x x x.
The common practice in the US is to require all lawyers to contribute to a state-managed “clients’ protection fund” to indemnify clients who have sustained damages by reason of the dishonesty and other unethical acts of their lawyers. In some states, lawyers are required to secure private professional liability insurance.
There is no equivalent rule in the Philippine legal profession.
There is a trend in some states in the US for clients to recover damages from their unethical or negligent lawyers not by way of the usual malpractice claims against the clients’ protection fund or the lawyers= professional liability insurance policies but through the invocation of the relevant provisions of state consumer fraud laws. But the US state jurisprudence on the matter is not yet fixed and stable. In a closely watched case, the Texas Supreme Court allowed a plaintiff to sue under the state’s consumer fraud law, while the Illinois Supreme Court dismissed a plaintiff’s consumers fraud complaint against a lawyer.
(See: John Gibeaut, "Trends in the Law: Shopping Bad Apples Around", ABA Journal, January 199. Chicago, Illinois: American Bar Association (ABA), pp. 34-35, citing Latham v. Castillo, 972 S.W. 2d 66 (June 23,1998), and Cripe v. Leiter, No. 84117 [Oct. 22,1998]).
Plaintiffs suing under consumer fraud statutes often have an easier time proving their cases than plaintiffs suing under the common-law theories of fraud or legal malpractice. In addition, many state consumer fraud laws allow punitive damages and awards of attorney=s fees that may not be available under other causes of action. (Id.).
Speculative Financing in Malpractice Claims
It is common for a client with a pending malpractice claim to assign his claim to a third party (usually an investor engaged in such business), on a discounted basis, and the latter bankrolls the claim in court. Some speculative American financiers have placed newspaper advertisements offering to buy judgments, at a discounted value. These instances have raised alarms in the US about the commercialization of malpractice claims by the clients, thus cheapening the dignity and image of the US legal profession.
In March 1999, the Massachusetts Supreme Judicial Court approved the legality of the assignment of malpractice claims, becoming the sixth jurisdiction in the US to allow assignments of legal malpractice claims. (John Gibeaut, "Trends in the Law: Strange, New Assignments", ABA Journal, June 1999. Chicago, Illinois: American Bar Association (ABA), pp. 34-35, citing New Hampshire Ins. Co. vs. McCann, 707 N.E. 2 and 332).
The overwhelming majority of state courts confronting the issue have strongly condemned assignments of legal malpractice claims. Some have expressed concern that claims could be bought and sold like any other product on the market and thus cheapen law as a profession. (Id.). The unanimous Massachusetts court, however, noted that the state allows assignments of most other claims for economic damages, such as contacts disputes.
The Utah Court of Appeals allowed a law firm to buy a $10,000 malpractice claim against it at a forced sheriff’s sale. The firm then deducted $10.000 from the former client’s (and malpractice plaintiff’s) unpaid $14,000 legal bill from the underlying case. [Id., citing Tannase v. Snow, 929 p. 2d 351 (1996)].
In the early part of 1999, the Texas Supreme Court faced a situation where a bankruptcy trustee sold a malpractice claim to a law firm representing the defendant firm=s insurance carrier. The purchasing firm then went to court and had the case dismissed, over the original plaintiff=s objections. (Id., citing Douglas v. Delp, No. 97 B 0827 (March 25, [1999]).The Texas Supreme Court is expected to rule on what many consider the quintessential evil: the sale of an interest in a malpractice claim, in exchange for the purchaser=s bankrolling the litigation. (Id.).
In one case the US Circuit Court of Appeals upheld the assignment of malpractice claims where plaintiff Mark W. Baker sold half his claim to one T.G. Heron, who had placed an advertisement in a Dallas newspaper offering to buy judgements of more than $25,000. (Id., citing Baker v. Mallios, 971 S.W. 2d 581 (1998).
ABA Model Rule 1.8 and Rule 8.3 - 8.4
(Model Rules of Professional Conduct)
Rule 1.8 of the ABA Model Rule of Professional Conduct, entitled Conflict of Interest), forbids conditioning legal representation by a lawyer on prospective release from malpractice claims unless clients are independently represented in making the agreement. [Joanne Pitulla, "Ethics: The Ethics of Common Decency", ABA Journal, August 1994. Chicago, Illinois: American Bar Association (ABA), page 96, citing Committee on Legal Ethics v. Committee, 430 S.E. 2d 320 (W.Va 1993)].
The same rule also prohibits other coercive conduct of lawyers, such as refusing to forward client files until the release of all malpractice claims has been signed by the client. (Id., citing see Cincinnati Bar Association vs. Schultz, 643 N.E. 2d 1139 [Ohio 1994]) and withholding payment from a personal injury settlement until the signing of the release by the client (id., In re Powell, 526 N.E. 2d 971 [Ind. 1988]).
The failure to disclose facts and circumstances that the lawyer reasonably believed might give rise to a claim of malpractice liability violates the provision of Model Rule 8.4 (Misconduct) which prohibits dishonest or fraudulent conduct on the part of a lawyer. (Id., citing Opinion No. 260, District of Columbia Bar, March 1996).
