If you’re driving from state to state, the rules of the road are generally consistent.  While details may differ, a red light means “stop” in every state of the Union.  But under our federal system, each U.S. jurisdiction has authority to regulate the practice of law — and under the resulting state ethics rules, not only the details, but even some of the basics may differ.

That’s spotlighted in a district court opinion issued earlier this year, denying a motion to disqualify counsel in a defamation case because plaintiff was not a “prospective client” under South Carolina’s ethics rules.

“If there is no conflict”

The plaintiff sued ten John and Jane Does, alleging he was defamed in a blog post.  The plaintiff first threatened suit against the blogger, who hired counsel at a Greenville, S.C. firm, (“Wyche”).  Ten days later, plaintiff’s lead counsel reached out to a different lawyer at Wyche.  They discussed the possibility of the Wyche lawyer serving as local counsel for plaintiff, and plaintiff’s lead lawyer asked for a fee agreement “if there is no conflict.”  The Wyche lawyer took the relevant names “for conflict purposes,” provided the firm’s rates, and said in an e-mail that “I hope we get the opportunity to work together.”

You can see where this is going, right?  The next day, the Wyche lawyer — having discovered that the firm already represented the blogger — told plaintiff’s lawyer that the firm had a conflict and declined the representation.

Later, plaintiff issued a subpoena to the blogger, claiming that she had knowledge of the Does’ identities.  When the Wyche firm appeared on behalf of the blogger, plaintiff moved to disqualify.

That’s where the Palmetto State’s ethics rules on prospective clients came into play.

Prospective client?

To safeguard the confidentiality interests of prospective clients, Model Rule 1.18 provides that if you obtain “information from [a] prospective client that could be significantly harmful to that person in the matter,” you and your firm are generally disqualified from adverse representation in the same or a substantially-related matter.

Who is a “prospective client” under the Model Rule? Anyone who consults with you “about the possibility of forming a client-lawyer relationship with respect to a matter” — even when no lawyer-client relationship ensues.

But South Carolina’s Rule 1.18 is more restrictive.  It’s version defines a “prospective client” as someone who consults with a lawyer — but “only when there is a reasonable expectation that the lawyer is likely to form the relationship.”

That made all the difference to the court in ruling on plaintiff’s DQ motion.  The court said that there was no evidence that a “commitment” was “likely” that the Wyche firm would represent the plaintiff.  The “hope-we-can-work-together” comment was only a “polite courtesy,” the court said.

“Niceties,” are not binding commitments to represent someone, the court held, and “are not, absent unusual circumstances, reasonably interpreted to indicate a commitment is likely.”  The plaintiff’s lawyer also clearly understood that before any engagement, Wyche had to check for conflicts.

Without having become a “prospective client” under South Carolina’s version of Rule 1.18, the plaintiff had no basis for disqualifying the Wyche firm.

Different rules, different outcome

The plaintiff here might have met the definition of “prospective client,” and been entitled to the protection of Rule 1.18, in a state that hews to the broader Model Rule language, instead of South Carolina’s more-restrictive version.  So you must be aware of such nuances in the ethics rules of the road.

But you also must be diligent in not “hearing too much” when a prospective client reaches out to you.  The Wyche lawyer who talked to the plaintiff’s lead counsel in this case didn’t get confidential information about the plaintiff before checking for conflicts.

That’s good policy.  There are plenty of examples of successful DQ motions where a lawyer has listened to details — which prospective clients often want to relate — and only then discovered a conflict.  The always-excellent Freivogel on Conflicts collects the cases.  In worst-case scenarios, that can result in needing to decline the prospective engagement and step away from the one that raises the conflict.  That’s the message of ABA Ethics Opinion 90-358 (1990) — an outcome no one wants.

One dollar billsLitigation funding is in the news again, with the U.S. Chamber of Commerce spearheading a request to amend the Federal Rules of Civil Procedure to require initial disclosure of all third-party agreements for compensation that are “contingent on, and sourced from, any proceeds of the civil action, by settlement, judgment or otherwise.”

The Chamber joined with 28 other organizations in a letter sent earlier this month to the federal courts’ Rules Committee, saying that its aim is to bring third-party litigation funding out of “the shadows” and to identify “a real party in interest that may be steering a plaintiff’s litigation strategy and settlement decisions.”

