The Law for Lawyers Today

The Law for Lawyers Today

Ethics, Professional Responsibility and More

Violating confidentiality order results in lawyer’s DQ and referral to state ethics board

Posted in Confidentiality, Disqualification, How Not to Practice

Confidentiality stampCourts often analyze motions to disqualify by balancing the need to uphold professional standards against the rights of clients to choose their lawyers freely.  The New Jersey court of appeals struck that balance earlier this month in upholding the disqualification of a lawyer who violated a confidentiality order, finding that the lawyer knowingly disobeyed a court order, among other violations.

Looking for class action plaintiffs

The lawyer sued a car dealership and others in a putative class action, alleging fraud and the violation of various state consumer statutes.  The parties agreed on and the court entered a confidentiality order that allowed any party to designate confidential documents produced in discovery as “Attorneys’ Eyes Only.”

The confidentiality order mandated that the parties could use such material “solely for purposes of the prosecution or defense of this action.”

After several twists and turns, the suit was trimmed of its class allegations and proceeded solely against the dealership.

However, as the trial court wrote, “lo and behold, after the dealer produced the documents under the confidentiality order, a new [class action] lawsuit was filed in [another] county,” against the same defendant, based on the same theories, and initiated by the same lawyer, who admitted that she had used the “Attorneys’ Eyes Only” documents in soliciting the named class-action plaintiffs to file suit in the second action.

The lawyer claimed that this did not violate the confidentiality order; the trial court disagreed, and “relieved [the lawyer] from serving as plaintiff’s counsel” because of the violation.  The trial judge also referred the matter to the state Office of Attorney Ethics.  Following the client’s interlocutory appeal, the appellate division affirmed the disqualification order.

Inherent authority to impose DQ remedy

New Jersey’s Rule of Professional Conduct 3.4(c), identical to Model Rule 3.4(c), forbids a lawyer to “knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists.”

The appeals court held that the lawyer knowingly used materials designated as “Attorneys’ Eyes Only” to solicit clients and to initiate a separate lawsuit against the car dealership, and that the trial court had not abused its discretion in using its inherent powers to sanction the lawyer for her ethical violation by disqualifying her.

Quoting from its prior holdings on balancing the need for ethical conduct against client choice, the court of appeals said that “there is no right to demand to be represented by an attorney disqualified because of an ethical requirement.”

“We underscore that an attorney’s failure to conform to his or her ethical obligations may imperil their client’s right to counsel of their choice.”

Not only did the lawyer’s client lose out; the lawyer put her own license in jeopardy, with the court’s referral to the state disciplinary agency.

Filing administrative appeal without being admitted results in dismissal

Posted in How Not to Practice, Licensing

Untitled-1The client of a Colorado lawyer who filed an administrative appeal in North Dakota without being admitted there got a harsh result — the North Dakota Supreme Court ruled in Blume Construction v. State that the lawyer’s action was the unauthorized practice of law, and therefore that the client’s appeal was void.

Admission ticket required

Blume Construction had been assigned a penalty tax rate on its unemployment insurance, and hired a Colorado lawyer to appeal the determination.  Two days before the appeal deadline, the lawyer signed and submitted an electronic appeal request on behalf of Blume, giving the basis for the appeal, summarizing several statutory provisions and requesting relief.  Local practice rules required the lawyer to move for pro hac vice admission within 45 days of filing the appeal request; the lawyer did not do so.

In fact, at least 30 days before the scheduled administrative hearing on the appeal, the lawyer notified the referee that he could not secure a sponsoring attorney licensed in North Dakota, as required for pro hac vice admission, and Blume, the client, told the referee that a North Dakota lawyer would represent Blume instead.

On the morning of the administrative hearing on the appeal, the referee became aware that the notice of appeal had been filed by the Colorado lawyer.

The hearing was cancelled, and the referee ruled that filing an administrative appeal required North Dakota admission, and that Blume’s appeal request was void because it was filed by a nonresident lawyer not admitted to practice in the state; therefore, Blume was stuck with its penalty tax rate.  The intermediate court of appeals affirmed the referee’s decision.

