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Disclosing client information on Facebook has gotten yet another lawyer in trouble.  A Massachusetts attorney was publicly reprimanded earlier this month for posting details of a guardianship case on the social media site, in violation of the Bay State’s version of Model Rule 1.6 (“Confidentiality of Information”).  The Board imposed a public reprimand, rejecting an argument that the only people who would have recognized the case from the information posted were the parties themselves.  The case highlights the risk of posting even information you have tried to anonymize.

“Back in the Boston office …”

After representing his client at a hearing in juvenile court, the lawyer (a member of the bar since 1977) posted on his personal Facebook page, which was public and had no privacy setting:

I am back in the Boston office after appearing in Berkshire Juvenile Court in Pittsfield on behalf of a grandmother who was seeking guardianship of her six year old grandson and was opposed by DCF [i.e., Department of Children and Families] yesterday.  Next date — 10/23.

Two people responded to the post.  A Massachusetts lawyer who was a FB friend asked, “What were the grounds for opposing?”  The lawyer answered, “GM [i.e. grandmother] will  not be able to control her daughter, the biological mother, and DCF has concerns.”  The friend responded (sarcastically), “DCF does have a sterling record of controlling children and questionable mothers, after all.”  The lawyer replied, “Indeed.”

A second FB friend, this one a non-lawyer, also responded:  “So what’s the preference … Foster care?  What am I missing here?”  The lawyer answered:

The grandson is in his fourth placement in foster care since his removal from GM’s residence in late July. I will discover what DCF is doing or not doing as to why DCF opposes the GM as guardian.  More to come.

Within a couple months, the lawyer’s client learned from her daughter about the lawyer’s FB post.  She later  complained to him and eventually to disciplinary authorities.

Connecting the dots?

The lower hearing committee recommended dismissing the disciplinary case, concluding that the FB post couldn’t reasonably be linked to the client, and therefore there was no confidentiality violation under Rule 1.6.  But the Board rejected that conclusion, because the post disclosed sufficient information to make it clear to the client’s daughter that the post referred to her mother. That belied the notion that no one could identify the case and learn confidential information from the post.

“Even if there were no evidence that a third party actually recognized the client in the post,” said the Board, “we would still conclude that the respondent had violated Rule 1.6(a).  There is no requirement that a third party actually connect the dots.”  Rather, the Board ruled, it was enough if it were “reasonably likely that a third party could do so.”

This was no mere hypothetical, or “shop talk” among lawyers the Board said.  The lawyer’s FB post did not seek advice from other lawyers, in the Board’s view, or have “any other purpose that would have served his fiduciary duty to his client.”  Rather, he violated the duty to “jealously guard … client secrets.”

The lawyer in this case had apparently practiced for 42 years without any other disciplinary history.  The Board brushed off his lack of previous discipline and said it was entitled to no mitigating weight.  Instead, the Board regarded the lawyer’s long experience as an aggravating factor, since “he should understand the importance of protecting client confidences.”

Be careful out there

Do we need to say it again?  Don’t even get close to talking about the specifics of your clients’ matters on social media.  Even if you try to disguise identities and details, that might not be enough to keep you out of trouble.

After hard-fought proceedings, you’ve finally settled a contentious case on behalf of your client.  The plaintiff’s lawyer has brought suit against your client before, and likely will again:  the lawyer advertises and uses social media aggressively to locate claimants who have the same kind of issue with your client.

Your client asks, “Can’t we include terms in the settlement agreement that would rein in this lawyer?  Maybe raise the settlement amount enough to get her to agree to stop taking these cases?  Or at least, get some language that would stop the blog posts and the TV ads fishing for clients to sue us?”

The answers:  “No — and no.”  A new ethics opinion from Ohio’s Board of Professional Conduct underscores the point.

Restrictions on right to practice

Model Rule 5.6(b), adopted with only minor variations in almost every jurisdiction,* bars you from “participating in making or offering” a settlement agreement that includes a restriction on a lawyer’s right to practice.  The new Ohio ethics opinion expressly extends that prohibition to settlement agreements conditioned on restricting a lawyer’s communication of information “contained in a court record.”

A settlement agreement can certainly bar both sides from disclosing non-public information (such as settlement terms, conditions and amount), and those are common clauses.  But preventing counsel from making a public announcement, or communicating to the media, or advertising about the case using information contained in case documents, violates Rule 5.6, said the Ohio Board.