It is never permissible to seek the release from an ethical violation. All jurisdictions condemn this and usually rely on paragraph (d) of Model Rule 8.4 (Misconduct), which, in general, prohibits conduct prejudicial to the administration of justice. (Id., citing Matter of Blackmelder, 615 N.E. 2d 106 Ind. 1993).
In addition, Model Rule 8.3 (Reporting Professional Misconduct Conduct) has been construed to bar lawyers from assisting in any agreement between clients and their former lawyers to protect the latter from disciplinary charges. (Id., citing Michigan State Bar Ass=n Opinion RI-88 (1991); Connecticut Rule 8.3 (a); and In re Himmel, 533 N.E. 2d 790 [Ill. 1988]).
ABA Ethics Opinions
Presented below are the digests of the latest ABA ethics opinions as of May 2002 which serve as useful guides to avoid potential malpractice suits. (cf. http://www.abanet.org/cpr/ethicopinions.html).
Formal Opinion 02-425, February 20, 2002Retainer Agreement Requiring the Arbitration of Fee Disputes and Malpractice Claims
It is permissible under the Model Rules to include in a retainer agreement with a client a provision that requires the binding arbitration of disputes concerning fees and malpractice claims, provided that the client has been fully apprised of the advantages and disadvantages of arbitration and has given her informed consent to the inclusion of the arbitration provision in the retainer agreement.
Formal Opinion 01-424, September 22, 2001
A Former In-House Lawyer May Pursue
a Wrongful Discharge Claim Against Her
Former Employer and Client As Long As
Client Information Properly Is Protected
The Model Rules do not prohibit a lawyer from suing her former client and employer for retaliatory discharge. In pursuing such a claim, however, the lawyer must take care not to disclose client information beyond that information the lawyer reasonably believes is necessary to establish her claim.
Formal Opinion 01-423, September 22, 2001Forming Partnerships With Foreign Lawyers
It is permissible under the Model Rules for U.S. lawyers to form partnerships or other entities to practice law in which foreign lawyers are partners or owners, as long as the foreign lawyers are members of a recognized legal profession in a foreign jurisdiction and the arrangement is in compliance with the law of jurisdictions where the firm practices. Members of a profession that is not recognized as a legal profession by the foreign jurisdiction would, however, be deemed "nonlawyers" such that admitting them to partnership would violate Rule 5.4 (Professional Independence of Lawyer). Before accepting a foreign lawyer as a partner, the responsible lawyers in a U.S. law firm have an ethical obligation to take reasonable steps to ensure that the foreign lawyer qualifies under this standard and that the arrangement is in compliance with the law of the jurisdictions where the firm practices. The responsible lawyers in a U.S. law firm also have ethical obligations to take reasonable steps to ensure that matters in their U.S. offices involving representation in a foreign jurisdiction are managed in accordance with applicable ethical rules, and that all lawyers in the firm comply with other applicable ethical rules
Formal Opinion 01-422June 24, 2001Electronic Recordings by Lawyers
Without the Knowledge of All Participants
A lawyer who electronically records a conversation without the knowledge of the other party or parties to the conversation does not necessarily violate the Model Rules. Formal Opinion 337 (1974) accordingly is withdrawn. A lawyer may not, however, record conversations in violation of the law in a jurisdiction that forbids such conduct without the consent of all parties, nor falsely represent that a conversation is not being recorded. The Committee is divided as to whether a lawyer may record a client-lawyer conversation without the knowledge of the client, but agrees that it is inadvisable to do so.
Formal Opinion 01-421 February 16, 2001Ethical Obligations of a Lawyer Working
Under Insurance Company Guidelines
and Other Restrictions
A lawyer must not permit compliance with "guidelines" and other directives of an insurer relating to the lawyer==s services to impair materially the lawyer==s independent professional judgment in representing an insured. A lawyer may disclose the insured==s confidential information, including detailed work descriptions and legal bills, to the insurer if the lawyer reasonably believes that doing so will advance the interests of the insured. A lawyer may not, however, disclose the insured==s confidential information to a third-party auditor hired by the insurer without the informed consent of the insured. Moreover, if the lawyer reasonably believes that disclosure of the insured==s confidential information to the insurer will affect a material interest of the insured adversely, the lawyer must not disclose such information without the informed consent of the insured.
Formal Opinion 00-420November 29, 2000Surcharge to Client for Use of a Contract Lawyer
When costs associated with legal services of a contract lawyer are billed to the client as fees for legal services, the amount that may be charged for such services is governed by the requirement of Model Rule 1.5(a) that a lawyer==s fee shall be reasonable. A surcharge to the costs may be added by the billing lawyer if the total charge represents a reasonable fee for services provided to the client. When legal services of a contract lawyer are billed to the client as an expense or cost, in the absence of any understanding to the contrary with the client, the client may be charged only the cost directly associated with the services, including expenses incurred by the billing lawyer to obtain and provide the benefit of the contract lawyer==s services.