No safe harbor

North Dakota’s version of Model Rule 5.5 provides safe harbor for some forms of temporary practice by out-of-state lawyers, including (1) “preparatory” efforts made by lawyers who intend to seek pro hac vice admission for the particular matter; and (2) services that the out-of-state lawyer carries out, but that could also be performed by non-lawyers.

Blume argued that filing the appeal request was merely preparatory, that its lawyer reasonably expected to be granted pro hac vice admission and, therefore, that the lawyer was within the safe harbor.  But the state supreme court disagreed, based on a 2009 case in which it had held that filing a request for reconsideration and being designated as counsel were not merely “preparatory.”

Blume also argued that a non-lawyer could have filed its administrative appeal, and therefore, that the Colorado lawyer did not need to be admitted in North Dakota.  Not so, said the court.  As a corporation, Blume couldn’t act through a non-attorney agent in a legal proceeding.  And the Colorado lawyer’s work in filing the appeal was more than clerical or just filling out a form; rather the lawyer applied legal skill and knowledge to the facts of the case.

Harsh result

With its harsh result — dismissal of Blume’s appeal — this case illustrates the risks to the client of unauthorized practice.  And, of course, lawyers who engage in unauthorized practice also put their licenses at risk.

Taking any action on behalf of a client before a tribunal in a jurisdiction where you are not admitted — or not yet admitted — requires close attention to several sources of authority in the jurisdiction you are headed for.  (Some lawyers make the mistake of looking to their home jurisdiction’s rules.)  You need to consider that jurisdiction’s ethics rules, its pro hac vice rules, its statutes, any applicable rules of court and its case law.  You may be under time pressure — as the Colorado lawyer was, with the client’s appeal deadline looming — but there is no substitute for knowing whether you have a safe harbor or a sinking boat.

Lawyers on hot seat after using paralegal to friend opposing party

Posted in Communication, How Not to Practice, Social Media and Internet

scientific_CloudComputing45Two New Jersey lawyers cannot avoid disciplinary charges arising from their use of a paralegal to friend a represented opposing party on Facebook, the state supreme court ruled recently.

We’ve written before about the perils of using Facebook to obtain information about opposing parties or to communicate with them.  This latest example involves a twist of particular interest to legal ethics wonks like me, because it also spotlights the issue of how disciplinary power is allocated between local and state ethics regulators.

“Will you be my friend?”

The two lawyers represented governmental defendants against the claims of a plaintiff injured after being hit by a police car.  The lawyers directed their paralegal to search the Internet to obtain information about the plaintiff, and in response, she accessed his Facebook page.  Initially, the page was open to all, but later, the plaintiff changed his privacy settings to limit access to “friends.”

It is alleged that the two lawyers then instructed the paralegal to access and continue to monitor the non-public parts of the plaintiff’s Facebook account.  In response, she submitted a friend request to the plaintiff — but she did not reveal that she worked for the law firm representing the defendants in the case, or that she was investigating him as part of the case.

The plaintiff — who was represented by counsel — accepted the friend request, and so the paralegal was able to get information from the non-public parts of his account.

The plaintiff learned about the lawyers’ actions after they sought to add the paralegal as a trial witness and produced printouts from the plaintiff’s Facebook page and his friends’ pages.  He filed a grievance with the local New Jersey District Ethics Committee, asserting that contacting him through Facebook without going through his own attorney constituted an ethical violation.

The local committee, however, declined to docket the grievance; the committee advised the plaintiff that the allegations, if proven, would not be a violation of the New Jersey Rules of Professional Conduct.

Who’s in charge?

But that was not the end of the matter.

The plaintiff’s lawyer filed a grievance directly with the state-level disciplinary body, the Office of Attorney Ethics, which, in New Jersey’s disciplinary system, has parallel jurisdiction.  The director investigated and filed a complaint against the lawyers alleging violation of numerous rules, including New Jersey’s versions of Model Rule 4.2 (communicating with a person represented by counsel); Model Rule 5.3 (failure to supervise a non-lawyer assistant); Model Rule 8.4(a) (violating the ethics rules by inducing another person to violate them); and Model Rule 8.4(c) (conduct involving dishonesty, fraud, deceit and misrepresentation).