The new push follows up on a 2014 proposal that the Chamber and a few other organizations made to the same rulemaking committee, which was rejected.  Things have changed since then, the Chamber’s June 1 letter said, citing expansion of third-party funding in the U.S., with several significant players reporting significant and steady growth, and on-line marketplaces opening the way for investors to shop for individual cases to contribute to.

Shift in momentum?

As we reported in February, the U.S. District Court for the Northern District of California became the first court to mandate disclosure of litigation funding that parties in class actions receive from outside sources, under a revision to the court’s standing order.  That was followed up in March, when the U.S. House of Representatives passed the Fairness in Class Action Litigation Act of 2017, which likewise would require disclosure of third-party funders in class actions.  The bill is now before the Senate Judiciary Committee.

Problems with alternative litigation funding

The process for amending the federal civil rules is a lengthy one.  But with at least some momentum on its side, the U.S. Chamber cited several justifications for the rule change it seeks, including:

  • The champerty problem.  This old legal doctrine, which seeks to prevent buying and selling lawsuits, still continues to be in play, with at least three state courts of appeals citing it or suggesting it as a viable defense in 2016-17, and a U.S. bankruptcy court in January finding an agreement to be champertous.
  • Fee-sharing issue.  Model Rule 5.4(a) bars almost all forms of sharing legal fees with non-lawyers, with the goal of preserving the lawyer’s independent professional judgment. But some models of third-party litigation funding apparently involve plaintiffs’ counsel repaying the funder’s investment out of the lawyer’s attorney fees, if any.
  • Confidentiality and conflicts.  To the extent that funding arrangements require disclosure of client information to the financier they could raise confidentiality concerns under the ethics rules, as well as privilege issues.  And lawyers who have “contracted directly with a funding company may have … duties to it that are … perhaps inconsistent with” the duties of loyalty to the client, including conflicts arising from steering clients to favored funders.

Watch and wait

In a press release, one large litigation funder, Bentham IMF, said that the Chamber’s proposal was misguided, including because the law firms using such financing were assisting under-served and under-funded clients — small-to-mid-size businesses and individuals — who could not otherwise afford to litigate their claims.  Bentham also said that the rule amendment proposal was unfairly one-sided, and that defendants should have to abide by similar disclosure rules.

Litigation funding will continue to be a hotly debated issue, and if your clients are involved in civil litigation, these are developments that bear watching.  Stay tuned.

potatoes covered in soil against whiteEven though a Mississippi lawyer’s conflict of interest lasted only one day, that was enough for a U.S. magistrate judge to disqualify him from representing a client adverse to Allstate Insurance Co. on a coverage claim, in a ruling issued last week.  Sending a termination letter to the insurer the day after accepting the new client’s case didn’t help the lawyer.  The judge found that the lawyer’s duty of loyalty required him to turn down the case, in light of the fact that he had pending cases in which he was directly representing Allstate.

Hot potato doctrine

The court recognized that the key issue in the case was whether the lawyer could drop Allstate as a client, turning it into a “former client” for purposes of the conflict-of-interest rules.  If so, then the “more lenient” substantial-relationship test would apply, in which the court looks at whether the new client’s matter is substantially related to the work the lawyer did for the former client.  But if the lawyer takes on the new client and represents it concurrently with the now-adverse existing client without both clients’ consent, then the duty of loyalty under Model Rule 1.7 has been breached.

The “hot potato” doctrine prohibits a lawyer from turning an existing client into a former client by “firing” it in order to accept an engagement adverse to the existing client.  The 1987 case that gave the principle its name is Picker International, Inc. v. Varian Associates, in which the federal district court judge said that “A firm may not drop a client like a hot potato, especially if it is in order to keep happy a far more lucrative client.”

Termination didn’t cure impropriety

In the Mississippi case, the court said that the lawyer’s conduct was understandable:  he hadn’t received any new work from Allstate in over a year; his firm was wrapping up its work on the “handful” of cases it still had, the majority of which were near the end of their life-spans; and the firm planned to end its relationship with the insurer based on the fact that it was not getting new work.