The Board reasoned that an agreement prohibiting a lawyer from using public information interferes with the ability to market legal services in a way otherwise consistent with the Rules of Professional Conduct.  It also interferes with “the public’s unfettered ability to choose lawyers who have the requisite background and experience to assist in pursuing their claims.”  Rule 5.6(b) “prevents settlement agreements from being used to ‘buy off’ plaintiff’s counsel … in exchange for the lawyer foregoing future litigation against the same defendant.”  The Board also mentioned the conflict that such agreements create “between the interests of current clients and those of potential future clients.”

Expansive readings

The ABA Ethics Committee, as well as ethics committees in New York and the District of Columbia, have reached similar expansive conclusions about the reach of Rule 5.6(b).  The ABA Committee particularly disapproved in 2000 of settlement agreements conditioned on not “using” information in later representations against the same opposing party or related parties.  And the D.C. ethics opinion notes that the fact of settlement is usually reflected in public documents, thus making it a rule violation to condition the agreement on non-disclosure of that fact.

Underlying these opinions, as the D.C. ethics committee said, “is the intent to preserve the public’s access to  lawyers who, because of their background and experience, might be the best available talent to represent future litigants in similar cases, perhaps against the same opponent.”

Not a limit on duty of confidentiality

The Ohio opinion, and others, should not be read to alter your duty of confidentiality to your client.  Under Rule 1.6, absent client consent and other narrow exceptions, you already have a duty to keep confidential all information relating to the representation — and that would include otherwise public information, as we’ve noted before.  In contrast, the opinions centering on Rule 5.6(b) are about your ability to offer or accept settlement agreements restricting the right to practice.

Further, as Hofstra Professor Emeritus Roy Simon explains in his treatise on New York ethics law, you can get into ethics trouble even if a court might otherwise enforce the settlement agreement:  “A lawyer who makes or agrees to [a settlement in which a lawyer promises not to represent a client in later disputes with your client] risks professional discipline even if a court later holds that the agreement is enforceable.”

Client ABC’s — and the nuclear option

The restriction against participating in a settlement agreement aimed at reining in opposing counsel is a part of the ethical landscape that clients may not understand — especially when you need to turn down a request to pursue something that would be to the client’s advantage.

This is an issue that certainly merits explanation under Rule 1.4 in order to “permit the client to make informed decisions regarding the representation.”  And you also must “consult with the client about any relevant limitation on the lawyer’s conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.”

The new Ohio opinion cautions that if worst comes to worst, and the client insists that you participate in accepting or offering settlement agreement with an impermissible condition, Rule 1.16(a)(1) requires you to withdraw from representation, in order to avoid violating Rule 5.6.  Hopefully you won’t need to exercise that nuclear option.

* An exception to the nearly-nationwide approach is Virginia’s Rule 5.6(b), which carves out settlement agreement restrictions on a lawyer’s right to practice that are approved by “a tribunal (in such situations as the settlement of mass tort cases) or a governmental entity.”

We’ve written before about the breadth of the duty of confidentiality we owe to our clients, and how it even extends to matters that you think are safe to discuss because they are of “public record.”   (See here and here.)  Now comes the ABA’s latest on the subject of lawyer “public commentary” — Formal Opinion 480 (Mar. 6, 2018).  And it prompts us to be wary of a couple pitfalls when it comes to what we say about clients in online articles, on twitter, at webinars, in podcasts and through traditional print publications — all of which the opinion refers to as “public commentary.”

Duty “extends generally”

All such public commentary, the ABA reminds us, whether on-line or not, must comply with the relevant jurisdiction’s version of Model Rule 1.6.  The rule requires us to maintain the confidentiality of all information relating to the representation of a client, unless that client has given informed consent to the disclosure, the disclosure is impliedly authorized to carry out the representation, or the disclosure is permitted by a specific exception in Rule 1.6(b).

The confidentiality rule, as is frequently said, is much broader than the attorney-client privilege, and includes all information relating to the representation, whatever its source.  Even the identity of the client is usually deemed to be confidential information, the ABA ethics committee notes in this newest, foot-note-heavy opinion.  And, adds the committee, it’s highly unlikely that a disclosure exception (except for consent) would apply when a lawyer engages in this sort of public commentary.

Don’t hype the hypo

That brings us to “hypotheticals.”  We all use them — from law profs in class, to lawyers seeking informal practical advice from colleagues at other firms, to gurus of various stripes who use real-life examples at legal CLE seminars.  But, says the ABA committee, beware:  “A violation of Rule 1.6(a) is not avoided by describing public commentary as a ‘hypothetical,’ if there is a reasonable likelihood that a third party may ascertain the identity or situation of the client from the facts.”

