The corporate gatekeeper in ethical perspective.

• Author: Hines, Christopher T.
• Position: Continuation of II. Categories of Conflicts Rules D. Ethical Rules through IV. Conclusion, with footnotes, p. 107-131

1. First-Order Ethical Rules

   A first-order ethical rule is, for purposes of this discussion, a rule of ethics as may be prescribed by the relevant profession. Accordingly, the first order ethical rule is an ethical rule of the first-order precisely because it is enunciated by the relevant profession as matter of self-regulation. (182) Again, while reasonable minds may disagree as to whether first-order ethical rules should be promulgated in the current fashion or whether alternatives may be desirable, (183) nevertheless the reality remains that first-order ethical rules do exist for the professional qua gatekeeper. (184) More specifically, the first-order ethical rules for corporate attorneys are those model rules of legal ethics as drafted by the American Bar Association ("ABA"), (185) and as further enunciated and enforced by the bar associations and courts in the various states. (186) Therefore, the ABA rules on the ethics of the legal profession and the historical development thereof are the focus of this discussion. (187)

   As a matter of legal history, it may be helpful to first recall the precise manner in which the self-regulation of attorneys commenced in the United States. (188) Although the antecedents of the professional regulation of attorneys read back to the nineteenth century in the United States, (189) and even as far back as the thirteenth century in England, (190) the first comprehensive ethical "code" (191) for attorneys in the United States took the form of the ABA Canons of Professional Ethics. (192) The impetus for such codification of ethical rules came from a speech by President Theodore Roosevelt given in 1905, where he made the following observation:

   Every man of great wealth who runs his business with cynical contempt for those prohibitions of the law which by hired cunning he can escape or evade is a menace to our community; and the community is not to be excused if it does not develop a spirit which actively frowns on and discountenances him. The great profession of the law should be that profession whose members ought to take the lead in the creation of just such a spirit. We all know that, as things actually are, many of the most influential and most highly remunerated members of the bar in every centre of wealth make it their special task to work out bold and ingenious schemes by which their very wealthy clients, individual or corporate, can evade the laws which are made to regulate in the interest of the public the use of great wealth. (193) In response to this call for action, the ABA adopted the Canons of Professional Ethics in 1908. (194) In comparison to the current rules of professional ethics the Canons of Professional Ethics are somewhat antiquated. (195) The adoption of these Canons meant the Rubicon had been crossed; there now existed a formal ethical code for attorneys in the United States. (196) Despite the fact that the specific rule on conflicts of interest was rather terse, (197) it did provide the beginnings for the further development of first-order ethical rules in the form of the Model Code of Professional Responsibility and the Model Rules of Professional Conduct. (198)

   1. Model Code of Professional Responsibility

      In 1969, the ABA enacted the Model Code of Professional Responsibility, which constituted a significant revision--indeed, perhaps one can even say a redrafting--of the first-order ethical rules for attorneys in the United States. (199) Notably, the Model Code reorganized the rules in question into a three-fold structure: canons, ethical considerations, and disciplinary rules. (200) The canons continued to provide general direction to attorneys, (201) while the ethical considerations provided aspirational rules. (202) Further, the disciplinary rules (203) provided the first step in what Professor Hazard calls the "legalization" process of the norms of professional conduct. (204) Accordingly, while the Model Code may be viewed as an intermediate step between the 1908 Canons and the Model Rules, on closer inspection the Model Code provided a clear break from the past in that first-order rules for attorneys now took the form, at least in part, of what is now frequently known as professional regulation (205)

      Nevertheless, the Model Code did maintain some elements of the 1908 Canons through the vehicle of the canons and, more specifically, the ethical considerations. (206) And the reasons for this division between the aspirational and the mandatory, as Professor David Luban explains in his important work on the subject matter, (207) was in part due to the scholarship of Professor Lon Fuller. (208) In this sense, therefore, the ethical considerations provide a means by which one may explore the "inner morality" of a profession that an otherwise mandatory rule may not achieve. (209) (210) Accordingly, the Model Code presents us with this bifurcated approach to first-order ethical rules--those that are aspirational, and those that are mandatory (.210)

