Cross-Border Legal Practice and Ethics Rule 4-8.5–Why Greater Guidance Is Needed
The Florida Rules of Professional Conduct provide little in the way of guidance for lawyers who engage in transnational work. Although the comment to Rule 4-8.5 acknowledges that “[i]n modern practice lawyers frequently act outside the territorial limits of the jurisdiction in which they are licensed to practice, either in another state or outside the United States,” the comment does no more than caution that “[i]n doing so, [such lawyers] remain subject to the governing authority of the jurisdiction in which they are licensed to practice” and that “principles of conflict of laws may apply.”1 B ecause this standard is both vague and confusing, this article suggests amending Rule 4-8.5 to make the ethical obligations of the cross-border practition-
The Need for Guidance
Although the practice of international law has grown substantially since the end of World War II, no global entity currently regulates transnational lawyers.2 I nstead, each nation (and, in countries like the United States, each state) is expected to discipline its own international lawyers.
Given the nature of international law, the decision to have local authorities regulate international lawyers is troubling.3 U nlike other fields of law, international law often requires its practitioners to deal with laws and policies that are alien in their design and seemingly insensible in their application. At the same time, the international lawyer rarely has—even with his or her own client—the comfort of shared assumptions, background, and language.
The authors of a law review article published several years ago made the foregoing points succinctly by noting that when an American attorney deals with another American attorney, the first attorney at least has some basis to believe that the [second] attorney is bound by, and acting in accordance with, the basic ethical principles enunciated in the Code and the Rules. However, the same presumptions do not necessarily apply when dealing with a foreign lawyer. The American lawyer is then instantly taken outside the scope of American ethical rules.4
The authors went on to identify seven areas in which the lack of a common ethical framework presents heightened difficulties for American lawyers: taking a case, setting a fee, forum shopping, multiple representation of clients, client communications, competent client representation, and settlement.5 A fter examining each of these areas, they concluded, somewhat dismally, that “there is nothing ‘clear’ or ‘easily applied’ about the basic principles of an attorney’s duties and responsibilities. This is particularly so in a transnational case. An attorney must often make original decisions on ethical matters.. . . ”6
These authors are not the only ones to have reached the conclusion that the current rules of ethics hold out little in the way of useful guidance for an international lawyer. Professor Robert E. Lutz of Southwestern University Law School has pointed out that [t]he giving of advice on foreign law, as well as the selection and use of foreign counsel, are matters occurring more and more frequently in law practice today.. . . [Yet d]espite this growth and the professional responsibility complexity in this area, U.S. bar associations have provided only limited, if any, guidance.7
Thirty-two pages later, Professor Lutz finished his examination of the problem by writing:
There are great challenges to the U.S. lawyer engaged in international practice to perform competently. However, the model standards governing the professional conduct of U.S. lawyers were written many years ago, when many of the complexities of practice today did not exist. The standards retain a U.S. law practice orientation and largely address the litigation aspects of such practice. Thus, the standards offer little guidance to lawyers engaged in international practice, which is more transaction-oriented and multijurisdictional. If one of the functions of bar associations is to explain the fundamental ethical rules that shape the profession and to define what it means to be a legal professional, then the bars, at all levels, ought to put more resources into and direct greater attention toward clarifying the U.S. lawyer’s current obligations in international practice under the various rules of conduct. It is important that U.S. lawyers know to what standards the profession holds them.8
Since the appearance of Professor Lutz’s article, there have been two court decisions that have grappled with the question of what standards to apply to international lawyers. Both, coincidentally, were decided by federal courts in California.
