How Not to Practice

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Last week the media was abuzz with the allegations made against the National Enquirer by Jeff Bezos, the founder of Amazon and the owner of The Washington Post. The details in Bezos’ blog post about his ongoing dispute with the Enquirer and its publisher David Pecker are sensationalistic to say the least: the world’s richest man being allegedly blackmailed by people working for Pecker (a long-time friend and supporter of President Trump), with threats to publish “compromising” photos of Bezos unless he backed off his investigation of the tabloid. Here is some reporting on the story.

Part of the interest arises because Bezos alleges that the threat was delivered, in part, by an attorney working for the Enquirer. A Law360 article on the situation says “Bezos’ published account of how a general counsel and others at the American Media Inc.-owned paper allegedly tried to blackmail him does appear to describe a violation of state and federal statutes, ethics and white collar specialists said.”

While there may be a debate as to whether these were just hard negotiations or discussions that crossed the line into blackmail, it at least appears that the lawyers involved might have allowed themselves to get close to the line, even if not over it.

Zeal … or trouble

When zealously representing your clients, it can be easy to forget that zeal cannot be the basis for doing things that break the law or undermine the legal system. For example:

  • In some states, threatening to file criminal charges against a potential defendant in order to obtain a civil settlement is treated as extortion, including when the threat is made by counsel attempting to recoup stolen assets. An ABA Litigation article on the general subject is here.
  • As the New York statute does, many states make it a crime to compel a person “by means of instilling in him or her a fear” that if a demand is not met the threatener will “expose a secret or publicize an asserted fact, whether true or false, tending to subject some person to hatred, contempt or ridicule.”
  • Obstruction of justice in the course of representing a client was the undoing of some of the lawyers involved in Watergate.  (See here for a take on Watergate’s legal ethics legacy by John Dean and our partner Jim Robenalt.)
  • Lawyers have faced ethics charges for going too far in public statements about their clients’ cases, in violation of the many different state versions of Model Rule 3.6 (“Trial Publicity”).
  • It can be an ethical violation under Model Rule 3.3(a)(2) if you fail to make a court aware of binding precedent that is directly adverse to your client’s position.

Knowing where zeal ends and unlawful or unethical conduct begins is the best way to keep yourself (and your client) out of trouble. And don’t let an echo-chamber do you in. Getting a reality check from someone not involved in the situation can sometimes help avoid problems. Remember, under Model Rule 1.6(b)(4), you are permitted to reveal information relating to the client’s representation to the extent you reasonably believe necessary to secure advice about your compliance with the Rules of Professional Conduct, opening the way for getting good ethics advice.

Going abroad?  Think that “national counsel” is going to take care of anything that comes up when you’re gone?  Get swamped when you return and take “several weeks” to wade through the e-mail that piled up in your absence?  If you’re local counsel, that might be a recipe for disaster — for your client — as the Seventh Circuit Court of Appeals held recently.

What we have here is a failure to communicate

After the plaintiff filed a trademark infringement case, the Wisconsin district court’s docket shows that just a month later the parties reached a deal and jointly moved to file a consent order resolving the dispute.  But about four months after that, the plaintiff was back in court, moving for a contempt order and asserting that the defendant had violated the consent order.

Here’s where things began to go south, according to the appeals court opinion:  The defendant’s local Milwaukee counsel received notice of the contempt motion, via the electronic docketing system (presumably PACER).  When the lawyer failed to respond, the district court scheduled a hearing.  No one showed up on behalf of the defendant.  The district court then granted the plaintiff’s motion, holding the lawyer in contempt, requiring his client to pay the plaintiff’s fees and costs, and ordering the lawyer to explain his unresponsiveness.

As the court of appeals wrote, that order “caught [the lawyer’s] attention.”  Local counsel explained that he had been “traveling internationally” when the plaintiff filed its motion for contempt, and even though he returned five days before his client’s response to that motion was due (and 26 days before the scheduled hearing), “it took him several weeks to catch up on his email.”  He saw the court’s notices only after “all response dates had passed.”