The lawyers denied any violations — including asserting that they acted in good faith and were “unfamiliar with the different privacy settings on Facebook.”  Later, they asked the OAE to withdraw the complaint, arguing that procedurally, the state-level OAE could not proceed against them after the local-level district committee had declined to do so.  The OAE would not withdraw the complaint.

State supreme court:  “You’re on the hook”

That sent the case out of the disciplinary system and into the state court system, eventually ending up in the state supreme court.  On April 19, the court ruled that under New Jersey’s “robust disciplinary system,” the action of the local committee in declining the grievance would not “close off further inquiry” at the state level if the grievance presented “an important, novel issue as to which there is little guidance,” or if the allegations involved “egregious, unethical conduct.”

Bottom line:  The two lawyers will have face the ethics charges against them, notwithstanding the pass they got the first time around at the local level.  (Be aware that your own jurisdiction may have disciplinary procedures that are quite different from New Jersey’s.)  Stay tuned — and in the meantime, be very careful when using social media to investigate litigants.  Several jurisdictions have ethics opinions that point to the pitfalls, and provide specific guidance on how to stay out of trouble when doing so.  The New York State Bar Association guide to social media ethics issues, published last year, collects many of the significant opinions.

Panama Papers spotlight danger of failing to screen for problem clients

Posted in How Not to Practice, Law Practice Management

Business DeterminationThe leak of millions of documents apparently hacked from Panama-based law firm Mossack Fonesca has exposed the tax strategies of some of the world’s elite.  But the Panama Papers also shine a light on some failures of Mossack Fonesca to screen out problematic clients — failures of due diligence that the firm itself recognized.

Petropars and the Iranian connection

Mossack Fonesca rose to prominence at the same time that Panama was emerging as a center for offshore banking activity, as a New York Times article explains.  When the International Consortium of Investigative Journalists obtained the document trove now known as the Panama Papers, Mossack Fonesca’s own internal communications showed that it had represented dozens of companies and people on various U.S. government blacklists — despite internal firm policies that should have screened out such clients, the ICIJ said.

One case in point is Petropars Ltd., which the ICIJ described as an Iranian-government- controlled intermediary between foreign companies and Iran’s oil ministry.  Through its offices in Dubai and London, Petropars was also a player in the development of Iran’s multibillion-dollar South Pars natural gas field.

The Clinton administration banned U.S. involvement with Iranian oil development back in 1995; in 2010, the U.S. Treasury sanctioned Petropars, and put it on the Office of Foreign Assets Control’s blacklist.  The list is of individuals and companies connected with sanctioned countries, regimes, entities and people targeted as threats to U.S. security or policy.

The links between Petropars and the Iranian government had surfaced in 2001, when the company was investigated for possible corruption in handing out oil and gas contracts, and the conduct of the Iranian Oil Minister came under scrutiny, as the New York Times reported at the time.

Mossack Fonesca incorporated Petropars in the British Virgin Islands in 1998; the firm represented Petropars until 201o, when Jurgen Mossack, one of the firm’s founders, learned that Mossack Fonesca’s BVI post office box address had been listed as Petropars’ address in OFAC’s blacklist entry for the company.

“This is dangerous!”

Mossack raised the alarm in an internal e-mail addressed to the firm’s “Compliance Department,” among others.  He wrote “This is dangerous! … Everybody knows that there are United Nations sanctions against Iran and we certainly want no business with regimes and individuals from such places.”

He called into question how Petropars had been vetted as a firm client to begin with, and blasted the firm’s United Kingdom office:  “It would appear Mossfon UK are not doing their Due Diligence [sic] thoroughly (or maybe none at all), and maybe from now on we ourselves will have to do the DD on all clients that Mossfon UK have with us, present and future!”

Mossack wrote that “Anybody having had to do anything with this company [sic], … should have realized immediately that the names associated with it were Iranian names.  A red flag should have been raised immediately.”

The firm resigned as Petropars’ registered agent in October 2010.

