Lawyers urged to embrace in-house ethics counsel

Canadian law firms shouldn’t be squeamish about lawyering up internally when faced with ethical issues and should consider having in-house ethics counsel, according to a Western University law professor.

Law firms are increasingly designating in-house lawyers as ethics counsel, said Prof. Stephen Pitel, who discussed his recent paper on the topic at a legal conference organized by the Centre for Legal Profession.

“If Bell or Rogers can have in-house counsel, why can’t McCarthy and Torys and Davies have in-house counsel?” he asked attendees at the event at the University of Toronto on Jan. 16.

As the trend grows, Pitel said communications between ethics counsel and their colleagues within their firm should benefit from the same confidentiality afforded to lawyers and their clients.

“Could the firm claim client-solicitor privilege for communication between the in-house counsel and lawyers in the firm?” he asked. “One view is that that’s preposterous.”

Partly due to what Pitel called “a robust notion of loyalty in Canada,” some observers say a client who has hired a law firm should have the right to know what its lawyers are saying. But since it’s common practice for law firms to hire external lawyers when they run into issues with clients, “it’s not disloyal to internally lawyer up against a client,” said Pitel.

In his paper, he suggested that a lawyer faced with allegations of malpractice, for example, “may place his or her interest in securing a favourable outcome ahead of the interest of the client. These situations are understood not to violate the duty of loyalty largely because that duty must still allow a lawyer or a firm scope to safeguard its own position.”

He added: “A reasonable client would understand that a firm might require advice to address a possible conflict of interest it might have with the client and would understand that such advice might be obtained from within the firm itself. As such, that practice would not violate the duty of loyalty.”

In the United States, where the American Bar Association’s model rules of professional conduct recommend the use of in-house counsel to improve the “ethical atmosphere,” the law when it comes to privilege is in flux, according to Pitel.

To date, there’s no Canadian jurisprudence that deals with whether privilege applies to communications between ethics counsel and other lawyers in a firm. Like in other industries, Pitel said the courts should recognize that some information should be kept from clients.

“Law firms should not be treated differently in this regard than other service firms like those in accountancy, insurance, banking, finance, and telecommunications,” he wrote in his paper.

“Beyond this basic principle, the difficulties then lie in working out, on a case-by-case basis, whether the appropriate preconditions to privilege exist and whether the privilege is defeated by any exceptions.”

Although Pitel endorsed the idea of designating an in-house counsel, he says law firms should be careful about who they select for the job and should take steps to mitigate bias towards them.

“It is true that most ethics counsel are partners at their firm, and are likely to be concerned about the firm’s bottom line, which will affect their ultimate compensation. However, the degree to which ethics counsel with an equity partnership will be affected by the dissatisfaction or loss of a given client will be much less than the partner or associate who is handling the client,” according to Pitel.

“Further, many ethics counsel are paid exclusively for their ethics work. Their function is one of risk management, not client satisfaction or partner gratification.
They are therefore in a unique position within the firm to offer frank advice to a lawyer whose misconduct has come to their attention. They are concerned with managing the risk to the firm, not with providing the best outcome for the individual lawyer.”

Pitel’s views were among several ideas proposed at the recent conference on ethics in the law firm context.

For University of Ottawa Prof. Amy Salyzyn, regulating law firms could improve ethics among lawyers. When it comes to regulation, looking at individual lawyers often misses what Salyzyn called “the bigger picture” issues such as overbilling practices at law firms.

“You really need to look at the entity level; you need to look at the structural level,” she said.

Another problem with the current model is that it relies on complaints and “the limitations of that become quickly clear,” she added.

“You wouldn’t have the discipline if you didn’t have the error at all.”

In Australia, law firm regulation resulted in a significant drop in complaints against lawyers, Salyzyn noted. “What would the made-in-Canada solution look like?”

What’s needed, she said, is “a proactive, management-based regulation” that educates law firms, finds the regulatory gaps, and promotes best practices.

One of the biggest challenges when it comes to regulating law firms is the lack of resources. But according to Salyzyn, the possibility that law firm regulation could be “a meaningless, box-checking process” is also a concern.

Still, the idea will become even more important as non-lawyers are joining law firms, Salyzyn said. When it comes to designing a model for law firm regulation, “we have not only the ability to think creatively but to share from other industries that have thoughts about this,” she added.

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