Can South Carolina local counsel serve as a passive 'potted plant' for pro hac vice out-of-state counsel and get a prospective waiver of any malpractice claim?

Plain-English summary

Attorney X, licensed in New York and admitted pro hac vice to represent a New York corporation in a South Carolina circuit court, was required by the court's order to retain Attorney Y as local counsel of record. To minimize expense, Attorney X and the client asked Attorney Y to do nothing but "sign all papers and attend all proceedings," acting otherwise as a "potted plant." Attorney Y was willing, but only if Attorney X and the client waived in writing any future malpractice claim, since Attorney Y would not review the file enough to be prepared "at all times" to assume full responsibility as SCACR 404(f) requires. The committee was asked whether Attorney Y would violate Rule 1.8(h), which restricts prospective agreements limiting a client's malpractice claims.

The committee explained that under Rule 1.8(h) a prospective limitation on malpractice liability is valid only if (1) permitted by law and (2) the client is independently represented in making the agreement. The second requirement was satisfied because the client was represented by Attorney X in connection with the waiver. The first requirement was the hard one and turned on SCACR 404(f), a question of law the committee does not resolve; but the committee observed that the rule, as amended effective July 1, 2002, requires the local attorney of record to be prepared at all times to assume full responsibility for the case, not merely to sign papers and appear, so discharging that obligation likely requires more than acting as a "potted plant."

The committee noted that if Attorney X and Attorney Y were attempting to circumvent the court's rule, they could be held in violation of it, which would make the waiver not "permitted by law" and therefore a violation of Rule 1.8(h). It added that the arrangement could violate Rule 3.4(c), which forbids knowingly disobeying an obligation under the rules of a tribunal, and Rule 8.4(e), because court rules requiring the participation of local counsel exist to better administer justice, so circumventing them could be conduct prejudicial to the administration of justice. Because Rule 404 had been so recently amended, the committee recommended compliance with the rule or a request for relief from the court hearing the case.

In practice

Under the South Carolina rules as they stood at the time of the opinion, the committee held that the validity of a prospective malpractice waiver under Rule 1.8(h) depends on its being permitted by law, that SCACR 404(f) likely requires local counsel to do more than act as a passive signatory, and that structuring local counsel as a "potted plant" with a prospective waiver could violate Rule 1.8(h), Rule 3.4(c), and Rule 8.4(e). The committee treated the meaning of SCACR 404(f) as a legal question outside its charge and recommended compliance or seeking relief from the court. South Carolina revised its Rules of Professional Conduct effective 2005, and court rules can change; verify the current text of Rule 1.8(h), Rule 3.4(c), Rule 8.4(e), and SCACR 404 before relying on the specific provisions cited.

Common questions

Q: Can South Carolina local counsel agree to be a passive "potted plant" for pro hac vice counsel?

A: The committee concluded that SCACR 404(f) likely requires the local attorney of record to be prepared at all times to assume full responsibility for the case, which is more than signing papers and appearing, so a purely passive role likely does not satisfy the rule.

Q: Is a prospective waiver of malpractice claims ever allowed?

A: The committee concluded that under Rule 1.8(h) such a waiver is valid only if it is permitted by law and the client is independently represented when making it; here the client was independently represented, but whether the waiver is permitted by law turned on compliance with SCACR 404(f).

Q: What other rules could a "potted plant" arrangement violate?

A: The committee concluded it could violate Rule 3.4(c) (knowingly disobeying an obligation under the rules of a tribunal) and Rule 8.4(e) (conduct prejudicial to the administration of justice), because local-counsel rules exist to better administer justice.

Q: What did the committee recommend doing instead?

A: Because SCACR 404 had recently been amended and its scope was uncertain, the committee recommended complying with the rule or requesting relief from the court in which the case is pending.

Background and rules framework

The opinion interprets South Carolina RPC 1.8(h) (prospectively limiting malpractice liability), 3.4(c) (disobeying a tribunal's rules), and 8.4(e) (conduct prejudicial to the administration of justice), corresponding to the like-numbered Model Rules, against South Carolina Appellate Court Rule 404(f), which (as amended effective July 1, 2002) requires the local attorney of record to be prepared at all times to assume full responsibility for the case. The committee also referenced the parallel federal Local Civil Rule 83.I.06 (DSC).

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.8(h) / Model Rule 1.8(h): prospectively limiting a lawyer's malpractice liability.
• South Carolina RPC 3.4(c) / Model Rule 3.4(c): knowingly disobeying an obligation under the rules of a tribunal.
• South Carolina RPC 8.4(e) / Model Rule 8.4(d): conduct prejudicial to the administration of justice.