The defendant’s request for reconsideration of the contempt order also pointed to what the appeals court called a “communication breakdown between local counsel and the company’s national trademark counsel.”  Local counsel believed national counsel would be “attending to any ongoing needs in the case; national counsel apparently had a different understanding,” the court wrote.

“Deadlines matter”

The result of this mess-up?  The district court found the local counsel in contempt, and after a line-by-line analysis of the plaintiff’s attorney fees and costs for the entire case — not just the contempt proceedings — sanctioned the defendant to the tune of almost $35,000.  The Seventh Circuit easily upheld those rulings, characterizing the whole situation as “unfortunate and avoidable.”

“Deadlines matter,” wrote the court, and certainly after the district court provided a second chance to the defendant by noticing a hearing, the lower court’s reaction in issuing its contempt order was not an abuse of discretion.  Nor did the defendant’s good faith provide any immunity from sanction, the appeals court said.

And the big take-away:  “Nor, of course, can communication breakdowns serve to exempt outside counsel … from compliance with the rules, or from the penalties for failing to do so.”

Beware local counsel duties — and check your e-mail

We’ve written before about local counsel duties. and a New York City Bar ethics opinion that is a helpful cautionary road map on local counsel duties.  The bottom line is that you don’t get any free pass for being “merely” local counsel.  The extent of local counsel’s role in any particular matter should be expressly set out in a carefully-considered engagement letter with the client.  If you think that “national counsel” is going to monitor a case or a docket after some certain end point, you should additionally clarify that understanding, something the court here said would have helped.

And, hey — Model Rule 1.1 (“Competence”) and Model Rule 1.3 (“Diligence”) mean that we can’t just totally put down our practices when we go on vacation.  That was true even in the days before e-mail and PACER, when someone “back at the ranch” would be monitoring our postal mail.  Now, the available technology means there is little excuse for not being aware of court filings in real time.

As for clearing up the inevitable post-vacation backlog of e-mails, the laundry from the trip might have to wait — but that’s okay, isn’t it?

The Ohio Supreme Court is continuing its trend of suspending lawyers who violate the disciplinary rule on sex with clients, and has again rejected arguments that pointed to the consensual nature of the relationship.  In a recent opinion involving sex between criminal defense counsel and his client, the court characterized the lower disciplinary Board’s analysis as “blaming the victim,” and increased the penalty above what the Board recommended.  The lawyer will serve a six-month suspension, with 18 months stayed on multiple conditions.

Hot tub trespass

The lawyer had previously represented “J.B.’s” boyfriend.  When J.B. was charged with felony theft, the lawyer agreed to represent her.  According to the opinion, the next day the lawyer and J.B. had drinks at a restaurant, discussed her case, had sex in the lawyer’s car in the parking lot, and engaged in sexual activity at least seven more times over the next four months, including trespassing into a neighbor’s yard to use a hot tub.

After rumors about the relationship began to spread, the lawyer falsely denied them to the judge presiding over J.B.’s criminal case.  In the meantime, the lawyer had filed a petition to run for prosecuting attorney.  After that, the county sheriff’s office began investigating the lawyer, and J.B. agreed to disclose the true nature of her relationship with the lawyer in exchange for a reduced sentence on her felonies.

Eventually, as part of a plea agreement on charges against him, including sexual battery, and criminal trespassing, the lawyer withdrew his candidacy for prosecutor and was sentenced to two years of community control and a fine.

Consent just doesn’t matter

The lawyer stipulated to violating Ohio’s version of Model Rule 1.8(j), which prohibits “sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.”  (The Ohio version refers to “sexual activity” with a client.”)

As the sanction for the lawyer’s misconduct, the Board of Professional Conduct recommended a two-year suspension with the entire two years stayed.  In the Board’s view, “not only was there no harm to the client, but the client leveraged her relationship with [the lawyer] to get a better plea deal,” and the lawyer had already suffered by his arrest, indictment, spending two nights in jail and being forced to withdraw from the prosecutor’s race — all stemming “from [the lawyer’s] consensual sexual relationship with his client.”

The Supreme Court strongly rejected this whole line of reasoning, along with the Board’s recommended sanction.  The Board’s approach, said the court, “essentially blamed the victim, J.B., for the negative consequences that [the lawyer] experienced resulting from his own decision to engage in sexual relations with a vulnerable client.”  (Emphasis in original.)