For example, in a widely-reported case mentioned in the ABA opinion, an Illinois lawyer got a 60-day suspension in her home jurisdiction for violating  Rule 1.6, when she blogged about her criminal defense clients using either their first names, a derivation of their first names, or their jail ID number.  Reciprocal discipline was imposed in Wisconsin.

In light of the ABA opinion, you’re going to want to make sure that any real-life client situations you describe in  public commentary is so thoroughly disguised that no one can tell that it’s real.  If you’re using social media to educate and engage, there’s arguable benefit in discussing actual situations in a hypothetical way, while being sure to scrub the real facts out.  But as we’ve said before, if you’re just making cocktail party chit-chat, why even go there?  It’s not worth the risk of divulging confidential client information.

Trial publicity statements

The ABA opinion also briefly notes the constraints that Model Rule 3.5 puts on using public commentary to influence the court of public opinion.  The rule prohibits a lawyer from seeking to influence a judge, juror, prospective juror, or other official by means prohibited by law, and cites the case of a Louisiana lawyer disbarred for, among other things, using an internet petition campaign to contest the rulings of a judge presiding over a custody dispute involving her client.  That kind of conduct can also obviously lead to trouble.

All in all, the new opinion is a straightforward application of Rule 1.6 to this age of public commentary; but it is a good wake-up call for those who need one.

Folder searchIn late December, a divided California Supreme Court ruled that legal-fee bills in closed cases aren’t necessarily covered by attorney-client privilege.  Although the case involved a discovery demand  sent to a government entity under the state’s  public records act, some lawyers have questioned (sub. req.) how far the privilege limitations might go.

No “categorical” protection

The case arose out of a public-records request from the ACLU of Southern California to the Los Angeles County Board of Supervisors, seeking legal fee invoices that would reveal law firm billings to the county regarding nine lawsuits, each of which alleged the use of excessive force against inmates in the L.A. County jail system.  The ACLU alleged that the county and its outside lawyers were pursuing “scorched earth” tactics in refusing to settle excessive-force cases, and were using taxpayer dollars to do so.

Three of the cases were closed; the county agreed to produce copies of those legal bills.  But as to the six still-pending suits, the county said that they were exempt from the reach of the public records law under the attorney-client privilege exception, because “the detailed description, timing, and amount of attorney work performed … communicates to the client and discloses attorney strategy, tactics and thought process and analysis.”

On dueling writs of mandate, the intermediate state court of appeals found that the invoices were privileged and exempt from disclosure under the public record act.   In a 4-3 vote, the state supreme court reversed.

The high court rejected “categorical protection” for billing records.  Acknowledging that attorney-client privilege “no doubt holds a special place in the law of our state,” the majority wrote that it still only protects communications “made for the purpose of seeking or delivering the attorney’s legal advice or representations.”

Agreeing with the ACLU, the majority opinion said that “while invoices may convey some very general information about the process through which a client obtains legal advice, their purpose is to ensure proper payment for services rendered, not to seek or deliver that attorney’s legal advice or representation.”  Fee bills, the court said, evoke “an arm’s -length transaction between the parties in the market for professional services” more than they do the “discreet conveyance of facts and advice.”

Information in the “heartland”?

What remains privileged in a fee bill, however, said the court, is information that “lies in the heartland of the attorney-client privilege” — namely everything in an invoice on an active and pending legal matter — even when the information is  conveyed in a document, i.e. the  bill,  that is not “categorically privileged.”

The dissenters said that the majority’s ruling undermines a “pillar of our jurisprudence” by adding a “heretofore hidden meaning” to the state privilege statute, by shielding only communications that relate to the provision of legal consultation, even if they were otherwise transmitted confidentially between lawyer and client.

Following the majority’s rule, the dissenters wrote, means that lawyers must explain to their clients that confidential communications that were previously privileged “may be forced into the open by interested parties once the subject litigation has concluded.  If a limiting principle applies to this new rule,” the dissent warned, “it is not perceptible…”

Privilege takeaways

The contents of fee bills have long been subject to attorney-client privilege when they reveal information about strategy, research topics and the like.  As even the majority in this case notes, things like research topics or an uptick in the hours charged can be useful information to litigation opponents.  But as California commentators point out, the case will likely be read as a narrowing of the privilege, and by introducing subjectivity into the test, will possibly encourage discovery forays against the fee bills of opposing counsel.

California lawyer Ellen A. Pansky, quoted in the ABA/BNA Lawyers’ Manual on Professional Conduct, noted that “the case leaves an interesting, unanswered question: What mechanism will courts use to resolve a privilege claim when a party asserts attorney-client privilege to only portions of invoices previously transmitted in a completed prior matter?”  This might be an acute question, because California law seems to be that a court may not compel disclosure of attorney-client communications, even in camera, to rule upon a claim of privilege.

