Ethics Seminar and Webinar for In-House Counsel - Last Chance to Attend!

1. IN-HOUSE COUNSEL LAST CHANCE ETHICS SEMINAR AND WEBINAR Thursday, December 27, 2012

2. IOWA CLE ACTIVITY INFORMATION Program Name: IN-HOUSE COUNSEL LAST CHANCE ETHICS SEMINAR AND WEBINAR Sponsor: BROWN WINICK LAW FIRM Start Date: 12/27/2012 End Date: 12/27/2012 City: DES MOINES Class Type: Live Webcast Total CLE Hours Approved: 2.0 (includes ethics hours) Ethics Hours Approved: 2.0 Activity Number: 100425

3. Learning from Other’s Mistakes: Recent Ethics Opinions Rebecca A. Brommel BrownWinick 666 Grand Avenue, Suite 2000 Des Moines, IA 50309-2510 Telephone: 515-242-2452 Facsimile: 515-323-8552 E-mail: brommel@brownwinick.com

4. Attorney Discipline Procedures • Attorney Disciplinary Board • Investigates all complaints with help of its staff • Investigations are confidential • Board can dismiss, admonish/reprimand attorney or file and prosecute complaint before Commission • Reprimand becomes public if attorney does not file an exception to it

5. Attorney Discipline Procedures • Grievance Commission • Hears complaints prosecuted by Board • Attorney has right to file answer • Matters are confidential • Hearing • Commission can dismiss, issue a private admonition or recommend reprimand, suspension or revocation to Supreme Court • Report/recommendation to Supreme Court is public record • Attorney may then file an appeal

6. Attorney Discipline Procedures • Iowa Supreme Court • May grant appeal by attorney – follow interlocutory appeal rules • May impose sanction different from the Commission’s recommendation

7. Sanctions • Revocation • Suspension • Specific amount of time (ie: 30 days, 1 year) • Indefinite with time period before reinstatement can be requested • Public Reprimand • Additional or alternative sanctions: • Restitution • Costs • Practice Limitations • Appointment of trustee/receiver • Passage of bar or MPRE • CLE requirements

8. Reasons for Discipline • Violation of Iowa Rules of Professional Conduct • Conviction of a Crime • Disability Suspension • Reciprocal Discipline • Failure to comply with support order • Failure to comply with student loan obligation • Interim suspension (pending final disposition; violation poses substantial threat of serious harm to public) • Temporary suspension for failure to respond to Board inquiries

9. 2011 Statistics • 542 complaint files (526 in 2010; 517 in 2009) • 70.5% of complaints filed were dismissed by Board • 15.1% private admonition • 6.1% public reprimand • 8.3% referred to Grievance Commission

10. Who would complain about lawyers? • Prisoners & Criminal Defendants - 28.4% of complaints • Clients (other than criminal defendants, prisoners and family law clients) – 21.6% • Family law clients – 10.3% • Judges & attorneys – 7.9% • Beneficiaries/Involved in Probate – 7.0% • Adverse parties (family law matters) – 6.3% • Adverse parties (other than family law matters) – 5.4%

11. What do they complain about? • Neglect or incompetence (over half) • Trial-related misconduct • Dishonesty/Misrepresentation • Conflict of Interest • Mishandling of money/property • Excessive or illegal fees

12. What did the Supreme Court see in 2012? • Engaging in Dishonesty, Fraud, Deceit or Misrepresentation – Iowa R. Prof’l Conduct 32:8.4(c) • False statements on mortgage applications • Aided and abetted client’s conversion of bank funds • Assisted client in concealing actual sales price from lender • Misrepresentation of facts to Board of Immigration Appeals and on Appeal • False statements to client security commission re: status of trust accounting procedures • False statement to court regarding status of suspension • False statement to client and client’s divorce attorney re: status of filing bankruptcy • Misrepresentation to client re: filing of certain documents • Leading client to believe appeal was pending when it had been dismissed • Taking funds from client’s trust account without colorable claim to funds and used money for his own purposes • Forged client’s signature • Forged witness signature on will • Filed forged guilty plea • Failure to file income tax returns for 3 years • Failing to comply with order re: suspension (obtained fees and stated he was working on file)

13. What did the Supreme Court see in 2012? (con’t) • Commission of Criminal Act that Reflects Adversely on Lawyer’s Honesty, Trustworthiness, or Fitness as a Lawyer in other Respects – Iowa R. Prof’l Conduct 32:8.4(b) • False statements on mortgage applications • Assisted client in concealing actual sales price from lender • Extortion – emailed officer of corporation involved in litigation with his wife and demanded $100k charitable donation in wife’s name in exchange for dismissal of lawsuit • 3rd Offense OWI and 3rd degree harassment • Pattern of misconduct (operating boat while intoxicated, OWI, possession of cocaine, substance abuse and mental health issues)