The court wrote that without a sexual relationship that pre-dates the client relationship, “seeking or having sex with a client is a per se violation,” and “the fact that a client appears to have consented does not mitigate the attorney’s misconduct or provide a defense against a violation.”

Instead, the court termed a sexual relationship with a client as “inherently and insidiously harmful,” categorizing this case as the “most disturbing” variety” — where “a lawyer has had sex with a client while defending the client against criminal charges … or has accepted sex in lieu of fees.”

The court imposed a two-year suspension with only 18 months stayed, along with multiple conditions — including taking and passing the MPRE, completing 12 hours of ethics CLE, and serving a two-year period of monitored probation.

Continuing trend

This case is one in a line of disciplinary opinions in which the Ohio Supreme Court has emphasized the power imbalance between the lawyer and client, and rejected the argument that the client’s consent to the sexual activity somehow ameliorates the ethical misconduct.  We’ve written before about one of these cases, in which the court found the lawyer not to be “remorseful” because he continued to argue that his sexual relationships with multiple clients were “consensual,” even while acknowledging it was wrong.  Several other such cases are cited in the opinion involving J.B.  It will be interesting to see how this court’s disciplinary stance on sex with clients continues to evolve.

If you’re admitted to handle a case PHV, mind your P’s and Q’s.

Translation:  Pro hac vice admission to practice before a court outside the state where you’re licensed requires attention to a range of ethics duties, and running afoul of them can have bad consequences.  Two recent cases spotlight some of the issues.

We’re looking at you….

A Louisiana lawyer was admitted pro hac vice to represent a client in the Western District of North Carolina.  On the application, he certified that he had never been subject to a formal suspension or public discipline in Louisiana.  Whoops.  In 2014, the lawyer had been suspended in the Bayou State for neglecting a client matter and mishandling a client trust account, but the suspension was deferred pending successful completion of a two-year probation.

The lawyer argued that his certification on the PHV application was not a material misrepresentation.  Maybe not technically — but the district court in North Carolina was not buying it.  The lawyer’s missteps in his home state didn’t automatically disqualify from appearing in North Carolina, said the court.  But he was required to explain his disciplinary history.  The lawyer’s argument that he had to disclose only an actual interruption in his ability to practice was “manifestly not credible,” the court found.  Even making the argument demonstrated his lack of candor, the court noted.

The outcome:  revocation of the lawyer’s permission to represent his client in the case.

Lesson:  Your state has a version of Model Rule 3.3 (Candor toward the Tribunal), Model Rule 5.5 (Multi-jurisdictional Practice) and Model Rule 8.4(c) (dishonesty, misrepresentation).  Don’t try to shave the corner of the plate when you’re applying for PHV admission.  Explain anything that even arguably needs explaining.  Don’t try to justify a failure to disclose with an over-technical reading of the  requirements.  A court might not look kindly on that strategy.

Hand-flapping and harassment

An Ohio lawyer admitted pro hac vice before the Delaware Chancery Court was representing the defendants.  Things went awry when the lawyer deposed one of the plaintiff’s witnesses, and based on misconduct at the deposition, the court granted the lawyer’s own motion to withdraw his PHV admission.

From its review of the deposition transcript and video, the court noted that the lawyer

  • raised his hand and made yapping gestures toward plaintiff’s counsel while plaintiff’s counsel was speaking;
  • repeatedly interrupted plaintiff’s counsel and referred to him as “Egregious Steve,” and the “sovereign of Delaware”;
  • harassed the deponent with personal questions; and
  • called the deponent and plaintiff’s counsel “idiots.

For this conduct, which it called “not only rude, but tactically so,” the court granted the motion to withdraw, and also referred the matter to Delaware disciplinary counsel, along with imposing attorneys’ fees on the lawyer and his firm.

Lesson:  Be professional and dignified at all times, but especially when you are in someone else’s bailiwick.  As the court said, the lawyer was appearing in Delaware “as a courtesy extended to him to practice pro hac vice.”  Delaware, like many other jurisdictions, has a professionalism code, in addition to its Rules of Professional  Conduct.  The Delaware code stresses “civility,” respectfulness, “emotional self-control,” and refraining from “scorn and superiority in words or demeanor,” and is binding on those appearing pro hac vice, the court said.