Particularly if you have cases in which California privilege law applies, stay tuned.

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

“Publicly available” vs. “generally known”

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

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

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

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

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

Disloyal use?

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

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

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

Duty of confidentiality not “nullified” by public record

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

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

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

Your lips are sealed

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

Lawyer in a Courtroom

Conflicts of interest aren’t always straightforward, especially with trust and estate planning matters. The Supreme Court of Utah recently determined that there was no former client conflict under Utah’s Rule 1.9 where lawyers were found to have only represented the former trustees and not the trust itself in litigation.

Trustees (“Trustees”) hired lawyers to represent them in their duties as Trustees of the trusts at issue. After a significant period, Trustees hired the same lawyers to hire them to defend a lawsuit brought by the trusts’ beneficiaries. A jury eventually found that Trustees breached their fiduciary duties to the trust. The court entered a $1.8 million judgment against the Trustees, which was mainly payable to the trusts. The court removed the Trustees and appointed Successor Trustees (“Successor Trustees”). Using the same attorneys, the now former trustees (“Former Trustees”) requested that the court reduce the judgment.

Differing viewpoints

The Successor Trustees moved to disqualify the Former Trustees’ attorneys arguing a Rule 1.9(a) conflict existed under the Utah Rules of Professional Conduct. Rule 1.9(a) prohibits a lawyer who has represented a client in one matter from subsequently representing another person whose interests are materially adverse to the former client’s interest in the same or a substantially related matter, absent client consent. The argument was based on the view that the lawyers had represented the trusts in the litigation initiated by the beneficiaries and therefore were prohibited from assisting the Former Trustees in trying to reduce the judgment. They argued that to do so would be adverse to the interests of the trusts and the trusts were their former clients. The lawyers were disqualified by the district court.

The Former Trustees appealed, arguing the district court erred in finding a disqualifying conflict under Rule 1.9(a) because the trial court misinterpreted existing precedent in finding that an attorney’s representation of a trustee means they also automatically represent the trust itself. The Former Trustees argued that only they were represented by the lawyers—not the trust as well.

Attorney-client relationship

The Utah Supreme Court found that while an attorney can represent a trust, an attorney-client relationship does not arise with the trust solely due to the lawyer’s representation of a trustee.  While a trust is capable of forming an attorney-client relationship with a lawyer, context determines whether such relationship was actually formed. The trust holds the attorney-client privilege and the trustee, as fiduciary, claims the privilege on the trust’s behalf.

Putting the facts to the test  

The test is whether the lawyers (1) previously represented the trusts (2) in the same or substantially related matter (3) in which the Former Trustee’s interests are materially adverse to the trusts.

In this instance, the beneficiaries’ suit was against the trustees, not the trusts. The trusts were not named in the lawsuit. The Utah Supreme Court found that the lawyers never represented the trusts in the lawsuit.

The attorneys for the Former Trustees may have represented the trust when retained to assist in trust administration. But the court found that even so, the fact that the attorneys (or at least one of them) may have represented the trusts at some point is not the concern. The concern is whether the lawyers represented the trusts in the same or a substantially related matter, which here would be whether the attorneys represented the trusts in the same lawsuit. The applicable time period could not have started to run until the beneficiaries filed the lawsuit for breach of fiduciary duty against the Former Trustees.    

While not a decisive factor, when lawyers are paid from trust funds it suggests they are involved in the administration of the trust. When lawyers are paid from a trustee’s personal funds, that suggests they are looking out for the trustee personally. But, even when lawyers are paid with trust funds, that alone does not create an attorney-client relationship with a trust. Further, the court found some ambiguity in that the lawyers engagement letter to the Former Trustees had only clarified that the lawyers did not represent the beneficiaries but said nothing about representing the trust. However, that ambiguity was not evidence of their attorney-client relationship with the trust.

The Utah Supreme Court found that because the lawyers never represented the trusts in the lawsuit, Rule 1.9(a) would not serve to block the lawyers from continuing to represent the Former Trustees.

Takeaway

While substantive law regarding trusts will vary from state to state, former client conflicts are fairly common.  Different states with the nearly identical former client conflict rules, may very well issue opinions with a vastly different result. For those states without clear cut answers to the questions raised in this opinion, engagement letters become even more crucial.  This case was not ultimately decided on the content of the engagement letter, but it is a wonder how far the case would have made it in court had the Former Trustee’s engagement letter explicitly mentioned who the client was not—rather than just mentioning who the client was. This case surely raises the question of when it would be advantageous for trusts and estates lawyers (and those in other fields of practice as well) to follow suit.

