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Posted by: Lucian Pera on Oct 27, 2010

Journal Issue Date: Nov 2010

Journal Name: November 2010 - Vol. 46, No. 11

How the new Tennessee Rules of Professional Conduct will change the way you practice law

After more than a year's study, on Sept. 29 the Tennessee Supreme Court brought Tennessee's lawyer ethics rules completely up to date. The revised rules go into effect on Jan. 1, 2011, and reflect many of the latest changes from the ABA, rules adopted in many other jurisdictions, and a few Tennessee innovations.
Acting on a May 13, 2009, petition from the Tennessee Bar Association and relying on several years of work by the TBA Standing Committee on Ethics and Professional Responsibility, the court's own substantial study, and extensive oral arguments before the court on June 1, 2010, the revised Tennessee Rules of Professional Conduct borrow the best parts of the most current ABA Model Rules of Professional Conduct (ABA Model Rules). Many of the most recent revisions to the ABA Model Rules have been widely adopted by other jurisdictions, and the court adopted many of these, presumably in the interest of achieving greater uniformity on topics where uniformity matters most. For example, the court adopted virtually all of the Comments to ABA Model Rule 1.7 concerning tricky conflict of interest questions, which have been widely adopted across the country. As a result, Tennessee lawyers, clients, and judges will soon be able to access and use much more authority on difficult conflict questions than ever before.

Still, the court did not slavishly follow the ABA; for example, the court rejected a black-letter rule banning sex with clients in favor of a more flexible approach using Comments to the central conflict-of-interest rule (Rule 1.7) and clearly explaining why almost all client-lawyer sexual relationships create a prohibited conflict, in violation of the basic precepts of existing Rule 1.7.

In revising the ethics rules, the court broke some new ground. For example, the court departed from the ABA Model Rules to address more explicitly and aggressively the use of nonrefundable fees and retainers.
The court also took a leadership role nationally in adopting a version of a very recent addition to the ABA Model Rules that requires prosecutors to act in their acknowledged roles as "ministers of justice" to affirmatively respond to real evidence of wrongful convictions.

A Little History

It wasn't that long ago " 2003, to be precise " when the Tennessee Supreme Court scrapped the decades-old Tennessee Code of Professional Responsibility for a version of the ABA Model Rules of Professional Conduct. That was a reasonably major overhaul of Tennessee's lawyer ethics rules, and it dramatically changed the format of the rules, changed some substantive rules, provided much more guidance on everyday issues for lawyers in the Rules and Comments themselves (importing the guidance from case law and ethics opinions), and aligned Tennessee with the overwhelming majority of jurisdictions that use a form of the ABA Model Rules. For the last seven years, Tennessee lawyers and judges have gradually learned the new Rules. All reports are that the transition has been a smooth one.

The 2010 changes are not an overhaul of our ethics rules. The Rules-and-Comment format remains the same, and there are few dramatic changes to the substance of the ethics rules. There is, however, much more guidance for lawyers on important issues " for example, in the Comments discussed above to the basic conflict of interest rule, Rule 1.7. Both the Rules and the Comments have also been brought much closer to the language in place both in the ABA Model Rules and in many other jurisdictions. This should make it much easier for Tennessee lawyers to find guidance, in Tennessee authorities, authority from other jurisdictions, ABA opinions, and national ethics treatises.

Effective Date?

As the court did in 2002 when it adopted the present Rules, it has set a delayed effective date several months out. This time, the revisions will be effective Jan. 1, 2011, and will be only prospective in application.

With respect to two provisions that mandate new writing requirements for fee agreements " new Rule 1.5(e) concerning division of fees by lawyers not in the same firm, and new Rule 1.5(f) concerning nonrefundable fees - these new requirements will only apply to agreements entered into or amended after Jan. 1, 2011. Thus, existing nonrefundable fee agreements or fee-division agreements will not need to be revised or committed to a writing merely because of the rule changes.

