THE LO-BONO CONUNDRUM. recent amendment to 22 NYCRR 118.1(e)(14) (the Reporting Rule or the Rule ), which

Transcription

1 THE LO-BONO CONUNDRUM By: Ronald C. Minkoff 1 Few court rules in recent years have raised the ire of members of the Bar as much as the recent amendment to 22 NYCRR 118.1(e)(14) (the Reporting Rule or the Rule ), which requires attorneys to report on their biennial registration statements their hours of voluntary pro bono services, and the amounts of their voluntary financial contributions made, to organizations primarily or substantially engaged in the provision of legal services to the underserved and to the poor during the previous biennial registration period. The instructions on the back of the registration statement amplify this requirement slightly, citing to 22 NYCRR Part 1200, Rule 6.1 ( RPC 6.1 ) and stating that the attorney should include services personally provided without expectation of a fee; services that were billed to a client but left unpaid should not be included. Importantly, as described in the accompanying footnote, RPC 6.1 has a more detailed definition of pro bono legal services than the Reporting Rule itself. 2 Also important, Judge Lippman has suggested in public statements that the Reporting Rule has two goals: to gather information about how many lawyers perform pro bono services for indigent clients, and to (indirectly) encourage lawyers to do so. There are many problems with how the Reporting Rule defines pro bono. This article will address just one of them, which we call the Lo-Bono Conundrum. This is the scenario 1 Ronald C. Minkoff is the head of the Professional Responsibility Group at Frankfurt Kurnit Klein & Selz, P.C., with a practice emphasizing professional ethics, legal malpractice and partnership law. He is the Chair of NYCLA s Task Force on Professionalism. The views in this article are his own, except where otherwise noted. 2 RPC 6.1 lists three types of pro bono legal services in which attorneys may engage to meet the court-sponsored goal of 50 hours each year to poor persons: (a) civil matters, and criminal matters for which the government is not obligated to provide funds for legal representation, to persons who are financially unable to compensate counsel; (b) activities related to the improvement of the administration of justice by simplifying the legal process for, or increasing the availability of legal services to, poor persons; and (c) professional services to charitable, religious, civil and educational organizations in matters designed predominantly to meet the needs of poor people.

2 where a lawyer takes on a client with the expectation that the lawyer will get paid for her work, but for one reason or another the client stops paying; and the lawyer continues to serve the client anyway. Though this obviously occurs in all sizes and types of law firms, it has been cited most frequently by solo and small firm practitioners, who often serve low and middle class clients lacking the means to pay the full agreed-upon fee. Excluding this work from the definition of pro bono legal services, these practitioners say, is unfair to them, as they find themselves in this situation often and it is not economically feasible for them to perform 50 hours of work for indigent clients on top of that, as the Rules of Professional Conduct suggest. See RPC 6.1 (50 hour aspirational goal). To help illustrate the Lo-Bono Conundrum, here are two hypothetical examples: Example 1: Jack, a securities broker, found himself in a litigation with a former employer. When he retained his lawyer five years ago, his new business was doing well and he had a large house in the suburbs. As the litigation continued, it proved more protracted and expensive than expected, and Jack began to fall behind on his bills. Ultimately, he was diagnosed with cancer, and has not worked for two years. The litigation has continued, and his lawyer did not have the heart to seek to withdraw; the outstanding balance is now very substantial. While he continues to own his house, he claims he lacks the resources to pay, and his attorney continues to represent him. Example 2: Ben, a currency trader living in Israel, retained a lawyer to represent him in a contract dispute. About two years ago, he stopped making regular payments, claiming a variety of excuses. He then stopped paying completely. The lawyer continued to work for him until the matter was over, believing his repeated excuses and promises to pay. Ben is a proud and secretive person; though the attorney suspects he is having financial difficulties, he has not told the lawyer that, and he has many lucrative but illiquid assets. For the Reporting Rule to have any efficacy at all, lawyers have to know exactly what they have to report. The examples above illustrate why the Lo-Bono Conundrum presents a particular problem in that regard. In Example 1, we know that Jack has stopped working, is seriously ill, and is not paying. Under the language of the Reporting Rule, however, Jack is neither underserved nor poor; his huge house in the suburbs is hardly a sign of poverty. But if the