Relevant Case Law
In Image Technical Services, Inc. v. Eastman Kodak Co., 820 F. Supp. 1212 (N.D. Cal. 1993), the defendant, Eastman Kodak, moved in an antitrust case to disqualify the law firm of Coudert Brothers from representing the plaintiff, Image Technical Services.9 District Judge Caulfield granted the motion on the grounds that: 1) Coudert Brothers had failed to obtain Eastman Kodak’s “informed consent” to the adverse representation; and 2) Eastman Kodak had not waived its right to object to the adverse representation despite the fact that the litigation had advanced beyond the preliminary stage.10
As it happened, the source of the conflict which led to Coudert Brothers being disqualified was work that the firm had been performing for the past six years for Eastman Chemical, one of Kodak’s three major operating divisions.11 These services covered a vast array of subjects, including competition law, contract and tax law, and environmental law.12 Although the bulk of the work was performed in Hong Kong, some of it also was performed in the firm’s offices in Washington, New York, Paris, Brussels, and Singapore.13
In 1991, the San Francisco office of Coudert Brothers was asked by Image Technical Services and various parties-in-interest to represent it before the U.S. Supreme Court.14 At the time, Eastman Kodak was appealing the Ninth Circuit’s reinstatement of Image Technical’s antitrust suit against Eastman Kodak, which had been dismissed by a district court.15 The San Francisco office of Coudert Brothers, after running a conflicts check, discovered that the firm had an ongoing relationship with Eastman Chemical.16 Accordingly, the San Francisco office asked the Hong Kong office to disclose the conflict to Eastman Chemical and obtain its consent to the firm’s representation of Image Technical.17
As requested, the Hong Kong office did speak to Eastern Chemical and subsequently reported back to the San Francisco office that Eastern Chemical had given its permission to the adverse representation.18 Still later, however, Eastman Kodak, asserting that the Hong Kong office had failed to provide certain critical information about the adverse representation, filed the disqualification motion.19
Judge Caulfield thus was faced with an interesting problem: The California lawyers, in accordance with the California rules of ethics, had asked for and received what they believed was a valid waiver. If there was any fault, it lay with the imperfect recitation performed by the lawyers in Hong Kong, who were clearly beyond the reach of the California courts and rules of ethics.20
All of this failed to impress Judge Caulfield. In granting the motion she explained that international lawyers, or rather, lawyers engaged in international practice, are held to the same standards as lawyers engaged in domestic practice:
The court and the legal profession have a strong interest in insuring that counsel fulfill the highest duty of loyalty to clients. While plaintiffs’ argument that multinational clients (such as Kodak) will often consult international law firms (such as Coudert) on discreet legal issues is well taken, plaintiffs have cited to no California or Ninth Circuit authority creating an exception to the rules about representation adverse to an existing client because of these factors.
Whether a matter is international, multinational or domestic, the standard of conduct for explanation of material facts underlying a potential conflict of interest is the same. The duty to the client of undivided loyalty and necessity of informed client consent to adverse representation applies internationally nomatter how difficult the communication hurdles. Law is a profession of service premised upon representation of the client with the highest duty of loyalty and the deepest regard for the trust of the client. Therefore, policy requires the disqualification of Coudert.21
More recently, in a case known as In re Mortgage & Realty Trust, 195 B.R. 740 (Bankr. Cal. 1996), a reorganized Chapter 11 debtor-real estate investment trust brought an adversary proceeding to cancel a post-petition contract. In the course of the litigation it moved to disqualify the international law firm of Bryan Cave, the defendant’s counsel of record, because one of the firm’s lawyers had served on the debtor’s board of trustees during the time when the disputed transaction had taken place.22 In a lengthy decision, Bankruptcy Judge Bufford granted the motion.23
Although Judge Bufford’s opinion touches on a number of different issues, for present purposes the important one again concerns which standard of ethics is to be applied to international lawyers. On this point Judge Bufford came to the same conclusion as Judge Caulfield in the Image Technical case.
Judge Bufford first noted the dimensions of the problem by writing:
In determining which standards of professional conduct to apply, the Court must be sensitive to the realities of law practice in firms with national and international practices, such as those on both sides in this litigation. Attorneys in such firms are licensed to practice by a variety of jurisdictions, including foreign countries, whose standards for professional conduct may vary substantially. In addition, such attorneys frequently perform legal services in jurisdictions outside of those where they are licensed to practice.