14. What did the Supreme Court see in 2012? (con’t) • Engaging in Conduct Prejudicial to the Administration of Justice – Iowa R. Prof’l Conduct 32:8.4(d) • Cases: • Emails requesting documents subject to a protective order by attorney to adverse party in wife’s litigation (triggered a series of legal proceedings) • Failure to cooperate with disciplinary Board and respond to demands for information • Failure to respond to client complaint and inquires from Board • Filing of forged guilty plea • Submission of will containing forged witness signature • Failure to close estate • Failure to prosecute client’s appeal • Withdrawal of probate fees based upon partially prepared return and without confirming payment of court costs • Dilatory conduct in failing to file bankruptcy petition for client who was planning divorce

15. What did the Supreme Court see in 2012? (con’t) • Communication with person represented by counsel – Iowa R. Prof’l Conduct 32:4.2 • Attorney sent emails asking for documents to officer of non-profit when he represented his wife in her litigation with the non-profit • Court distinguished between contact with officer (not allowed) and member of Board of Directors (allowed) – Board member was not a constituent because he did not have individual authority to bind the non-profit • In another case, no violation was found because the represented party initiated the communication and the Court was unable to determine whether the contact was authorized by the corporation’s attorney

16. What did the Supreme Court see in 2012? (con’t) • Conflict of Interest – Iowa R. Prof’l Conduct 1.7 • Attorney continued to represent client without disclosing to him that client could have a ground to overturn an order based upon an ineffective assistance of counsel claim – conflict between client interest and attorney’s personal interest • Attorney had a conflict when he represented his wife in drafting a contract where former client was the purchaser and the purchase was substantially related to the foreclosure action he handled for the client (same property) – needed to obtain informed consent • Failures re: to Withdrawal of Representation – Iowa R. Prof’l Conduct 32:1.16 • Attorney failed to withdraw for 5 months after client discharged his services • Attorney ceased representing client on appeal without asking for permission to withdraw • Attorney failed to take steps to safeguard client interests or return files after withdrawing without notice

17. What did the Supreme Court see in 2012? (con’t) • Failing to Explain Matter to Allow Client to Make an Informed Decision re: Representation – Iowa R. Prof’l Conduct 32:1.4(b) • Attorney failed to tell client about potential ineffective assistance of counsel motion as an option for overturning the over entered by immigration court – attorney owed client an explanation of the alternative course of action in order to permit client to make informed decision • Attorney failed to comply with his suspension from practice by informing clients of his suspension and his inability to represent them • Failing to Keep Client Reasonably Informed about Status of Matters and to Respond to Requests for Information – Iowa R. Prof’l Conduct 32:1.4(a)(3, 4) • Attorney failed to answer phone, return message, attend appointments with clients and to appear for hearing • Attorney failed to inform clients of dismissal of their appeal for 2 months and did not respond to 3 letters from the clients requesting information • Attorney only contacted client 3 times in a 17 month period, and client had made numerous requests; Attorney did not tell client about 2 letters he did send on client’s behalf • Attorney failed to keep client informed of status of her divorce matter or respond to client's requests for information

18. What did the Supreme Court see in 2012? (con’t) • Failure to Act with Reasonable Diligence & Promptness – Iowa R. Prof’l Conduct 32:1.3 • In numerous matters, attorney failed to take timely action for clients, failed to file client interrogatory answers, failed to comply with orders and notices re: deficient filings • In a 20 month period, only action attorney took was to send out two delayed letters to claims adjuster • Attorney neglected estate for over 3 ½ years • Attorney failed to meet deadline on 7 occasions in an estate proceeding • Attorney failed to ensure that client completed discovery requests, failed to attend sanction hearing or inform client of sanctions and failed to file bankruptcy petition • Attorney took 14 months to re-file a post-conviction relief matter, failed to respond to client inquiries and sought 3 continuances of the trial date • Failure to Make Reasonable Efforts to Expedite Litigation Consistent with Client’s Interests – Iowa R. Prof’l Conduct 32:3.2 • Attorney failed to appear in court and remedy deficient filings • Attorney used delay tactics in order to mask dilatory estate filings • Attorney failed to appear at hearings, participate in discovery or file bankruptcy petition