3 broader definition of pro bono services in RPC 6.1 is taken into account and, as noted, that Rule is actually cited in the instructions on the biennial registration form 3 -- the question is closer. Under RPC 6.1, pro bono services is defined to include professional services rendered in civil matters... to persons who are financially unable to compensate counsel. (Emphasis added.) In addition, the instructions on the registration form suggest that services... provided without expectation of a fee are included. Jack s situation, desperately ill and unable to work, may satisfy this requirement, since it may be impossible for him to continue to pay on a regular basis, or to even borrow against the equity in his house in order to raise the money. In addition to the registration form s language, both logic and policy support using RPC 6.1 to supplement the definition of pro bono services in the Reporting Rule. RPC 6.1 sets the 50-hour annual goal for pro bono legal services; there should be congruence between the RPC and the Reporting Rule which, as noted, is supposedly intended to provide the court system with information as to whether that goal is being met. In addition, defining pro bono services more broadly, as RPC 6.1 does, eliminates some of the objections to the Reporting Rule s drafting by allowing attorneys to report their service on many charitable boards, and on many bar association committees and foundations. While not addressing the legal needs of specific clients, these organizations raise money and advocate for necessary changes that can have a direct and positive impact on poor people involved in the legal system. As to Jack, there is a strong argument for allowing his lawyer to report the hours spent working for him. Once he fell ill, stopped working, and declared his inability to pay, the attorney could have moved to withdraw, but did not. It was certainly no less noble for the 3 In pertinent part, the instructions on the registration form read: Pursuant to 22 NYCRR 118 you must report your voluntary 1(a) unpaid pro bono services and 1(b) financial contributions made to organizations primarily or substantially engaged in the provision of legal services to the underserved and the poor during the previous biennial registration period. See also, 22 NYCRR Part 1200, RPC 6.1. (Emphasis in bold in the original; emphasis in italics added).

4 attorney to continue to work for years for Jack after he had seemingly become impecunious, than it would have been to take on a poor person s work ab initio. Although Jack is a person who has a large suburban home, there are thousands of others in more modest financial circumstances who each year hire a lawyer in good faith, but through a change in circumstances (illness, loss of job, family issues) find themselves financially unable to meet their obligations. See RPC 6.1. And there are thousands of lawyers who act with understanding and sensitivity in continuing to work for those clients with no expectation of payment. Interpreting the Reporting Rule to allow reporting under these circumstances will address concerns by small firm and solo practitioners that the Rule is unfair to them. But before we go too far, we must recognize that the argument to allow reporting by lawyers faced with the Lo-Bono Conundrum is problematic, for several reasons. First, it fails to explain why the drafters of the Reporting Rule did not use the same language as RPC 6.1 or why, other than the ambiguous citation to RPC 6.1 in the registration form, they have not made more of an effort to clarify the interplay between the two Rules. Indeed, the reference in the registration form instructions to services... provided without expectation of a fee is unclear: does it refer only to the attorney s expectations at the beginning of the relationship, or to a later change in circumstances as well? The rest of the sentence, with its reference to services billed to the client but left unpaid, suggests the former. And this suggests the drafters may have intended to limit reporting to services for which the lawyer never expected to receive payment services for the truly indigent, a legitimate focus of the court system s concern in its own right. Second, we often do not know for sure why our clients are not paying us. It is one thing to be screened for indigence by a legal services agency. It is another for a lawyer to take a

5 client s word for indigence, or to assume indigence where it in fact may not exist. This is particularly clear in Example 2 above, where Ben has not told his lawyer the reason for his failure to pay, and the lawyer s suspicions of his financial trouble may be unfounded. Even in Jack s case, we do not know for sure he is unable to pay; he may have enormous savings, or disability insurance taking care of his day-to-day expenses, or other financial resources of which we are unaware. It is, in short, hard to know when a client is truly unable to pay, or is just choosing not to. Third, if the Reporting Rule is intended to gather information on the provision of legal services to underserved communities and to encourage lawyers to serve those communities, neither goal is furthered by allowing lawyers to report work for clients such as Jack and Ben, who at least start out in better economic straits. As just suggested, client payment problems are often as much a product of bad business decisions by attorneys as they are of sudden and unexpected indigence by clients, and it is hard to know which is which. Allowing attorneys to satisfy the Reporting Rule in these situations risks stripping the Rule of any meaning. Still, the Lo-Bono Conundrum is best solved by allowing attorneys to report work they do for clients they know to be financially unable to compensate clients, whether the attorneys have that knowledge at the beginning of the representation or whether it occurs because of subsequent events. This will require a revision of the Reporting Rule to (a) make it congruent with RPC 6.1; and (b) impose a knowledge requirement regarding client indigence. Doing this will encourage attorneys, particularly in cash-strapped practices, to continue working for those clients who fall victim to illness or a changing economy, while allowing them to identify themselves, accurately and appropriately, as meeting the court-imposed goal of pro bono service to their communities.