February 28, 2015

Tenth Circuit: Fourth Amendment Does Not Require Judge’s Signature on Search Warrant

The Tenth Circuit Court of Appeals issued its opinion in United States v. Cruz on Monday, December 22, 2014.

Raul Cruz was convicted by a jury of knowingly and intentionally possessing methamphetamine with intent to distribute and sentenced to 63 months’ imprisonment. His conviction and sentence were affirmed on direct appeal. Cruz subsequently filed a motion to vacate, set aside, or correct his sentence, alleging his trial counsel was ineffective for failing to move to suppress evidence uncovered during the search of his residence pursuant to an unsigned search warrant. The district court denied relief on this assertion, and Cruz appealed.

The Tenth Circuit found, upon examination of the record, that the affidavit and warrant had been presented to a New Mexico district judge on March 26th, 2010. The judge signed the signature lines on the affidavit but neglected to sign the warrant at that time. Officers executed the warrant on March 29, 2010, and found methamphetamine, horse steroids, cash, and false identification. Officers found no evidence of drug use in the home or by Cruz. Cruz admitted to possession of the drugs but not intent to distribute. Approximately a month later, the judge signed the warrant, dated it March 26, 2010, and wrote “Nunc Pro Tunc on this April 23, 2010″ below the date line.

Cruz asserted that his counsel should have moved to suppress the evidence seized during the search of his residence, as well as his subsequent statements to police about the fruits of the search, because the unsigned warrant was not “issued” by a judge. Cruz claims that such motion would have been meritorious and would ultimately have led either to dismissal of the charges against him or his acquittal at trial. The Tenth Circuit disagreed, finding instead that nothing in the text of the Fourth Amendment conditions the validity of a warrant on its being signed. The First Circuit recently dealt with surprisingly similar facts and rejected the defendant’s argument, concluding that nothing in the Fourth Amendment required the judge who made the probable cause determination to also sign the warrant. The Tenth Circuit exhaustingly examined the meaning of the term “issue” under the Fourth Amendment, and found no reason to impose conditions on a validity of a warrant that were not set forth by the Fourth Amendment itself. The Tenth Circuit therefore concluded that there was no support for an inference that Cruz’s counsel’s motion to suppress would have been meritorious, and found no deficient performance of his counsel.

The district court’s judgment was affirmed.

Compensation During Dissolution of Law Firm LLCs

Editor’s Note: This article originally appeared in the Colorado Bar Association Business Law Section’s January 2015 newsletter. Click here for the Business Law Section webpage.

HerrickLidstoneBy Herrick K. Lidstone, Jr., Esq.

The Colorado Limited Liability Company Act was front-and-center in a January 2015 decision from the Colorado Supreme Court. The case, LaFond v. Sweeney, 2015 CO 3 (January 20, 2015) involved the dissolution of a law firm organized as a two-member LLC with no written agreement regarding the treatment of assets and liabilities on dissolution. Richard LaFond brought a contingent fee case into the law firm and performed a significant amount of work on that case before the firm dissolved. He continued his work on the matter after dissolution. His now former partner, Charlotte Sweeney, claimed an interest in the contingent fee.

Mr. LaFond brought a declaratory judgment action against Ms. Sweeney to obtain a judicial determination regarding her right to any portion of the contingent fee. The trial court entered judgment for Ms. Sweeney, finding that she would be entitled to one-half of the fees earned from the contingency case, up to a maximum of $298,589.24 potentially to be paid to Ms. Sweeney (based on the time spent by the LaFond & Sweeney law firm before dissolution and assumed billable rates).

Ms. Sweeney appealed the trial court’s decision to the Colorado Court of Appeals. Ultimately, the Colorado Supreme Court ruled that absent an agreement to the contrary, all profits derived from winding up the LLC’s business belong to the LLC to be distributed in accordance with the members’ or managers’ profit sharing agreement, and the LLC Act does not grant winding up members or managers the right to receive additional compensation for their winding up services.