Red flags, the duty to supervise, and avoiding problems

Later, in 2012, the firm’s audit of its London office concluded that the outpost had “no procedure in place” for “handling high-risk politicians, family and associates” and was not even conducting Internet searches to screen potential clients, according to the ICIJ.

Of course, Mossack Fonesca is not a U.S. law firm, and as such neither OFAC’s sanctions list nor our Rules of Professional Conduct apply to it.  But its founder certainly recognized the trouble it was courting by the apparent breakdown in its system of evaluating and screening potential clients.  For lawyers operating under U.S. rules, even without considering whether a firm is being used to assist client wrongdoing (see Model Rule 1.2(d)), agreeing to represent a client on OFAC’s sanctions list is not a wise move.

Engaging  in conduct that is prejudicial to the administration of justice violates Model Rule 8.4(d).  And under Rule 5.1, law firm managers must make reasonable efforts to have measures in place to ensure that firm lawyers are following the ethics rules.  Moreover, a “supervisory lawyer” can be responsible for another lawyer’s ethics violations, either by ratifying them or by failing to take remedial action against known ethics lapses.

Take home lesson:  If any component of your practice is international, and even if not, your client intake process should include thorough vetting, and close examination of relevant U.S. government sanctions lists.

Unpaid legal interns’ work can be billed to clients as fees or costs, NY state bar ass’n says

Posted in Communication, Fees, Law Practice Management

Unpaid internshipsIn today’s soft legal services market, some aspiring members of the profession feel pressure to work for free, but the fairness of such arrangements in general has come under scrutiny.  In a twist (and just in time for the summer crop of interns), the New York State Bar Association earlier this month said that law firms can bill clients for services provided by unpaid legal interns, as long as the amount is not excessive, and the internship program complies with applicable law.  If charged to clients as an expense, the law firm can build in its overhead costs, such as for supervising the intern, the Committee on Professional Ethics said in its Opinion 1090.

U.S. DOL standards judicially rejected

Last summer, the Second Circuit refused to apply U.S. Department of Labor standards barring employers from deriving immediate economic advantage from unpaid interns, in favor of a non-exhaustive set of considerations that focus on what the intern receives in exchange for the work.  The ruling overturned the grant of class certification in a wage case against Fox Entertainment.  The Second Circuit also upheld a trial court denial of class certification in another intern wage case against Hearst Corp.

Many law schools place students with private-sector employers who do not pay them; but the interns do benefit in some cases by getting academic credit.  Whether and how clients can be billed for the work of such credit-earning interns was the subject of a law firm inquiry.

Billing intern work as fees vs. expenses

In response to the inquiry, the NYSBA ethics committee said that there was nothing in the state’s ethics rules that would prohibit a law firm from billing clients for the services of a law student-intern on either a fee basis or as an expense to the firm, even if the firm didn’t pay the intern or the law school.

The state’s version of Model Rule 1.5(b) mandates communicating to the client “the basis or rate of the fee and expenses,” and under Rule 1.5(a), as interpreted by previous opinions, neither the fee nor any expenses may be “excessive” — defined as one where a “reasonable lawyer would be left with a definite and firm conviction” that it is too much.  Nothing in the opinion appears to require the firm to inform the client that although the intern receives academic credit, the firm is not compensating the intern.

While the firm could bill the student’s work to the client as legal fees (by the hour or per task, for instance), the committee also approved the possibility of billing the work as an expense instead.  In that case, the committee said, “the lawyer may charge the client ‘either … an amount to which the client has agreed in advance or … an amount that reflects the cost incurred by the lawyer’ to sponsor the intern (e.g., the cost of supervising the intern).”

In other words, although the law firm does not have any direct costs in connection with using an unpaid intern, it does incur overhead costs, and may peg the expense value of the  intern’s work to include those costs to the firm.

ABA opinions on billing

The NYSBA’s opinion tracks the ABA’s 1993 opinion on billing issues.  There, the ABA ethics committee said that in the absence of disclosure, it is improper to mark up expenses such as taxis and meals charged to the client unless the lawyer herself has incurred additional expenses beyond the actual cost of the disbursement item.  Later, in 2000, the ABA’s committee expanded the same principles to cover the work of temporary or contract lawyers.  This most recent New York opinion continues the same line of reasoning to support using the lawyer’s overhead cost to value an unpaid intern’s work when it is charged to the client as an expense.

