Jurisdiction and Choice of Law: Which state standard should apply?
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For attorneys practicing in multiple states, there has been an unresolved question about which choice of law governs when legal ethics questions arise.
Each state a lawyer is admitted to may not have adopted the same ethical standards, potentially causing jurisdictional confusion.
Formal Opinion 504 from the ABA Standing Committee on Ethics and Professional Responsibility seeks to resolve these questions by providing a comprehensive analysis of which jurisdiction should control.
The governing rule is ABA Model Rule of Professional Conduct 8.5, which provides in subsection (a) that a “lawyer admitted to practice in this jurisdiction is subject to the disciplinary authority of this jurisdiction, regardless of where the lawyer’s conduct occurs.”
Rule 8.5(b) deals with choice of law questions and provides:
(1) For conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise.
(2) For any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.
Model Rule 8.5 “has been amended three times—most recently in 2013,” explains ethics expert Peter Joy, who teaches professional responsibility at Washington University School of Law in St. Louis. “I believe that this is the first ABA ethics opinion directly addressing this important rule, and it should be very helpful to the practicing bar.”
Opinion 504 breaks down that for litigation matters, lawyers are subject to the rules of the jurisdiction of the court before which they are litigating a case. For other matters, the rule generally provides that the rules apply where the lawyer’s conduct occurred unless “the predominant effect of the conduct is in a different jurisdiction.” A difficult part of this rule is making the determination when the predominant effect of the lawyer’s conduct is in a different jurisdiction.
In its opinion, the committee identifies a number of factors as relevant to determining predominant effect:
• The client’s location, residence and/or principal place of business.
• Where the transaction may occur.
• Which jurisdiction’s substantive law applies to the transaction.
• The location of the lawyer’s principal office.
• Where the lawyer is admitted.
• The location of the opposing party and other relevant third parties (residence and/or principal place of business).
• The jurisdiction with the greatest interest in the lawyer’s conduct.
Leslie C. Levin, who teaches ethics at the University of Connecticut School of Law, identifies the committee’s test for predominant effect as an extremely helpful aspect of the opinion.
“It was never clear from the language of Rule 8.5 what ‘predominant effect’ meant, and this opinion brings some clarity to that question. The committee lists some factors that it believes lawyers should look to when determining where the predominant effect of the lawyer’s conduct occurs.”
The rule has a safe harbor provision providing that a lawyer will not be “subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.”
But Levin notes that “it remains hard to assess whether it is ‘reasonable’ to believe the predominant effect occurs in a particular jurisdiction without knowing which factors deserve the greatest weight.”
Multifactor considerations
The opinion examines the application of Rule 8.5 in five areas:
(1) Fee agreements.
(2) Law firm ownership.
(3) Reporting professional misconduct.
(4) Confidentiality duties.
(5) Screening for laterals.
“Any lawyer who practices law in more than one jurisdiction should read this opinion and, for starters, review their fee agreements,” Joy says.
To assist multistate practitioners with determining jurisdiction issues related to fees, the opinion analyzes a scenario in which a lawyer-client relationship is formed in state X and the fee agreement is signed there. The client resides in state X, and the lawyer will work from her office in state X, but the litigation will occur in state Y, another state where the lawyer is licensed.
The opinion explains that while a lawyer is generally subject to the ethics rules of the jurisdiction of the tribunal, Comment 4 to Rule 8.5 explains that “conduct in anticipation of a proceeding not yet pending before a tribunal” is covered by Rule 8.5(b)(2), not 8.5(b)(1).
In other words, drafting a fee agreement is conduct not yet pending before a tribunal rather than litigation before a tribunal. This means that Rule 8.5(b)(2) would govern, and the question becomes where is the predominant effect of the lawyer’s conduct. The opinion explains that the lawyer and client would reasonably regard that as state X rather than state Y.
According to the formal opinion: “The agreement is signed in state X, where lawyer’s office is located, where lawyer is admitted to practice, where lawyer will research and prepare for the matter (even if done virtually), and where client resides.” Thus, state X and its version of Rule 1.5, the rule regarding lawyer fees, would govern the fee agreement.
But to avoid ambiguity, “a lawyer may want to identify in the fee agreement the lawyer’s belief as to which jurisdiction’s rules of professional conduct will apply to the fee agreement.”
Levin appreciates the clarity of the approach but says the opinion could have gone further. “It would have been helpful if the committee had attempted to address more complex scenarios. For example, if the lawyer, as stated in the above scenario, is admitted in both state X and state Y, doesn’t state Y also have a client protection interest in seeing its rules observed?”
Ethics rules vs. court rules
The most complex aspect of the opinion concerns the issue of screening lateral hires, a common phenomenon with larger law firms. Choice of law is important here, as some states permit screening without obtaining consent from affected clients and others do not.
The opinion also counsels that the initial consideration about which jurisdiction controls revolves around whether the underlying matter involves litigation or is a transactional matter. With transactional matters, the lawyer’s principal place of business is but one of several factors to consider in identifying the controlling jurisdiction. And lawyers may have significant contacts in more than one jurisdiction.
The ethics opinion explains that in nonlitigated matters, it may be difficult to determine the predominant effect of the lawyer’s representation of the client when there are multiple states involved. In those situations, the opinion counsels that it may be prudent to ensure the lawyer complies with the jurisdiction with the more restrictive rule.
“While the opinion does a good job of trying to provide guidance on this important issue, it falls short in one major respect,” Joy says. “The opinion fails to mention that in some states where the ethics rules do not permit screening of lateral hires, the courts do. The opinion would have provided more useful guidance by pointing that out and the need to research caselaw, because the real concern around screening is law firm disqualification and not professional discipline.”
Nonetheless, the consensus among ethics experts is that Formal Opinion 504 covers a great deal of ground, clarifying a gray area of the Model Rules and providing helpful guidance to lawyers.
This story was originally published in the June-July 2023 issue of the ABA Journal under the headline: “Jurisdiction and Choice of Law: Which state standard should apply?”