Admited to attorneys in large firms and specialists: many lawyers now find that their practices overlap jurisdictional boundaries, both among the United States and with foreign countries as well. This complicates the analysis that must be undertaken to determine the applicable standards of professional conduct in a case like this.24
Eventually, Judge Bufford decided that the ethics rules of the forum—i.e., California—applied to all of the lawyers. He explained why as follows:
Thus the local rules of the forum court. . . determine the standards that an attorney must satisfy to appear as counsel in the court. It does not matter whether another jurisdiction where the lawyer practices has standards that are more demanding or less demanding.
There are important policy grounds for this rule. The representation of interests that may be conflicting directly impacts the quality of justice provided by a court. More importantly, it impacts the appearance of justice in the eyes of the public.25
Problems with Current Rule
Few readers are likely to be seriously offended by Judge Bufford’s decision to apply the California rules of ethics to a matter proceeding in a California court before a California bankruptcy judge. In fact, it really could not be otherwise. There would be tremendous confusion if, in the same proceeding, each lawyer was being governed by a different set of ethics rules. The playing field would be horribly distorted and the client with the lawyer from the least restrictive jurisdiction would enjoy a terribly unfair advantage.
The Image Technical decision, however, is much less satisfactory. Setting aside the fact that both the San Francisco lawyers and the Hong Kong lawyers were partners in the same firm, Judge Caulfield’s sweeping conclusion that the rules of ethics are to be applied in exactly the same manner in both domestic and international cases is quite troubling.
As pointed out earlier, the practice of international law does not, unlike other fields of law, proceed from common assumptions. Thus, judging lawyers who are engaged in international practice by the same standards used in noninternational cases increases the likelihood of a wrong decision because doing so fails to recognize and give proper weight to the differences in the two types of practice. At the same time, it creates a body of precedent that is likely to be used indiscriminately in deciding future cases (thereby again increasing the likelihood of a wrong decision).
Amending the Rule
Given the foregoing, Rule 4-8.5 should be amended to make it clear that when a lawyer is engaged in transnational work, judges and disciplinary committees need to take into account the peculiar difficulties of dealing with clients and adversaries who are located overseas, speak a different language, and come from a dissimilar culture.26 To be effective, the amendment should: 1) delineate its applicability (i.e., define the phrase “international lawyering”); and 2) identify the factors that can lead to mitigation or exoneration (i.e., explain when it can be used).
As to the former, it is suggested that a broad definition like the one found in Chapter 2 of the Federal Arbitration Act (FAA) should be adopted.27 The FAA deems a contract, agreement, transaction, or relationship to be international if at least one party is a citizen of a foreign country or the matter “involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states.”28
As to the latter, it would be preferable to provide a general statement of principles rather than a laundry list of specific factors. Such a statement could be drafted to read as follows: “The lawyer whose conduct is in question shall be deemed to have acted properly if, taking all relevant facts into account, including the difficulties of acting within a foreign legal environment or on behalf or against a foreign party, the lawyer’s conduct was that of a reasonably prudent Florida lawyer engaged in the practice of international law. In making this determination the lawyer’s reliance on the acts or advice of a duly qualified foreign country attorney shall be deemed to be of special importance.” Such a statement provides adequate protection for the lawyer who acts in good faith while giving courts and disciplinary committees enough flexibility to decide each case on its own merits.