Nonetheless, said the judge, the lawyer and his firm had an attorney-client relationship with Allstate when the lawyer signed a contract to represent the claimant against the insurer, and he couldn’t abandon his existing client by dropping it like a hot potato:  “In withdrawing representation of Allstate to pursue a new, more attractive representation, [the lawyer] violated the duty of loyalty he owed to Allstate.”

Game of spuds

The question of when a client becomes a former client under conflict rules can be a nuanced one.  For instance, the hot-potato doctrine may not operate when a conflict is “thrust upon” a law firm as a result of a client merger, the addition or new parties or other circumstance over which the firm has no control.  Then, the firm may be able to choose to avoid disqualification by withdrawing from the representation that creates the conflict.  See, e.g., Sabrix, Inc. v. Carolina Casualty Ins. Co. (D. Ore. 2003) (hot-potato rule did not apply where withdrawal followed another party’s naming of additional defendant that created conflict).  And timing matters, too.  For example, if a firm has a new client in mind for the future, may it terminate an existing relationship in order to prevent a conflict?

Bottom line:  Be careful in working through these conflict issues so you don’t drop the ball — or the potato.

Viral marketing conceptWhen a conflict of interest crops up during a case, Ethics 101 tells us that the “taint” of that conflict can spread, and potentially disqualify all the lawyers of the affected firm.  Model Rule 1.10, “Imputation of Conflicts” explains the rule.  But how far does that disqualification go?  A New York appeals court examined this question in December, and reversed a DQ order in a personal injury suit.

“Associated in a firm”?

In Kelly v. Paulsen, the firm (“HHK”) represented two plaintiffs who had been injured in a motorcycle accident allegedly caused by the defendant.  HHK filed suit on plaintiffs’ behalf in 2009.  Four years later, a sole practitioner joined the plaintiffs’ team as co-counsel.  Very shortly before trial in 2015, the defendant learned — allegedly for the first time — that HHK was representing plaintiffs.  On the first day of trial, the defendant moved to disqualify HHK because the firm had also represented the defendant in “personal and business matters” for the previous 30 years.  (The court didn’t explain these somewhat singular facts, particularly how a party doesn’t learn the identity of opposing counsel’s firm for six years while a suit is pending.)

Based on the conflict, HHK withdrew, leaving the solo as plaintiffs’ only lawyer.  Defendant then moved to disqualify the solo as well, and the trial court granted the motion.  On appeal, the Third Department reversed.

The court of appeals said that New York’s Rule 1.10(a) (like the Model Rule), bars lawyers who are “associated in a firm” from representing a client when a conflict of interest would preclude any one of them from doing so if the lawyer were practicing alone.

This imputation rule thus has the potential for spreading the “taint” (a word courts often use) of the primarily-disqualified lawyer to others.

Although the Rules don’t define the phrase “associated in a firm,” the court in Kelly found that the well-established meaning extends beyond partners and associates who are employed in the same firm — it also can include “of counsel” relationships, for instance.

Nonetheless, the court wrote, “not every lawyer who has any connection or relationship with a firm is considered to be ‘associated’ with that firm” for conflicts and imputation purposes.  The question requires a factual analysis, and turns on whether the lawyer’s relationship with the firm is “sufficiently close, regular and personal.”

More like a contract lawyer

Here, the facts showed that the solo had his own separate office, didn’t receive any support services from HHK, and HHK didn’t “supervise” his work.  The key factor, however, was that the solo averred that he never had access to any HHK files except plaintiffs’, never represented the defendant, was not aware of him or his business affairs before the motorcycle case, and never got any confidential information about the defendant from HHK or had access to such information.

The defendant argued that HHK had “undeniably shared” his confidential information with the solo practitioner, based on plaintiffs’ demand for a high settlement figure.  Defendant said the demand indicated that the solo had received confidential information about his finances.  But the court viewed that argument as mere speculation.

The solo’s role here, said the court, is “more akin to that of a contract lawyer” who gets a case referral and works from his or her own office as co-counsel.  The court noted a 1999 New York ethics opinion that such a contract lawyer is not “associated” with the employing firm for conflicts purposes, and analogized that principle to the solo lawyer.

