A New York district court judge last month disqualified a firm representing hundreds of 401(k) plan participants based on a conflict of interest.  The judge called the risks posed “endless,” and requested additional briefing on whether the firm would be allowed to remain as counsel in related arbitration proceedings in Missouri.  The ruling spotlights the sometimes-thorny conflict issues that can arise in ERISA litigation.

Litigation in the Empire State; arbitration in the Show-Me State

Several related actions are pending in the Southern District of New York centering on the plan and its administration.  In two of the actions, The Klamann Law Firm represented profit-sharing plan participants who alleged ERISA violations based on several breaches of fiduciary duty against the participants’ employer, the trust investment manager and the plan advisory committee along with the advisory committee’s individual members.

At the same time, in Missouri, The Klamann Law Firm was representing a number of claimants, including three individual former members of the plan advisory committee, in arbitration proceedings against the employer and the trust investment manager.  Claimants’ claims in the arbitration were nearly identical to the litigation claims asserted in the two New York district court cases.

The defendants in the district court cases moved to disqualify The Klamann Law Firm, asserting that in suing the plan advisory committee and its individual members, the firm was essentially suing its own clients, raising a disqualifying current-client conflict of interest.

The district court agreed.

“Broad discretion”

Citing its broad discretion to invoke the “drastic remedy” of disqualification whenever a lawyer’s conduct “tends to taint the underlying trial,” the district court noted that the Second Circuit considers adverse representation of current clients improper per se.  The burden is on the lawyer to show that there will be no actual or apparent conflict in loyalty or “diminution in the vigor of [the lawyer’s] representation.”

The court noted that claims in the New York District court complaints made it “evident” that plaintiffs intended to sue both the employer and the plan advisory committee for fiduciary breaches committed while two and possibly all three of the individual members were on the committee — the same members The Klamann Firm was representing as claimants in the Missouri arbitration.

“The risks posed by this scenario are endless,” the court wrote, brushing away plaintiffs’ arguments.  The court rejected contentions that the DQ motion was merely a “strategic tool,” and that the law firm’s clients would suffer undue prejudice from its disqualification.

The court was harsh in discussing the contention that the district court complaints should be read to allege claims only for conduct after the three advisory committee members had left the committee.  To the court, that raised the possibility that the firm was “improperly” seeking to “limit the scope” of the assertions in the district court complaints “simply to preclude liability against [the] arbitration clients.”   It is not possible, the court wrote, to “amend[] a complaint to erase the appearance of concurrent representation.”

Take-aways

Some key take-aways from this disqualification opinion:

  • Like many federal courts ruling on disqualification motions, the court here said it would look to state disciplinary rules, but that they “merely provide general guidance,” and that a violation of a lawyer conduct rule will not necessarily spell disqualification.
  • Although the court did not cite it, the relevant rule here is New York’s version of Model Rule 1.7, which provides that a conflict of interest exists when a lawyer concurrently represents clients with “differing interests,” even when the matters are unrelated.
  • Under many circumstances, a current-client conflict is waivable if each client gives informed consent.  Timing is everything, however.  Here, the firm said it had obtained consent of its clients — but only too late, wrote the court.  Consent “needed to be obtained prior to … undertaking representation of adverse interests, not in response to a motion to disqualify.”

The National Association of Plan Administrators has commented on a “spate” of ERISA litigation that includes claims against plan advisory committees and their members, and has called for better member education about the risks, including potential personal liability.  The conflict issues that arise for lawyers demand equal attention and caution.

*This post originally appeared in ERISA Litigation.

We’ve written a lot over the past six years about the Rules of Professional Conduct, and for good reason.  The lawyer conduct rules represent a floor:  when your conduct sinks below the floor, you can merit professional discipline.  But there are other norms and mores in our legal community, namely standards of professionalism.  As the Preamble of the Model Rules notes, the Rules “do not, … exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile human activity can be completely defined by legal rules.”

Without providing a basis for discipline; norms of professionalism nonetheless express a common understanding within the legal community about how a “professional” lawyer acts and the ideals that lawyers should aspire to uphold.