Court of Appeals Decision

In its decision (2012 WL 503655, Feb. 16, 2012), the Court of Appeals recognized that it would have to decide:

[That since] there was no written agreement that specifically described how the contingent fee generated by the case should be distributed[,] we must look to other authority to decide the ultimate issue raised by this appeal: should the contingent fee be divided between LaFond and Sweeney, and, if so, how?

The Court of Appeals went on to decide that:

  1. Cases belong to clients, not to attorneys or law firms;
  2. When attorneys handle contingent fee cases to a successful resolution, they have enforceable rights to the contingent fee; and
  3. A contingent fee may constitute an asset of a dissolved law firm organized as a limited liability company.

The important conclusion by the Court of Appeals and affirmed by the Supreme Court was that when a limited liability company formed under Colorado law dissolves, the members/managers owe a duty to each other to wind up the business of the LLC, and unless otherwise agreed between the parties, no additional compensation is paid for winding up activities.

Supreme Court Decision

The statute in question is § 7-80-404(1)(a), which provides that members in a member-managed LLC and managers of a manager-managed LLC have a duty to:

Account to the limited liability company and hold as trustee for it any property, profit, or benefit derived by the member or manager in the conduct of winding up of the limited liability company business or derived from a use by the member or manager of property of the limited liability company, including the appropriation of an opportunity of the limited liability company.

The Supreme Court noted that, in 2006, the General Assembly added C.R.S. § 7-80-803.3 (entitled “Right to wind up business”) to Colorado’s limited liability company act, but did not include any provision allowing the person winding up the business of the LLC to be compensated for such actions, absent an agreement for such compensation. The Supreme Court also noted that the 1996 version of the Uniform Limited Liability Company Act did contemplate compensation to members who engage in winding up activities: (“A member is not entitled to remuneration for services performed for a limited liability company, except for reasonable compensation for services rendered in winding up the business of the company.” See Unif. Ltd. Liab. Co. Act § 403(d) (1996)). Colorado did not adopt this provision even though, as the Supreme Court noted, “the General Assembly’s 2006 amendments to the LLC Act incorporated some elements from the Model Act.”

The Supreme Court also noted that, in 1997, the General Assembly enacted the Colorado Uniform Partnership Act which, in C.R.S. § 7-64-401(8) “explicitly states that a partner is entitled to additional compensation for services performed in winding up the business of the partnership.” The Supreme Court went to the next logical conclusion:

If it wished, the legislature could have included language that would give members or managers the right to additional compensation for their services in winding up the LLC, but did not do so in the original LLC Act or its subsequent amendments.

Based on its analysis of the Colorado limited liability company act, the Colorado Supreme Court affirmed the Court of Appeals’ decision and concluded that:

  1. an LLC continues to exist after dissolution to wind up its business;
  2. upon dissolution, pending contingency fee cases are an LLC’s business;
  3. absent an agreement to the contrary, all profits derived from winding up the LLC’s business belong to the LLC to be distributed in accordance with the members’ or managers’ profit sharing agreement; and
  4. the LLC Act does not grant winding up members or managers the right to receive additional compensation for their services in winding up LLC business.

Members and Managers Fiduciary Duties?

In another portion of the opinion (at paragraphs 36–37), the Supreme Court addressed fiduciary duties in the LLC context in a manner that is inconsistent with the Colorado LLC Act. While acknowledging that the client has the right to choose legal counsel and to enter into and to terminate engagements with counsel, the Supreme Court said:

Under Colorado law, members and managers of an LLC cannot act to induce or persuade a client to discharge the LLC for the benefit of a particular member or manager of the LLC to the exclusion of the others; they breach their fiduciary duties to the LLC if they attempt to do so.

