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ETHICS NEWS - SUMMER, 2005


1. Law firm website disclaimers: Ninth Circuit ruling on confidentiality

The Ninth Circuit Court of Appeals ruled on June 9th that law firms that use prospective client intake forms with disclaimers about not establishing an attorney/client relationship still may treat the intake information as “confidential” under California’s Rules, if the disclaimer does not specifically renounce confidentiality. This decision is worth reading for any firms with disclaimers, even though it interprets California’s Rules, to assure that you have sufficient information in your disclaimer to prevent both an inadvertent attorney/client relationship from forming and from having to maintain the confidentiality of the information transmitted. Barton v. SmithKline Beecham: http://www.ca9.uscourts.gov/ca9/newopinions.nsf/E284E41D92AC941E8825701A007675F4/$file/0571086.pdf?openelement

2. Partnership agreements should provide for buying back shares when partner leaves

The Arizona Court of Appeals, Division One recently held that a law firm shareholder agreement was void as a matter of public policy with respect to its provision that any shareholder leaving the firm had to forfeit their capital contribution. Even though the court held that provision to be void, the court did not require that the firm repurchase the departed lawyer’s shares. Practical suggestion nevertheless: all partnership/shareholder agreements should include buy-back provisions that provide for repurchase of shares within a reasonable period of time after departure….or your departed lawyers will continue to hold shares in the firm. Fearnow v. Ridenour, Swenson, Cleere & Evans (April, 2005) http://www.cofad1.state.az.us/opinionfiles/CV/CV030650.pdf

3. Arizona’s Pro hac vice provisions upheld by Ninth Circuit

The Ninth Circuit has been busy on ethics issues. In a June 6th decision the Court concluded that the pro hac vice admission requirements established by the Arizona Supreme Court were fair and reasonable requirements for admission and struck down George Mothershed’s Constitutional challenges to the rule. Mothershed v. Justices of the Arizona Supreme Court et al., http://www.ca9.uscourts.gov/ca9/newopinions.nsf/CC33BE4A5002E911882570180078E92D/$file/0316878.pdf?openelement

4. Responding to Client Auditor Letters: Follow the ABA Protocols

Remember when responding to auditor letters for clients that you must follow the protocols set forth in the ABA Statement of Policy in order to avoid waiving the work product privilege and confidentiality. See Laguna Beach County Water District v. Superior Court of Orange County, 124 Cal. App. 4th 1453 (2004).  ABA Statement of Policy Regarding Lawyers’ Responses to Auditors’ Requests for Information (Dec. 8, 1975)(ok, so the Policy isn’t new, but the Laguna Beach decision is a new twist): www.abanet.org/buslaw/attorneyclient/policies/aicpa.pdf


5. Federal Trade Commission’s regulations on disposal of client-sensitive information may apply to law firms

The Federal Trade Commission’s new rule, effective June 1, 2005, on disposal of “sensitive information” implements the 2003 Fair and Accurate Credit Transaction Act. The Rule requires that businesses that collect sensitive information from consumer reports or derived from consumer reports must establish procedures that will prevent the unauthorized use of such information. Law firms already should have document retention and destruction policies but this Rule further confirms that law firms cannot discard into dumpsters client information such as employment histories, billing information, social security numbers, check writing records, insurance claims, residence histories and medical histories. All such information either must be shredded or incinerated. For more information on the FTC’s requirements see: http://www.ftc.gov/bcp/conline/pubs/alerts/disposalalrt.pdf