HOT TOPICS IN LEGAL ETHICS

1. HOT TOPICS IN LEGAL ETHICS Larry McDougal Richmond, Texas 281-238-8500

2. Rule 104 (f) Referrals Fees • Eliminates referral fees for attorneys who do not work on a case but only refer it to another attorney. Establishes a test for determining a reasonable correlation between the amount and value of services performed and the share of the fee received. • Define "joint responsibility" to ensure that both the referring attorney and the handling attorney maintain some responsibility throughout the representation and that compensation is divided based on the division of that responsibility. • Require that any arrangement for the division of fees be acknowledged in writing by the client when he or she enters into an agreement for representation. The agreement should reflect how fees and representation will be divided among the attorneys.

3. Solicitation Rule 703 • Barratry TPC 38.12 Felony 3rd • is an attorney, chiropractor, physician, surgeon, or private investigator licensed to practice in this state or any person licensed, certified, or registered by a health care regulatory agency of this state; and • (2) with the intent to obtain professional employment for the person or for another, provides or knowingly permits to be provided to an individual who has not sought the person's employment, legal representation, advice, or care a written communication or a solicitation, including a solicitation in person or by telephone • Rule 703 (b) A lawyer shall not pay, give, or offer to pay or give anything of value to a person not licensed to practice law for soliciting prospective clients for, or referring clients or prospective clients to, any lawyer or firm, except that a lawyer may pay reasonable fees for advertising and public relations services rendered in accordance with this Rule and may pay the usual charges of a lawyer referral service that meets the requirements of Article 320d, Revised Statutes

4. Non Refundable Fees • There are no NON REFUNDABLE FEES in Texas • There are no flat fees in Texas. • You can only cap your fee.

5. Non Refundable FeesSuggestions Use bench marks as to when the fee is earned. Explain to the client in your contract when the fee is earned at different stages of the representation. Example 25% at time of signing 50% after first court appearance Remaining 25% at time of plea or rejection of plea offer. Take terms Non Refundable and Retainer out of your contracts.

6. History on Fee Contracts. • Ethics Opinion 391 1978 A non-refundable retainer belongs entirely to the attorney at the time it is received in that the fee is earned at the time the fee is received; therefore, it may be placed into the attorney's general operating account

7. Ethics Opinion 431 1986 While a non-refundable retainer is not unethical per se, an attorney may be disciplined for refusing to refund an unearned fee. A true retainer, however, is not a payment for services. It is an advance fee to secure a lawyer's services, and remunerate him for loss of the opportunity to accept other employment.

8. Cluck v. Comm'n for Lawyer Discipline, (Tex. App. Austin 2007, no pet.) • The attorney agreed to represent a client in a divorce case. The fee agreement provided that the client would pay a “non‑refundable retainer” against which fees would be billed. The attorney deposited the funds into his operating account. The client subsequently terminated the attorney because she was allegedly dissatisfied with the lack of progress on her case. The attorney did not refund any portion of the collected fees to the client.

9. Cluck v. Comm'n for Lawyer Discipline, (Tex. App. Austin 2007, no pet.) • The designation of the funds as a “non‑refundable retainer” did not relieve the attorney of the duty to hold the funds in a trust account until they were earned.

10. True Retainer • the Cluck opinion explains that a true retainer "is not a payment for services. It is an advance fee to secure a lawyer's services, and remunerate him for loss of the opportunity to accept other employment." Again quoting 431, the Cluck opinion goes on to state that "[i]f the lawyer can substantiate that other employment will probably be lost by obligating himself to represent the client, then the retainer fee should be deemed earned at the moment it is received."

11. Ethics Opinion 611 • It is not permissible under the Texas Disciplinary Rules of Professional Conduct for a lawyer to include in an employment contract an agreement that the amount paid by a client with respect to a matter is a “non-refundable retainer” if that amount includes payment for the lawyer’s services on the matter up to the time of trial.

12. Gutierrez v. Wright Lawfirm, PLLC, (Tex. App. Dallas Apr. 27, 2012). • over the years, attorneys have used the term "retainer" in so many conflicting senses that it should be banished from the legal vocabulary.

13. Willie v. Comm’m for Lawyer Discipline1st Court of Appeals, Houston 2014 • 1. A true retainer is not payment for legal services but to secure the lawyers availability. • 2. Fee is not earned simply because designated as non-refundable • 3. Do not place fees in operating account until earned.