The social justice aspect of using unpaid interns is hotly debated; but at least in New York, lawyers and firms have some guidance about the rules of the road in billing clients.

“Don’t they have e-filing where you come from?” Tech-challenged lawyer dodges suspension

Posted in Competence, Social Media and Internet

Arrrgh Button on Modern Computer Keyboard.My spouse and I visited Chicago years ago, and confusedly started driving the wrong way down a one-way street.  We were promptly pulled over by one of the Windy City’s finest.  I gave him my best smile, and said, “Sorry, officer, we’re from out of town.”  He grunted, “Don’t they have one-way streets where you come from?”  But he didn’t give us a ticket.  A recent disciplinary opinion out of Oklahoma, involving a tech-challenged bankruptcy lawyer, brings the story to mind.

E-filing woes bring bankruptcy court discipline

The lawyer in Oklahoma Bar Ass’n v. Oliver was admitted to practice in 1967, and represented clients in federal bankruptcy court for almost 30 years.  He ran into problems complying with the bankruptcy court’s electronic pleading requirements, which he acknowledged were caused by his lack of computer skills.  The bankruptcy court tried to work with the lawyer; its staff gave him personalized help on more than one occasion, but to no avail.  There was evidence that in his frustration, the lawyer even “insulted court staff when the Bankruptcy Court refused to bend the rules for him.”

These problems led the Bankruptcy Court for the Western District of Oklahoma first to suspend the lawyer from practice for 30 days in 2014 and then, in January 2015, to suspend him for 60 days.

At that point, the bankruptcy court took the unusual step of assigning the lawyer nine pages of “homework” to complete in order to demonstrate his technological competence and ability to conform to the court’s electronic filing procedures.  The lawyer flunked; the court charged him with getting unauthorized help with the “homework” (he strongly disputed that), and finally, in June 2015, permanently suspended him from practicing in that court.

In violation of the Oklahoma rules of practice, the lawyer failed to report his suspension to the state bar regulators; he claimed this was an oversight resulting from ignorance of the rule.

No tech knowledge?  No problem in OK.

But in its proceeding to determine whether to impose reciprocal discipline on the lawyer, a divided  Supreme Court of Oklahoma only saw fit to publicly censure the lawyer.  Refusing to suspend him for any amount of time, the court said that the lawyer’s “problem was technological proficiency.  This in itself, does not disqualify him from practicing law in the courts of Oklahoma.”

In their dissent, two judges said that the bankruptcy court’s series of disciplinary orders “reveal an attorney not only unable to meet the minimum requirements of modern bankruptcy practice but also one unwilling to make any substantial effort to do so.”  The dissenters were “unconvinced Respondent will represent future clients with any more competence than he displayed in his bankruptcy practice.”

Don’t be a legal Luddite

So what’s up Oklahoma?  As the Chicago cop asked us so many years ago (kinda), “Don’t you have e-filing in your state courts?”  And as the dissenting justices asked in this case, will this lawyer do any better in meeting the tech requirements — or the soon-to-be requirements — inherent in modern law practice before the tribunals of the Sooner State?

Oklahoma’s Rule 1.1, titled “Competence,” requires a lawyer to possess the legal knowledge and skill reasonably necessary for each representation.  And comment [6] advises that maintaining the requisite knowledge and skill means keeping abreast of changes in the law and its practice.  Being a legal Luddite doesn’t really pass muster under the ethics rules, as we’ve had a couple occasions to note before.

At the very least, technophobes should hire someone to do what they think they can’t learn to do, or they might risk an actual suspension, like the one the Kansas Supreme Court issued in 2008 to another bankruptcy lawyer who (among other things) failed to get up to speed on e-filing.

Seems like this Oklahoma lawyer, like we did in Chicago, escaped without a ticket.