Last week, the Sixth Circuit Court of Appeals provided a good lesson on the value of professionalism as applied to briefs submitted to the court.  In an  opinion recommended for publication, the court affirmed dismissal of a Clayton Antitrust Act complaint based on plaintiffs’ lack of standing, and in the process called plaintiffs’ counsel to task for numerous over-the-top insults directed at the opposing parties in briefs.

The court cited some examples of statements in briefs that plaintiffs’ counsel filed, including that:

  • one defendant “surrendered to [a co-defendant], much in the manner Marshal Petain surrendered France to Adolph Hitler.”;
  • two co-defendants are “intertwined in an incestuous relationship, the likes of which have not been seen since the days of Sodom and Gomorrah.”;
  • a defendant was possibly “affixing its buzzard-like grin” on the region “ready to ravenously pounce upon the medical facilities in these areas like the buzzard swoops down upon the carcass of a dead cow.”;
  • an individual defendant who had stuttered during a television interview was compared to “Porky Pig, a famous Warner Brothers cartoon character, [who] also stuttered.”

This language (and more) in plaintiffs’ filed briefs prompted Judge Amul R. Thapar, writing for the Court of Appeals, to note that “there are good reasons not to disparage your opponent, especially in court filings.  The reasons include civility; the near-certainty that overstatement will only push the reader away …; and that, even where the record supports an extreme modifier, the better practice is usually to lay out the facts and let the court reach its own conclusions.”

After rejecting each of plaintiffs’ arguments in favor of standing, the court concluded by writing, “[We] take a moment to remind plaintiffs’ counsel that, as an officer of the court, he is expected to treat other parties in the case (as well as their counsel) with courtesy and professionalism.  Careful research and cogent reasoning, not aspersions, are the proper tools of our trade…. Counsel will best serve his clients if he remembers this going forward.”

I sit on my state supreme court’s Commission on Professionalism, so this is a subject I think about quite a bit.  Many states have similar bodies devoted to promoting behaviors and attitudes that go above mere adherence to the Rules of Professional Conduct, and many have adopted statements on professional ideals, as the supreme court in my Buckeye State has.

Litigators in particular should view Judge Thapar’s opinion as words to the wise.

If you’re a litigator, you may have already experienced the brave new world of remote videoconference depositions.  If you haven’t yet you will, and when you do, you may have to think about what opportunities for misconduct arise when you aren’t in the room with the witness.  If you’re not there to watch, can the other side get away with coaching the witness via emails or texts during the depo?  No ethical opposing counsel would do such a thing, but …

So how far can you go to ensure that no monkey-business occurs?  Last week, a New York federal judge drew the line when a plaintiff asked her to require deponents to screen-share their computer monitors during the deposition so counsel could see if they were getting any messages from defense counsel.  The judge denied that request, but she did order other guardrails to address plaintiff’s concerns.

Witness coaching would “never be seen”

The plaintiff, a fired King & Spaulding lawyer representing himself against his former firm, requested that two third-party witnesses — his former colleagues — be ordered to share their computer screens throughout their examinations.  The plaintiff argued that screen-sharing was needed to “discourage” and “if necessary, to make observable for the record” potential impermissible communications from counsel to the witnesses.

The district court’s Local Rule 30.4 bars private conferences between deponents and their lawyers while a question is pending.  Requiring the deponents to provide a recording or screen-share of their monitors while on the record, the plaintiff asserted, would merely give effect to the local rule in the videoconference-deposition setting.

The plaintiff also argued for the sharing based on previous occasions when he claimed opposing counsel had tried to suggest answers to other deponents by words or gestures.  He said that at a remote deposition, the risk was that “e.g., emails and instant messages sent to the witness’s computer mid-testimony, could never be seen by anyone else,” leading to undetectable misconduct.

In a short rejoinder, counsel for King & Spaulding said that the request to “surveil” the deponents’ screens to monitor for surreptitious communications was unwarranted and unduly intrusive.  “As officers of this Court,” counsel wrote, they “will abide by [Rule 30.4] and that should be enough for Plaintiff.”