This blog post was co-authored by Thompson Hine partner Tony Rospert and associate Micah Fishman.

Yes. Or at Least, They Shouldn’t Lie. (Do We Even Need to Say That?)

Lawyers experienced in the art of settlement negotiations can become primarily focused on little more than getting the best results for their client and will often use various implicit and explicit statements to convince the other side of the merits of their position. But there are always ethical limits on zealous representation, and settlement negotiations are no exception. Each jurisdiction will have a different interpretation of just how far lawyers can go in using puffery and deception to secure the best deal for their client. While it is never ethically permissible to lie, being completely transparent in settlement negotiations may not be the best strategy either; divulging information that is not required could be deemed a failure to provide competent representation. Thus, in any settlement discussion there is a tension between negotiating with honesty and good faith and obtaining the best results.

The Ethics Rules: A Certain Shade of Gray

Lawyers in negotiations who are tempted to overstate their cases should be familiar with their state’s version of Model Rule 4.1, the ABA version of which provides: “In the course of representing a client a lawyer shall not knowingly: (a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.”

The ABA Standing Committee on Ethics and Professional Responsibility (“Committee”) issued Formal Opinion 06-439, which lays out a roadmap to analyze Model Rule 4.1 in the context of settlement negotiations. The Committee provides multiple examples of what a “false statement of material fact” is under Rule 4.1. The Committee opines that “statements regarding a party’s negotiating goals or its willingness to compromise, as well as statements that can fairly be characterized as negotiation ‘puffing,’ ordinarily are not considered ‘false statements of material fact’ within the meaning of the Model Rules.”

Likewise, exaggerating or emphasizing strengths and minimizing or deemphasizing weaknesses of factual or legal position can be deemed “puffing” or “posturing.” Parties to a negotiation typically would not be expected to rely on these statements, which must be differentiated from “false statements of material fact.”

The Committee gives an example: “a lawyer representing an employer in labor negotiations stating to union lawyers that adding a particular employee benefit will cost the company an additional $100 per employee, when the lawyer knows that it actually will cost only $20 per employee.” That is a fact, it is material, and it is false. However, the Committee opines that determining whether a statement can be regarded as one of material fact can depend on the particular circumstances, stating that the value placed on the subject of a transaction, price estimates, a party’s intent as to a satisfactory settlement of a claim, and the existence of an undisclosed principal (unless such nondisclosure would be deemed fraud) would all typically not be considered statements of material fact, nor would statements pertaining to goals of negotiating, or willingness to compromise.

Model Rule 4.1(a) pertains only to statements of material fact the attorney knows are false, and therefore does not apply to false statements that are made unwittingly, that concern inconsequential matters, or that do not relate to facts. The Committee reminds us that lawyers may decline to give the client’s bottom line without violating the rules, but if a lawyer discloses the limit of their settlement authority, they must be truthful. Further, parties are not allowed to waive the protection from attorney misrepresentation under Rule 4.1, whether by informed consent or by impliedly agreeing to allow false statements to be made in the process.

Example: The Personal Injury Case

In Formal Opinion No. 2015-194, the State Bar of California Standing Committee on Responsibility and Conduct presents an example involving a plaintiff injured in an automobile accident who sustains $50,000 in medical expenses and advises her attorney that she is no longer able to work. The plaintiff earned $50,000 annually before the accident. Before discovery, the plaintiff’s attorney files suit and agrees to participate in a settlement conference. The plaintiff’s attorney falsely contends in a settlement conference brief that he can prove the defendant was texting immediately before the accident because a (nonexistent) credible eyewitness saw everything.

The defendant’s attorney asserts that the defendant will file for bankruptcy if they do not get a defense verdict. However, the defendant’s lawyer knows that the defendant does not qualify for bankruptcy and has no intention of filing. When the matter is not settled, the parties agree to meet in one month for a follow-up settlement conference at which the plaintiff will provide information showing her efforts to mitigate damages by seeking to obtain other employment. In the meantime, the plaintiff’s attorney learns that the plaintiff has obtained a new job and will be earning $75,000 annually. The plaintiff tells her attorney not to discuss her new employment at the upcoming settlement conference and to refrain from including any information about her efforts to obtain new employment. At the settlement conference, the plaintiff’s attorney makes a settlement demand including future earnings as a part of the plaintiff’s damages and specifying a dollar amount for that component.

What statements violate Model Rule 4.1? The misrepresentation regarding the nonexistent eyewitness is not considered an expression of opinion and, thus, is an ethical violation. This is an improper false statement of fact that is intended to mislead, and the type of statement that another would attach importance to in determining their course of action.