Key:  sharing confidential information

There are a number of courts that, like Kelly, have held that taint doesn’t affect co-counsel, at least where there is no showing that co-counsel received confidential information about the party moving to disqualify.  The always-excellent Freivogel on Conflicts collects the cases.  But there are still decisions that go the other way, too.  See, e.g., j2 Global Communications Inc. v. Captaris Inc., (C.D. Cal. 2012) (imputing “outside in-house counsel’s” disqualification to firm).  Bottom line:  while information-sharing remains key, this is a fact-specific area, and it pays to be aware of nuances that can vary the outcome.

2017 Happy New Year typeYou may have some holiday leftovers lurking in your fridge (potato latkes, Xmas goose, black-eyed peas, New Year’s Eve caviar), and we too have some interesting ethics topics that we didn’t have room for during 2016 — so here’s a potpourri, touching on positional conflicts, coercive settlements and maybe how not to use your firm’s letterhead.

Arguing damage caps, pro and con

The U.S. district court for the Middle District of Tennessee in October turned back a disqualification motion aimed at Butler Snow, ruling that the firm could  continue representing a personal injury plaintiff who was potentially contesting the constitutionality of the state’s punitive damage caps, while at the same time asserting the caps defensively in at least one pending case for another client.

In its DQ motion, the trucking company defendant said those positions were inconsistent and raised a positional conflict in violation of Tennessee’s version of Model Rule 1.7 and its cmt. [24].

Not so, said the district court.  First, the trucking company waited until two months before trial to try to disqualify the law firm; it would cause severe prejudice to the plaintiff if she had to find new counsel.  Second, the firm retained separate counsel to represent the plaintiff on all post-trial issues challenging the damage caps, an arrangement that plaintiff agreed to at the beginning of her representation.  Third, there was no evidence that the potential conflict had actually affected the injury case, or was likely to compromise the firm’s representation of clients who simply asserted the caps to limit their liability rather than expressly defending their constitutionality.

On all these bases, the court held, the firm could stay in the case, part of which has now been settled.

Threat to publicize sexual allegations

In November, an Arizona lawyer who threatened to use press releases to alert the public to sexual allegations in order to obtain a settlement consented to a 30-day suspension.

In 2015 the lawyer filed a federal sexual harassment complaint on behalf of a client.  In a letter to the defendant, he announced he had created a specific website regarding the allegations, and said he would put up a public “shame on you” banner near the defendant’s restaurants.  He also told the defendant that he had scheduled meetings with police and the federal Department of Justice about the alleged hiring of undocumented workers.  In response to a settlement offer, the lawyer told the defendant’s lawyers that he “intended to destroy” the defendant’s businesses.

The judge in the federal case insisted that the lawyer stop his unprofessional behavior; the parties settled; and the state Disciplinary Judge accepted the lawyer’s admission that his conduct violated Arizona’s versions of Model Rules 4.4 (respect for the rights of others) and 8.4(d) (conduct prejudicial to the administration of justice).  The lawyer also agreed to two years probation and to pay costs.

The rules in my home jurisdiction, Ohio, include Rule 1.2(e), a specific prohibition against threatening criminal charges or professional misconduct allegations solely to obtain an advantage in a civil matter.  Interestingly, the Model Rules lack an express prohibition, although this case illustrates that disciplinary authorities can get there via other rules.

Using firm letterhead

Last, here’s a cautionary tale about using your firm letterhead for a personal legal dispute.

According to plaintiffs in a federal complaint filed in November, a Pepper Hamilton partner entered into a lease-to-own deal with a couple for a $750,000 house he owned.  The couple terminated the contract and moved out, and the lawyer claimed that they owed about $10,000.  The lawyer sent a demand letter for the money in September, using the firm’s letterhead.

That drew a suit from the couple against both the lawyer and the law firm for allegedly violating the federal Fair Debt Collection Practices Act.  “Once [the lawyer] sent the Sept. 19 letter … on [the firm’s] letterhead, he was no longer acting as an individual collecting his own debt, but rather a debt collector subject to the FDCPA,” the couple said in their complaint.

It remains to be seen whether that theory will fly — the case docket does not yet reflect any response to the complaint.  But it points to an issue that you should probably think about in your personal dispute before putting a piece of firm stationery in the printer.