Remote depo guardrails set

In a memo order endorsed and attached to plaintiff’s request, the court agreed with King & Spaulding’s counsel.  Nothing in Rule 30.4 requires the examiner to be allowed to monitor the witness’s communications, the court ruled.  And while it could nonetheless impose such a requirement, there was no indication, said the court, that defense counsel would not abide by the Local Rule or the court’s order.

The court did order counsel for King & Spaulding to give plaintiff prior notice before engaging in any private communication with a deponent, and also that, for the duration of the depositions, the deponents must:

  • close all Internet browsers, messaging applications, email programs, “or any other Internet page or computer program that would enable the receipt or initiation of an electronic communication” other than the platform used for the deposition; and
  • close any other applications that would generate any pop-up notices or windows on their screens.

Be honest now…

Every jurisdiction has adopted some form of Model Rule 8.4(c), which bars lawyers from engaging in dishonesty, fraud, deceit and misrepresentation.  It’s no stretch to say that a lawyer who secretly texts a witness during a deposition in order to suggest answers is not on the right side of that rule.  And, as in this case, local rules of practice will contribute to any analysis.

Faced with the inevitability of at least some remote depositions for the foreseeable future, you might want to consider the kinds of stipulations that the parties here entered into regarding the technological and other parameters, as well as the limits the court set on the deponents’ communications during the deposition.

Whether to flee from areas experiencing COVID-19 outbreaks, or simply to take advantage of the opportunity to work far away from the office, lawyers may sometimes wish to work remotely from a jurisdiction other than the one where they are licensed. Though you may dream of “practicing” from a laptop in the distant California mountains, a cabin in the Minnesota forest or on a Hawaii beach, crossing state lines remains a significant event for licensed attorneys. Most jurisdictions have adopted some version of ABA Model Rule 5.5 which addresses multi-jurisdictional practice, but you must carefully adhere to the particular jurisdiction’s ethics rules plus any other jurisdiction-specific regulations in order to temporarily work remotely from your location of choice.

Home field advantage

In the United States, individual states compete for every imaginable resource, including legal talent and business. Model Rule 5.5(b) prohibits lawyers who are not admitted to practice in a jurisdiction from either (1) establishing “an office or other systematic and continuous presence,” for the practice of law or (2) representing “to the public” that the lawyer is authorized to practice. While many “creative class” professionals can work from any place with a nearby power outlet and a solid Wi-Fi connection, lawyers must remember to follow local “unauthorized practice of law” rules (and perhaps remember that they too benefit from such protectionist measures in their home jurisdiction).

Belt and suspenders approach

If you intend to work remotely for an extended period from a jurisdiction where you are not licensed, the safest approach is to become licensed in that jurisdiction. Assuming no rational human would ever elect to take another bar exam, you might consider “waiving in” to your remote work site of choice. However, most states require lawyers to practice “full time” for three to five years before they are eligible to do so, and even then, the process can be cumbersome, lengthy and expensive. Some states (including the aforementioned California, with all its idyllic remote work destinations) only allow admission through bar passage.

Temporary remote work “safe harbors”

Model Rule 5.5(c) provides a number of “safe harbors” through which lawyers can practice in a different jurisdiction on a “temporary basis.” While Rules 5.5(c)(1)-(3) authorize such temporary practice in specific scenarios (active association with a local attorney, pro hac vice admission and pending alternative dispute resolution (ADR) matters), Rule 5.5(c)(4) provides the broad “catch-all” exception.

