Key Passages from--
Ted Schneyer, Professionalism as Bar Politics: The Making of the Model Rules of Professional Conduct, 14 Law & Social Inquiry 677 (1989).
Pages 689-90: “The other exotic issue mentioned in [1977 American Bar Association President] Spann’s charge to the Kutak Commission was of special concern to securities lawyers. The CPR’s Disciplinary Rule (DR) 7-102(B)(l) originally required a lawyer whose client has used her services to defraud others to take steps to rectify the fraud, if necessary by “blowing the whistle” on the client. The SEC used this rule in 1972 to bolster its complaint in the National Student Marketing case against two leading law firms that failed to notify shareholders or the SEC when they got wind of fraud in the merger transaction they were working on.69 In 1974, the ABA House of Delegates countered by amending the CPR to subordinate the whistleblowing duty to the lawyer’s duty of confidentiality.70 As CEPR [the ABA’s eight-member Standing Committee on Ethics and Professional Responsibility] later construed the amendment,71 it gutted the disclosure duty. The trouble was again that a large majority of states never got around to adopting the amendment.72 ”
Pages 705-06: “Part II will discuss the negative side of this mentality under the heading “Defensive Ethics.” But, to illustrate the affirmative use of the Model Rules process to shape other law, consider the strategy of the ABA Corporation Section, and especially the Evans committee, for whom the Model Rules process was often SEC politics by other means.”
“The Evans committee was created, remember, in response to the SEC’s use of a CPR provision, DR 7-102(B)(1), to bolster its National Student Marketing complaint against two law firms that learned the merger documents they had drafted were fraudulent but let the merger close without telling stockholders or the SEC what they knew. In 1980, the SEC tabled a proposal that the agency codify the theory of the National Student Marketing complaint. The SEC found the proposal premature because the ABA was then considering the same issues in the Model Rules process.172 ”
“This meant that the ABA--the Corporation Section’s home court--was where the action would be. An Evans committee memorandum in 1978 had pointed out that ethics rules no longer served simply as a guide to lawyers and a basis for professional discipline. The memo declared that the CPR had become “the basic source of law” from which courts and agencies “draw the responsibilities of lawyers.”173 Armed with this insight, the Evans committee sought ABA whistleblowing rules for corporate lawyers which would be tough enough to convince the SEC to back off, yet hedged enough to keep lawyers’ relations with management comfortable.174 ”
Footnotes:
69. SEC v. Nat’l Student Mktg. Corp. No. 225-72 [1971-72 Transfer Binder] Fed. Sec. L. Rep. (CCH) para. 93,360 (D.D.C. Feb. 3, 1972). See also Roberta Karmel, “Attorneys’ Securities Law Liabilities,” 27 Bus. Law. 1153 (1972).
70. See CPR DR 7-102(B)(l).
71. ABA Comm. on Ethics and Professional Responsibility, Formal Op. 341 (1975).
72. Victor Kramer, “Clients’ Frauds and Their Lawyers’ Obligations: A Study in Professional Irresponsibility,” 67 Geo. L.J. 991 (1979).172. See supra note 130 & accompanying text.
173. Gordon Cooney, Memorandum to Committee on Counsel Responsibility and Liability, ABA Section of Corporation, Banking and Business Law 6-7, 38-40 (Aug. 4, 1978) (emphasis added).
174. See supra notes 127-32 & accompanying text.[Return to the referring web page.] [Link to a full PDF copy of this article (3.9 MB).]