Our New Top 10

So, with sincere apologies to David Letterman, let's run through our " drum roll, please " "Top 10 Ways the New Tennessee Rules of Professional Conduct Will Change the Way You Practice Law":

10 Just a nip here and a tuck there ...
The lawyer advertising rules are getting a small facelift.

The revised rules will no longer require that Tennessee lawyers file all advertisements with the Board of Professional Responsibility. Instead, the new Rules merely require that all ads be maintained by the advertising lawyer for two years, along with a record of when and where the ad appeared. (Rules 7.2(b), 7.3(c)(7))

In another minor tweak to the Rules, the current disclaimer required for direct-mail pieces and similar electronic communications seeking business will be "Advertising Material," rather than the currently required, "This is an advertisement." (Rule 7.3(c)(1))

Perhaps more significantly, the traditional ban on in-person solicitation will now be modified to permit lawyers to directly and personally solicit business from fellow lawyers, including in-house lawyers. (Rule 7.3(a)(1))
In each of these instances, the court adopted the TBA's proposals.

9 Just don't even ask.
The Rule concerning gifts from clients will be tightened. The current Rule prohibits a lawyer from preparing an instrument by which a client makes a substantial gift to the lawyer, unless the client is closely related to the lawyer.

Under the new Rule, you can't even ask: The revised Rule will now bar lawyers from preparing or soliciting any substantial gift from an unrelated client. (Rule 1.8(c)) Like the current ban, the new prohibition bans solicitation of gifts not only to the lawyer, but also to "a person related to the lawyer."

The new Comment does clarify that, while a lawyer can't ask for a gift from a client, she may still accept a gift, though it cautions that a substantial gift might be voidable on grounds of undue influence, based on other law. The Comments also acknowledge that the Rule generally still permits a lawyer to draw a will or trust that names him as executor or trustee.

8 Can you really say that?
The important topic of lawyer-client confidentiality has received several touch-ups in the revised Rules. But just touch-ups " no major changes.

First, the court adopted two narrow new exceptions to confidentiality, patterned after provisions of the ABA Model Rules now in place in many states, that permit a lawyer whose services have been used by a client to defraud or otherwise financially injure someone to make disclosures of a client's otherwise confidential information to prevent or mitigate the injury. (Rule 1.6(b)(2) and (3)) These new exceptions slightly expand a lawyer's current ability to disclose confidential information.

But the court declined to adopt another TBA proposal that would have amended the core confidentiality rule, Rule 1.6(a). The court rejected what would have been a unique Tennessee provision that would have added a clear exception to client confidentiality to permit some additional harmless disclosures of client confidential information that has already been made public. (Rule 1.6(a)(3)) This proposal would have mitigated what some " including the TBA " saw as the sweeping overbreadth of the literal language of the confidentiality obligation under Rule 1.6(a). But the court obviously did not agree.

Second, the court adopted an amendment of the Rule on confidentiality of former clients' matters that now will permit disclosure of information about the representation of a former client that has become generally known and provides more guidance regarding what "generally known" means. (Rule 1.9(c) and Comments [8] and [8a])

7 The ethical duties of ministers are changing, too.
The Rules have always placed higher ethical duties on prosecutors than on lawyers for ordinary litigants, especially the responsibility to pursue a fair result. Indeed, the Comments to our Rules assert that "[a] prosecutor has the responsibility of a minister of justice whose duty is to seek justice rather than merely to advocate for the State's victory at any given cost." (Rule 3.8 Comment [1])

On an important issue of prosecutorial ethics, the Supreme Court sided with the TBA and the Tennessee District Attorneys Generals Conference, and rejected the position of the three incumbent United States Attorneys, to adopt a Rule imposing new obligations on prosecutors who learn of possible wrongful convictions to launch a further investigation or seek a remedy. This disagreement led to the most fascinating moment of the June 2010 oral arguments on the TBA's rules petition, when arguments on this proposal were made to the Supreme Court by a veteran state prosecutor for the TBA and the DAs Conference and by a sitting U.S. Attorney in opposition.