The rule authorizes lawyers who are licensed and in good standing in their home jurisdictions to provide legal services that “are not within paragraphs (c)(2) or (c)(3) and arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice.” The rule includes several elements:

  • Temporary basis. Though review of the remote work state’s rules would be required to understand the applicable definition of “temporary,” a lawyer should be mindful to not work remotely in a different jurisdiction for so long, or in such a way, as to trigger the prohibition of Rule of 5.5(b) on establishing a systematic or continuous presence. The practical analysis can be difficult: there are no bright lines on how long your temporary practice could last before you would risk a state bar regulator’s investment of resources into an investigation of your activity.
  • Not within 5.5(c)(2)-(3). Whereas Rules 5.5(c)(2)-(3) contemplate specific pending litigation or ADR matters in the remote work jurisdiction, work under (c)(4) contemplates general legal practice that is tied to the lawyer’s home jurisdiction.
  • Reasonable relation. As we have previously discussed, Comment 14 to Rule 5.5(c) lists factors that may indicate a “reasonable relationship” between the legal services rendered from the remote work state and the lawyer’s home state. Some factors include whether the client has significant contacts in the lawyer’s home state and whether the matter has significant connections to the lawyer’s home state.

Conclusion

According to a recent M.I.T. study, of those employed pre-COVID-19, about 50 percent are now working from home, including 35 percent who report they were commuting and recently switched to working from home. Another study predicts that 30 percent of the U.S. workforce will regularly work remotely within two years. Lawyers are no exception – you can hear crickets chirping down the hallways in law firm offices around the country. However, if you decide to head west for a few months and work remotely from California, or east to the rockbound shores of Maine, be sure that you pay careful attention to the nuances of that jurisdiction’s unauthorized practice regulations, including Rule 5.5.

Blogs are a great way to market your legal practice and the more visually compelling the better.  Careless use of social media and its visual impact can spell real trouble, though.  We’ve posted about things to watch out for in responding to on-line reviews, using Facebook and sharing on-line opinions.  Now comes another risk to think about:  copyright infringement.

The issue is in the spotlight because an award-winning photojournalist filed a complaint last week in Pennsylvania district court against a national plaintiff-side personal injury firm for allegedly infringing his copyright by using one of his images in a blog post on the firm’s website.

Fatal fire

The plaintiff alleges that in June 2017 he produced a video documenting a fatal fire in East Coventry, Pennsylvania, in which a nine-year-old boy died.  He registered the copyright in the video with the U.S. Copyright Office and solely holds all rights in and to the video, he says in the complaint.

The defendant law firm is alleged to have infringed the copyright with a blog post on its “For the People” website that “prominently featured” the video.  The complaint attaches a copy of the post, which appears to picture an embedded video from a CBS TV affiliate in Philadelphia.  The posted article describes the fire, notes that the kitchen can be one of the “deadliest rooms in the house,” and discusses how residential landlords in general may potentially be held liable for house fires.

Tips for staying on the (copy)right side

The defendant law firm has called the copyright infringement suit “meritless,” and has not yet responded to the complaint.  But whatever the merits, the filing itself offers a good opportunity to take a look at your own practices in using images in marketing yourself and your firm.

Creators of visual or audiovisual works have a protectable interest in their works, namely a copyright that exists from the moment the work is fixed in a tangible medium of expression.  Although registering a copyright may be a prerequisite to an infringement suit, a work is protected by copyright even before it is registered.

A common misconception is that an image is fair game for you to use if you don’t benefit commercially from that use.  In reality, even non-commercial use can, under some circumstances, infringe the author’s copyright, because the essence of the protection is the exclusive right to reproduce, display and perform the work.

A well-chosen image can dramatically pep up your CLE presentation, PowerPoint slide deck, blog post or firm brochure.  But the purpose of all these marketing pieces is to draw positive attention to yourself and your expertise within the bounds of your state’s version of Model Rule 7.1 (“Communications Concerning a Lawyer’s Services”).  That can backfire if they draw negative reaction.  Some ways to avoid that:

  • Use “kosher” images that you purchase via a subscription service; don’t pull things off the internet.  (The images for this blog, for example, are almost all from Getty Images.)
  • For a source of free-to-use images, become familiar with “Creative Commons” licensing, a form of royalty-free use that requires attribution.  (One of our recent posts used such an image, for example.)
  • Seek advice from someone in the know about IP law, because the ins and outs can be complicated.  If you’re lucky enough to have access to in-house expertise from a colleague, ask!  An ounce of prevention, and all that.