In a law review article written some years ago, the author observed:
International law requires not only mastering two legal systems, but also keeping abreast of non-legal developments in two countries which are frequently thousands of miles apart.. . . [T]he attorney must provide extensive explanations to his client regarding the structure and documentation of the proposed transaction, the local oddities of litigation, and if possible, must seek some middle ground. The form and language of contracts or negotiations are always critical. Not only may a word have a totally different meaning in another language, but also language is a factor in the negotiations.. . . An awareness of cultural, social, economic, and political factors surrounding transactions is often critical to the client’s success.29
Given these complexities, amending Rule 4-8.5 as suggested in this article would ensure that both clients and lawyers involved in an international matter are treated fairly and thoughtfully. q
1 Florida Rules of Professional Conduct Rule 4-8.5 cmt. (1997).
2 Calls for such a body, however, have been made from time to time. See, e.g., Detlev F. Vagts, The International Legal Profession: A Need for More Governance?, 90 Am. J. Int’l L. 250 (1996).
3 For criticisms of the current system, see John Toulmin, A Worldwide Common Code of Professional Ethics?, 15 Fordham Int’l L.J. 673 (1991-92), and Malini Majumdar, Note, Ethics in the International Arena: The Need for Clarification, 8 Geo. J. Legal Ethics 439, 441 (1995). Recognizing the weaknesses of the present system, in 1988 the European Community moved from a local to a regional model of regulation by adopting the Code of Conduct for Lawyers in the European Community (“CCBE Code”). For the text of the CCBE Code, as well as an exhaustive analysis of its provisions, see Laurel S. Terry, An Introduction to the European Community’s Legal Ethics Code Part I: An Analysis of the CCBE Code of Conduct, 7 Geo. J. Legal Ethics 1 (1993), and Laurel S. Terry, An Introduction to the European Community’s Legal Ethics Code Part II: Applying the CCBE Code of Conduct, 7 Geo. J. Legal Ethics 345 (1993).
4 Michael Maloney & Allison Blizzard, Ethical Issues in the Context of International Litigation: “Where Angels Fear to Tread,” 36 S. Tex. L. Rev. 933, 942 (1995) (footnote omitted).
5 Id. at 933-34. To this list another commentator would add: supervision of co-counsel, confidentiality, unauthorized practice of law, and fiduciary responsibilities. See Rona R. Mears, Ethics and Due Diligence: A Lawyer’s Perspective on Doing Business with Mexico, 22 St. Mary’s L.J. 605, 614-18 (1991).
6 Maloney & Blizzard, supra note 4, at 965.
7 Robert E. Lutz, Ethics and International Practice: A Guide to the Professional Responsibilities of Practitioners, 16 Fordham Int’l L.J. 53, 54-55 (1992-93) (footnotes omitted).
8 Id. at 85-86 (footnotes omitted).
9 Image Technical Services, 820 F. Supp. at 1214.
10 Id. at 1216-18.
11 Id. at 1214.
16 Id. Coudert Brothers also represented a separately incorporated independent French subsidiary of Kodak called Kodak Pathe. Judge Caulfield found that this representation was irrelevant, however, because representation of a separately incorporated subsidiary did not by itself create a conflict of interest. Id. at 1214 n.1.
17 Id. at 1214.
18 Id. at 1214-15.
19 Id. at 1215.
21 Id. at 1218.
22 In Re Mortgage & Realty Trust, 195 B.R. at 744-45.
23 Id. at 758-59.
24 Id. at 747 (footnote omitted).
25 Id. at 749.
26 Although some may question the wisdom of carving out a special rule just for international lawyers, it should be remembered that Rule 4-7.6(a) permits patent lawyers to ignore the otherwise highly restrictive rules regarding holding oneself out as a specialist.
27 9 U.S.C. §§ 201-208 (1994).
28 9 U.S.C. § 202.
29 Peter Roorda, The Internationalization of the Practice of Law, 28 Wake Forest L. Rev. 141, 146 (1993).
Robert M. Jarvis is a professor of law at Nova Southeastern University Law Center in Fort Lauderdale. He received his B.A. from Northwestern University, his J.D. from the University of Pennsylvania, and his LL.M. from New York University.
This column is submitted on behalf of the International Law Section, Edward M. Joffe, chair, and Jeremy R. Page, editor.