Unfortunately this misinterprets the Colorado LLC Act which carefully does not use the term “fiduciary duty” to define the duties of the members and managers. Furthermore the Supreme Court’s language treats the duties of members and managers as being identical, whether or not the LLC is member-managed or manager-managed. For example, the duty to “account to the limited liability company and hold as trustee for it any property, profit, or benefit derived by the member or manager in the conduct or winding up of the limited liability company business” (C.R.S. § 7-80-404(1)(a)) only applies to members of a member-managed LLC, not to members of a manager-managed LLC. Members of a manager-managed LLC only owe the obligation to “discharge the member’s … duties to the limited liability company and exercise any rights consistently with the contractual obligation of good faith and fair dealing.” (C.R.S. § 7-80-404(3)) The Supreme Court’s ultimate conclusion is not dependent on the fiduciary duty analysis which may, in fact, be applicable in other forms of ownership (such as a general partnership).

In this case, the articles of organization reflect that LaFond & Sweeney was, in fact, organized as a member-managed LLC and, therefore, the members did in fact have the duties to “hold as trustee” for the benefit of the LLC. In a trust as described in C.R.S. § 15-16-302, a trustee “shall observe the standards in dealing with the trust assets that would be observed by a prudent man dealing with the property of another, and if the trustee has special skills or is named trustee on the basis of representations of special skills or expertise, he is under a duty to use those skills.” This arises to a higher duty than the “contractual obligation of good faith and fair dealing. ” The Court should have reached a similar conclusion in the context of this case without using the overly-broad language referring to fiduciary duties.

In the end, Mr. LaFond is obligated to share the contingent fee with his former law partner under the same sharing ratio as the two had shared things during the existence of their law firm, and he was not separately compensated for his efforts in finishing the case as part of his obligation to wind up the business of the LLC. Is it fair that Richard LaFond took the case to a successful conclusion after the dissolution of LaFond & Sweeney while his former partner shares on a 50-50 basis in the award? Is it fair that had the decision been under CUPA or the Uniform Limited Liability Company Act the decision would likely have been different? Whether the Colorado LLC Act should be amended to provide for “reasonable compensation for services rendered in winding up the business of the limited liability company” is an open policy question.

Herrick K. Lidstone, Jr., Esq., is a shareholder of Burns Figa & Will, P.C. in Greenwood Village, Colorado. He practices in the areas of business transactions, including partnership, limited liability company, and corporate law, corporate governance, federal and state securities compliance, mergers & acquisitions, contract law, tax law, real estate law, and natural resources law. Mr. Lidstone’s work includes the preparation of securities disclosure documents for financing transactions, as well as agreements for business transactions, limited liability companies, partnerships, lending transactions, real estate and mineral property acquisitions, mergers, and the exploration and development of mineral and oil and gas properties. He has practiced law in Denver since 1978. He writes for many publications, including the Colorado Bar Association Business Law Newsletter, where this article originally appeared.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Colorado Supreme Court: Actual Conflict Requires Showing of Both Conflict of Interest and Adverse Effect

The Colorado Supreme Court issued its opinion in West v. People on Tuesday, January 20, 2015.

Conflicts of Interest—Post-Conviction and Extraordinary Relief—Ineffective Assistance of Counsel.

In these appeals, defendants alleged that their trial counsel labored under conflicts of interest because counsel concurrently or successively represented trial witnesses against them. The court of appeals remanded both cases to the trial courts to determine whether, under Cuyler v. Sullivan, 446 U.S. 335 (1980), defendants’ attorneys labored under an “actual conflict.” Defendants separately petitioned for review of the court of appeals’ judgments, asking the court to clarify whether the Sullivan standard requires a defendant to demonstrate, in addition to a conflict of interest, that an “adverse effect” arose from the conflict.

In People v. Castro, 657 P.2d 932 (Colo. 1983), the Supreme Court held that an adverse effect was inherent in a “real and substantial” conflict of interest and thus a separate showing was unnecessary. In this consolidated opinion, the Court overruled Castro because the U.S. Supreme Court recently held that an actual conflict, under the Sullivan standard, requires a defendant to show both a conflict of interest and an adverse effect on his or her attorney’s performance.