We hope you enjoy all the images that we use here at The Law for Lawyers Today!

One market effect of the ongoing COVID-19 pandemic is that transactional clients might be eager to offer you stock or some other form of participation in a deal in lieu of your legal fees.  An uptick in proposals like this could come as clients try to limit cash outlays until the business climate and their operations become less unpredictable.  In an arrangement like this, the client preserves cash and if the deal works out your investment in a client might increase in value, even above the cash fee you might have earned.  It would seem like a win-win situation, right?

Not so fast.  Deals like this can raise risk for firms, and the ethics rule governing transactions between lawyers and clients has several requirements.

Accepting stock in lieu of fees

Taking stock or having a personal financial stake in a client’s transaction can potentially create a conflict of interest between your personal interest in the investment and the client’s interests, particularly if you will also be acting as a legal adviser in the deal.  The optics by themselves can raise risk — namely the appearance that you might structure the transaction or advise in a way favoring your own interests over the client’s.

If the deal goes south, the parties might look for deficiencies in the lawyering; a conflict can give rise to a claim, or at the very least complicate your defense.

For these reasons, many larger firms limit or even prohibit investing in clients.  In all events, business transactions with a client — whatever form they take — are subject to your jurisdiction’s version of Model Rule 1.8(a), which governs whenever the lawyer knowingly acquires an ownership or other pecuniary interest adverse to a client.  See ABA Formal Opinion 00-418 (July 7, 2000) (advising that lawyers can invest in clients, including stock in lieu of fees, but must comply with Rule 1.8(a)).

Rule 1.8(a) prohibits business transactions with a client unless:

  • the deal is fair and reasonable to the client;
  • its terms are fully disclosed to the client in writing;
  • the client is advised in writing to consult independent legal counsel and given a reasonable opportunity to do so; and
  •   the client gives informed consent, in writing, to the transaction and the lawyer’s role in it, including whether the lawyer is representing the client in the transaction.

And when you also represent the client in the transaction, you must additionally comply with your jurisdiction’s version of Model Rule 1.7, which governs “material limitation” conflicts, in which your financial interest in the transaction raises “a significant risk” that your representation of the client will be materially limited by your own interests.

Real life risks

The real life risks are illustrated by a complaint filed last week here in Cuyahoga County (Cleveland), Ohio.  The complaint’s allegations set out a complex transaction, but include the claim that the lawyer in the deal accepted a two percent ownership interest in the plaintiff at the same time he was representing the plaintiff, but without meeting the requirements of Ohio’s Rule 1.8(a).  The relief sought includes a declaration that the defendant’s ownership interest was not lawfully obtained and is void.  (No responsive pleading has been filed as of yet.)

Many decisions illustrate the possible pitfalls.  See, e.g., BGJ Assoc., LLC v. Wilson, 113 Cal. App. 4th 1217 (2003) (oral contract between client and lawyer/joint venturer void; client’s consultation with other counsel not sufficient unless client signed a written waiver).  Professional discipline can also be a consequence.  See, e.g., In re Snyder, 35 S.W.3d 380 (Mo. 2000) (lawyer who made fee agreements that included acquiring interest in clients’ residential property suspended for failing to comply with Rule 1.8(a)).

Takeaway on taking stock

The current climate is one of uncertainty for clients and lawyers.  If you are offered the opportunity to participate by way of an investment in a deal in which you are representing a client, whether or not the investment will be in lieu of your fees, consider the risks, and make certain that you comply with your jurisdiction’s ethics rules, including on conflicts and business transactions with clients.

This Photo by Unknown Author is licensed under CC BY-SA

If a South American investor asks you to take delivery of $1 million cash in your law office, to deposit it into a client account and then wire it to different designated accounts, all to supposedly “leverage” additional funds to produce a movie — should you do it?  A New York lawyer who did was charged with money laundering, allowed to plead to a lesser offense, and earlier this month was suspended from practice for three years based on the conviction.

The opinion of the New York Appellate Division in the case dovetails nicely with a recent ABA ethics opinion on the “duty to inquire” in order to avoid assisting with a fraudulent transaction.