No duty to raise claims unless “viable,” even if they are “colorable,” says court

Posted in Malpractice

Thumbs up and downA lawyer’s duty of care to a client does not include raising claims on the client’s behalf that are merely “colorable,” and not actually “viable,” the Oregon Supreme Court held last month.  The court said that a “colorability” standard would only promote “scorched earth litigation,” and expose lawyers to malpractice liability based on “hindsight bias.”

Plummeting real estate market — and shareholder oppression

In Rowlett v. Fagan, the plaintiff was a real estate developer who had organized an LLC to develop some valuable properties.  When the two other members of the business took actions the plaintiff viewed as unfair to his interests, he sought legal advice from a large Pacific Northwest regional firm.

The firm filed a demand for arbitration based on breach of fiduciary duty.  The case went into hiatus at that point.  Two years later, the firm amended the arbitration demand and added a claim based on “shareholder oppression.”  But in the meantime, the plaintiff’s two partners had ousted him from the LLC and cut him out of a $5.8 million distribution.

The court dismissed the arbitration claim for lack of prosecution; the firm then filed a complaint on the plaintiff’s behalf, with the same claims and a $900,000 prayer for relief.

Fast forward one year.  The real estate market had dropped like a rock, and the defendant offered to settle for $200,000, which the plaintiff accepted.  Then he turned around and sued his lawyers, alleging, among several other things, that they were negligent in failing to recognize that the factual circumstances gave rise to a claim for shareholder oppression, and in not asserting that claim before the real estate market tanked, at a time when it might have provided some negotiating leverage.

“Colorable” vs. “viable”

The intermediate court of appeals had reversed the trial court’s dismissal of the plaintiff’s claim for negligent failure to timely press the oppression claim, holding that while Oregon law was not clear on whether an oppression claim against an LLC was actually cognizable, the claim was at least colorable, and therefore that the law firm had a duty to raise it.  Wrong, said the state supreme court.

The supreme court held that lawyers cannot be held to have breached a duty of care by failing to raise claims that are merely colorable.  Rather, a malpractice plaintiff must “prove the existence of ‘a valid cause of action or defense, which, had it not been for the attorney’s alleged negligence, would have brought about a judgment favorable to the client in the original action.'”  Thus, a lawyer has no duty to a client to take “‘colorable,’ but ultimately incorrect, legal positions.”

A “colorable” standard of duty “would place lawyers in an untenable position, given that, any time an area of law is unsettled, both sides arguably are ‘colorable,'” said the court.  In sum (and perhaps inadvertently in a catchy rhyme), “a lawyer cannot be held liable for failing to assert a claim that is colorable but not viable.”

Vulnerable to second-guessing

The court’s ruling in Rowlett is in line with what the court called the “universally recognized” idea that where the law is unsettled, as it was on the underlying issue of the oppression claim, a lawyer’s judgment call does not subject the lawyer to liability — even if the judgment, as seen in the rear-view mirror, turns out to have been mistaken.

Lawyers can’t necessarily disclose former client info, even if it’s “publicly available”

Posted in Confidentiality, How Not to Practice

StorageYou’re chatting with your pals at the bar association cocktail hour, and talk turns to the indictment just handed down against a former city official.  Someone says, “Hey, didn’t your firm used to represent her?”  “Yes,” you reply, “and a couple years ago, I had a really interesting case involving her.  Maybe I shouldn’t discuss it — but I guess it’s of public record, so….”  And with that, you’re off to the races, discussing your former client’s old case.  Have you done anything wrong, since it’s all “of public record”?

“Publicly available” vs. “generally known”

Model Rule 1.9(c)  says that when you have formerly represented a client in a matter, you shall not thereafter:

(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or

(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

Comment [8] notes that formerly representing a client “does not preclude the lawyer from using generally known information about that client when later representing another client.”

But significantly, just because information might be a matter of “public record,” or “publicly available” in a court filing, does not necessarily mean that it is “generally known” within the meaning of the ethics rules.  That’s the holding of a case decided last month by the Pennsylvania Superior Court, Dougherty v. Pepper Hamilton LLP, et al.

Disloyal use?

