Rule 1.18: Guess what? You have a duty to prospective clients
Until the passage of the new rules, a mix of Professional Rules, Evidence Code, Business and Professions Code and case law created limited duties to prospective clients. These duties emphasized an attorney’s duty of loyalty, confidentiality and competence and evolved from an attorney’s duty to existing and former clients. Rule of Professional Conduct 1.18 now firmly establishes an attorney’s duty to a prospective client and makes an attorney’s failure to comply with this rule a disciplinable offense.
Old Duties
Until Rule 1.18, an attorney’s duty of loyalty to existing and a limited duty to former clients could preclude an attorney from taking on a new client whose interests were adverse to existing clients or substantially related to a former client’s matter. Further, an attorney’s duty of competence required the attorney to advise a prospective client regarding statute of limitations or advise on legal issues that a reasonable attorney should know and could impact the prospective client’s interests. An attorney who failed to comply with these duties could be disciplined or find themselves exposed to a malpractice complaint.
Rule 1.18
With the new Rule 1.18, which parallels the model rule, attorneys now have specific duties to prospective clients that if not followed could lead to discipline and exposure to malpractice complaints.
In its entirety, Rule 1.18[1] states:
(a) A person* who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from the lawyer in the lawyer’s professional capacity, is a prospective client.
(b) Even when no lawyer-client relationship ensues, a lawyer who has communicated with a prospective client shall not use or reveal information protected by Business and Professions Code § 6068(e) and Rule 1.6 that the lawyer learned as a result of the consultation, except as Rule 1.9 would permit with respect to information of a former client.
(c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received from the prospective client information protected by Business and Professions Code § 6068(e) and Rule 1.6 that is material to the matter, except as provided in paragraph (d). If a lawyer is prohibited from representation under this paragraph, no lawyer in a firm* with which that lawyer is associated may knowingly* undertake or continue representation in such a matter, except as provided in paragraph (d).
(d) When the lawyer has received information that prohibits representation as provided in paragraph (c), representation of the affected client is permissible if:
(1) both the affected client and the prospective client have given informed written consent,* or
(2) the lawyer who received the information took reasonable* measures to avoid exposure to more information than was reasonably* necessary to determine whether to represent the prospective client; and
(i) the prohibited lawyer is timely screened* from any participation in the matter and is apportioned no part of the fee therefrom; and
(ii) written* notice is promptly given to the prospective client to enable the prospective client to ascertain compliance with the provisions of this rule.
This is a long and complex rule, so let’s break it down.
What is a “prospective client?”
Rule 1.18(a) defines a prospective client as an individual who consults with an attorney for the purpose of retaining or securing legal service or advice. The general concept of an attorney’s duty to a person seeking representation is not a new idea to California legal ethics. California Formal Opinion 1984-84 advised that “a person who consults with an attorney is a ‘client’ only for purposes of evidentiary attorney client privilege,” but did not extend the duty beyond evidentiary issues, and California Formal State Bar Opinion No. 2003-161 advised that a duty may be owed to an individual even when an attorney client relationship has not been established. Case law also makes this clear, with the California Supreme Court stating: “‘The fiduciary relationship existing between lawyer and client extends to preliminary consultations by a prospective client with a view to retention of the lawyer, although actual employment does not result.’” (People ex rel. Dept. of Corporations v. Speedee Oil, Inc. (1999) 20 Cal.4th 1135, 1147-48 [86 Cal.Rptr.2d 816] [quoting Westinghouse Elec. Corp. v. Kerr-McGee Corp., supra, 580 F.2d 1311, 1319, fn. omitted].)
What duties are now owed to prospective clients?
Rule 1.18(b) establishes that an attorney owes a duty of confidentiality to a prospective client by incorporating Business and Professions Code § 6068(e) and Rule 1.6 but adding the limitation of Rule 1.19. Business and Professions Code § 6068(e) establishes an attorney’s duty of confidentiality to a client and Rule 1.6 advises that an attorney may disclose confidential information with a client’s informed consent or when an attorney reasonably believes that the disclosure of such confidential information is necessary to prevent a criminal act that is likely to result in death or substantial bodily injury. The integration of Rule 1.9 requires an attorney to consider a former client’s interest when considering taking on a prospective client. Thus, applying Rule 1.9 would prohibit an attorney from taking on a representation is the same or substantially related to a consultation of a prospect client without the prospective client’s written consent.