The take-home from these two cases is obvious.  When you’re specially admitted before a court, any professional or ethical misconduct carries with it the added potential risk of being tossed from the case, with clear downsides for your client, as well as for you.  Mind those P’s and Q’s, and stay out of PHV trouble.

Do we need another reminder about the perils of posting internet comments on cases and matters we are connected with?  Apparently we do, and here’s a strong one.  Earlier this month, an assistant U.S. attorney for the Eastern District of Louisiana was disbarred based on hundreds of comments he posted pseudonymously on the website of the New Orleans Times-Picayune.  The posts included many related to high-profile cases he or his colleagues in the U.S. Attorney’s office were prosecuting, including government bribery scandals and the killing of two unarmed residents by the police following Hurricane Katrina.

In its opinion, the Louisiana Supreme Court wrote that the lawyer’s “extrajudicial comments about pending cases” struck at “the foundation of our system.”  The court felt compelled to “send a strong message … that a lawyer’s ethical obligations are not diminished by the mask of anonymity provided by the internet.”

The hearing panel had recommended a two-year suspension, with one year deferred. The court, however, adopted the disciplinary board’s disbarment recommendation, which in the Bayou State entitles a lawyer to petition for reinstatement after five years.

“GUILTY as charged!”

The lawyer was a prolific poster on the newspaper’s internet site, using a number of pseudonyms to comment about pending cases he or his office was involved in.  For instance, during a bribery trial he prosecuted, the lawyer posted that the defendant’s lawyer “has screwed his client!!!!,” continuing that “You’re just as arrogant as [the allegedly bribed official] … and the jury knows it.”

During the federal trial of six police officers for the shooting of unarmed residents on the Danziger Bridge, and the ensuing cover-up, the lawyer posted, “Perhaps we would be safer if the NOPD would leave next hurricane and let the National Guard assume all law enforcement duties.  GUILTY AS CHARGED.”

The lawyer’s posts connected to the Danziger Bridge trial came to light after the six officers were found guilty and received lengthy sentences.  Following an investigation, the lawyer’s conduct was cited as one aspect of a pattern of prosecutorial misconduct that prompted the grant of the officers’ motion for new trial and eventually a plea bargain for much lighter sentences.

Not the way to relieve stress

The lawyer stipulated that his conduct violated Louisiana’s versions of Model Rules 3.6 (trial publicity); 3.8(f) (prosecutors’ extra-judicial comments); 8.4(a) (violating rules of professional conduct) and 8.4(d) (conduct prejudicial to the administration of justice).

But at the disciplinary hearing, although acknowledging his misconduct, the lawyer testified that he thought his posts would help him deal with the stress of his work.  His treating psychologist opined that the lawyer suffered from post-traumatic stress disorder resulting from his past work as a police officer and FBI agent, during which he had witnessed gruesome scenes and personally had come under gunfire.

In imposing a sanction, the court rejected PTSD as a mitigating factor.  Although the psychologist testified that the online posts were the result of the lawyer’s PTSD, the court found no clear and convincing support for the conclusion that there was a causal link between the posts and the lawyer’s mental condition.

Key to that determination, said the court, was the lawyer’s own admission that he knew he should not be posting his comments online, and that it was his anger over public corruption that led him to vent his pseudonymous criticism.

Think before you click submit

We all feel the stress of our chosen profession.  But is the relief valve of venting it in public (even anonymously) worth the risk of professional discipline?  Keeping a private journal (locked in your drawer) may not be as satisfying as seeing your words up in pixels, but it’s surely safer from a licensing standpoint.

A federal district court refused last week to disqualify a Connecticut lawyer in a suit against Yale University, even though finding a violation of the state’s version of Model Rule 4.2, the “no contact rule.”  Although ruling that disqualification was too extreme a sanction, the court ordered the turnover of interview notes from the lawyer’s interview of the improperly-contacted witness.

The case underscores the need to tread carefully when contacting anyone associated with the opposing party.