The Court held that to show an adverse effect, a defendant must (1) identify a plausible alternative defense strategy or tactic that trial counsel could have pursued; (2) show that the alternative strategy or tactic was objectively reasonable under the facts known to counsel at the time of the strategic decision; and (3) establish that counsel’s failure to pursue the strategy or tactic was linked to the actual conflict. The Court therefore affirmed the court of appeals’ judgments in part and instructed the trial courts to consider whether, under this framework, defendants received ineffective assistance of counsel by virtue of their attorneys’ alleged conflicts and are therefore entitled to new trials.

Summary and full case available here, courtesy of The Colorado Lawyer.

The Future of Law (Part One): Beyond the Borg

rhodesWe finished last year talking about the law profession’s cultural ethos, and how new practice models and wellness initiatives are liberating lawyers from its harmful aspects (the Legal Borg). An earlier 2014 series also looked at alternative practice models. Another considered how the law’s cultural ethos can cause stress-induced cognitive impairment and how mindfulness practice can help.

These developments may have sneaked in unnoticed, but now they’ve become the elephant in the room, and it’s time to deal with them. They’re causing a seismic shift in the profession’s ethos, and a new ethos requires a new ethic: i.e., new standards for how to enter the profession and how to behave once you’re in it.

The ABA Journal published a piece on that very topic on New Year’s Day, entitled “Does The UK Know Something We Don’t About Alternative Business Structures?” The article begins as follows:

For two nations sharing a language and legal history, the contrast in the visions at play in the legal systems of the United States and United Kingdom is more than striking. It’s revolutionary.

The debates in the U.S. go on: Should ethics rules blocking nonlawyer ownership of law firms be lifted? Is the current definition of unlicensed law practice harming rather than protecting clients? What about the restrictions on multidisciplinary practices?

And those debates are by no means ending: Witness the newly created ABA Commission on the Future of Legal Services. Though ABA President William C. Hubbard does not mention ethics rule changes in the commission’s primary task of identifying the most innovative practices being used in the U.S. to deliver legal services, some of those practices have been questioned as possible ethical breaches. Meanwhile, the rules and restrictions stay in place. The situation in the United Kingdom couldn’t be more different: Such restrictions have largely been lifted, and under the Legal Services Act the creation of new ways of providing legal services—including through alternative business structures—is more than simply permitted; it is actively encouraged.

Nonlawyer ownership of law firms, unlicensed practice, multidisciplinary practice… those are big issues. We’ll let the ABA tackle them. If you’ve been following these issues for awhile, you’ll remember the ABA did just that at their summer convention 17 years ago, and again the following year.

This blog won’t try to keep pace with the pros on that debate’s current version. We will, however, do some guessing of our own about how current trends in law practice and lawyer wellbeing might change not just lawyers and law practice, but our very stock and trade: the law itself. A new cultural ethos in the law will do precisely that. It is already. We’re going to talk about that, and speculate about what it might look like going forward.

According to Wikipedia, futurology is an “attempt to systematically explore predictions and possibilities about the future and how they can emerge from the present.” We’re not going to be systematic here. Instead, we’ll engage in some moderately-well-informed-but-we-don’t-know-what-the-insiders-know curiosity.

Should be fun. So draw the shades and polish up your crystal ball (maybe you prefer this kind, or maybe that) and let’s take a look!

Kevin Rhodes has been a lawyer for nearly 30 years, in firms large and small, and in solo practice. Years ago he left his law practice to start a creative venture, and his reflections on exiting the law practice appeared in an article in the August 2014 issue of The Colorado Lawyer. His free ebook, Life Beyond Reason: A Memoir of Mania, chronicles his misadventures in leaving the law, and the lessons he learned about personal growth and transformation, which are the foundation of much of what he writes about here.

A collection of Kevin’s blog posts, Enlightenment, Apocalypse, and Other States of Mind, is now available as an ebook. Click the book title to sample and download it from the distributor’s webpage. It’s also available on from Barnes & Noble, iTunes, Amazon, and Scribd. The collection includes Forewords from Debra Austin, author of the Killing Them Softly law journal article which has been featured here, and from Ron Sandgrund, author of The Colorado Lawyer article mentioned above.

You can email Kevin at kevin@rhodeslaw.com.