14. When are Non Refundable fees an issue • Only when services are terminated before the representation is complete. • The FIX • When the client makes a demand for the return of all unused fees, and prior to a grievance being filed, return a reasonable amount of the fee to the client. Do not try to keep it all. Once the grievance is filed it is too late. • Always refund fees from your IOLTA Account.

15. Trust AccountsIOLTA • This is the clients money not yours. • Do not pay your bills from this account. • Do not transfer funds from your account to cover shortages. Comingles funds. • Credit Cards. Watch for shortages due to the credit card companies charging you fees. • Also be concerned with disputed charges and the company taking the money from your account.

16. Trust AccountsIOLTA • Credit Card Fees. • Texas Finance Code 59.402 & 339.001. • Cannot charge the credit card fees back to the client. • E Filing fees are considered an expense and you can charge those back to the client. • Pay-Pal and Square cannot be deposited into IOLTA • Cannot have holding account and transfer into IOLTA • Expenses can be passed along to the client but they cannot be marked up.

17. But we can charge credit card fees to the client • November, 2018 a Federal Court in Austin, Texas found Texas Finance Code sections prohibiting the charging of credit card fees to the customer was unconstitutional. • The case was litigated by the Texas Attorney General who lost and did not file and appeal.

18. Have Credit Cards deposit directly into IOLTA Do not transfer from operating to IOLTA Watch credit card fees as there cases where IOLTA gets drained due to accounting error. MY PRACTICE Each month when I withdraw from my IOLTA, I leave in the amount of credit card fees from the prior month. Authorized under Texas Access to Justice Rule 4

19. Trust AccountsIOLTA Deposit all advanced fees into your IOLTA Account. Draw them out as earned. State Bar will not get involved in fee disputes but they will for comingling funds

20. ContractsThey protect us • If fees paid by a 3rd person, client must authorize. Make any refund to the person who made the payment • To discuss case with 3rd person client must authorize. • If fee paid on Credit Card, any refunds must be made on same card. • Payment terms with punch-out • Specifically describe the work to be done • File destruction policy • Fee splitting with another out of firm attorney • Authorization to release fee agreement and billing information in case of dispute. (charge backs)

21. Communications • Rule of thumb. If a client calls, call them back within 7 days. • If major development need to call client as soon as possible • Get a pen register on your phone

22. Responding to a Grievance Always file a written response, even if it is just a short letter. They will give you a 30 day extension just for asking. Talk to the investigator if you are comfortable that you did not violate any rule, and most will tell you exactly what they need from you to clear you.

23. Ethics Opinion 680Cloud Based Storage a lawyer may use a cloud-based electronic data storage system or cloud-based software document preparation system to store client confidential information or prepare legal documents.  However, lawyers must remain alert to the possibility of data breaches, unauthorized access, or disclosure of client confidential information and undertake reasonable precautions in using those cloud-based systems.

24. Ethics Opinion 679Renegotiate Fixed Fee • A lawyer may renegotiate his fixed, flat fee for representing a client in a litigation matter after the litigation is underway if modification of the fee agreement is fair under the circumstances

25. Ethics Opinion 677Part Time Municipal Judges Law Partner • the law partner of a part-time municipal court judge may not represent defendants in criminal cases pending before other judges in that municipal court unless the lawyer reasonably believes the representation of the criminal defendants will not be materially affected and, after full disclosure, the criminal defendant clients consent to the representation.

26. Ethics Opinion 541Part Time Municipal Judge • recognized conflict between the lawyer’s role as a municipal court judge and the lawyer’s role as an advocate.  As a judge, the lawyer must maintain impartiality.  As an advocate, however, the lawyer would necessarily be adverse to police officers who would be expected to be witnesses in cases before him as judge. • If a lawyer would be prohibited by this Rule from engaging in particular conduct, no other lawyer while a member or associated with that lawyer’s firm may engage in that conduct.”

27. Ethics Opinion 673Online Discussion Groups • The Texas Disciplinary Rules of Professional Conduct do not categorically prohibit informal lawyer-to-lawyer consultation for the benefit of a client, whether the consultation occurs in an online discussion group, an in-person meeting, or otherwise. • An inquiring lawyer may not reveal confidential information protected by the lawyer-client privilege without the client’s express, informed consent. An inquiring lawyer may not reveal unprivileged confidential information for the benefit of the client if the client has expressly instructed the lawyer not to do so.

28. Ethics Opinion 662Client’s Negative Post on Review Site. • The lawyer may post a proportional and restrained response that does not reveal any confidential information or otherwise violate the Texas Disciplinary Rules of Professional Conduct.