“Didn’t feel good about it”

The lawyer in the case was assured by the client that the money was “clean.”  He testified that under the irregular circumstances he “didn’t feel good about it,” but went ahead with the arrangement anyway.  For his role in the transaction, the lawyer was paid $25,000.

In hindsight, the lawyer should have listened to his tingling Spidey sense, and run the other way, because several years after the transaction, he “learned that the money was ‘drug money,'” according to the court of appeals opinion.

The lawyer was immediately suspended from practice after his guilty plea in the criminal case; regulations in New York as in other systems provide for such interim suspensions upon conviction for serious crimes.

Later, in imposing the three-year suspension, the appeals court quoted the remark of the judge at the lawyer’s criminal sentencing:  “People usually don’t walk into an office with a million dollars in cash” and ask that it be converted into another form, and therefore, the court said in the disciplinary case, the lawyer “should have been on notice that this was not a legitimate transaction.”  In fact, the lawyer acknowledged that something was not right but decided to participate anyway, the court said.

Duty to inquire

If you find yourself with a cool million bucks that a client wants you to move around, like this lawyer did, you should first read the ABA’s Opinion 491, which was issued April 29.  Model Rule 1.2(d) prohibits a lawyer from advising or assisting a client in conduct the lawyer “knows” is criminal or fraudulent.  The extensively-footnoted opinion discusses when you “know” that, and spotlights some circumstances that require lawyers to inquire further before they provide their services.  The opinion includes some hypotheticals.

The knowledge that a deal is criminal or fraudulent may be inferred from the circumstances, “including a lawyer’s willful blindness to or conscious avoidance of facts,” the ABA Committee said.  Therefore, if you have facts that “establish a high probability that a client seeks to use the lawyer’s services” for a crime or fraud, you have “a duty to inquire further to avoid advising or assisting” the wrongdoing.

Even if information you get (whether from an intake interview or during the representation) doesn’t meet the “high probability” standard under Rule 1.2(d), the Committee advised, other rules on competence, diligence, communication and honesty may require you to inquire further.

If the client or prospective client refuses to give you information necessary for you to assess the legality of the proposed transaction, you “must ordinarily decline the representation or withdraw” from an existing representation, the Committee concluded.

Listen to your Spidey sense

“A lawyer may not ignore the obvious,” the ABA Committee wrote.  We’ve commented before (here and here) on the 2016 TV exposé that captured secretly-taped intake interviews in which lawyers appeared to be willing to use “gray money” to carry out transactions proposed by fake “clients.”  In each set-up, there were clues that should arguably have prompted further inquiry.

Bottom line:  If your nose tells you something is fishy about a client transaction you are asked to help with, then as the ABA opinion quoted, you have “an ethical responsibility to find out whether the proposal [is] above-board before performing the services.”

The eyes of the nation and of the world have been on crucial issues of racial inequity in the past few weeks following the death of George Floyd at the hands of police.  These issues penetrate to the very essence of how we can maintain a just society — issues that likewise go to the heart of lawyering.  One of the many ways that the legal community does the day-to-day work of maintaining an equitable society is by adhering to our ethical standards, which strongly call on us to practice our craft in line with the highest ideals of integrity.  These standards are always being refined and interpreted through the work of state and national ethics committees and the opinions they issue to guide practitioners.

Two significant ethics opinions have been issued in recent days.

California finally weighs in on pot practice

The Golden State has the most lawyers in the nation, and also the largest cannabis market.  However until late last month, the state bar’s ethics committee had been silent on the burning issue for lawyers seeking to counsel cannabis clients:  Can they provide representation with respect to conduct that is state-legal but that remains federally illegal?  As we noted at the time, city bars in San Francisco and Los Angeles took the lead on giving guidance to the state’s lawyers.

Now the state bar committee has weighed in, and unsurprisingly given the green light to lawyers who want to represent clients in all aspects that are “reasonably required” to make their clients’ businesses “functional and profitable in compliance with California law,” says the committee’s opinion.