What can you do to limit your exposure?
Rule 1.18 (c) prohibits an attorney from representing a client with interests materially adverse to those of a prospective client. This prohibition not only applies to a client in the same matter but also a matter that is substantially related to the consultation of a prospective client. Thus, when interviewing a prospective client, an attorney should limit the consultation to information reasonably necessary to allow the attorney to determine if s/he can take on the matter and, when appropriate, advise the prospective client on issues such as cost, statute of limitations and a cursory risk analysis.
Finally, this rule not only applies to the affected lawyer but also applies to the entire firm. The application of Rule 1.18 (c) can potentially disqualify an entire firm when a singular attorney obtains confidential information from a prospective client, which leads directly to Rule 1.18(d).
What can you do if you have already received confidential information from a prospective client?
Rule 1.18(d) outlines two options that an attorney or law firm could take if an attorney has received confidential information from a prospective client that is materially adverse to an client’s interests.
First option: Consent. The law firm or attorney could obtain specific consent from both the affected client and the prospective client. If the prospective client refuses to provide consent, then the second option applies to law firms.
Second option: Screen off the Attorney. When an attorney took reasonable measures to avoid further exposure to a prospective client’s confidential information, and for whatever reasons could not obtain consent from both the existing client and the prospective client, then the law firm:
1. Must impose a timely screen of the prohibited attorney (who is then prohibited from receiving any portion of the fee from the existing client) and
2. Must promptly provide written notice to the prospective client. The written notice must provide a general description of the subject matter in which the lawyer was consulted and the screening procedures employed.
In compliance with the law firm’s continuing duty to the existing client, the firm should take care in not disclosing the existing client’s confidences which includes the identification of the client whose representation is the source of the conflict of interest with the prospective client.
Guidance on the New Rule
Presently there are no California State Bar discipline cases involving Rule 1.18, but prior to the new Professional Rules of Professional Responsibilities coming into effect, the US District Court, Central District of California applied the rule in SkyBell Technologies, Inc. v. Ring, Inc., No. 18-cv-14 (C.D. Cal Sept. 18, 2018).
In SkyBell a law firm gained confidential information during a pitch to represent SkyBell Technologies in a patent enforcement matter against Ring, Inc. SkyBell did not hire the law firm, but did proceed with the law suit against Ring, Inc., who was represented by Lawyer. Six months later, Lawyer, who had put in about 1,500 hours on the case, moved to the law firm, who implemented a screen and provided notice to SkyBell, however they never received SkyBell’s written consent. SkyBell then moved to disqualify the law firm on the basis of the conflict of interest created with them as a prospective client.
Though Rule 1.18 was not yet in effect, the court applied the rule and sided with SkyBell, disqualifying the law firm because of the conflict of interest between a current client (Ring) and a prospective client (SkyBell) in the same matter without receiving informed consent pursuant to the requirements of 1.18(d). SkyBell Technologies is the first case to apply and interpret Rule 1.18. The decision is controversial as it has interpreted the rule to require specific consent, whereas the language of Rule 1.18(d)(2)(i-ii) does not require specific consent from the prospective client. Rather, it requires that the lawyer who received the confidential information from the prospective client be screened off and receive no portion of the fee from the current client AND that written notice was provided to the prospective client, both of which were done in this case. Ultimately, this remains a case to watch as SkyBell Technologies continues to work its way thought the courts.
Rule 1.18 codifies a web of California statutory law, State Bar Formal Opinions and case law to create an attorney’s affirmative duty to a prospective client. State Bar Court discipline cases have yet to apply this rule thus it is not clear what kind of discipline could come from violating the rule. SkyBell Technologies, however, advises that not complying with Rule 1.18 could lead to disqualification and malpractice exposure.
[1]http://www.calbar.ca.gov/Portals/0/documents/rules/Rule_1.18-Exec_Summary-Redline.pdf