29. Ethics Opinion 658Marking Up Client Expenses • absent an agreement to the contrary, Texas lawyers may not bill clients for expenses paid to a third party in an amount that is greater than the amount that the third party charged their law firm.

30. Ethics Opinion 657Cost of Returning Client’s File • the documents, papers and other information received from a client or received or generated in the course of representing the client, including work product and notes, are the property of the client. • must make the client’s file available for transfer to the client or a designated representative at the lawyer’s office. • may require the client to pay any delivery or shipping expenses associated with delivering the file to the former client at a location other than the lawyer’s office • may provide the client’s file in the form in which it is maintained

31. Returning the file • 1. You cannot impose a copying fee when a client has terminated your services and wants their file. • 2. You must give it to them within a reasonable time. Within 2 weeks, in most cases reasonable. 2 months creates a problem. These are on a case by case basis. • 3. No lawyers lien on the file.

32. Ethics Opinion 654offering to provide free information such as warrant checks and bail bond information • A lawyer may advertise the offering and giving free information about bail bonds and warrants to the public who visit the lawyer’s office in response to the lawyer’s offer to provide such free information.  • the lawyer must honor such offers

33. Ethics Opinion 652Collection of Client’s Debt to Lawyer • May use a collection agency if the following conditions are met: (1) the lawyer is no longer handling the client’s matter, (2) the fee is not unconscionable, (3) the lawyer has attempted other reasonable means of collection short of using a collection agency, (4) the lawyer retains control over the collection process, and (5) the lawyer reveals to the collection agency only the minimum amount of client information necessary to collect the debt.  • a lawyer may not, directly or indirectly, report a delinquent client to a credit bureau as this is not necessary to the collection of the debt, the effect is punitive

34. Ethics Opinion 648Confidential Information by Email. • a lawyer may generally communicate confidential information by email

35. Ethics Opinion 646TCCP 39.14. Prosecutor Imposed Limitations • The Texas Disciplinary Rules of Professional Conduct require prosecutors to comply with the Michael Morton Act, Tex. Code Crim. Proc. art. 39.14, including making disclosures required by the act • article 39.14 requires an “open file” policy by prosecutors without pre-conditions, prosecutors would violate Rule 8.04(a)(12) if they refused to produce and permit the inspection of their file in accordance with the provisions of article 39.14 unless defense lawyers first agreed to waive certain rights of their client • prosecutors violate Rule 8.04(a)(12) if they attempted to impose conditions not found in article 39.14

36. Comment 1 to Rule 3.09 states that “a prosecutor is obliged to see that the defendant is accorded procedural justice, that the defendant’s guilt is decided upon the basis of sufficient evidence, and that any sentence imposed is based on all unprivileged information known to the prosecutor.” Furthermore, Rule 8.04(a)(12) provides that a lawyer shall not “violate any other laws of this state relating to the professional conduct of lawyers and to the practice of law.”Because article 39.14 requires an “open file” policy by prosecutors without pre-conditions, prosecutors would violate Rule 8.04(a)(12) if they refused to produce and permit the inspection of their file in accordance with the provisions of article 39.14 unless defense lawyers first agreed to waive certain rights of their clients. Under article 39.14—and, therefore, under Rule 8.04(a)(12)—prosecutors are required to produce and permit the inspection of their files, subject only to the limitations set forth in article 39.14. Thus, prosecutors would violate Rule 8.04(a)(12) if they attempted to impose conditions not found in article 39.14 before making the required disclosures.

37. Ethics Opinion 639Retired Municipal Judge • it is permissible for a lawyer who has ended his service as a part-time municipal court judge to include on the lawyer’s letterhead and business cards the phrase “Retired Judge” if the lawyer has actually retired from this judicial service  • The potential for misleading the recipients of the lawyer’s letterhead and business cards can be eliminated by including the specific court or judicial position previously occupied by the lawyer

38. Ethics Opinion 627Destruction of Client Files •  a lawyer or law firm is permitted to destroy closed files when circumstances • including the passage of time, • the nature of the files, • the absence of client instructions to the contrary, • reasonable conclusion that destruction of the file is not likely to harm material interests of the client concerned, • provided that reasonable steps (such as a brief visual review of physical files) have been taken to avoid destruction of items of client property, such as currency, bonds and original deeds, that might be included in the files to be destroyed.

39. New Self Reporting Rule. • Must report within 30 days • Discipline in another state • Any Felony Conviction or Deferred • Any Misd Conviction or Deferred involving • Barratry, theft, embezzlement, misappropriation of money, conspiracy or solicitation