Coin curator’s claim

Yale University has an acclaimed art museum, and the museum’s former Curator of Coins and Medals sued the university for age discrimination after it terminated his employment.

In addition to being the museum’s coin curator, the plaintiff was an adjunct professor in the classics department.  The plaintiff’s lawyer phoned another professor in the department and interviewed him for 34 minutes as a potential witness, according to the opinion.  The other professor had never been involved in a law suit, and later said that it did not occur to him during the interview that he needed to consult with Yale’s lawyers before answering questions from the opposing side.

Yale’s counsel only learned about the interview six weeks later, and promptly moved to disqualify the plaintiff’s counsel for violating the no-contact rule, asserting that the professor interviewed was a represented “party” who was off-limits under the rule, absent consent from Yale’s lawyers.

Conceded “technical” violation

Connecticut’s Rule 4.2 differs from the Model Rule by barring communication about the subject of the representation “with a party the lawyer knows to represented by another lawyer in the matter,” without the other lawyer’s consent.  (The Model Rule uses the word “person,” not “party.”)  This raises the question “Who is included as a party?” for purposes of the no-contact rule, especially when an organization is a party.

Under the Connecticut rule comments, a “party” includes an organization’s employees with managerial responsibility; employees whose act or omission in connection with the matter may be imputed to the organization; and employees whose statements may constitute an admission of the organization.  While not express in the opinion, the profession presumably fell into one of these categories — perhaps the third one.

The plaintiff’s lawyer conceded that his interview raised a “technical violation” of Rule 4.2, but that it had been inadvertent, because the professor and the plaintiff were close colleagues and the lawyer regarded the professor as a witness on behalf of the plaintiff.  The lawyer argued that he had no intent to gain an unfair advantage, and that Yale was not prejudiced.

Trial taint needed for DQ

The district court agreed that the circumstances did not merit disqualification, notwithstanding the conceded rule violation.

As in many other jurisdictions, there is authority in the Second Circuit that disqualification motions require balancing the need to uphold ethical standards with a party’s right to freely-chosen counsel.  Therefore, an ethical violation, standing alone, might not be sufficient to mandate disqualification.  Many opinions in the Second Circuit and elsewhere hold that the remedy of disqualification is justified only when a violation poses a significant risk of trial taint.

The court agreed that disqualification was not necessary here.

Here, the district court explained, the taint concern was that the plaintiff’s lawyer had obtained confidential information about Yale’s litigation strategy from the professor, who had previously discussed the case with Yale’s lawyers.  The plaintiff’s lawyer had proposed to provide the court with the notes from the interview for in camera review; but the best remedy, said the court, was to order the lawyer to turn the notes over to Yale’s counsel.

Take-home lessons

If you’re involved in representing a client in any matter (not just litigation), you need to take heed of the no-contact rule.  As this case highlights, the rule comes in different flavors depending on jurisdiction.  While the case here involved disqualification, there is also always the possibility of disciplinary action from violating an ethics rule.  Last, the court’s order to turn over the interview notes — clear attorney work product — to the opposing party is a surprising remedy.  But obviously, such an order can’t be ruled out in circumstances that would appear to call for it.

Advising a “client” on how to move “grey money” into the U.S. has resulted in an agreed public censure in September for a New York attorney.  The lawyer (along with a number of others) was caught on video by Global Witness, a British-based public advocacy group.  But the sanction raises some questions regarding the imposition of discipline for conduct based on a pretextual situation.

The “client” was actually an undercover investigator who posed as a German lawyer and succeeded in getting appointments with 13 firms (out of 50 he tried) to supposedly get advice on behalf of an undisclosed African government official.  The question from the fake lawyer’s fake client:  how to launder funds described as “gray money” or “black money,” including by buying a New York brownstone, a jet and a yacht.

60 Minutes exposé

The video later aired on 60 Minutes.  (The section on the censured lawyer is here.)  We previously wrote about Global Watch’s sting operation, noting that the bad news was that some of the firms appeared to be on ethical thin ice in their interaction with the investigator (assuming the secret tapes accurately reflected their conduct).  The good news was that 37 firms didn’t schedule meetings with the fake prospect.  (And one lawyer who agreed to a meeting firmly rejected the bait, saying that “it ain’t for me,” and pointing out the Foreign Corrupt Practices Act.)

