The State Bar seeks public comment on Proposed Formal Opinion Interim No. 21-0003 (Ethics of In-House Counsel)
Deadline: May 27, 2025, 11:59 p.m. (60 days)
Comments should be submitted using the online Public Comment Form. The online form allows you to input your comments directly and can also be used to upload your comment letter and/or other attachments.
The State Bar Standing Committee on Professional Responsibility and Conduct (COPRAC) is charged with the task of issuing advisory opinions on the ethical propriety of hypothetical attorney conduct. In accordance with applicable State Bar policy and procedure, the committee shall publish proposed formal opinions for public comment. (See State Bar Board of Trustee Resolutions July 1979 and December 2004. See also, Board of Trustee Resolution November 2016.)
Proposed Formal Opinion Interim No. 21-0003 considers:
The opinion interprets rules 1.0.1, 1.7, 1.8.1, and 1.13 of the Rules of Professional Conduct of the State Bar of California.
The opinion digest states: In-house lawyers are often offered employee stock options or grants as part of their compensation package. In a typical attorney-client relationship—which is inherently imbalanced in favor of the attorney—taking stock of a client requires compliance with rule 1.8.1: the transaction must be fair and reasonable; the lawyer’s role in the transaction must be fully and plainly disclosed to the client in writing; and the client is advised in writing to consult with independent counsel about the transaction. The client must then provide written consent to the transaction. This rule applies in the in-house context, even if the lawyer is offered the same general compensation terms as those offered to other employees and indicia of inequality do not exist.
Stock ownership may likewise trigger a material limitation conflict under rule 1.7, paragraph (b) if there is a significant risk that the in-house lawyer’s representation will be materially limited by their financial interest in connection with their stock ownership. Such a conflict could arise if the lawyer is asked to advise the company concerning a transaction that affects the character or price of the stock, such as a merger or acquisition. If so, the lawyer must obtain informed written consent from an authorized constituent of the company. If the lawyer does not reasonably believe they can competently represent the company due to the conflict, or if the company refuses to consent to the conflict, the lawyer must refer the matter to nonconflicted in-house counsel or outside counsel.
At its March 14, 2025 meeting and in accordance with its procedures, the State Bar Standing Committee on Professional Responsibility and Conduct tentatively approved Proposed Formal Opinion Interim No. 21-0003 for an additional 60-day public comment distribution. COPRAC especially welcomes comments from in-house counsel, whose professional experience with corporate compensation structures and equity-based benefits provides valuable perspective on how these proposed guidelines would function within the unique attorney-client relationship of organizational employment.
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State Bar Standing Committee on Professional Responsibility and Conduct
May 27, 2025, 11:59 p.m.