The ruling in Dougherty revives a union official’s suit against the Pepper Hamilton firm for breach of fiduciary duty.  The firm had formerly represented the official when he was subpoenaed by a grand jury as part of a federal bribery investigation.  An FBI affidavit was part of that investigation; it was later mistakenly filed on the federal court’s electronic PACER system.  Subsequently, the firm represented the Philadelphia Inquirer in defending a defamation suit by the same official against the newspaper.  In representing the newspaper, Pepper Hamilton used the FBI affidavit.

The official alleged that the firm breached its duty to him by using information from the former representation, including the FBI affidavit.  Pepper Hamilton countered that since the information was “publicly available,” it could not form the basis of a disloyalty claim.

The state court of appeals agreed with the official, reversing the lower court’s grant of summary judgment in favor of the law firm.

Duty of confidentiality not “nullified” by public record

Whether information is “generally known” for purposes of Rule 1.9, said the court, depends on the circumstances.  The court said that publicly-accessible electronic data could be “generally known” if it is easily accessible, such as through public indexes.  But information is not generally known if it would be difficult or expensive to obtain or would require special knowledge.

Quoting opinions from Ohio and West Virginia, the Dougherty court noted that “an attorney is not free to disclose embarrassing or harmful features of client’s life just because they are documented in public records or the attorney learned of them in some other way,” and that “the ethical duty of confidentiality is not nullified by the fact that the information is part of a public record or by the fact that someone else is privy to it.”

There were genuine issues of fact, the court said, about whether the FBI affidavit was actually “generally known,” and these questions were enough to keep the case against the law firm alive.

Your lips are sealed

In all, the safest thing to do at a cocktail party is to keep quiet about information you know as a result of formerly representing a client, even if you think that it is of “public record.”  That’s the best way to steer far clear of any chance of misconduct.  And when it comes to “using” information of a former client on behalf of another client, careful analysis is required before you conclude that the “generally known” exception applies.

Privilege shields internal firm discussions about conflict, N.D. Cal. magistrate rules

Posted in Conflicts, In-house Counsel, Privilege

Privilege.1Internal discussions among Orrick’s chief legal officer and other firm lawyers about a conflict of interest remain privileged under federal common law, a federal magistrate judge for the Northern District of California has held in quashing a third-party subpoena directed to the firm  — even though the firm still represented the client at the time of the discussions.  The opinion is the latest in a line of federal and state cases on the developing doctrine of law-firm privilege.

Intra-firm privilege claimed

In Loop AI Labs Inc. v. Gatti, et al., Loop alleged that its former CEO, Gatti, secretly worked for one of its competitors and misappropriated Loop’s trade secrets.

Orrick has not been involved in that litigation, but it represented Loop for almost three years, including in matters related to Gatti and her employment with Loop.  At the same time, Orrick also represented the competitor Gatti allegedly went to work for.

Loop served Orrick with a third-party subpoena for documents, including internal Orrick communications about the conflict of interest and the litigation between the parties.  In its motion for a protective order, Orrick asserted that as with any other client, a law firm is entitled to an attorney-client privilege covering confidential communications with its internal legal counsel.

Loop argued that federal common law recognizes a fiduciary exception to the attorney-client privilege, and that until Orrick withdrew from representing it in March 2015, Orrick had a fiduciary duty to act in Loop’s best interests.  Therefore, Loop contended, Orrick should not be permitted to withhold any internal communications with the firm’s in-house lawyers that took place during the representation.

“Fiduciary exception” does not apply

The federal magistrate judge rejected the argument.  She recognized the fiduciary exception, which other courts in the district had applied in legal malpractice cases, based on the 2007 decision in Thelen Reid & Priest LLP v. Marland.  The Thelen court had held that where there is a potential conflict of interest between a firm and its client, the firm may not withhold communications discussing potential claims of the client, known conflicts as to the client or known errors in representing the client.

But, said the magistrate judge, the court in Thelen also held that communications “reflecting consultations between the firm’s lawyers regarding the firm’s legal and ethical obligations to its client” remain shielded by privilege.  The policy announced in Thelen was that “[a] rule requiring disclosure of all communications relating to a client would dissuade attorneys from referring ethical problems to other lawyers, thereby undermining conformity with ethical obligations.”