Similar to Model Rule 1.2(d), Rule 1.2.1 of the California Rules of Professional Conduct bar counseling or assisting a client to engage in criminal, fraudulent or illegal conduct.  However, lawyers may nonetheless discuss the legal consequences of any proposed course of conduct with a client.  Under California’s comment [6] to Rule 1.2.1, a lawyer may “advise a client regarding the validity, scope and meaning of California laws that might conflict with federal or tribal law,” and advise on complying with California law “even if the client’s actions might violate the conflicting federal” law.

Interpreting the rule and comment, the Committee advised that California lawyers could provide legal services related to state-legal cannabis.  They may not advise the client to violate federal law, the Committee warned, and cannot provide advice or assistance in violating state or federal law in a way that avoids detection of those violations.  Lawyers must also advise the client about the conflict between state and federal laws on cannabis, including the potential for federal criminal liability and the associated penalties.

With 33 states and the District of Columbia taking steps to legalize cannabis for medical or recreational use or both, California’s guidance for lawyers may be influential elsewhere as well.

ABA cautions against “hearing too much” from prospective clients

In its latest ethics opinion, issued Tuesday, the ABA’s Standing Committee on Ethics and Professional Responsibility warned about the conflicts of interest that can arise from prospective-client interviews where a talkative potential client might over-share specific information before you decide whether to take on the matter.

Under Model Rule 1.18, even if no attorney-client relationship ensues as a result of a preliminary consultation, learning information from a prospective client creates duties of confidentiality that can bar you (under Rule 1.9) from taking on substantially-related future matters adverse to the prospective client.

In particular, the Committee advised, “Under Model Rule 1.18 a lawyer is prohibited from accepting a new matter if the lawyer received information from the prospective client that could be significantly harmful to the prior prospective client in the new matter.”

The kind of information that could be “significantly harmful” depends on the context.  But, drawing from cases and state ethics opinions, the Committee gave some examples of topics to avoid — at least until you decide whether to take on the matter:

  • settlement issues like pricing and timing;
  • detailed accounts of strategic thinking;
  • projections of potential claims and defenses;
  • legal theories regarding a case;
  • client financial information;
  • terms and structures of proposed transactions.

Bottom line:  patience pays.  Not hearing (or saying) too much before you determine that you will accept a new client or matter is the way to avoid learning “significantly harmful” information that can raise a conflict down the road if the consultation doesn’t result in an attorney-client relationship.

We’ve noted before that just because information relating to your representation of a client might be publicly available, your duty of confidentiality means that you can’t disclose it if it is not “generally known.”  The two concepts — public availability and being “generally known” —  are not the same, as a New Jersey lawyer learned earlier this month when the state supreme court imposed a one-year suspension in a disciplinary case that (among other things) involved a Yelp review.

“Good for the goose…”

According to the disciplinary board’s decision, the lawyer represented a client in a child custody matter and achieved a “seemingly good result” via settlement.  Over a year later, however, the client posted “poor reviews” of the lawyer’s services on several websites.  In turn, as set out in the board decision, the lawyer posted a review of the client’s massage business on Yelp, where he said that the client

is a convicted felon for fleeing the state with children.  A wonderful parent.  Additionally, she has been convicted of shoplifting from a supermarket.  Hide your wallets well during a massage.  Ooops, almost forgot about the DWI conviction.  Well maybe a couple of beers during a massage would be nice.

After the client complained, the lawyer sought to explain his actions, according to the board decision.  He admitted he was “very upset” by the client’s negative Yelp rating of his practice, and felt that his response was justified because “what was good for the goose was good for the gander.”

The lawyer conceded that his conduct regarding the client “rating was [not] my finest moment,” said the board.  The lawyer contended , however, that the conduct was not unethical because his disclosures “were public information and I did not violate attorney client privilege.”

Public information vs. generally known

Model Rule 1.9(c), like its New Jersey analogue, prohibits using “information relating to the representation” to the disadvantage of a former client with only narrow exceptions, “or when the information has become generally known.”