Other authority:

• S.C. App. Ct. R. 404(f) (responsibilities of local counsel for pro hac vice admission), amended effective July 1, 2002.
• Local Civil Rule 83.I.06 (DSC) (participation of local counsel).

See also

• ABA Formal Op. 504: Choice of law under Model Rule 8.5
• ABA Formal Op. 495: Lawyers working remotely

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-03-01/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 03-01

Factual Summary
Attorney X, licensed in New York, has been admitted pro hac vice, to represent a New York corporation in a civil case pending in a circuit court in South Carolina. As required by the Court’s Order, Attorney X retains Attorney Y, an attorney licensed in South Carolina, as local counsel of record. Attorney X and his client, who wish to minimize legal expense, request that Attorney Y do nothing except “sign all papers and attend all proceedings.” In all other respects, Attorney Y is to act essentially as a “potted plant.”

Attorney Y is willing to agree to this arrangement, provided that Attorney X and his client waive in writing any future legal malpractice claim that may arise as a result of the representation, since, under the terms of the representation, Attorney Y will not undertake sufficient review of the file or other work necessary to be prepared “at all times” to assume full responsibility for the case as required by South Carolina Appellate Court Rule 404(f). Attorney X and his client are willing to agree to the prospective waiver.

QUESTION PRESENTED
Is Attorney Y in violation of the Rules of Professional Conduct, specifically Rule 1.8(h) prohibiting prospective agreements limiting client malpractice claims?

SUMMARY
Under Rule 1.8(h) agreements limiting prospective malpractice liability are valid if (1) permitted by law and (2) the client is independently represented in making the agreement. On the facts presented, the second requirement is met because the client is represented by Attorney X in connection with the agreement limiting Attorney Y’s malpractice liability. The determination of whether the agreement is permitted by law involves interpretation of SCACR 404(f) dealing with the responsibilities of local counsel when out-of-state counsel is admitted pro hac vice. This issue is a legal question beyond the scope of the Committee’s authority. However, the rule likely requires more than the very limited role contemplated by Attorney Y. In addition, Rule 3.4(c) prohibits attorneys admitted to practice in South Carolina from knowingly violating the rules of a tribunal and Rule 8.4(e) forbids conduct “prejudicial to the administration of justice.”

ANALYSIS
Effective July 1, 2002, Rule 404 of the South Carolina Appellate Court Rules was amended. As amended, Rule 404(f) requires that the attorney of record be prepared at all times to assume full responsibility for the case, as well as sign all papers and attend all proceedings.[1]

Rule 1.8(h) of the Rules of Professional Conduct states:
A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement, or settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith.

Under Rule 1.8(h) agreements limiting prospective malpractice liability are valid if (1) permitted by law and (2) the client is independently represented in making the agreement. On the facts presented, the second requirement is met because the client is represented by Attorney X is connection with the agreement limiting Attorney Y’s malpractice liability. The issue of whether the agreement is permitted by law is more complex.

Although it is not within the scope of this Committee’s charge to resolve questions of law, it is apparent that Attorney X and Attorney Y are attempting to circumvent a rule of the Court. While the Committee can offer no opinion regarding the meaning of the requirement that a local attorney “shall at all times be prepared to go forward with the case; sign all papers subsequently filed; and attend all subsequent proceedings in the action,” it is likely that discharge of this obligation would require more than acting as a “potted plant.” Attorney X and Attorney Y may be held in violation of the rules of court.[2] If so, the agreement would violate Rule 1.8(h) because it would not be permitted by law. In addition, the agreement would violate Rule 3.4(c) which provides that a lawyer shall not “knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists.”

Rule 8.4 of the Rules of Professional Conduct generally addresses various categories of professional misconduct. Rule 8.4(e) specifically prohibits a lawyer from engaging “in conduct that is prejudicial to the administrative of justice.” Arguably, court rules requiring the appearance and participation of local South Carolina counsel exist to better administer justice within the state. Accordingly, circumvention of these court rules would be a violation of Rule 8.4(e).

Because South Carolina Appellate Court Rule 404 has been so recently amended, it is unknown at present the scope or meaning of the language at issue. For this reason, the Committee recommends compliance with the rule, or a request for relief from the court in which the case is pending.[1] The Federal District Court Local Rules have a similar provision which provides “local counsel shall be present at all pretrial conferences, hearings and trials, and may attend discovery proceedings. Local counsel is expected to be prepared to actively participate if necessary.” Local Civil Rule 83.I.06 DSC.[2] Note that Attorney X, while not licensed to practice in South Carolina, necessarily expressly agreed to be subject to all local court rules when appearing pro hac vice. See, SCACR 404(c)(9) and Local Civil Rule 83.I.05 DSC.