My Shingle

Why the Devil’s in the Details of Ethics Rules When You Start A Law Firm and Why That Needs To Change

by Carolyn Elefant on March 17, 2009 · 3 comments

in Ethics & Malpractice Issues, Ethics 20/20

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I’d love to be able to share the specifics about how to start and run a law firm for every jurisdiction in the country.  In part, that was the reason behind MyShingle’s The Bars, Reviewed which summarizes the benefits for solos and small firms offered by the 50 bars and the ABA and provides quick links to ethics and IOLTA rules for those bars that maintain them online.  Truth is though that for all the information that I can make available, there’s no escaping that the devil’s in the details when you start and run your practice because each state has its own finicky way of doing things, which gives rise to fifty different sets of ethics rules.  And that’s something that ought to change as the practice of law increasingly becomes location-independent.

Two recent news stories and a reader question prompted me to write this post because in one way or another, all relate to some quirk of state ethics rules.  First, the New York Law Journal reported on a story about a New York divorce attorney who nearly lost his fee for failing to bill his client at 60-day intervals as required by a New York rule,  22 NYCRR 1400.2.  New York’s rule differs from many jurisdictions and it’s easy to envision a situation where, for example, an attorney who’s practiced family law in another jurisdiction and gains admission to the New York bar runs afoul of this requirement.

Next, I noticed that Stephanie Kimbro posted about North Carolina’s new rule on meta data at her Virtual Law Practice blog.  North Carolina requires lawyers to use due care in preventing disclosure of metadata but it also prohibits lawyers who accidentally come across confidential meta data from using it to their advantage. The North Carolina decision joins the crazy quilt of state bar rules on metadata.  Don’t the bars realize that attorneys every so often send documents across state lines (isn’t that, after all the whole point of e-mail?)  So what if I receive a document from a North Carolina attorney that contains meta data?  The bars where I practice yield three results – Maryland says I can use it,  New York says I can’t and DC’s rule is so moronic as to be incomprehensible anyway.  And what does that all mean for the poor North Carolina attorney who’s out there assuming that even if he has a meta data slip-up, he’s still protected because North Carolina won’t let his opponents use it.

Finally, today I responded to a reader question (as well as an identical one posed to Solo Practice University‘s Susan Cartier Liebel) about whether a DC licensed lawyer who lives in Maryland or Virginia and wants to open a practice needs to seek admission to one of those other bars.  Though adding a bar admission could increase marketing opportunities, a DC lawyer can certainly find enough work without it.  Unfortunately, foregoing Maryland or Virginia licensing may not be an option where the DC lawyer wants to work from a home office – since they might be accused of UPL (at one time, Maryland’s rules were so strict that even Maryland biglaw associates lawyers who telecommuted a few days a week from their DC firms took the Maryland bar to avoid UPL restrictions).

Isn’t it high time that the states just gave up their parochial little ethics rules and we just adopted the Model Code?  In fact, why don’t we just have universal reciprocity without requiring lawyers seeking reciprocal admission to another bar to pay extortionist fees to get licensed?  In this economic downturn, the bars should be doing all they can to maximize flexibility to increase lawyers’ options.  If a biglaw attorney laid off from a New York job wants to try opening a practice in a remote underserved area in another state, why not remove costly barriers to entry?  If a lawyer is forced to relocate to another state to accommodate a spouse’s job, why shouldn’t he be able to set up shop in the new location without going through the whole rigamarole of gaining admission to that jurisdiction.

I’m not suggesting that we take the states out of the equation entirely.  Let the states retain enforcement authority to penalize lawyers who steal from trust accounts or otherwise violate national standards.  There’s another benefit to states as well:  with a national standard, states would save a ton of money if they no longer had to go through the process of enacting ethics rules and reinventing the wheel fifty times over – and they could spend the extra funds on pro bono projects instead.  In addition, a uniform standard would eliminate the problem of ethics laundering that New York Personal Injury Attorney Eric Turkewitz has blogged about on several occasions.

Today, our profession faces new realities that weren’t around when state bars were created.  Online advertising, metadata, IOLTA and virtual practices mean that we lawyers regularly cross state lines — at least online — very day.  And displacement resulting from the economic downturn means that more lawyers may move between jurisdictions either by choice or because of a spouse.  If law firms are medieval castles, then the state bars that guard and protect those firms and the lawyers within are the fortresses.  Isn’t it finally time to tear down these walls and make way for the 21st century?

  • http://www.cathygellis.com Cathy

    Hear, hear. I currently live in CA and am licensed there and in NY and NJ. I want to start practicing on my NY and NJ licenses, but I’m terrified. Bona fide office requirements? Lawyer advertising laws? Arbitrary (and often unconstitutional) CLE requirements? So instead I just send them my bar fees every year and get no value from it. Takes too much effort to control the risk exposure.

  • http://www.ethicsmmaven.com Eric Cooperstein

    Of course it’s time! But the gatekeepers are not motivated to break down these barriers. Why? For one thing, their livelihood doesn’t depend on it. Second, it’s about turf and control. Third, competition is bad for old-line stakeholders who would rather not be forced to change and compete more.
    Aside from these cynical forces against change, there is a real problem of how disciplinary enforcement will work if we were ever to break down the barriers between the states. If someone gets a MN law license, moves to Arizona, opens a practice, and steals a client’s money, who conducts the investigation? How do you prevent the lawyer from just moving to another state and hanging out another shingle? How will local lawyers compete if well-financed national law firms can practice anywhere with no barriers to entry?
    We have achieved much more uniformity in ethics rules with the new ABA Model Rules — I believe over 40 states have adopted them in some form, although they each tend to tweak them here and there. Many states have adopted a more-expansive version of Rule 5.5 regarding MJP. What we need now is a committee to work on MJP II – figuring out how to write realistic rules that allow lawyers to practice virtually anywhere and still be answerable for any wrongful conduct they engage in. It will take a lot of work.

  • http://lawyermarketing.attorneysyn.com/blog Gyi Tsakalakis

    This area is yet another indication of the disconnect between the practical reality of practicing and the “powers that be” at the State bars.
    While New York and Florida have received most of the publicity in this arena, several states still have arcane, vague, and arbitrary rules.
    While there needs to be a balance struck between a lawyer’s right to commercial speech and protecting the public from misleading advertisements, the current ethics landscape is quite simply, unworkable.

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