The American Bar Association’s response to the 60 Minutes segment is here.

Agreed censure for “counseling a client”?

Almost two years after the 60 Minutes piece, the censured New York lawyer entered into a discipline-by-consent agreement based on his meeting with the Global Witness actor.

Significantly, the main charge was counseling “a client to engage in conduct [the lawyer] knew was illegal or fraudulent,” in violation of New York’s version of Model Rule 1.2(d).

Of course, no lawyer should violate that rule.  But the brief opinion of the New York Appellate Division’s First Department reflects no acknowledgment that the person speaking to the censured lawyer was an actor, that there was no bona fide prospective “client,” and that there was never going to be any action taken in response to whatever comments the censured lawyer might have made.  Rather, the opinion speaks of the conduct occurring during “a meeting with a potential client.”

The lawyer’s misconduct was significantly mitigated, the First Department noted, by his cooperation, and the fact that it was a single “aberrational” incident in the lawyer’s 50-year career.  Those factors justified the relatively light sanction — a public censure.

Beware possible counseling traps

This case spotlights the knife-edge you sometimes walk in counseling clients — including that a disciplinary authority might view as sanctionable even conduct undertaken in response to a pretext where there is no actual client.

You can never “counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent.”  But under Rule 1.2(d) you can and should “discuss the legal consequences of any proposed course of conduct with a client.”

And, as Comment [9] explains, you are not precluded “from giving an honest opinion about the actual consequences that appear likely to result from a client’s conduct. … There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.”

The stakes now appear higher than ever in getting that distinction right.

In the movie “Goodfellas,” Robert De Niro famously advises that the two greatest life lessons are “Never rat on your friends, and always keep your mouth shut.”  Those are good rules if you’re in a crime syndicate.  But as most lawyers know, our Rules of Professional Conduct can actually require us to “rat out” our fellow lawyers, under some limited circumstances.  Model Rule 8.3(a), adopted in some version in almost all jurisdictions, says:

“A lawyer who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.”

Rule 8.3(b) applies the principle to judges.

But do you ever have to, in effect, rat yourself out — self-reporting your own ethical misconduct?

In almost every jurisdiction (my home state of Ohio is an exception), the answer is “No.”  The Model Rule, as incorporated into almost all the state professional conduct rules and the rules of the District of Columbia, deals expressly with reporting the ethical misconduct of “another lawyer.”  Under that language, there is no ethical duty to self-report your own violation of the professional conduct rules.  In some jurisdictions, though, self-reporting might be considered as part of the mitigating factors that can reduce the severity of professional discipline, as a recent Nevada opinion illustrates.

Stayed suspensions for trust fund misconduct

In the Nevada case, two lawyers got one-year fully-stayed suspensions after their employee improperly used more than $1 million in client trust account funds to pay firm business expenses.  As described in the state supreme court’s opinion, the two lawyers admitted they violated Nevada’s version of Model Rule 5.3, by failing to properly supervise a non-lawyer assistant, and they agreed to the sanction.  The lawyers were not aware of the non-lawyer’s actions.  And, strikingly, “Within fifteen minutes of discovering the non-lawyer assistant’s improper trust fund transfers,” they “self-reported to the State Bar.”  In accepting the proposed discipline, the supreme court noted the lawyers’ “full and free disclosure to disciplinary authority.”  It also helped that the lawyers immediately hired a forensic accountant for an audit, and began repaying the trust account shortfall out of earned fees.

… And you might have to self-report crimes and/or other discipline

The general rule excusing you from ratting on yourself is turned upside down in many places, however, when it comes to self-reporting discipline that is imposed on you by a court (for instance a federal court) or by a disciplinary authority in another jurisdiction.  In those cases, many jurisdictions require you to bring the matter to the attention of your home state’s disciplinary body.  It’s not the misconduct itself, but the fact of disciplinary action emanating from somewhere besides your home jurisdiction’s highest court that triggers this kind of self-reporting duty.

