Diminished Client Capacity: Ethical Considerations for Attorneys

• Publication year: 2004
• Pages: 125

33 Colo.Law. 11 Colorado Lawyer 2004.

2004, August, Pg. 125. Diminished Client Capacity: Ethical Considerations for Attorneys

Vol. 33, No. 8, Pg. 11

The Colorado Lawyer
August 2004
Vol. 33, No. 8 [Page 125]

Specialty Law Columns
Professional Conduct and Legal Ethics
Diminished Client Capacity: Ethical Considerations for Attorneys
by James R. Walker

This column is sponsored by the CBA Ethics Committee Articles published in this column do not necessarily reflect the views of the Committee and may be those only of the individual authors

Column Editor

Susan Bernhardt, Denver, of Netzorg, McKeever, Koclanes & Bernhardt LLP - (303) 864-1000, sbernhardt@ nmkb.com

James R. Walker

About The Author:

This month's article was written by James R. Walker, Denver, a partner with Rothgerber Johnson & Lyons LLP - (303) 628-9510, jwalker@ rothgerber.com.

This article summarizes key developments in representing persons with diminished capacity. New Restatements and recent Model Rule changes stress the underlying need to protect these clients, who often are financially and mentally abused.

Although many Coloradans enjoy long and active lives, it is important to recognize that physical health does not always mirror mental health. Because legal representation is heavily dependent on mental health, physical well-being can mislead a lawyer to overlook a client's deteriorating mental health.1

The current Colorado Rules of Professional Conduct ("Colorado Rules" or "Colo.RPC") do not prescribe counsel's role in uncovering "diminished capacity." Thus, counsel often must proceed without effective guidance or tools to diagnose and resolve these difficult issues.

This article addresses problems arising from diminished client capacity. It reviews new ethical rules and Restatements that provide a framework for these issues. As the substantive law of client capacity finally emerges, counsel may find guidance and tools for resolving the challenges inherent in this area.

National Ethics Projects

During the last five years, the "law of lawyering" has taken giant steps forward. Both the American Law Institute ("ALI") and the American Bar Association ("ABA") have approved high-profile projects addressing ethics and professional responsibility.

In 1999, the ALI gave final approval to the two-volume Restatement (Third) of the Law Governing Lawyers. With a scope far beyond a traditional ethics code, this Restatement addresses critical core topics such as forming the attorney-client relationship and a lawyer's civil liability.

In tandem with this effort, the ABA developed and approved a five-year project to modernize the Model Rules of Professional Conduct ("Model Rules"). Nicknamed "Ethics 2000,"2 this project's goal was to "update" the Model Rules so that they "will be comprehensible and responsible in the eyes of the public while providing clear guidance to the practitioner."3 The Ethics 2000 "hot topics," or "six C's," are competence, communication, confidentiality, conflicts, corporate clients, and candor.4

The Ethics 2000 Model Rules changes are not currently binding on Colorado lawyers,5 but likely will serve as the foundation for future changes to the Colorado Rules. Before new Model Rules become enforceable, the Colorado Supreme Court would need to adopt them; this is currently under advisement with the Court.

Although the scope of these ALI and ABA projects is impressive, client capacity received only minimal coverage. Moreover, the current Colorado Rules fail to address in detail when a client would be considered to have lost capacity. Instead, the current Colorado Rules state that a lawyer should resolve fundamental capacity issues under "principles of substantive law" external to the Colorado Rules.6 With this vague reference, the Colorado Rules most likely direct lawyers to the Restatements, namely Restatement (Third) of the Law Governing Lawyers and the Restatement (Third) of Agency.

The Restatements and
Capacity Issues

Capacity issues were addressed in the 1958 Restatement (Second) of Agency ("1958 Restatement"). The 1958 Restatement provides that a principal's loss of capacity terminated both the agent's actual authority and apparent authority.7 The old rule equated the principal's loss of capacity with death, voiding all transactions made by the agent after such event. This harsh approach applied even if the agent or third party lacked any notice of the event.

This 1958 Restatement also employed the "cliff approach," expressing capacity as an all-or-nothing proposition that the principal has or does not have. The 1958 Restatement expressly declined to give an opinion on the effect of temporary incapacity from a principal's mental disease.8

The 2000 Restatement (Third) of the Law Governing Lawyers expressed displeasure with the automatic termination rule in the context of legal representation. This Restatement views the per se termination rule as inappropriate when applied to a lawyer's beneficial efforts to protect a client with diminished capacity.9 Under the modern view, such a client continues to have rights requiring protection, and counsel remains with authority to help secure that needed protection.

A 2001 draft of Restatement (Third) of Agency10 changes the automatic termination rule. It creates a new rule, entitled "Loss of Capacity," describing with more precision when and how a principal's loss of capacity impacts an agent's...