The new Rule is patterned on ABA Model Rule language, and Tennessee is one of the first jurisdictions to adopt a version of this language. (Rule 3.8(g) and (h)) As of this writing, four other states " Colorado, Delaware, Idaho, and Wisconsin " have adopted rules based on and similar to the ABA Model Rule, and at least seven other jurisdictions have such rules under active consideration.

New Rule 3.8(g) imposes obligations on a prosecutor who "knows" " a high standard approaching actual knowledge " "of new, credible, and material evidence creating a reasonable likelihood that a convicted defendant did not commit an offense of which the defendant was convicted." Specifically, where the questionable conviction was obtained outside the prosecutor's jurisdiction, the prosecutor must disclose the new evidence to the appropriate authority; where the questionable conviction was obtained within the prosecutor's jurisdiction, the prosecutor has to either investigate or get someone else to do so. As to this Rule, the court lessened slightly the obligation that would have been imposed by the TBA proposal where the conviction was obtained outside the prosecutor's jurisdiction.

New Rule 3.8(h) says that, when a prosecutor "knows" " again, a high standard of knowledge " "of clear and convincing evidence establishing that a defendant in the prosecutor's jurisdiction was convicted of an offense that the defendant did not commit, the prosecutor shall seek to remedy the conviction."

Separately, the new Rules also impose some new limitations on the public statements that a prosecutor is permitted to make concerning a criminal defendant. (Rule 3.8(f))

6 What do I do with THIS stuff?
The current Rules provide almost no guidance on the touchy question of a lawyer's duties as to inadvertently received materials, but the revised Rules offer systematic help on what seems to be a problem occurring with greater frequency. On this point, the court adopted in whole the TBA's proposal.

Largely codifying the guidance from the Board of Professional Responsibility in Formal Ethics Opinion 2004-F-150, new Rule 4.4(b) addresses the appropriate and ethically required response to a lawyer's receipt of inadvertently disclosed confidential or privileged information. Essentially, the Rule requires a lawyer receiving inadvertently disclosed confidential or privileged information (e.g., the errant fax, the misaddressed email) to (1) stop reading; (2) notify the sender; and (3) either abide by the sender's instructions (e.g., to return the material or destroy it) or seek guidance from a court.

This new Tennessee provision is not a part of the ABA Model Rules

5 OK, so where did I put that retainer, again?
No single subject seems to confuse more lawyers and clients than nonrefundable fees and retainers, and the current Rules are just not that helpful. (Neither are the ABA Model Rules, for that matter.) On these points, the court adopted the TBA's proposals in whole, and then added an additional Comment for good measure.
A new provision in the Rule governing fees expressly permits nonrefundable fees, gives examples of situations in which they might be reasonable and appropriate. (Rule 1.5(f) and Comment [4a]) A new Comment clearly notes that earned fees " including nonrefundable fees " may not go in the lawyer's trust account, but must go in the lawyer's operating account. (Rule 1.15 Comment [10]) All of this almost certainly merely codifies Tennessee law. See, e.g., Formal Ethics Opinion 92-F-128; Stalls v. Pounders, 2005 Tenn. App. LEXIS 42 (Tenn. Ct. App., Western Section, Jan. 27, 2005).

Acting on its own, the court turned to its recent decision in Bd. of Prof'l Responsibility v. Allison, 284 S.W.3d 316 (Tenn. 2009), to add a new, unique paragraph reminding lawyers that Rule 1.15 requires lawyers to promptly withdraw their own earned fees from their trust account " otherwise, it's prohibited commingling. (Rule 1.15 Comment [15])

In a very important change to the Rules for any lawyer who uses fees that are nonrefundable, in whole or in part, however, the new Rules depart from the existing Tennessee law and practice by imposing a new requirement that any fee that is nonrefundable, in whole or in part, now must be set out in a writing signed by the client, just like a contingent fee. (Rule 1.5(f))

There may be no other legal term as consistently and widely misunderstood and misused as "retainer," and, while the new Rules don't ban its use, they do state more clearly the application of the rules to many varieties of what are sometimes called "retainers."