Rules from Chapters 18 and 20 of Colorado Rules for Civil Procedure Amended

On January 14, 2015, the Colorado Supreme Court adopted Rule Change 2015(02), amending Rules 205.3, 205.5, 205.6, 224, and 227 of Chapter 18 of the Colorado Rules of Civil Procedure, and amending Rules 251.1, 260.2, and 260.6 of Chapter 20 of the Colorado Rules of Civil Procedure.

The change to Rule 205.3, “Pro Hac Vice Authority Before State Courts — Out-of-State Attorney,” updated the reference in subparagraph (7) to Colo. RPC 1.15A through E. Rules 205.5, “Pro Hac Vice – Foreign Attorney,” and 205.6, “Practice Pending Admission,” were similarly updated to cite to Colo. RPC 1.15A through E. The updates to Rule 227 were also minor, changing the reference in subparagraph (2)(a)(4) to Colo. RPC 1.15B and updating citations in the Comment to the “Regstration Fee of Non-Attorney Judges” section of the rule.

In Rule 224, “Provision of Legal Services Following Determination of a Major Disaster,” subparagraphs (2) and (3) were amended to change citations from C.R.C.P. 220(1)(a) and (b) to C.R.C.P. 205.1(a) and (b), and from C.R.C.P. 220 to C.R.C.P. 205.1; citations in subparagraphs (5)(a) and (b) were updated from C.R.C.P. 221 and 221.1 to C.R.C.P. 205.3 and 205.4; and subparagraph (6) was amended to change the citation from C.R.C.P. 220(3) to 205.1(3) and add a citation to Colo. RPC 8.5.

Citations were also updated in Rules 251.1, 260.2, and 260.6. Rule 251.1, “Discipline and Disability; Policy — Jurisdiction,” was changed to reference Rules 204 and 205 instead of Rules 220, 221, and 222. Subsection (4) of Rule 260.2, “CLE Requirements,” was amended to clarify that the subsection was repealed and replaced by C.R.C.P. 203.2(6), 203.3(4), and 203.4(6). Citations in subsections (5)(a) and (6) of Rule 260.6, “Compliance,” were also amended, updating references from Rule 201.14 to Rules 203.2(6), 203.3(4), and 203.4(6).

Click here for the Colorado Supreme Court’s 2015 rules changes.

Tenth Circuit: Attorney’s Failure to Appear at Rescheduled Hearing Justified Finding of Contempt

The Tenth Circuit Court of Appeals issued its opinion in United States v. Hernandez on Friday, November 14, 2014.

Miguel Ramon Velasco was Adrian Hernandez’s criminal attorney. In the criminal proceeding, Hernandez pleaded guilty to two counts of an indictment charging conspiracy to distribute a controlled substance. On the day before a scheduled hearing to change his client’s plea, Velasco filed a motion for continuance, citing a problem with his computer. The court granted the continuance and the hearing was rescheduled for a date two months later. Again, the day before the hearing, Velasco filed a motion to continue. The court granted the motion but admonished Velasco that no more continuances would be granted. The parties agreed on August 7, 2013, for the hearing date.

Ten days before the third hearing date, Velasco again filed a motion to continue, citing a family vacation that could not be postponed due to his children’s school schedules. Velasco asserted that his client would not agree to substitute counsel. The court did not grant the continuance, and substitute counsel appeared at the hearing, to which Hernandez objected. Substitute counsel made an oral motion for continuance, and the court, recognizing the prejudice to Hernandez if a continuance was not granted, agreed. The court directed Velasco to show cause why he should not be held in contempt of court. At the show cause hearing, the court discovered that Velasco had knowingly made vacation plans after agreeing upon the hearing date. The court held Velasco in contempt and imposed a $2,000 fine. The following day, Velasco filed a motion to reconsider, citing the fact that his client’s brother had agreed to substitute counsel, but not explaining why the brother had any authority to so agree. The court entered an opinion and order reaffirming its finding of contempt, and Velasco appealed.