The defense attorney’s assertion that the defendant will file for bankruptcy is a false representation of fact because they in fact know there is no intention, and the defendant is not eligible to file.

The plaintiff instructing her attorney not to reveal that she has a new job making more money would be deemed a material omission of fact if the lawyer followed the plaintiff’s instruction. Concealing facts about her new employment is considered a misrepresentation since she would not be entitled to lost future earnings upon finding new employment. Including such damages in the demand implicitly and impermissibly misrepresents that the plaintiff has not found new employment. Here, the opinion warns lawyers that if following a client’s instructions would violate ethics rules, lawyers must counsel against such concealment and misrepresentation. If the client insists on proceeding with such conduct, the attorney must withdraw from the representation.

The Catch-All Trap

While Rule 4.1 is explicit that it applies to misrepresentations made while representing a client, there is no comfort for the lawyer who wants to argue that his or her misrepresentations are arguably made outside the scope of representation. Rule 8.4’s “catch-all” provisions reiterate that “It is professional misconduct for a lawyer to:

  • (b) commit an illegal act that reflects adversely on the lawyer’s honesty or trustworthiness;
  • (c) engage in conduct involving dishonesty, fraud, deceit, or misrepresentation;
  • (d) engage in conduct that is prejudicial to the administration of justice;

So, while a lawyers’ fraudulent tax returns may be filed outside the scope of representing clients, such filings are nonetheless violations of the Rules and the basis for many examples of discipline (and jail time).

Takeaways

Lawyers should become familiar with the ethics rules pertaining to settlement negotiations in the states where they are licensed, looking also to ethics opinions and case law. Lawyers should understand permissible distinctions such as puffing versus impermissible misrepresentations. For example, some states specifically allow puffing. However, making affirmative false representations of fact – lying – is never ethically permissible and one should not be too cavalier in classifying a statement as puffing when in fact it is a misrepresentation of fact. Hiding material facts can be an ethics violation as well as it can be deemed an implied misrepresentation. Not only can lawyers be disciplined for Rule 4.1 violations, but affirmative misrepresentations made by attorneys in negotiations have led to the imposition of sanctions, the filing of civil lawsuits against the attorney, and settlement agreements being set aside.

disqualified banner. disqualified speech bubble. disqualified sign

A common situation faced by law firms – and especially larger law firms – is the potential conflicts and disqualifications posed by Model Rule 1.10(a)’s imputation of one lawyer’s conflicts to all lawyers in the firm.  This can become a substantial issue when different lawyers get initial calls from different parties to an event or transaction seeking counsel.  When different lawyers get confidential information from adverse parties, even without agreeing to be their lawyer, the end result is that the entire Firm can be disqualified from representing anyone. 

The American Bar Association Standing Committee on Ethics and Professional Responsibility (the “Committee”) in their recent Formal Opinion 510, issued late last month, focuses on how to avoid the imputation of conflicts in the context of prospective client interactions.  The Committee also provides lawyers with guidance on the reasonable measures they must take to avoid imputing conflicts to the entire law firm.

Under Model Rule 1.18, when a prospective client does not retain a lawyer after consultation, that lawyer is disqualified from representing a client adverse to the prospective client in the same or a substantially related matter if the prospective client shared “disqualifying information” with the lawyer. Disqualifying information is information that may be “significantly harmful to the prospective client in the matter.” Under Model Rule 1.10(a), a lawyer’s conflict is typically imputed to all other lawyers in the firm. This is consistent with Model Rule 1.18(c) in the context of prospective clients. However, representation can still be permissible if the conduct falls under Model Rule 1.18(d). There is no imputation when writen consent is provided by both the potential client and affected client, under Model Rule 1.18(d)(1). When consent is not provided, representaton can still be permissible under Model Rule 1.18(d)(2), so long reasonable measures are taken.

Reasonable measures

When consent is not provided, representation can still be permissible under Model Rule 1.18(d)(2) as long as 1) reasonable measures were taken to avoid learning more disqualifying information than reasonably necessary to determine whether to represent the client, 2) the lawyer is timely screened from participation and not apportioned any fees from the representation, and 3) prompt, written notice is provided to the prospective client. What measures are reasonable can depend on a host of facts, including the lawyer’s background and experience, the identity of the client, and the type of engagement.

Information necessary to assess whether to take on the representation

Lawyers may obtain two types of information during an initial consultation to aid in the determination of whether to accept a representation. The first relates to the lawyer’s professional responsibilities, such as the identity of parties needed to assess the permissibility of the representation under the applicable Rules of Professional Conduct.  The lawyer may also obtain information necessary for the lawyer to assess whether they are competent to handle the matter, whether the prospective client intends to use the lawyer’s services to perpetuate a crime or fraud, or to determine if the client’s claim was frivolous.