The new Rules depart from the ABA Model Rules in a very helpful way by clearly spelling out that fees and expenses paid in advance but not yet earned (for fees) or paid out (for expenses), regardless of the name given these advance payments, must go in the lawyer's trust account. (Rule 1.15(c) and Comment [10])

4 Just sign here ... and here ... and here ...
The revised Rules add a few enhanced writing requirements, including those for division of fees, nonrefundable fees, and aggregate settlements. (OK, so we're double-dipping on the writing on nonrefundable fees, but it really is important ...) Again, on these points, the court adopted the TBA's proposals.

Currently, where an attorney fee on a matter is divided between two lawyers not with the same firm, the Rules only require a writing if the fee is to be divided on some basis other than in proportion to the services performed by each lawyer. Under the new rules, the client will be required to agree in a signed writing to any division of fees between lawyers not in the same firm, even where the fee is to be divided in proportion to the services performed. (That is true even though, under the new Rules, as under our current Rules, the client will not need to be informed of the actual share that each lawyer is to receive.) (Rule 1.5(e))

As discussed above, a second new writing requirement addresses any fee that is nonrefundable, either in whole or in part. Nonrefundable fees have never before been expressly dealt with in our Rules, nor do the ABA Model Rules treat them separately. But our new Rules will specifically require that any fee that is nonrefundable, either in whole or in part, must be agreed to in a writing signed by the client, just like a contingent fee. (Rule 1.5(f))

Third, while the Rules currently require a writing confirming any aggregate settlement of the claims of two or more clients, the revised Rules will require that the informed consent of all the clients be in a writing that is actually signed by the clients. (Rule 1.8(g))

3 I love my partner, but I'm not sharing THAT with her.
The court also amended the Rules concerning imputation of personal-interest conflicts of interest.
Lawyers instinctively know that they share conflicts with their partners " in other words, in general, if one lawyer has a conflict of interest and cannot take on a representation, then every other lawyer in the disqualified lawyer's firm has a conflict and none of them can take the matter either. That's "imputation," and it is provided for in Rule 1.10.

The court has now followed the lead of the ABA, as proposed by the TBA, to confirm in the Rule that conflicts of interest that arise from the purely personal interest of a lawyer do not automatically disqualify other lawyers in the lawyer's firm from representations. (Rule 1.10(a))

While that may well be the law in Tennessee now, as in a number of other states, this amendment fills a void in Tennessee authority.

2 Whew. I'm sure glad that's not a conflict anymore!
Conflicts of interest continue to consume great amounts of lawyer and law firm time and attention. Adopting the TBA's proposal virtually in whole, the court's revised Rules bring a great deal more clarity to conflict questions. The new Rules closely parallel the conflict provisions of the ABA Model Rules that have now been adopted in most jurisdictions, and that will make it easier for Tennessee lawyers and courts to find and rely on helpful authority from other jurisdictions.

The new Rules also include a rewrite of the black-letter of the main conflict Rule " Rule 1.7 " to parallel the ABA Model Rule and the rule in most jurisdictions, but these changes are not intended to work any change in the law. Indeed, no court interpreting this new language has found any meaningful difference in meaning from the black-letter language now in place in Tennessee. (Rule 1.7(a) and (b))

Most helpful are a number of revised Comments to new Rule 1.7 addressing particular issues for the first time in Tennessee, including:

  • "Thrust-upon" conflicts, or conflicts that arise for a lawyer through no act or fault of the lawyer, such as the purchase of a client business or adverse party, including raising the possibility that such a conflict may not mandate withdrawal or disqualification in all circumstances (Comment [5]);
  • Sexual relations between lawyers and clients, including language that makes clear that almost all sexual relations between lawyers and clients create a conflict between a lawyer's personal interests and the client's interests (Comments [12] - [12b]);
  • Client revocation of a prior consent to a conflict, suggesting that whether such revoking of consent leads to a lawyer's withdrawal or disqualification may depend upon the effect that a lawyer's doing so will have upon another client or upon other factors (Comment [21]);
  • Advance waiver of conflicts, including excellent general guidance concerning when it may or may not be appropriate for a lawyer to seek or accept a client waiver of a conflict of interest that may arise only in the future and when such waivers may and may not be appropriate and effective (Comment [22]);
  • Conflicts in class-action representation, including whether unnamed members of a proposed class are considered clients of a lawyer for the class representative (Comment [25]);
  • Conflicts in joint representation, including discussion of such matters as when joint representation may not be possible, confidentiality between multiple clients, and the consequences of conflicts arising in such representations, effectively providing a mini-treatise on the subject of great use to any lawyer drafting a joint-representation conflict waiver (Comments [29] - [32]);
  • "Corporate family" conflicts, including guidance on when the representation of one member of a group of affiliated businesses or organizations precludes a lawyer from another representation adverse to another member of the same group of affiliates (Comment [33]); and
  • Lawyers serving as directors of clients, including discussion of when these two roles may conflict and particular issues of privilege and confidentiality that may arise for lawyers serving in both roles (Comment [34]).

There is a substantive pattern in these Comments: Almost all of them attempt to condense into a brief summary of principles case law on these questions that has developed over the last two decades, or borrow principles from the American Law Institute's Restatement of the Law Governing Lawyers. Thus, while they may not provide a full answer to a conflict question, they quite frequently will provide lawyers, clients, and judges with principles that will supply the rules of decision in a particular case.

Almost all of these Comments closely parallel the ABA Model Rules language now adopted in many jurisdictions, with the exception of the Comments treating sexual relations with clients. On this topic, the Tennessee Supreme Court opted to follow the TBA proposal and reject the ABA's narrow black-letter language. Instead, the court adopted more general Comment guidance that alerts lawyers to the serious dangers such relations pose for the attorney-client relationship.

More significantly, virtually no Tennessee authority exists on these topics now. Thus, these Comments provide a brand-new treasure trove of guidance on Tennessee conflict-of-interest questions.

Following the TBA's proposal, the new black-letter Rule also provides new and helpful guidance by amending the basic conflict rule to explicitly treat joint representation in juvenile delinquency proceedings in the same manner as the Rule now addresses joint representation in criminal proceedings. (Rule 1.7(c)). But the court went further than the TBA proposed to add also a useful and unique Tennessee Comment to Rule 1.7 that points to other law that addresses whether and to what extent a juvenile client may have the capacity to give informed consent to a joint representation. (Rule 1.7 Comment [37])

1 Yes, partner, you certainly can sue that fellow who didn't hire me.
In what may be the most useful change in the revisions to the Rules, the court approved the TBA's proposal for a new Rule that, for the first time, addresses a lawyer's obligations to prospective clients " those with whom a lawyer discusses possible representation, but who do not ultimately hire the lawyer. New Rule 1.18 brings together in one place all our obligations to prospective clients. In the process, the new Rule changes the law significantly on some of those obligations.

The new Rule is patterned closely after the ABA Model Rule, and versions of that rule have been adopted in many jurisdictions. After first defining a "prospective client," the Rule clarifies that a lawyer owes to one with whom she discusses a potential representation a duty of confidentiality generally consistent with the confidentiality duty owed to former clients. (Rule 1.18(a) and (b))

But the new Rule then turns to conflicts arising from consultations with prospective clients and clearly and significantly changes the law. Traditionally, both a Tennessee lawyer and her firm were barred from being adverse in the same or any related matter to any prospective client who had shared any confidential information about a potential representation. The new Rule changes this rule of law in two significant ways.
First, the consulted lawyer herself is only barred from being adverse to the prospective client if the matter for another client is "substantially related" to the matter discussed with the prospective client and if any confidential information the consulted lawyer learned "could be significantly harmful to the" prospective client in the matter. (Rule 1.18(c)) Thus, the consulted lawyer herself can be adverse to the prospective client, even if she received confidential information, so long as the information could not be significantly harmful. That's a real change in the law.