Velasco asserted five points of error, each generally arguing that the court erred by employing the summary contempt procedures in F.R.C.P. 42(b) for direct contempt rather than the full notice-and-hearing procedures from F.R.C.P. 42(a) for indirect contempt. Velasco contended that review should be conducted for abuse of discretion. However, since he did not properly raise his objections in the lower court, the Tenth Circuit reviewed for plain error and found none. Under a plain error review, the court must find that (1) there was error, (2) that was plain, and (3) the plain error affected his substantial rights. If these three criteria are met, the court may act to correct the error if it seriously affects the fairness or integrity of the proceedings. The Tenth Circuit found that Velasco’s arguments failed at the second step because it is not plain that his contempt was direct. The Tenth Circuit briefly explained the differences between direct contempt and indirect contempt, and found that it was plain to the trial judge and to the Tenth Circuit that his planned vacation was directly subversive of the court’s previous ruling.

The contempt order and fine were affirmed.

Colorado Court of Appeals: Reasonableness Implied Term in All Contracts for Attorney Fees

The Colorado Court of Appeals issued its opinion in Southern Colorado Orthopaedic Clinic Sports Medicine & Arthritis Surgeons, P.C. v. Weinstein, M.D. on Thursday, December 18, 2014.

Attorney Fees—Employment Agreement—Fee-Shifting Provision—Reasonableness.

In this litigation between a professional corporation and Dr. David M. Weinstein, the professional corporation alleged that the doctor had breached his employment agreement with the professional corporation. Dr. Weinstein filed counterclaims.

This appeal involves a fee-shifting provision in an employment agreement. The provision stated that the prevailing party in any action to enforce the agreement “shall be entitled to recover . . . all attorney fees [and] costs.” The trial court held that neither the professional corporation nor the doctor had prevailed at trial; it then declined the professional corporation’s request for attorney fees and costs under the provision. The appellate court reversed, holding that the professional corporation did prevail at trial. The trial court thereafter ordered Dr. Weinstein to pay a portion of the professional corporation’s attorney fees.

On appeal, the professional corporation contended that the trial court erred by not awarding it all of its attorney fees and costs. As a matter of public policy, reasonableness is an implied term in every contract for attorney fees, and trial courts must consider whether the requested attorney fees and costs are reasonable even if the contract does not mention reasonableness. Therefore, the trial court did not err when it determined reasonableness in awarding fees. Further, the trial court did not abuse its discretion when it reduced the award of attorney fees based on all the relevant reasonableness factors set forth in Colo. RPC 1.5(a), including the professional corporation’s success at trial. The case was remanded to the trial court for a determination of attorney fees to award Dr. Weinstein as the prevailing party in this appeal.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Rules of Judicial Discipline Amended by Colorado Supreme Court

On Friday, December 12, 2014, the Colorado Supreme Court announced Rule Change 2014(16), amending the Colorado Rules of Judicial Discipline. The rule change was adopted and effective December 10, 2014.

The rule changes were extensive and covered many of the rules. Significant changes were made to the rules regarding review of complaints, investigation, determination, statement of charges, and many others. For a redline of the changes, click here.

Comment Period Open for Changes to Colorado Rules of Judicial Discipline

The Colorado Supreme Court is seeking comments regarding proposed changes to the Colorado Rules of Judicial Discipline. The public comment period is now open, and will close at 4 p.m. on October 14, 2014. Comments should be submitted to Christopher Ryan, the clerk of the supreme court, at 2 E. 14th Ave., Denver, 80203.

The changes to the Rules are extensive. Several rules have been moved or deleted, including the rules on confidentiality, screening of complaints, investigation, discovery, and special masters. For a redline of the changes, click here.

For all of the Colorado Supreme Court’s adopted and proposed rule changes, click here.

New C.J.E.A.B. Opinion States Judges Cannot Ethically Use Marijuana

On Thursday, July 31, 2014, the Colorado State Judicial Branch released Colorado Judicial Ethics Advisory Board (C.J.E.A.B.) Opinion 2014-01, advising Colorado judges that because marijuana is still illegal under federal laws, any use of marijuana violates Rule 1.1 of the Canon of Judicial Conduct.

