Risk Update

OCGs — Analysis and Opinions of Outside Counsel Guidelines & Gotchas

Posted Dan Bressler

We’ve already looked a bit at news and commentary  about proposed changes to DC rules concerning OCGs. This recent article from two partners at partners at Harris Wiltshire & Grannis LLP caught my eye for highlighting several interesting provisions spotted in the OCG forests out there — particularly about the ownership of developed legal expertise/legal theories, which was a new one for me: “A Look At DC Proposals To Curb Outside Counsel Guidelines” —

  • “In response, the committee issued proposed amendments to the D.C. rules on Nov. 12, 2020, making it the first jurisdiction in the nation to propose amendments to address issues raised by outside counsel guidelines. The committee is also seeking additional comments, which are due by Feb. 11.”
  • “These changes would make it a violation of the D.C. rules for a lawyer to agree to outside counsel guidelines that define the “client” more broadly than the entity the lawyer actually represents, as well as alter egos or affiliates that believe the lawyer was representing them.[6] The committee explained, however, that it was “interested in receiving suggestions as to other, possibly less far-reaching, approaches” to limit conflicts of interest.[7]”
  • “This revision is a significant change that will require lawyers and in-house counsel to reexamine their outside counsel guidelines. Previously, Comment 25 to Rule 1.7 presented an “open-ended invitation to corporate clients to designate the parent and all its affiliates as the ‘client.'”[8] That comment is now being significantly limited, as described above, with the stated goal to provide “free choice of counsel” by limiting the definition of who the client is.”
  • “Comments noted that some outside counsel guidelines state that the client will own its lawyers’ work product, and some state that a lawyer may not even keep a copy of its own work product. Other outside counsel guidelines require that a lawyer not make any use of any information — including nonconfidential information such as legal theories — gained in connection with representation of a client when representing any future clients.”
  • “The committee cited a consolidated comment from 26 large law firms noting that it is “standard practice for lawyers to retain a copy of the client file, including their work product, and to use that work product as a resource for other clients and matters (subject, of course, to their confidentiality obligations to current and former clients.”[15]”
  • “The committee also recommended amending Comment 41 to Rule 1.6, Confidentiality of Information, to clarify that a lawyer is not only permitted, but ethically obligated, to use “growing knowledge of the law on behalf of each successive client.”[19]”
  • “This recommendation would align with existing D.C. ethics opinions concluding that a legal theory is not a client secret, and that lawyers have an ethical obligation to use “growing expertise to represent clients to the best of their ability.”[20]”
  • “This change cuts against what some outside counsel comments described as a belief by some clients that “if they pay for an outside lawyer’s creation of a document or acquisition of knowledge, that document or information should belong to them — just as a purchased machine, building, or vehicle belongs to them.”[21]”
  • “Third, the committee did not propose any amendments to the D.C. rules addressing some clients’ requests to audit lawyers’ internal files, but cautioned both lawyers and clients that any such outside counsel guideline provisions must conform to the D.C. rules’ confidentiality requirements.[27]”