Thumbs up and downIf you “like” a political Facebook post, or tweet a comment on a controversial legal topic, are you potentially creating an ethical conflict of interest with your clients who may have contrary interests?  The District of Columbia bar ethics committee thinks so, and warns about the risk in its Opinion 370, issued late last month.

The position, which the ABA/BNA Lawyers’ Manual on Professional Conduct (subs. req.) called “novel,” is part of an opinion that otherwise accords with the large body of common-sense advice about using social media for legal marketing and personal enjoyment.  Opinion 370 weighs in on several frequently-encountered issues, such as protecting client confidences, responding to online reviews and identifying legal specialties.

Positional conflicts?

But the D.C. bar ethics committee is possibly the first to single out blogging, tweeting or commenting as having the potential to raise a “positional conflict” with a client.  Such a conflict can arise when a lawyer takes one position and then takes an inconsistent position on behalf of a client.  The D.C. committee said:

“Caution should be exercised when stating positions on issues [on social media], as those stated positions could be adverse to an interest of a client, thus inadvertently creating a conflict.  [D.C.] Rule 1.7(b)(4) states that an attorney shall not represent a client with respect to a matter if ‘the lawyer’s professional judgment on behalf of the client will be or reasonably may be adversely affected by … the lawyer’s own financial, business, property or personal interest.’ … Content of social media posts … may contain evidence of such conflicts.”

While at least one academic scholar has advanced the idea that blogging can raise such a positional conflict, comment [13] to D.C.’s Rule 1.7 seems to describe the conflict only in connection with taking inconsistent positions on behalf of a client in a matter, where doing so would “adversely affect the lawyer’s effectiveness in representing another client.”

That would seem to rule out the possibility of a positional conflict where a lawyer is simply making a personal expression of opinion using social media, outside the scope of representing a client.

Bad for business…

Nonetheless, the brief warning in the D.C. opinion is valuable in making the point that what you say on-line can put you in an awkward spot with clients or potential clients.  Being identified in a high-profile way with a particular position could certainly cause a client to fire you or not hire you.  But that may just be viewed as a regular part of today’s legal practice.

When it comes to establishing a policy about what a firm’s lawyers and staff can say on-line, most firm managers avoid a heavy-handed approach.  Unless the lawyer or staffer wants to mention a specific client, the social media policies that most firms now have usually simply ask for the use of discretion and good sense, without stifling personal expressions of opinion — and that’s the way it should be.

Note:  My co-editors and I are thrilled that the ABA Journal has honored The Law for Lawyers Today as one of this year’s 100 best blogs!  Read the magazine’s announcement here.  We promise to keep bringing you fresh and lively news and comment every week from “Legal Ethics World.”

International communication conceptAs we’ve predicted before, the increasing globalization of high-level legal practice continues to create questions about forms of legal practice – in particular, vereins, a structure aimed at letting firms based in different countries operate under a unified brand.  Mega-firms Fulbright & Jaworski  (subs. req.) and Dentons have faced motions to disqualify centered on such structural issues, and now a Texas ethics opinion issued last month questions whether lawyers in the Lone Star state can use a verein name on pleadings.  (Hat tip to Dan Bressler and the Law Firm Risk Management blog for alerting us to the opinion.)

Five AmLaw 100 firms affected

In Opinion 663, the Texas Professional Ethics Committee concluded that under the state’s Disciplinary Rules of Professional Conduct, Texas lawyers in an organization such as a verein “may not use the name of the organization as their law firm’s name on pleadings or other public communications” unless all the names are those of current or former lawyers in the Texas firm or a predecessor firm.

According to an article in Texas Lawyer, five firms on the AmLaw 100, which lists the highest-grossing U.S. law firms, are Swiss vereins that include Texas lawyers, including DLA Piper, Baker & McKenzie, Hogan Lovells, Norton Rose Fulbright and Squire Patton Boggs.

The Committee based its opinion, which is advisory, on Texas’s Rule 7.01(a), which unlike the analogous Model Rule on firm names, expressly bars lawyers from practicing under a “a firm name containing names other than those of one or more of the lawyers in the firm,” (except for deceased/retired lawyers’ names or names of predecessor firms).