19. What did the Supreme Court see in 2012? (con’t) • Failure to follow client instructions – Iowa R. Prof’l Conduct 32:1.2(a) • Attorney filed forged guilty plea • Attorney altered written arraignment and not guilty plea to waive speedy trial and falsely said that client signed it in front of him • False Statement to Tribunal – Iowa R. Prof’l Conduct 32:3.3 • Attorney falsely state that he was unaware that his license has been suspended (after he had signed a certified mail receipt for the order) • Attorney falsely stated that he was waiting on income tax remittance, even though he hadn’t even filed the return • Disobedience of Court Orders – Iowa R. Prof’l Conduct 32:3.4 • Attorney failed to comply with discovery orders, appear at hearing or respond to discovery requests

20. What did the Supreme Court see in 2012? (con’t) • Trust Account Issues – Iowa R. Prof’l Conduct 32:1.15; 45 • Attorney failed to deposit retainer fees, failed to maintain a current list of clients on a regular basis that listed their trust account balances • Attorney co-mingled trust account funds with his personal checking account and failed to provide contemporaneous notice to clients of the time, amount and purpose of his fee and the withdrawals from the trust account; Attorney also took several months to return unearned fees in one matter and failed to send bill or return retainer for nearly a year in another matter • Attorney failed to deposit a special retainer (a flat fee) into the trust account and withdraw amounts only once earned and without providing an accounting to the client • Attorney accepted funds, provided no accounting and did not timely refund his unearned fees (fees relating to activities that were done after date of suspension) • Attorney entered a minimum fee contract that has been deemed prohibited, failed to properly treat the retainer as an advance fee • Attorney failed to return $500, which was an undisputed overpayment, even after the matter was brought to his attention • Attorney delayed 17 months in one case and 4 months in another to return fees in 2 criminal cases • Attorney withdrew unearned fees and failed to keep disputed fees (they were the subject of a divorce proceeding) separate

21. What did the Supreme Court see in 2012? (con’t) • Charging an Unreasonable Fee or a Fee in Violation of Restrictions of Law – Iowa R. Prof’l Conduct 32:1.5(a) • Attorney received 1st and 2nd half probate fees before allowed • Attorney entered unethical minimum fee contract and contracted for, charged and collected an unreasonable fee for the work performed • Attorney collected $500 fee to perform work in Georgia – a state where he was not licensed – and also did no work on the matter • Failure to Communicate Fee – Iowa R. Prof’l Conduct 32:1.5(b) • Attorney’s preparation of final bill was insufficient, because it failed to disclose fee/expense rate within a reasonable time of the commencement of representation • Attorney’s oral agreement for $500 followed by bill of over $1300 just weeks later

22. What did the Supreme Court see in 2012? (con’t) • Unauthorized Practice of Law – Iowa R. Prof’l Conduct 32:5.5 • Attorney failed to comply with suspension order – took fees, advised client and corresponded with others on behalf of client • Attorney appeared in juvenile court 6 days after accepting service of the order suspending his license • Failure to Participate, Respond or Cooperate with Disciplinary Authorities – Iowa R. Prof’l Conduct 32:8.1 • Attorney failed to respond to the investigation committee inquiries • Attorney disregarded 2 letters from Board that requested copies of communications and an accounting of settlement checks • Attorney failed to respond to information demands of Board

23. What sanctions did the Supreme Court give in 2012? (con’t) • Public Reprimand • Indefinite suspension with no reinstatement for 60 days, 3 months, 6 months, 1 year, 2 years • Suspension for 30 days, 60 days, 6 months, 1 year, 18 months, 2 years • Revocation

24. Advertising Rules • Iowa R. Prof’l Conduct 32:7 • Relaxation of rules • Less specific on what can be on/in ads – still cannot be misleading • Recognition that lawyers should be able to make their services known through organized advertising and not just through reputation

25. QUESTION & ANSWER SESSION

26. Conflicts and the Duty to Supervise for In-House Counsel Brian McCormac BrownWinick 666 Grand Avenue, Suite 2000 Des Moines, IA 50309-2510 Telephone: 515-242-2431 Facsimile: 515-323-8531 E-mail: mccormac@brownwinick.com

27. Agenda • Conflicts Issues in Corporate Law Departments • Overseeing the Work of Others

28. Conflicts in Corporate Law Departments • Iowa’s Rules of Professional Conduct expressly include corporate law departments in the definition of “firm” • “For purposes of the Iowa Rules of Professional Conduct, the term ‘firm’ denotes lawyers in a law partnership, professional corporation, sole proprietorship . . . or lawyers employed in the legal department of a corporation or other organization.” Iowa R. Prof. Conduct 32:1.0(c).