The second type of information relates to the lawyer’s business decisions—such as whether the lawyer wants to take on such representation. Information that would assist in this determination would include how time intensive the matter would be, how much income could be generated Modfrom taking on the matter, the probability of being fully compensated, the possible expenses associated with the representation, and whether taking on the matter is consistent with the lawyer’s law firm’s internal policies.

Lawyers are cautioned not to take their questioning too far – the Rule contemplates only obtaining the information reasonably necessary.  A line of questioning designed to or going beyond that necessary to obtain only the information truly needed to determine whether to accept the representation will still raise the possibility of disqualification. The Committee gives various examples, including extracting detailed information designed to convince the prospective client to retain the lawyer, offering strategic insight, or taking the opportunity to promote themselves.

Reasonably necessary inquiry

The Committee reminds lawyers that their line of questioning may be for legitimate or permissible purposes, but that does not mean the inquiry is “necessary” to the lawyer’s determination whether to represent the prospective client. For instance, Model Rule 3.1 prohibits lawyers from bringing or defending a frivolous proceeding. But during the initial consultation, a brief inquiry would generally be all that is required for a lawyer to determine whether a proposed lawsuit is frivolous and thus whether to take on the representation, but more than that would not be “reasonably necessary”. The more detailed inquiry into such facts and research of law would be undertaken during the representation to comply with Model Rule 3.1.

The bottom line is that once a lawyer has enough information to determine whether to take on the prospective representation, any further inquiry can no longer be deemed “necessary.” Once the lawyer determines he or she will decline the representation or is required to turn down the representation, stopping the inquiry completely will put the lawyer in the best position to avoid imputing the conflict to the whole firm.

Typing

You just figured out that the materials you got from opposing counsel include documents that may have been inadvertently included.  What should you do? Model Rule 4.4(b) provides a clear answer—promptly notify the sender. But what happens when you receive, through non-party discovery, a DropBox link that supplies you with live access to opposing party’s corporate file directory? A court in New York was recently presented with this novel question.

How did this happen?

Defendants subpoenaed documents from Plaintiff’s financial consultant. The production contained emails that contained links to a DropBox site. Plaintiff used the site in lieu of an in-house server to store its electronic files.  For about a week, Defendants’ counsel and the client used the links to download and review the Plaintiff’s unproduced documents before finally alerting Plaintiff’s counsel and warning of their intent to use the accessed materials.

Thinking beyond the Rule 

Similar to the Model Rules, New York’s Rule 4.4(b) requires lawyers to promptly notify the sender upon receiving documents related to the representation of the lawyer’s client when the lawyer knows or reasonably should know were inadvertently sent. In addressing the obligations, the Commercial Division referenced both Cmt.[2] and Cmt.[3] in its Decision. The court concluded that the Rule does not support the argument that Defendant’s counsel was allowed to download and examine Plaintiff’s electronically stored corporate files prior to notifying Plaintiff’s counsel.

Cmt.[2] in relevant part provides that “Although this Rule does not require that the receiving lawyer refrain from reading or continuing to read the document, a lawyer who reads or continues to read a document that contains privileged or confidential information may be subject to court-imposed sanctions, including disqualification and evidence-preclusion. Whether the lawyer or law firm is required to take additional steps, such as returning the document or other writing, is a matter of law beyond the scope of these Rules, as is the question whether the privileged status of a document or other writing has been waived.”

Cmt.[3] in relevant part provides that “Nevertheless, substantive law or procedural rules may require a lawyer to refrain from reading an inadvertently sent document or other writing, or to return the document or other writing to the sender or permanently delete electronically stored information, or both. Accordingly, in deciding whether to retain or use an inadvertently received document or other writing, some lawyers may take into account whether the attorney-client privilege would attach. But if applicable law or rules do not address the situation, decisions to refrain from reading such a document or other writing or instead to return them, or both, are matters of professional judgment reserved to the lawyer.”

A distinction should be drawn here

The court found that the difference between the issue being one of whether the review of and use of was permissible under the more typical situation under Rule 4.4(b) where one received inadvertently received individual privileged documents in discovery is that the corporate file directory was not actually produced. Instead, the corporate directory was secretly and continually accessed by Defendant and their counsel under circumstances that should have raised red flags and that were outside of the scope of discovery. Further, while Plaintiff should have taken greater precautions to secure its DropBox files, that still did not authorize Defendants to rummage through these electronically stored files without authorization. The Court found that the Defendant should have notified opposing counsel and/or requested direction from the court as to what use could be made from the documents accessed through the DropBox.   