The Committee’s analysis used a hypothetical Texas firm formerly named “Smith Johnson,” that has joined an “international verein” and become known as “Brown Jones Smith.”  The Texas lawyers in the verein would be violating Rule 7.01(a), said the  Committee, because “there has never been a lawyer in the Texas law firm or any predecessor firm named Brown or Jones.”

In addition, like the analogous Model Rule, Texas Rule 7.02 prohibits “misleading” firm names, and the Texas Committee concluded that the use of the “Brown Jones Smith” name would also be misleading, by creating “the appearance that all lawyers in all the law firms that are in the verein are members of a single law firm when in fact they are not.”  The firm’s statements about its composition in advertising disclaimers don’t diminish the misleading nature of the communication, the Committee said.

Be careful what you ask for?

According to Texas Lawyer, the Texas Committee issued Opinion 663 in response to an inquiry from Robert Newman, who is of counsel with Norton Rose Fulbright (a verein with Texas lawyers), and a former chair of the Committee.  Asking for an advisory ethics opinion, and then getting an adverse one, is always a possibility, although even an adverse opinion at least tells you where you stand, ethically speaking.  But the reactions of the current Committee chair and the mega-firms contacted by Texas Lawyer are interesting, and indicate that it will basically be business as usual for the firms, notwithstanding the (advisory) opinion.  The Committee chair said that “Literally nothing is going to happen” unless someone files a grievance against a lawyer for using a verein name, which he said would be a “rare” occurrence.

For their part, two firms contacted by Texas Lawyer — Norton Rose Fulbright and Baker & McKenzie — said they do not plan to make any changes as a result of the ethics opinion.  The magazine quotes the managing partner of Baker’s Dallas office, who said “We’ve been practicing in Texas as Baker & McKenzie since 1986 and plan to continue to do so.”

Whether this ethics opinion will resonate with bar regulators in other jurisdictions, and whether it will generate some disciplinary cases remains to be seen.  Also interesting is the Texas committee’s view that the law firms in the verein are not members of the “same firm,” which might have a potential impact on analyzing future conflict of interest issues, among other things.  Stay tuned for further developments.

Business Acronym COI as CONFLICT OF INTERESTIt’s common for law students to clerk for a couple different firms during their law-school years.  When a law clerk or a law school graduate you hire has clerked for a firm representing a party adverse to your client, what happens?  Is the student or newly-minted lawyer disqualified from working on your matter? Is your whole firm disqualified?  Can you screen the clerk/former clerk and solve the problem?  Two recent ethics opinions out of Texas and Ohio clarify the rules.

Lone Star ethics opinion

The issue, of course, is centered on state versions of Model Rules 1.7, 1.9 and 1.10.  Firms have a justifiable concern that they may be precluded from taking on work — or worse, be disqualified from an ongoing matter — if a law clerk or new lawyer joins the firm after having worked for opposing counsel.  Acquiring confidential client information can disqualify the clerk from working on the adverse matter at the new firm and the conflict can be imputed to the whole firm.

In March 2016, the Texas Supreme Court amended Texas Disciplinary Rule of Professional Conduct 1.06, its unique version of the Model Rule on conflicts, to add a comment addressing how conflict imputation works for non-lawyer employees and lawyers who were formerly involved in a matter in a non-lawyer role.   Comment [19] provides that with proper screening, the conflict of interest of a non-lawyer, or the conflict of a lawyer that arose before the person became a lawyer, is not imputed:

A law firm is not prohibited from representing a client … merely because a nonlawyer employee of the firm, such as a paralegal or legal secretary, has a conflict of interest arising from prior employment or some other source…. [or] … merely because [of] … a conflict of interest arising from events that occurred before the person became a lawyer, such as work that the person did as a law clerk or intern. But the firm must ordinarily screen the person with the conflict from any personal participation in the matter to prevent the person’s communicating to others in the firm confidential information that the person and the firm have a legal duty to protect.

The new Texas ethics opinion applied the new comment and ruled that when a firm hires a new associate who worked as a clerk for the firm representing the opposing party, the former clerk is disqualified from working on the case at the new firm, but that the new firm can screen the clerk and avoid imputation of the clerk’s conflict.  That sensible approach is good news for Texas firms and law clerks, and the comment is broadly aimed at other incoming non-lawyer employees, such as secretaries, too.