29. Conflicts in Corporate Law Departments • How do the conflicts rules apply to in-house attorneys? • Joint representation of corporation and its officers, directors, shareholders, or employees • Representation of subsidiaries • When lawyers move to/from corporate law departments • From private practice • From other corporate law departments • From government • Interactions with former clients

30. Conflicts in Corporate Law Departments—Who is the Client? • Who is the client? • Most issues arise in two contexts • Joint representation of corporation and its employees, directors, or shareholders • Representation of a subsidiary

31. Conflicts in Corporate Law Departments—Who is the Client? • Rule 32:1.13 • makes clear that the client is the organization • Does not prohibit joint (or separate) representation of organization and its constituents, provided that there is no conflict under Rule 32:1.7 • Requires lawyer to deliver “Miranda warning” to constituent explaining that the organization is the client when the lawyer knows/should know the constituent’s interests are adverse to those of the organization • Be careful to protect attorney-client privilege in joint representations • Joint representation privilege • Best practice to retain separate counsel for employees when interests could be potentially adverse to organization

32. Conflicts in Corporate Law Departments—Who is the Client? • Representation of Subsidiaries • Generally no problems when representation of the subsidiary aligns with the interest of the parent company or if the subsidiary: • Is wholly-owned by the parent, • Has common directors with the parent, or • A single legal department administers legal services for both entities • If the interests of the parent and subsidiary are not aligned, separate counsel should be retained for the subsidiary • Contract negotiations between parent/subsidiary • Insolvency of subsidiary (may require management for benefit of creditors) • Insured claims

33. Conflicts of Interest-Generally • Conflict rules apply to lawyers within a “firm”, defined to include“lawyers employed in the legal department of a corporation or other organization.” Iowa R. Prof. Conduct 32:1.0(c). • Conflict rules apply to both former and current clients. Iowa R. Prof. Conduct 32:1.7-32:1.9. • Conflicts of interest can be imputed to lawyers practicing together in a law firm or corporate law department. Iowa R. Prof. Conduct 32:1.10.

34. Conflicts of InterestCurrent Clients • Governed by Rules 32:1.7, 32:1.8 • Prohibits dual representation if a “concurrent conflict” exists • Two situations: • “direct adversity”: representation of one client will be directly adverse to another client • “material limitation”: significant risk that the representation of a client will be materially limited by a lawyer’s responsibilities to another client, former client, or a third party, or by a personal interest of the lawyer

35. Conflicts of InterestCurrent Clients • Conflict can be waived by client” • If consent is written • If representation is not contrary to law • If representation does not involve two clients adverse in litigation • In no event can a lawyer represent both parties in dissolution of marriage proceedings.

36. Conflicts of InterestFormer Clients • Governed by Iowa R. Prof. Conduct 32:1.9 • Prohibits: • lawyer from representing a former client with interests materially adverse to a former client if the lawyer represented the former client in the same or a substantially related matter • Lawyer from knowingly representing a former client of a firm with which the lawyer was formerly associated, if the firm represented the former client in the same or a substantially related matter and the lawyer acquired material, confidential information about the former client • Lawyer may not (a) reveal confidential information about the representation of the former client or (b) use such information to the disadvantage of the former client

37. Conflicts of InterestFormer Clients • Common Issues: • Can former client consent to the representation or use of confidential information? Yes, if in writing. • What is a “substantially related” matter? • Comments to Rule provide guidance: • Involves the same transaction or legal dispute • Substantial risk that confidential factual information normally obtained in former representation would materially advance the other client’s interest in the subsequent matter • Passage of time can eliminate conflict, for example, confidential information may have become obsolete or generally known • Points 2 and 3 are highly fact-specific; advisable to avoid close calls.

38. Conflicts of InterestImputation of Conflicts • Rule 32:1.10 governs imputed conflicts of interest • A firm may not knowingly represent a client if any individual attorney in the firm would be barred from doing so, unless: • The conflict is based on the attorney’s personal interest and does not present a significant risk of materially limiting the representation of the client by other lawyers in the firm (example, political beliefs) • Firm may represent a person with interests materially adverse to those of a client represented by a departed lawyer, if: • Such client is not currently represented by the firm • The matter is not the same or substantially related to matters in which the departed lawyer represented the client • No lawyer remaining in the firm has confidential information of the former client that is material to the matter

