March 2022 LEMR Lead Article
This article is featured in Volume 3, Number 3 of the Legal Ethics and Malpractice Reporter.
During the past month, much of the world has viewed the Russian invasion and subsequent conflict in Ukraine with a mixture of horror and outrage. Russia’s actions, although condemned by most of the world’s nations, have posed a significant geopolitical and military dilemma for these nations. On the one hand, many nations, including the United States and most of the European nations, want to take whatever measures are necessary to end the fighting and destruction in Ukraine. On the other hand, Russia has a large stock of both strategic and tactical nuclear weapons, and direct military intervention by the U.S. or NATO countries could lead to a nuclear conflict. Fear of initiating a nuclear war has been heightened by the inflammatory rhetoric of Russian President Putin and current Russian military doctrine which permits the use of tactical nuclear weapons in certain circumstances. Consequently, as of the time of writing this article, the United States and the NATO nations have decided to limit their response to Russian aggression in Ukraine to providing military aid to Ukraine and imposing stiff economic sanctions on Russian governmental and business entities and on some individuals.
The sanctions imposed by the U.S. and other countries are extensive and complex. As an example of these sanctions, we can look at the news release issued by the U.S. Treasury Department on March 11, 2022, discussing some of these sanctions:
Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new round of sanctions targeting Russian and Kremlin elites, oligarchs, and Russia’s political and national security leaders who have supported Russian President Vladimir Putin’s brutal and illegal invasion of Ukraine.
Today’s actions include designating regime elites and business executives who are associates and facilitators of the Russian regime, including three immediate family members of President Putin’s spokesperson, Dmitriy Sergeevich Peskov; Russian tycoon and Kremlin insider Viktor Vekselberg; and the Management Board of the sanctioned VTB Bank. Additionally, OFAC designated 12 members of the Russian State Duma, including Vyacheslav Victorovich Volodin, who is also a permanent member of Russia’s Security Council.
On February 24, 2022, Treasury designated VTB Bank, Russia’s second largest bank, pursuant to E.O. 14024 for being owned or controlled by, or for having acted or purported to act for or on behalf of, directly or indirectly, the GoR, and for operating or having operated in the financial services sector of the Russian Federation economy. Today, OFAC is designating the ten individuals comprising VTB Bank’s management board…
As a result of today’s action, all property and interests in property of the individuals above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person….
Press Release, U.S. Department of the Treasury, “Treasury Sanctions Kremlin Elites, Leaders, Oligarchs, and Family for Enabling Putin’s War Against Ukraine” (Mar. 11, 2022) (emphasis added).
The paragraph above makes it clear that American lawyers and law firms with Russian clients who are on the sanctions list may well have significant problems with continuing their representation of these clients on several grounds.
American lawyers and law firms with Russian clients who are on the sanctions list may well have significant problems with continuing their representation of these clients…
First, of course, U.S. law firms obviously do not want to violate any sanctions imposed by the U.S. government. Second, these imposed sanctions may make it impossible for a law firm to be paid for services rendered. These problems have led some firms to “drop” their Russian clients. On March 1, 2022, the ABA Journal published an article online titled “Law firms drop some Russian clients following sanctions for Ukraine invasion” by Debra Cassens Weiss. She reports: “Several major law firms are dropping some Russian clients and reviewing Russian-related work to comply with sanctions imposed in response to the invasion of Ukraine.”
In addition to avoiding violating sanctions and the fear that sanctions may prevent American law firms from being paid by their Russian clients, there is another problem. Currently, American public sentiment against Russia and all things Russian is running high. Many Americans are shunning Russian products like Vodka or refusing to eat in Russian restaurants in the U.S. Lawyers who are known to have Russian clients risk facing similar objections from many of their American clients. This anti-Russian sentiment extends far beyond the individuals and entities subject to sanctions. Law firms with Russian clients, even those not subject to sanctions, may well be considering withdrawing from their representation of such clients. For all American lawyers and law firms, these various issues and the possibility of ending representation of Russian clients, raise the question as to whether such withdrawal is permissible under Rule 1.16.
Rule 1.16 contemplates two types of withdrawal from representation—mandatory withdrawal and permissive withdrawal. KRPC Rule 1.16(a) addresses circumstances under which withdrawal would be mandatory:
A. Except as stated in paragraph (c), a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if:
- The representation will result in violation of the rules of professional conduct or other law;
- The lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client;
- The lawyer is discharged; or
- The client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent.