Buckeye ethics opinion

Over in my bailiwick, Ohio’s Board of Professional Conduct issued similar advice earlier this summer.  Based on Ohio’s rules of practice governing certified legal interns, who effectively function as lawyers under clinical supervision even while in law school, the Board said that:

The conflicts of a former legal intern, newly employed as a lawyer, are not imputed to the lawyers in a law firm, but necessitate the screening of the lawyer from any matter [for which] he or she had substantial responsibility.

On the other hand, the Board said, the conflicts of current legal interns are imputed to the firms they simultaneously clerk for.  That seems fair, because by being certified under the state’s legal intern rules, the students working at their school legal clinics are more like lawyers, and should be treated as such for conflicts purposes, while striking a balance in favor of their post-law school employability.

Check your rules

As always, these principles come in lots of flavors, and you must know your own jurisdiction’s approach.  Texas and Ohio have gotten it right, protecting clients’ legitimate confidentiality interests, and maximizing the ability of law firms to bring on new lawyers, which of course benefits the firms and the lawyers.

Let's talkWhat should you do when you are co-counsel on a case or in a deal, and you become aware that the other lawyer has made an error?  A new ethics opinion from the New York State Bar Association says that if you reasonably believe that your co-counsel has committed a significant error or omission that may give rise to a malpractice claim, you must disclose the information to the client.

Discovery slip-up

Ethics Opinion 1092 was based on an inquiry received from a lawyer with a dilemma.  The lawyer had been brought into a case as co-counsel on the eve of trial, and found that the other lawyer had done virtually no discovery, and had not made any document requests — despite the fact that communications and e-mails between the parties would be critical to the case.

The lawyer believed that the lack of discovery was a significant error, and that it could constitute malpractice.  The outcome of the case was still pending.  The lawyer was concerned that disclosing the information to the client could undermine the lawyer’s relationship with co-counsel, but was nonetheless convinced that it was in the client’s best interest to reveal the facts as soon as possible.

Interpreting communication, conflict rules

The NYSBA Committee on Professional Ethics noted that prior opinions had consistently held that a lawyer must come clean to the client about his or her own significant errors or omissions in providing legal services.  That principle is founded on two ethical duties:  (1) the duty to communicate with the client, and provide the information necessary for the client to make informed decisions (see Model Rule 1.4); and (2) the duty to withdraw from the representation where the lawyer’s personal interests conflict with the client’s (see Model Rule 1.7(a)(2)).

Those same rules also raise a duty to communicate with the client about co-counsel’s potential malpractice, the Committee opined.

Respect for client autonomy and decision-making means that the lawyer must provide information about all significant developments affecting the representation.  That “applies equally to a significant error or omission by co-counsel that may give rise to a malpractice claim,” said the Committee.

If co-counsel committed such an error, the client would have several options, such as continuing the relationship with co-counsel and reserving a possible malpractice claim; terminating co-counsel; bringing a malpractice action against co-counsel now; or getting independent advice about the options.  But without information, the client would be stymied in pursuing any of these choices.

Also, depending on the facts, the lawyer with the inquiry might have a personal conflict of interest that would raise a significant risk of adverse effect on the lawyer’s professional judgment — for instance, if the lawyer’s desire to maintain a good relationship with co-counsel was motivated by personal concerns, like preserving a good referral source (as opposed to being based on the goal of avoiding harm to the client’s case).  A personal interest plus risk of adverse effect on professional judgment could raise a duty to withdraw.

Further thoughts …

Instead of the facts posed by the inquiry to the Committee, what if the case is already over, and then you become aware of some error by co-counsel — but the trial outcome was favorable, notwithstanding the mistake?  The Committee didn’t consider that possible scenario, but it raises some further questions.  For instance, even if the result was an award to the client, is it possible that the award would have been larger absent the error?  How far do you have to go to decide such a question?

Even with these open questions, one thing is clear from this recent ethics opinion:  at least sometimes, co-counseling a case can result in a duty to have a difficult conversation with your client, and you should keep alert and know your ethics rules if that day should come.

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.