39. Conflicts of InterestImputation of Conflicts • Issues: • What does the knowledge requirement in 32:1.9(b) and 32:1.10 mean? • Defined in Rule 32:1.1 as “actual knowledge.” • However, Comment 3 to Rule 32:1.7 provides that “[t]o determine whether a conflict of interest exists, a lawyer should adopt reasonable procedures, appropriate for the size and type of firm and practice, to determine in both litigation and non-litigation matters the persons and issues involved.” • “Ignorance caused by a failure to institute such procedures will not excuse a lawyer’s violation of this rule.” • ABA Formal Opinion 09-455 (“When a lawyer moves between law firms, both the moving lawyer and the prospective new firm have a duty to detect and resolve conflicts of interest”)

40. Conflicts of InterestImputation of Conflicts • Issues: • Conflict can be waived by obtaining consent in writing • If representation is not contrary to law • If representation does not involve two clients adverse in litigation or dissolution proceedings • Nonlawyer conflicts are not imputed. However, majority rule requires screening nonlawyers from participating in matters that would be a conflict for an attorney

41. Conflicts of InterestGovernment Attorneys, Judges • Rules 32:1.11 and 32:1.12 govern conflicts relating to former government attorneys and judges • Such attorneys cannot represent a client in connection with a matter in which the attorney personally and substantially participated in as a government employee or judge, without written consent • Members of a firm associated with a lawyer disqualified under the above provision may not knowingly represent a client in the matter unless: • Disqualified lawyer is screened and receives no portion of fee • Notice is given to the government agency or, in the case of a former judge, the parties to a litigation matter • Lawyers having confidential government information about a person acquired during government service may not represent clients in a matter in which such information could be used to the material disadvantage of such person

42. Conflicts of InterestExamples • Traditional firm context: • Lawyer moving from one firm to another • Typical practice: • List of clients the lawyer believes may follow • Lawyer discloses clients of previous firm on whose matters she worked or has material information • Firm determines whether lawyer has material information about the other side of a firm matter • Conflicts analysis and screening • In the event of a conflict, comply with 32:1.10 relating to imputed conflicts.

43. Conflicts of InterestExamples • Same issues exist in moves to and from a corporate law department: • Lawyer moving from one law department to another • Lawyer moving from private practice to law department • Lawyer moving from a law department to private practice

44. Conflicts of InterestBest Practices • Keep a list of matters and adverse parties in transactional and litigation matters involving the company • Keep a similar list for affiliates • Good idea to keep this information for a few years, to help identify risks relating to confidential information • Request information from lateral candidates and conduct ethical screening • Be particularly careful when hiring lateral candidates from competitors or their outside counsel • Consent less likely than with conflicts arising from an isolated transaction or litigation matter

45. Overseeing the Work of Other Lawyers • Rule 32:5.1 sets forth the responsibilities of supervising lawyers • partners in a law firm and lawyers with comparable managerial authority in a law department “shall make reasonable efforts to ensure that the firm has in effect reasonable measures giving reasonable assurance that all lawyers in the firm conform to the Iowa Rules of Professional Conduct.” Iowa R. Prof. Conduct 32:5.1(a).

46. Overseeing the Work of Other Lawyers • Comment 1 makes clear that this rule applies to lawyers having partner-like authority in a law department or government agency • Comment 2 explains that “measures giving reasonable assurance that all lawyers in the firm” comply with IRPC includes establishing procedures to: • Detect and resolve conflicts of interest • Identify deadlines in pending matters • Ensure that inexperienced lawyers are adequately supervised • Other measures may be required depending on the structure and nature of the law department, examples: • Confidential referral system for ethical issues • Ethics training

47. Overseeing the Work of Other Lawyers • A lawyer with direct supervisory authority over another lawyer must make reasonable efforts to ensure that the other lawyer conforms with the IRPC • Iowa R. Prof. Conduct 32:5.1(b)

48. Overseeing the Work of Other Lawyers • Under Rule 32:5.1(c), a lawyer is responsible for another lawyer’s violation of the IRPC if: • The lawyer orders or knowingly ratifies the conduct • The lawyer has managerial authority or direct supervisory authority, knows of the conduct at a time when consequences can be avoided or mitigated but fails to act

49. Overseeing the Work of Non-Lawyers • Rule 32:5.3 governs attorney supervision of nonlawyers • Requirements for the supervision of non-lawyers are parallel to the requirements for the supervision of subordinate attorneys

50. Overseeing the Work of Non-Lawyers • partners in a law firm and lawyers with comparable managerial authority in a law department “shall make reasonable efforts to ensure that the firm has in effect reasonable measures giving reasonable assurance that [the non-lawyer’s] conduct is compatible with the professional obligations of the lawyer.” Iowa R. Prof. Conduct 32:5.3(a).