Here, said the board, the information in the Yelp review the lawyer posted related to the former representation, and the information had not become generally known.  The board cited New Jersey state and federal case authority and the ABA’s Formal Opinion No. 479 (2017).

As the ABA advised, “the phrase ‘generally known’ means much more than publicly available or accessible.  It means that the information has already received widespread publicity.”  Merely being “of public record” does not mean that the information is “generally known” when it is not “within the basic understanding and knowledge of the public,” said the New Jersey district court in a 2006 opinion.  And in a previous disciplinary opinion, the state supreme court had found that subpoenaed records from police departments had not become “generally known.”

On these bases, the state supreme court adopted the board’s decision finding a violation of Rule 1.9, and suspended the lawyer for a year, based on that plus other misconduct.

Don’t yelp

Retaliatory reviews on social media seem to be a recurrent ethical trouble spot for lawyers.  But you might be tempted to use or disclose client information in other more-benign-seeming settings — like at a social gathering (or Zoom hangout), where talking shop might lead to dishing the dirt on a matter because “after all, it’s ‘of public record.'”  In situations like that, the ethics rules should make you think twice.

Dan Bressler’s Risk Blog and The Professional Responsibility Blog also mention this case.

Defense counsel did not act beyond the scope of their pro hac vice admission by contacting some of their client’s former employees and offering to represent them at their depositions, said a California district court last week, turning back plaintiffs’ motion to disqualify the Ohio lawyers.  In its opinion the court analyzed both pro hac vice principles and the Golden State’s ethics rules on client solicitation.

Extent of PHV admission

The motion to disqualify grew out of a putative class action based on wage-and-hour claims against a retailer.  In their applications for pro hac vice admission, the Ohio lawyers identified the defendant as the party they represented.  Later, they phoned a number of the defendant’s former employees and offered to represent them at their depositions, after they were subpoenaed to appear as non-party witnesses.  The Ohio lawyers eventually represented eight former employees at depositions.

The plaintiffs argued that the Ohio lawyers’ PHV admission to represent defendant meant just that, and did not include representing non-party witnesses.  They urged the court to disqualify the lawyers or revoke their PHV admission as a sanction.  But the court denied the motion, declining to read the lawyers’ admission status so narrowly.  Instead, said the court, “counsel, admitted on a pro hac vice application, ought to be able to fully prosecute or defend the action in which they were admitted within the bounds of the law.”

Solicitation for pecuniary gain?

The plaintiffs also argued that by phoning some of the defendant’s former employees, the Ohio lawyers had violated California’s rules on client solicitation.  Like Model Rule 7.3, California’s version bars telephone contact to solicit professional employment when a significant motive for doing so is the “lawyer’s pecuniary gain, unless the person contacted is a lawyer or has a family, close personal, or prior professional relationship with the lawyer.”

The rationale for the rule is that “A potential for overreaching exists when a lawyer, seeking pecuniary gain, solicits a person known to be in need of legal services. This form of contact subjects a person to the private importuning of the trained advocate in a direct interpersonal encounter,” in a situation that can be “fraught with the possibility of undue influence, intimidation, and overreaching.”  Model Rule 7.3, cmt. [2].

But, argued the defendants, the Ohio lawyers did have a preexisting professional relationship with the employees, because they were all former managers of the client.  The court acknowledged that these were  management-level employees who were being deposed as a result of that employment relationship.

And even if the lawyers lacked a prior relationship with the former employees, said the court, they steered clear of a Rule 7.3 violation because they did not solicit for “pecuniary gain.”  Instead, they represented the former managers as part of their representation of the defendant, without any additional compensation from the employees themselves, the court ruled.

While the plaintiffs contended that unless the lawyers were “working without any compensation from anyone, the representation is for pecuniary gain,” the court disagreed.

Watch yourself…

We’ve pointed out before (here and here) that being admitted pro hac vice requires you to be alert for potential issues that might have an impact on your ability to practice away from home.  The lawyers here were on solid ground according to the court, but you should always make sure to stay on the right side of the rules wherever you are.