House Bill 1335

AN ACT TO CREATE THE HONESTY IN LAWYERING ACT; TO REQUIRE ATTORNEYS TO MAKE CERTAIN DISCLOSURES REGARDING FEE ARRANGEMENTS; TO PROVIDE THAT ATTORNEYS MAY BE SUBJECT TO CERTAIN PENALTIES; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. This act shall be known and may be cited as the "Honesty in Lawyering Act."

SECTION 2. The Legislature finds that:

(a) State courts have held that legislatures have constitutional authority to enact legislation affecting business or entrepreneurial aspects of the practice of law, as well as attorney misconduct that is against the public interest;

(b) The severity and number of high-profile episodes of unlawful or deceitful attorney practices nationally have exposed specific laws and rules, regulating either attorney business practices or misconduct against the public interest, that may not assure the public that such misconduct will be timely exposed or that the laws and rules will be adequately enforced in Mississippi; and

(c) Legislating specific measures to guard against such attorney misconduct is essential for protecting consumers and the public interest.

SECTION 3. (1) An attorney admitted to The Mississippi Bar or otherwise permitted to practice law in Mississippi shall be required to comply with the following standards in his or her relations with any client, potential client or other member of the public:

(a) The attorney shall affirm in writing any agreement to provide legal services that the attorney, and/or those with whom he is in partnership or are otherwise employed by or affiliated with the attorney's entity of legal practice, possesses the ability, time, and resources to provide those legal services adequately and competently.

(b) The attorney shall fully disclose, in any agreement to provide legal services, any agreement or intent for an outside counsel, defined as an attorney not in partnership with or employed by the attorney's entity of legal practice, to provide any of the legal services pursuant to the agreement. The disclosure shall include the scope and reasonably anticipated costs associated with engaging such outside counsel. The attorney must amend the agreement and receive the client's written consent to engage an outside counsel should the agreement or intent to engage the outside counsel arise after the agreement is effectuated.

(c) In any contingent fee agreement, defined as any agreement to provide legal services where the attorney's fee is contingent, in whole or in part, upon a judgment being rendered in favor of or a settlement being obtained for a client and is either a fixed amount or an amount to be determined by a specified formula, including, but not limited to, a percentage of any judgment rendered in favor of or settlement obtained for the client, the attorney shall:

(i) Fully disclose all fees and costs reasonably anticipated to be incurred to provide the legal services, and provide an explanation of how the contingent fee will be calculated and the manner in which costs will be handled, both while the matter is pending and at resolution.

(ii) Disclose the reasonably anticipated number of hours each attorney is likely to spend to provide said legal services.

(iii) Provide a client with three (3) business days to review and cancel the agreement, and the attorney shall conspicuously disclose in the agreement this right to cancel.

(iv) Not acquire from a client absolute authority to control major decisions in the matter.

(v) During representation, have a duty to communicate timely and adequately so that a client is properly informed about his or her matter when the client inquires. The attorney shall also provide clients in a reasonable time with copies of any complaint, any answer or reply, and any other pleading or document served or received in the matter that materially impacts the client's interests in the matter. The attorney shall notify the client in a reasonable time of any settlement offer, dispositive motion, court ruling and other material development affecting the client's principal interests.

(vi) If he or she becomes entitled to compensation or reimbursement of costs under that contingent fee agreement, provide the client, or the lead plaintiff(s) and the court in a public filing where the attorney represents a class, with a signed closing statement at the time of or prior to the receipt of such compensation or costs and a complete accounting of all financial transactions related to the provision of legal services, including:

1. The amount of the contingent fee, including any division of the contingent fee with any outside counsel;

2. The number of hours each attorney spent providing the legal services;

3. The resulting fee per hour, determined by dividing the total contingent fee in one (1) by the total number of attorney hours in two (2);

4. An itemized accounting of all costs; and

5. Any other information the attorney considers appropriate.

(d) The requirements of paragraph (c) of this section do not apply where the client is a nongovernmental entity deemed to be a knowledgeable consumer of legal services, which is defined for the purpose of this provision as a sole proprietorship, or other business entity that:

(i) Employs or otherwise retains a legal officer whose responsibilities include review of an agreement for legal services;

(ii) Employs at least thirty (30) employees during the calendar year for at least one thousand two hundred fifty (1,250) hours of employment per employee; or

(iii) Signs a written waiver, as a separate instrument from the agreement for legal services, of these requirements that expressly states each requirement being waived. An attorney who relies in good faith on the client's representation that its business meets the requirements of paragraph (d) of this section shall not be liable for any violation of paragraph (c) of this subsection.

(e) Where an attorney maintains a fiduciary or escrow account for receiving or holding funds on behalf of a client and the collective deposits in the account from matters in which the attorney was retained under contingent fee agreements exceed One Million Dollars ($1,000,000) during a calendar year, the attorney shall sign and file with The Mississippi Bar a certification from an outside financial expert that the account has been maintained in accordance with all applicable laws and regulations. For the purposes of this paragraph (e), an outside financial expert shall be a person not in partnership with or employed by the attorney's entity of legal practice who, through education and experience as a licensed public accountant or auditor or a principal financial officer, comptroller, or principal accounting officer, possesses a comprehensive understanding of generally accepted accounting principles and financial statements, and experience with internal accounting controls and audit committee functions.

(f) The attorney shall be subject to the requirements, enforcements and remedies of Chapter 24, Title 75, Mississippi Code of 1972, for any advertisement, public statement, or communication to a potential client.

(2) The attorney shall initially, and timely thereafter as warranted, certify to the court in a disclosure statement served on the parties in the matter the following:

(a) The existence of any financial, familial, or material personal relationship the attorney or the party the attorney is representing has with any judge, juror, witness, mediator, magistrate or other person who is in a position to directly and materially impact the matter. This requirement shall not include any campaign contribution that has been reported or is reportable.

(b) The existence of any financial relationship that the attorney, the party the attorney is representing, or the attorney's entity of legal practice has with a trustee, vendor, or other person receiving funds for products or services directly related to the prosecution or resolution of the matter.

(c) That all factual information contained in a claim, pleading, motion, brief, or other written material or written statement prepared or signed by the attorney and submitted to the court or served on a party in the matter is not false based on the attorney's reasonable belief and is not inconsistent with any other claim made against any person or entity for the same injury.

(3) Any disclosure by the attorney pursuant to subsection (2) of this section shall include disclosures for all attorneys who have provided legal services in the matter to the party.

SECTION 4. The provisions of this act shall be in addition to and not in lieu of any other available remedies or penalties, including any ethics rules applicable to attorneys that provide additional protections for legal consumers. An attorney who fails to comply with the provisions of this act shall be subject to court sanctions, disciplinary action by the state bar association or other such professional organization through existing procedures, and civil liability in an action brought by a party alleging injury from failure to comply with this act. A party alleging injury from failure to comply with this act shall elect as between the civil liability relief granted by this section and the remedy granted by Section 3 of this act.

SECTION 5. This act shall take effect and be in force from and after July 1, 2016.