Second, even if the lawyer consulted is barred by this new Rule from being adverse to the prospective client herself, " because, for example, she has confidential information that is significantly harmful - the consulted lawyer's partners may screen her and still take a new representation adverse to the prospective client. The only condition is that the consulted lawyer must have taken reasonable measures not to learn "more disqualifying information than was reasonably necessary to determine whether to represent the prospective client." (Rule 1.18(d)) Of course, the screen must be timely and effective, and the prospective client must be given notice.

The new Rule also addresses how a lawyer must handle client file materials of a prospective client. (Rule 1.18(e))

Not the ABA Model Rules

Both the TBA proposal to the court and the new Rules as ultimately adopted by the court closely follow the ABA Model Rules. On the TBA's part, and probably on the court's part, this following of ABA patterns, especially where many other jurisdictions have already followed, was conscious and deliberate.

Close readers of the new Tennessee Rules will, however, spot a number of ways in which the Tennessee Rules diverge. Some instances are mentioned elsewhere in this article, bur here are a few more example. The court:

  • Retained two factors not in the ABA Model Rules that address whether a fee is reasonable under Rule 1.5(a) " advertisement concerning fees and whether a fee agreement is in writing.
  • Maintained Tennessee's current approach to attorney-client confidentiality, continuing its divergence from the approach of the ABA Model Rules.
  • Retained a unique Tennessee black-letter provision on conflicts in criminal representations (Rule 1.7(c)), and added juvenile delinquency proceedings to its coverage.
  • Maintained unique Tennessee language addressing the meaning of the "substantial relationship" test governing former-client conflicts under Rule 1.9.
  • Retained, despite a change in the ABA's position on screening of lawyers who move from one private-practice setting to another, and despite the TBA's renewed urging that the court broaden permitted screening of such lawyers, Tennessee's existing rule on screening, remaining apart from the ABA Model Rule provision on this point.
  • Retained, despite the ABA's abandonment of it, Rule 2.2 on intermediation, continuing to provide a vehicle especially for business lawyers to handle joint representations of clients pursuing a common goal.
  • Maintained Tennessee's current approach to ethics for lawyers who serve as ADR neutrals in Rule 2.4.
  • Maintained Tennessee's decidedly non-ABA approach to problems of clients and witness perjury under Rule 3.3.

The Road Not Taken

No report of the Tennessee Supreme Court's recent action would be complete without a nod in the direction of significant portions of the TBA's proposals to the court that were not adopted.

While several ways in which the court charted its own path are evident from the discussion above, two proposals that the court asked to have argued orally before it and then rejected bear special mention.

First, the court rejected the TBA's request that the state of the law on screening for laterally moving private-practice lawyers be returned to where it was before the court's 2001 decision in Clinard v. Blackwood, 46 S.W.3d 177 (Tenn. 2001). The TBA asked the court to delete the exception to screening for litigation matters, which since shortly after Clinard has banned screening for a moving lawyer who was "substantially involved" in the representation at her former firm. The court declined to do so.

Second, the TBA had submitted to the court, with substantial support from various quarters, a new rule that would have provided much more guidance to lawyers on the handling and disposition of client file materials, a serious bundle of issues that lawyers and client (and the Board of Professional Responsibility) frequently face. It was a new rule, not based on any ABA Model Rule, and would have been unique to Tennessee. The court also declined to adopt this proposal.

State of the Art

The bottom line: In the wake of the Tennessee Supreme Court's September 29 Order adopting new ethics rule for Tennessee lawyers, Tennessee lawyers, clients, and judges have rules that are state-of-the-art and crafted carefully to their unique history and needs. A 21st century profession now has 21st century rules.  

LUCIAN T. PERA LUCIAN T. PERA is a partner in the Memphis office of Adams and Reese LLP. He has been a member of the TBA Standing Committee on Ethics and Professional Responsibility since its founding in 1995 and served as its Chair for many years until 2009. He currently serves as ABA Treasurer-Elect.