      Of particular note for the present discussion on conflicts of interest, the Model Code provides, under the rubric of an Ethical Consideration, a rule on the appearance of impropriety, which may be helpful to consider at length:

      Every lawyer owes a solemn duty to uphold the integrity and honor of his profession; to encourage respect for the law and for the courts and the judges thereof; to observe the Code of Professional Responsibility; to act as a member of a learned profession, one dedicated to public service; to cooperate with his brother lawyers in supporting the organized bar through the devoting of his time, efforts, and financial support as his professional standing and ability reasonably permit; to conduct himself so as to reflect credit on the legal profession and to inspire the confidence, respect, and trust of his clients and of the public; and to strive to avoid not only professional impropriety but also the appearance of impropriety , (211) The Model Code, therefore, provides first-order ethical rules that came in an almost binary fashion--what one must do under the Disciplinary Rules, and what one should do under the Ethical Considerations. (212) In this manner, conflicts of interest under the Model Code should be considered under both the mandatory rule, as to whether a conflict of interest in point of fact exists as enunciated in the Disciplinary Rules, (213) as well as the possibility of an appearance of impropriety in the given case. (214) This approach evolved, however, under the present formulation of first-order ethical rules for the legal profession--that is, the Model Rules of Professional Conduct. (215)

   2. Model Rules of Professional Conduct

      In 1983, the ABA replaced the Model Code of Professional Responsibility with the Model Rules of Professional Conduct, which remain the primary source of first-order ethical rules for attorneys in the United States. (216) In their formulation, the Model Rules had the intended purpose of "legalizing" the rules of legal ethics. (217) In this sense, therefore, the Model Rules completed the task that the Model Code initiated--that is, a concerted effort to remove the rules of legal ethics from the vestiges of canonical prose, or the language of professional scripture. (218) Such a development, while not inevitable, (219) was nevertheless an improvement in the self-regulation of the legal profession. (220) In lieu of what may be considered as rather vague notions of "ethics" and "professionalism" that arguably obtained under the Model Code and certainly were set forth in the 1908 Canons, the Model Rules brought clarity and focus to the regulation of attorneys as a profession. (221) The clarity brought by the Model Rules meant that vague notions of "ethics" and "professionalism" were no longer the criteria upon which one would determine whether particular conduct by an attorney was permissible or not. (222)

      As an example of the increased clarity, consider the manner in which the Model Rules addressed the issue of an "appearance of impropriety" in comparison to the approach taken under the Model Code, as discussed previously. (223) In keeping with the aim of legalizing the rules of legal ethics, the Model Rules take the direct approach in that they discard the ethical consideration of an appearance of impropriety from the conflict of interest rules. (224) The reasons for such an approach are persuasively explained in the commentary to the Model Rules:

      The other rubric formerly used for dealing with disqualification is the appearance of impropriety proscribed in Canon 9 of the ABA Model Code of Professional Responsibility. This rubric has a twofold problem. First, the appearance of impropriety can be taken to include any new client-lawyer relationship that might make a former client feel anxious. If that meaning were adopted, disqualification would become little more than a question of subjective judgment by the former client. Second, since "impropriety" is undefined, the term "appearance of impropriety" is question-begging. It therefore has to be recognized that the problem of disqualification cannot be properly resolved either by simply analogy to a lawyer practicing alone or by the very general concept of appearance of impropriety. (225) Accordingly, the "appearance of impropriety" criterion is subject to compelling criticism in that it makes the test a subjective one where the opinion of a former client will, more often than not, be decisive. (226) Moreover, if the effort behind the Model Rules is to legalize legal ethics, then the appearance of impropriety test could not remain in the manner set forth in the Model Code. (227) The criterion necessarily needed revision in order to move the test from a subjective to an objective one. (228) As a consequence, the Model Rules in a certain sense reified the Disciplinary Rules of the Model Code. (229) This change, then, is the current state of affairs of the first-order ethical rules for the legal...