You also might have a duty to self-report if you are charged with or convicted of a crime.  If (heaven forbid) you find yourself in that situation, you should get advice about what your jurisdiction requires of you, including any mandatory time frames on self-reporting.

Carve-out for lawyer assistance programs

Last, a PSA:  If you are struggling with a mental health problem, or with substance abuse, be aware that the lawyer assistance program that every jurisdiction has is very likely exempted from reporting to disciplinary authorities misconduct that its staff lawyers learn of in the course of helping you.  Check your own state’s version of Model Rule 8.3(c), but those I’m aware of have some form of the Model Rule’s carve-out:   “This Rule does not require disclosure of information otherwise protected by Rule 1.6 or information gained by a lawyer or judge while participating in an approved lawyers assistance program.”

Here in Ohio, our lawyer assistance program advises that no disciplinary problem is ever made worse by seeking help.

A Washington lawyer was disbarred last month by the state supreme court in a disciplinary case with an interesting array of issues:  the heavy penalties for using trust account money to “rob Peter to pay Paul;” the danger of treating the representation of a relative too casually; “compassion fatigue” as a potential mitigating factor in lawyer discipline; and the application of the Constitutional protection against double jeopardy in the disciplinary setting.

Rob Peter, pay Paul

The lawyer was a sole practitioner with a personal injury practice.  Alerted to overdrafts in his client trust account, disciplinary counsel investigated and found numerous irregularities:

  • The lawyer transferred trust account money to his operating and personal accounts when they were overdrawn or short of funds, in the process converting more than $10,000 to his own use.
  • He also failed to pay several clients the full amounts of settlements they were entitled to, and made misrepresentations to them in the process.
  • The lawyer shuffled money in and out of the trust account, using funds properly belonging to one client to pay settlement amounts owed to others.

Misusing and misappropriating client funds in these kinds of ways is the most serious ethics breach in the rule-book, and the court found violations of Washington’s versions of Model Rule 1.15 (Safekeeping Property) and Rule 8.4(c) (dishonesty, fraud, deceit and misrepresentation).  In Washington, as in many jurisdictions, the presumptive penalty is disbarment.

All in the family

Additional counts of the disciplinary complaint involved the lawyer’s representation of his nephew in a car accident case.  There was no fee agreement, but the lawyer eventually settled the case for $90,000 and took a $20,000 fee.  Later, however, after a change in Washington law, the tortfeasor’s insurer sent the lawyer more than $17,000 as an additional settlement payment.  The lawyer failed to notify the nephew, signed his nephew’s name on the check and eventually disbursed it to his office account, using it to pay bills.

The lawyer testified that his sister — the client’s mother — authorized him to negotiate the check, and that the nephew’s drug problem made it inappropriate to give the additional settlement money to him.  The sister had power of attorney over her son at one point, but it had expired long before the lawyer distributed the additional settlement funds to himself without the client’s knowledge or permission.

The court found that in addition to violating the trust account rules and converting the funds dishonestly, the lawyer violated the state’s version of Model Rule 1.4 (Communication).

“Compassion fatigue”?

The lawyer argued that the disciplinary board, which unanimously recommended disbarment, should have considered his emotional problems as a mitigating factor.  In the same year that he committed the charged misconduct, he had lost three personal injury trials in a row.  A psychiatrist testified at the disciplinary hearing that these losses and the lawyer’s over-identification with his clients led to “compassion fatigue,” a syndrome in which people in the helping professions become ill themselves as a result of working with traumatized populations.

The lawyer’s expert witness said that symptoms of “compassion fatigue” can include becoming “jaded,” and mentally disassociating from daily life, and that it had caused the lawyer to become careless and to avoid the stress of dealing with his bookkeeping.

The court accepted the concept of “compassion fatigue” as a potential mitigating factor.  Under Washington law, the mitigating factor of emotional problems requires merely some connection between the asserted problem and the misconduct; the court found that the psychiatrist’s expert testimony established that connection at least as to  some of the lawyer’s misconduct.

Nonetheless, the court said, under the totality of the circumstances, the lawyer’s emotional problems carried “little weight.”  “Compassion fatigue” did not actually cause the lawyer to forge his nephew’s signature, or convert client funds, the court said; and he testified that he was still aware of his ethical obligations.

