The very public spectacle surrounding the demise of the Girardi Keese law firm in California has brought into sharp focus questions regarding alleged abuse of client trust accounts and the misappropriation of client funds. But behind the headlines another layer of the litigation seeks to hold former Girardi Keese lawyers personally liable for what strongly worded allegations call theft of client funds, including efforts to hold those other lawyers in civil contempt for not ensuring that the firm complied with court orders regarding disbursement of settlement monies.
In a series of cases filed by former Girardi Keese clients in the United States District Court for the Northern District of Illinois, Eastern Division, and one filed in the same court by Girardi Keese’s local counsel for the Lion Air litigation, plaintiffs seek to hold at least two former Girardi Keese lawyers responsible for Tom Girardi’s alleged misappropriation of client settlement funds. See, Welly Chandra v. The Boeing International Sales Corp., et. al., USDC N.D. IL, ED., 18-cv-7686 (lead case) and Edelson PC v. Thomas Girardi et. al., USDC N.D. IL ED 20-cv-07115. Both of these cases grapple with the fact that Girardi Keese apparently operated as a sole proprietorship and none of these other lawyers were legally partners of Tom Girardi. These suits appear to focus on issues of whether these other lawyers had an obligation to report allegedly known or suspected misconduct of the named partner, but they beg the stickier and trickier question: do we have a legal or ethical obligation to police our own partners?
The Rules of Professional Conduct do not explicitly answer this question. The three ABA Model Rules1 implicated by the analysis are Rules 8.3 (Reporting Professional Misconduct), 8.4 (Misconduct) and 5.1 (Responsibilities of a Partner or Supervisory Lawyer). ABA Model Rule 8.3 obligates lawyers to “inform the appropriate professional authority” when the lawyer “knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects.” Rule 8.4 delineates a non-exhaustive list of behaviors that constitute professional misconduct. Collectively these rules suggest that when misconduct is known, a lawyer is obligated to report the same. Neither the rules nor the advisory opinions related to them address the question of whether there is an obligation to investigate one’s partners in order to ferret out any violations of Rule 8.4 which may be occurring but not yet apparent to the partnership or the clients.
The duty to supervise non-lawyer staff or a subordinate attorney is clearly spelled out in Rule 5.1(b) & (c):
(b) A lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.
(c) A lawyer shall be responsible for another lawyer's violation of the Rules of Professional Conduct if:
- the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or
- the lawyer is a partner or has comparable managerial authority in the law firm in which the other lawyer practices, or has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.
Less clear is what the obligations are with respect to our partners. Rule 5.1(a) requires: “A partner in a law firm, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct.” The South Carolina Supreme Court has advised that what constitutes “reasonable efforts” may be a fluid concept:
The measures required to fulfill the responsibility prescribed in paragraphs (a) and (b) can depend on the firm's structure and the nature of its practice. In a small firm, informal supervision and occasional admonition ordinarily might be sufficient. In a large firm, or in practice situations in which intensely difficult ethical problems frequently arise, more elaborate procedures may be necessary.
In re Anonymous Member of S.C. Bar, 346 S.C. 177, 185, 552 S.E.2d 10, 13–14 (2001) (quoting comment to S.C. Rule 5.1). While taking care to note the difference between the Rules and evidence required to establish vicarious liability, the South Carolina Supreme Court further emphasized that “’partners of a private firm have at least indirect responsibility for all work being done by the firm ...”’ Id., citing Rule 5.1 cmt. (emphasis in original).
What makes the analysis of our obligations related to our law partners different from the obligations with respect to subordinates within the firm is the fact that partners owe one another fiduciary duties. Among them are the obligation to “refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.” § 404 (c), General Standards of Partner's Conduct, Rev. Uniform Partnership Act Section 404 (2020-2021 ed.) As one Georgia Court recently put it: “Partners still must act toward other partners with the utmost good faith and with the finest loyalty.” Rollins v. Rollins, 338 Ga. App. 308, 318, 790 S.E.2d 157, 165 (2016) (internal citations omitted).
In a law firm, it is only logical that this duty encompasses the obligation to comply with the Rules of Professional Conduct. It seems only reasonable then that, absent evidence to the contrary that would trigger obligations under Rule 8.3, we are entitled to assume that our partners are fulfilling their fiduciary duties including those to ensure compliance with the Rules of Professional conduct. Case law suggests that this is true, provided the firm has generally taken steps to comply with Rule 5.1(a)’s requirements to “ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct.” This responsibility falls generally on all partners in the firm because “[b]y placing some responsibility on the senior management of a firm, the rule prevents those attorneys who have the most influence over the atmosphere of the firm from turning a blind eye to the behavior of the firm's attorneys. While partners are not required to guarantee that other attorneys in their firm will not violate the Rules of Professional Conduct, ignoring their supervisory responsibilities can lead to sanctions for those running the firm.” In re Anonymous, 346 S.C. at 187.
It is important that every law firm, big or small, whether operating entirely virtually, entirely in brick and mortar offices, or in some hybrid model, establish procedures to ensure that all the lawyers – regardless of their rank or role within the firm – are complying with both the spirit and the letter of the Rules of Professional Conduct. The specific structure of the program will vary depending on the size of the firm, the number of jurisdictions the practice covers and other matters, but the creation and utilization of formal procedures is a fundamental element of the ethical and responsible practice of law. And as is painfully apparent from the Girardi Keese scandal: if you see something, say something.
1 This article analyzes only the ABA Model Rules. Rules for your individual state may differ from the ABA Model Rules.