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Most states still reject law firm discipline

By Diane Karpman

Diane Karpman

Many of you remember the terrific legal thriller The Firm by John Grisham. In the movie, Tom Cruise played the overwhelmed young lawyer employed at a corrupt law firm, with a client roster that included organized crime. In the book, the young lawyer betrays attorney-client privilege in order to assist the FBI and expose systemic overbilling, which morphs into a federal offense (using the U.S. Postal Service). Indictments are brought against the firm and their clients. Great drama, but is this a realistic option to obtain firm compliance?

Law firm discipline is considered highly controversial. Professor Ted Schneyer was the first to call for it in his article, “Professional Discipline for Law Firms” (77 Cornell L. Rev. 1 (1991), as a method of pursuing institutional misconduct based on respondeat superior (let the master answer). The theory provides for a collective sanction against an entity as opposed to the current status where the wrongdoer blamed is usually the newest hire (sacrificial lamb) or the most recently deceased partner. If prosecutors had this type of hammer, maybe the entity would cough up the actual wrongdoer.

New York and New Jersey enacted law firm discipline about a decade ago. However, the dearth of reported cases in New Jersey or New York suggests that this is not a panacea for all that ails a firm. In one case, a firm was reprimanded for the improper solicitation of clients immediately following a disaster. They placed a portable office right outside a Red Cross shelter. Dastardly conduct, helping people find lawyers. In another case, a firm was reprimanded for failing to place a check in the right trust account.

Generally, our rules impose discipline only on members, not entities. They are based upon the concept of personal accountability. However, Federal Rule 11 does permit firm sanction. In a Rule 11 case from 2005 (83-page opinion), a district court sanctioned a firm for a “culture of misrepresentation and deception.” In addition to sending the opinion to the State Bar, it ordered all 80 firm lawyers to attend ethics classes (Moser v. Bret Harte Union High School Dist., 366 F. Supp. 2d 944 [E.D. Cal. 2005]).

A lawyer novelist’s perception of devious legal practices might make an entertaining book or movie, but cases suggest that reproving law firms isn’t the solution to unethical conduct. Such an action may raise other problems, such as unfairness to low-level lawyers with no control, or expanding the firm’s exposure to civil claims.

That may be why the majority of states — including The State Bar of California’s Rules Revisions Commission on Nov. 7 — have rejected the concept of disciplining law firms. Incidentally, we are in our seventh year of revising our rules. Few State Bar Court decisions will be cited in the new rules, and opinions from the ethics committees that could give you guidance will not be included. It might be more helpful to practicing lawyers to give you more information about how the rules are interpreted and applied, which would help you stay out of ethical trouble with the State Bar.

Check out our new proposed rules and tell the commission what you think:

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