Here, the magistrate judge found, the fiduciary exception did not apply:  there was no evidence that Orrick knew that Gatti was working simultaneously for Orrick’s conflicting clients.  Nor did Orrick know of any malpractice claim that Loop might have had.  And Orrick did not do any work for Loop after the firm became aware of the potential conflict.  Instead, Orrick took steps to evaluate its ethical obligations,  and withdrew from representing Loop two weeks later.

Developing privilege law for in-house firm counsel

We’ve written several times before about the developing law of privilege for in-house law firm counsel.  With some exceptions, the trend seems to be toward recognizing that “as with any other client, a law firm enjoys an attorney-client privilege covering confidential communications with its internal legal counsel,”  as the court said in this case.  The contested issues in this area appear to be on the application of the fiduciary exception.  Stay tuned.

Ticket to hell: Fla. judge resigns after taking Rays tix from law firm with pending case

Posted in How Not to Practice

Baseball ticketsA Florida judge resigned last week in the wake of a state judicial ethics investigation launched after he accepted baseball tickets from a law firm that was actively litigating a slip-and-fall case before him.  The judicial-ethics issue should be a no-brainer — but it is also a timely reminder for lawyers about some of the ethics rules governing their interactions with judges.

Overturned verdict

According to the Notice of Charges filed by the state Judicial Qualifications Commission, the judge was presiding over a negligence case against Wal-Mart during the summer of 2015.  After a four-day trial, the jury rendered a defense verdict.  The next day, the judge instructed his judicial assistant to ask the law firm representing the plaintiff for tickets to that night’s Tampa Bay Rays game against the Boston Red Sox.  The law firm obliged with tickets for five excellent seats.

Six days later, the law firm filed a motion to set aside the jury verdict and for a new trial on the plaintiff’s behalf.

Four days after the hearing on the motion, the judge asked the firm for more tickets to a game against the Twins, which the firm again provided.  The next day, the judge overturned the jury’s verdict and granted a new trial to the firm’s client, the plaintiff, holding that no reasonable jury could have found that Wal-Mart was not at least partly liable for the injuries to the firm’s client.

“Fess up…”

The Chief Administrative Judge of the judge’s circuit learned about the tickets and the timing of their receipt, and told him that the conduct was “inappropriate” and must be disclosed to the parties and to the Judicial Qualifications Commission.  The judge’s disclosure to the parties only stated that “I previously received Tampa Bay Rays baseball tickets” from the firm, without mentioning the damning timing of the requests.

The Commission, after its investigation, wrote that the judge’s “extraordinary action allowed the Plaintiff a second opportunity to seek damages from Wal-Mart,” although he had never before overturned a jury verdict during his tenure as judge.  The Commission noted two other instances where the judge accepted tickets to major league sporting events from other lawyers or law firms that appeared before him.


In his answer to the Commission’s charges of impropriety, the judge apologized.  He cited his relatively short time on the bench, and said he didn’t realize what he did “would adversely reflect on the judiciary and the administration of justice.”  He said that he had no improper intent and thought that he had to disclose his receipt of sports tickets only on his annual disclosure forms.  He denied that his conduct reflected unfitness to serve on the bench.

Fast forward:  The judge resigned his position as of March 7 (ahead of a disciplinary hearing scheduled for June), and the Commission voluntarily dismissed its charges against him.

What about the lawyers?

It’s possible that Florida’s disciplinary gears are already engaged against the lawyers involved in this sorry tale, although I don’t know that for a fact.

But Model Rule 3.5(a) bars lawyers from seeking to influence judges by means prohibited by law.  And Model Rule 8.4(f) prohibits knowingly assisting a judge in conduct that is a violation of applicable rules of judicial conduct or other law.  The Florida Rules of Professional Conduct incorporate substantially similar or identical provisions, and likewise advise lawyers to be aware of the state’s Code of Judicial Conduct and to “avoid contributing to a violation of such provisions.”

What’s the moral of this story as to lawyers?  Reserve those great sports tickets for your clients, and steer clear of anything that could put your license in jeopardy.