court of Appeal
upheld the suspension. North asserted the contention that the district court
is acting irrationally and improperly by limiting its membership to active members
of the State Bar of Arizona. The court rejected this contention, reasoning that
the district court is justified by the legitimate interest of ensuring that
all attorneys practicing before the courts clear the standards required by the
respective state bar associations. It also serves the purpose of facilitating
regulation and discipline of those attorneys practicing in the federal court
system.
Venture Law Group v. Superior Court (April 7, 2004, 6th District) 118 Cal.App.
4th 96, 12 Cal.Rptr. 3d 656.
In this action, minority shareholders
sought discovery of legal advice given to a corporation by a former lawyer before
a merger with a larger corporation. The attorney claimed the attorney/client
privilege under Cal. Evid. Code ยง953(d) and refused to answer questions during
a deposition. The trial court granted a discovery motion compelling testimony
by the former attorney. The attorney applied for a writ of mandate.
The court of appeal granted the
writ and held that the privilege passed from the former corporation to the successor
corporation after the completion of the merger. Absent waiver from the successor
corporation, former managers of the merged corporation are not entitled to depose
the attorney who represented the merged corporation.
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