The Decision

The court found that the cases provided did not suggest “that when an e-mail contains a link to an entire cloud-based file directory to facilitate the recipient’s provision of services (i.e., not as a link to specific documents referenced in the email), that automatically means that the producing party’s entire cloud-based file directory becomes fair game for discovery.”

Accordingly, the Defendants were ordered to return all documents from the DropBox that were not independently produced during discovery, destroy all notes and derivative work product flowing from such documents, and for Defendants (counsel and client) to pay plaintiff for the cost of bringing the motion for protective order and for attorneys’ fees—to the tune of $155,977.  The Decision has been appealed. Upon motion, the court denied Defendant’s challenge to the attorney fees award, but stayed the enforcement of the sanctions award pending appeal due to the novelty of the issue. 

Takeaway

While your jurisdiction’s ethics rules may or may not explicitly prohibit lawyers from reviewing inadvertently sent documents or links to document, do not just assume that you are allowed to keep reviewing the materials or that you can use the materials in any meaningful way, especially without researching the applicable substantive rules. While you may at first think you got a lucky break by seeing the materials, what you do afterward may cost your client and firm a substantial amount of money and harm.

Caution text and sign.

Like it or not, artificial intelligence is not going away and it’s evolving—quickly.  While AI talk has been brewing for quite some time, many of us assumed AI’s direct effect on our business was still years off.  But over the last year the pace of development and use has accelerated exponentially and it is now obvious that lawyers must address numerous AI issues head on. Technological and societal changes often outpace the law, but lawyers remain ethically bound to stay abreast of changes in the law, including relevant technology. So, where do lawyers turn for ethical guidance when, as one authority has noted, “even for those who create generative AI products, there is a lack of clarity as to how it works?”

Recent guidance and resources

California’s Practical Guidance Executive Summary is one great resource. The Florida Bar Board of Governors’ Review Committee on Professional Ethics has issued Proposed Advisory Opinion 24-1. Also leading the charge, Michigan issued an ethics opinion, which confirms that judges have an ethical duty to understand artificial intelligence. Ethics counsel for the North Carolina State Bar also lists several ethics rules lawyers should be considering when using AI.

The American Bar Association recently created its Task Force on Law and Artificial Intelligence.  The New York State Bar Association created their own AI Task Force as well. Stay tuned for additional guidance from local and state bar associations.

Watch out for these ethics rules   

The Rules of Professional Conduct are written broadly enough to cover AI, even if the words “artificial intelligence” cannot be found in the rules or comments. While AI issues are easily found in several other rules, here are the most rules most often implicated:

  • 1.1 (Competence) Lawyers have a duty to provide competent representation. Do not overly rely on AI. Before using an AI tool, lawyers should have a reasonable degree of understanding.
  • 1.4 (Communication) Lawyers have an ethical duty to keep their clients reasonably informed, which will vary based on the circumstances and may include the use of AI.
  • 1.5 (Fees) Lawyers should not overcharge clients for time saved by using AI. Lawyers should be clear about who is paying for the costs associated with AI.
  • 1.6 (Confidentiality)  Lawyers must protect the confidential information of their client, including from inadvertent disclosure. This may necessitate working with IT and asking for client consent in advance.
  • 5.1 and 5.3 (Supervision) Lawyers must ensure proper training, supervision, and adherence to policies.  
  • 8.4 (Misconduct) AI systems may be trained on biased information. Lawyers must be watchful in identifying and addressing biases in AI tools to make certain they provide fair and unbiased legal services to their clients. Lawyers should continue learning about AI biases and their impact on the legal practice.

A few other practical tips

  • Start looking for changes in local rules and standing orders governing use of AI in the courtroom. For instance, the United States Court of Appeals for the Fifth Circuit has proposed to amend its rule to require lawyers and pro se parties alike to certify that no generative AI program was used to draft the document presented for filing, but if generative AI was used, that a human has reviewed the material for accuracy and approved it as well.
  • Always review documents and pleadings for accuracy before submitting to your client or the court!
  • AI for legal purposes is not cheap.  It can be priced many different ways that cost may increase over time.  So it is now the time to consider how AI will factor into the firm budget and pricing structures.  That also means that prudent lawyers will discuss he use of AI with their clients, including an understanding as to who is footing the bill.
  • Pay close attention to detect AI provisions in agreements, engagement letter, and outside counsel guidelines.
  • Watch out for Unauthorized Practice of Law (UPL) issues by leaving tasks that require legal judgment solely up to AI.