KRPC Rule 1.16(b) addresses circumstances under which withdrawal is permitted, but not required:
B. Except as stated in paragraph (c), a lawyer may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interests of the client, or if:
- The client has used the lawyer’s services to perpetrate a crime or fraud;
- A client insists upon pursuing an objective that the lawyer considers repugnant or imprudent;
- The client fails substantially to fulfill an obligation to the lawyer regarding the lawyer’s services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;
- The representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or
- Other good cause for withdrawal exists.
MRPC 4-1.16 tracks KRPC 1.16 with two exceptions:
MRPC 4-1.16 permits but does not require withdrawal when “the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent.” MRPC 4-1.16 permits an attorney for withdraw when “the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement.”
To analyze whether a law firm having Russian clients may or must withdraw from its representation, one must look to see which of the Rules stated above apply to the potential withdrawal. To do this, it is helpful to consider the three most likely reasons for seeking to withdraw from representation in the current situation:
- The Russian client is under sanctions;
- The Russian client, because of sanctions, cannot pay the lawyer’s fees; and
- The lawyer’s other clients object to the representation because of Russian actions in Ukraine.
In cases where continued representation of a client would violate sanctions imposed by the U.S. government, it would seem clear that the lawyer would be required to withdraw from representation pursuant to Rule 1.16(a)(1). It is also important to note that, even were representation of a client not to directly run afoul of Rule 1.16(a)(1), if a client were to seek the lawyer’s assistance to evade sanctions in some way, the lawyer would also potentially have problems pursuant to KRPC Rule 1.2(d), which states:
A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.
(MRPC Rule 4-1.2(f)).
In cases where continued representation of a client would pose financial difficulties for a lawyer or law firm because sanctions made payments impossible, withdrawal would not be required. However, KRPC Rule 1.16(b)(4) and MRPC 1.16(b)(6) might provide the lawyer with the ability to withdraw. In this case, the question will be whether the client’s inability to pay its bills because of government sanctions would be deemed to be an “unreasonable financial burden.” The fact that the client could pay no bills so long as the sanctions continue in force may well be sufficiently burdensome to be “unreasonable” in most cases.
The third situation—where a lawyer or law firm wants to withdraw from representation of a client because of the client’s unpopularity and the possibility of backlash from other clients—is the most problematic. Certainly, KRPC Rule 1.16(a) and MRPC 4-1.16(a) would not require the lawyer to withdraw from representation in such a case. If a lawyer represents a Russian client or a client with substantial business in Russia sufficient to cause other clients to be uncomfortable with the representation of this client because of public outcry, then it becomes necessary to analyze whether any of the provisions of KRPC Rule 1.16(b) or MRPC Rule 4-1.16(b) would authorize such a withdrawal. If the client is able to pay its bills and if representation of the client does not run afoul of sanctions, then the most likely provisions one might cite would be KRPC Rules 1.6(b)(2) or 1.16(b)(5) and MRPC Rules 4-1.16(b)(4) or 1.16(b)(7).
Invocation of KRPC Rule 1.16(b)(2) or MRPC Rule 4-1.16(b)(4) to justify a permissive withdrawal because a lawyer does not want to be criticized because of a client’s actions that could seem to be pro-Russian (e.g., maintaining non-sanctioned business activity in Russia) might not be successful. To permit withdrawal in such cases would open the floodgates to lawyer withdrawal whenever public opinion turned against a client. This would go to the very heart of a lawyer’s fiduciary responsibility of loyalty to a client.
The invocation of KRPC Rule 1.16(b)(5) or MRPC Rule 1.16(b)(7) to permit withdrawal from representation in these cases for “other good cause” is also questionable. Whether a court would find adverse publicity a sufficiently “good cause” for permissive withdrawal in such a case is impossible to predict but would seem to implicate the same issue of loyalty.
Of course, in all three scenarios discussed, even if a law firm were able to justify withdrawal from representation under Rule 1.16, a withdrawal will still be subject to the limitations imposed by KRPC Rule 1.16(c) or MRPC Rule 4-1.16. KRPC Rule 1.16(c) states:
When ordered to do so by a tribunal, a lawyer shall continue representation notwithstanding good cause for terminating the representation.
MRPC Rule 1.16(c) reads:
A lawyer must comply with applicable law requiring notice to or permission of a tribunal when terminating a representation unless the lawyer has filed a notice of termination of limited appearance. Except when such notice is filed, a lawyer shall continue representation when ordered to do so by a tribunal notwithstanding good cause for terminating the representation.
The questions of withdrawal from representation that have been raised by the current Russo-Ukrainian conflict and the imposition of sanctions on Russian and Russia-related entities, as well as the public outcry against anyone seen to be assisting Russia require analysis under the applicable Rules of Professional Conduct by any lawyer or firm considering such a withdrawal. The analytic framework suggested above will, hopefully, be helpful in this regard.
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