The C.J.E.A.B. consists of judges and non-judges who provide advice on ethical issues to judicial officers who request an opinion. Any judicial officer in Colorado may request an opinion from the Board. Once the request is received, the C.J.E.A.B. will consider whether to research the question and issue an opinion regarding the propriety of the proposed conduct and the ethical issues presented.

The question raised in Opinion 2014-01 was whether a judge may use marijuana privately and in a manner consistent with the Colorado Constitution in light of the legalization of marijuana in Colorado. The C.J.E.A.B. decided that because marijuana is still illegal under federal law, using marijuana even in a manner consistent with Colorado law is more than a minor violation of the law and constitutes a violation of Rule 1.1 of the Canon of Judicial Conduct. The C.J.E.A.B. decided that virtually every violation of Colorado law is a violation of the CJC, because the exceptions delineated by the committee that crafted the CJCs were extremely minor, such as parking tickets. Further, because drug- and alcohol-related offenses were specifically mentioned as not falling under the exception, the C.J.E.A.B. determined that a judge’s use of marijuana is not a minor violation of law.

Click here for the full text of Opinion 2014-01 and click here for all of the C.J.E.A.B. opinions.

Colo. RPC 1.15 Concerning Fees and Trust Accounts Repealed and Reenacted as Five New Rules

On Wednesday, June 18, 2014, the Colorado Supreme Court released Rule Change 2014(07), which repealed Colo. RPC 1.15 and reenacted it as Colo. RPC 1.15A, 1.15B, 1.15C, 1.15D, and 1.15E. The rule change was signed on June 17, 2014 and is effective immediately.

Colo. RPC 1.15A, “General Duties of Lawyers Regarding Property of Clients and Third Parties,” sets forth rules regarding client property and accountings. Rule 1.15A mostly tracks the language of subsections (a) through (c) of former Rule 1.15, and adds that the provisions of 1.15B through 1.15E apply to all funds or property held or maintained by the lawyer.

Colo. RPC 1.15B, “Account Requirements,” makes significant changes to subsections (d) through (h) of former Rule 1.15. Rule 1.15B sets forth requirements for COLTAF and other accounts in which to maintain client funds, and specifies practical procedures for paying account fees and dispersing interest.

Colo. RPC 1.15C, “Use of Trust Accounts,” rearranges the management provisions previously contained in 1.15(i) and increases the rule’s readability.

Colo. RPC 1.15D, “Required Records,” establishes recordkeeping requirements for client property. Some of the provisions from former 1.15(d) through (h) regarding recordkeeping procedures were moved to Rule 1.15D, and the language of former 1.15(j) through (m) is also incorporated where appropriate.

Colo. 1.15E, “Approved Institutions,” lists requirements for financial institutions housing trust accounts and defines acceptable forms of accounts. Rule 1.15E is expanded from former 1.15(e)(3), and many provisions were added regarding the financial institutions.

For the full text of new Rules 1.15A through 1.15E, click here. For all of the Colorado Supreme Court’s rules changes, click here.

Colorado Supreme Court: Public Censure Appropriate Remedy Where Attorney Engaged in Negligent Conduct

The Colorado Supreme Court issued its opinion in In the Matter of Olsen on Monday, June 2, 2014.

Attorney Discipline—Colo. RPC 3.1 and 8.4(d).

In this attorney discipline proceeding, The Supreme Court held that the hearing board’s order suspending attorney John R. Olsen for six months with the requirement of reinstatement was unreasonable. The hearing board found that Olsen engaged in negligent conduct, not knowing falsehood. After reviewing prior decisions and the American Bar Association’s Standards for Imposing Lawyer Sanctions, the Court concluded that the appropriate sanction against Olsen was public censure. Accordingly, the Court affirmed the hearing board’s conclusions that Olsen violated Colo. RPC 3.1 and 8.4(d), but reversed its imposition of a six-month suspension with the requirement of reinstatement and instead ordered that Olsen be publicly censured for his misconduct.

Summary and full case available here.