In order to justify mitigation where the presumptive sanction is disbarment, the court noted, the circumstances must be “extraordinary.”  Here, they were not, and the failure to preserve the integrity of his clients’ funds led the court to rule that the lawyer’s emotional troubles could not reduce the sanction.

Double jeopardy and lawyer discipline

Last, the lawyer argued that being charged with multiple rule violations stemming from single instances of misconduct meant that he was being punished more than once for the same conduct, in violation of the Constitutional protection against double jeopardy.

This was an issue of first impression in Washington.  However, numerous jurisdictions have considered whether the double jeopardy clause is implicated in lawyer disciplinary proceedings, and answered “No,” and the Washington Supreme Court was persuaded by these holdings.  The weight of authority is that the sanctions for professional misconduct — reproval (or admonishment or reprimand), suspension or disbarment — are not criminal sanctions (which consist of fines or incarceration).  Thus, disciplinary sanctions are not “punishment” for purpose of the double jeopardy clause, the court held.

As the legal market continues to change, attorneys face more challenges when it comes to client relations. While the trend has been for clients to slash attorney’s fees by hiring third party auditors to review bills, or to aggressively seek discounts on fees, ethical considerations, and now the United States Court of Appeals for the 10th Circuit, make it clear that overbilling clients cannot be a solution for legal revenue woes.

In a recent opinion, the Tenth Circuit left a law firm with a legal bill of its own when the Court ruled that the firm’s malpractice insurer was entitled to recover its expenses from defending an overbilling malpractice claim not covered under the firm’s policy.

What happened?

In 2012, the Colorado Attorney General’s Office began investigating attorney Michael P. Medved for allegedly overbilling clients, and later filed suit against him.  Additionally, Medved was facing a class action suit from former clients relating to the same allegations. Medved reached out to his firm’s malpractice insurance provider, Evanston Insurance Company, for representation in both matters.  At the time, Medved’s firm had a malpractice policy that covered “wrongful acts by reason of professional services.” Evanston agreed to defend Medved subject to a reservation of rights. Both cases resulted in relatively quick settlements.

Evanston later sued Medved seeking reimbursement for legal fees and costs incurred, arguing that the malpractice policy did not cover claims related to overbilling because overbilling was not a “wrongful act by reason of professional services.”

The 10th Circuit Court of Appeals agreed, reasoning that:  “The alleged wrongful act (overbilling) lacked the required connection to professional services rather than the claim itself, and the ‘by reason of’ phrase does not create a connection between the wrongful act and the professional services . . .”

Medved argued that Evanston’s failure to properly reserve its right to challenge the representation should estop Evanston’s claims, but the Court of Appeals quickly dismissed this argument, finding that Medved had failed to show prejudice.

Ethical considerations

Model Rule 1.5 prohibits a lawyer from collecting unreasonable fees or an unreasonable amount of expenses from a client. While this rule seems pretty simple on its face, there is no bright-line test to determine what is, or is not, reasonable. Given there is no bright-line rule, the ABA Model Rules provide eight factors you should consider when determining the reasonableness of a fee.

All jurisdictions have adopted some version of Rule 1.5.  Clients and courts have been paying more attention to attorneys’ billing practices; the Tenth Circuit’s ruling here points to the risk of not being able to rely on malpractice insurance to cover the cost of defending against overbilling claims.

The Tenth Circuit ruling also shines a light on the importance of heading off billing problems with clients before they start.  Communicating with clients about fees is more important than ever, and it’s also part of your duty under your jurisdiction’s version of Model Rule 1.4 (Communication). Thoughtful communication with the client throughout the course of a matter is the best practice.  However, the more transparently you communicate with clients about your fees and billing practices on the front end, the less likely it is that you’ll have to defend against an action based on overbilling on the back end.

*Imokhai Okolo is a rising second-year law student at the University of Akron School of Law where he serves as an Assistant Editor on the Akron Law Review, member of the Akron Law Trial team, Vice President of the Akron Black Law Students Association, and Student Director of the Driver License Restoration Clinic.