Formal Opinion 00-419 - (in its entirety)July 7, 2000Use of Credit Cards for Payment of Legal Fees; Withdrawal of Formal Opinions 320 (1968) and 338 (1974)and Informal Opinions 1120 (1969) and 1176 (1971)
The Committee has learned that inquiry frequently is made of the Association's ETHICSearch Research Service regarding the propriety of lawyers permitting or encouraging clients or potential clients to use credit cards to pay their legal fees and/or expenses. Review of several of the Committee's opinions addressing this subject reveals that the advertising provisions of the ABA Model Rules of Professional Conduct, adopted in 1983, render inapplicable prohibitions or requirements that were contained in Formal Opinion 338 (November 16, 1974); Formal Opinion 320 (February 19, 1968); Informal Opinion 1120 (October 3, 1969), and Informal Opinion 1176 (February 4, 1971).
Formal Opinion 338, although not formally withdrawing Informal Opinions 1120 and 1176, had rejected their reasoning that credit cards or other bank-financing arrangements properly could be employed only for "facilitating the sales of merchandise and sales of non-professional services," and not for legal services; in so doing, the Committee accepted, per se, the propriety of using credit cards to pay legal fees. However, Opinion 338 carried forward from another earlier opinion, Formal Opinion 320 (Legal Fee Finance Plan), a series of requirements that are not justified by the present-day Model Rules of Professional Conduct.
Because the Model Rules require only that any advertising materials used by a lawyer not be false, fraudulent, or misleading, and because they do not require any advance approval by a bar association for a lawyer's participation in a credit-card plan, the Committee hereby withdraws each of the four opinions referred to above.
Formal Opinion 00-418Acquiring Ownership in a Client
in Connection with Performing Legal Services
The Model Rules of Professional Conduct do not prohibit a lawyer from acquiring an ownership interest in a client, either in lieu of a cash fee for providing legal services or as an investment opportunity in connection with such services, as long as the lawyer complies with Rule 1.8(a) governing business transactions with clients, and, when applicable, with Rule 1.5 requiring that a fee for legal services be reasonable. To comply with Rule 1.8(a), the transaction by which the lawyer acquires the interest and its terms must be fair and reasonable to the client, and fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client. The client also must be given a reasonable opportunity to seek the advice of independent counsel in the transaction and must consent to the transaction in writing. In providing legal services to the client's business while owning its stock, the lawyer must take care to avoid conflicts between the client's interests and the lawyer's personal economic interests as an owner, as required by Rule 1.7(b), and must exercise independent professional judgment in advising the client concerning legal matters as required by Rule 2.1.
Formal Opinion 00-417Settlement Terms Limiting a Lawyer==s Use of Information
Although a lawyer may participate in a settlement agreement that prohibits him from revealing information relating to the representation of his client, the lawyer may not participate or comply with a settlement agreement that would prevent him from using information gained during the representation in later representations against the opposing party, or a related party, except in limited circumstances. An agreement not to use information learned during the representation effectively would restrict the lawyer's right to practice and hence would violate Rule 5.6(b).
Formal Opinion 00-416Lawyer’s Purchase of Accounts Receivable from Client
A lawyer may purchase accounts receivable from a client if, as required by Model Rule 1.8(a), the transaction is fair and reasonable to the client; its terms are disclosed to the client in writing in a manner that can be reasonably understood; it is consented to by the client in writing; and the client is given a reasonable opportunity to seek independent counsel. When the accounts receivable may be subject to a dispute between the client and the client==s debtors, the lawyer must make additional disclosures and comply with Rule 1.7 or 1.9 before acquiring the accounts receivable and pursuing collection of them.
Formal Opinion 99-415Representation Adverse to Organization by Former In-House Lawyer
When an in-house lawyer moves to a law firm or another legal department, both he and his new law firm have ethical obligations that limit their ability to handle matters adverse to his former employer. If the former in-house lawyer personally represented his employer in a matter, neither he nor his new firm may undertake a representation adverse to his former employer in the same or a substantially related matter absent the former employer's consent. Even if the former in-house lawyer did not personally represent his former employer in a matter, but obtained protected information concerning that matter while it was being handled by others in his legal department, he will be disqualified and his disqualification will be imputed to his new firm.
Having borne supervisory responsibility for a matter without some personal involvement does not necessarily mean that the former in-house lawyer personally represented his former employer with respect to that matter. Similarly, the fact that he was responsible for matters of a particular type will not by itself preclude him from representing a client in a similar matter in which the former employer is an adverse party.
Formal Opinion 99-414Ethical Obligations When a Lawyer Changes Firms
A lawyer’s ethical obligations upon withdrawal from one firm to join another derive from the concepts that clients’ interests must be protected and that each client has the right to choose the departing lawyer or the firm, or another lawyer to represent him. The departing lawyer and the responsible members of her firm who remain must take reasonable measures to assure that the withdrawal is accomplished without material adverse effect on the interests of clients with active matters upon which the lawyer currently is working. The departing lawyer and responsible members of the law firm who remain have an ethical obligation to assure that prompt notice is given to clients on whose active matters she currently is working. The departing lawyer and responsible members of the law firm who remain also have ethical obligations to protect client information, files, and other client property. The departing lawyer is prohibited by ethical rules, and may be prohibited by other law, from making in-person contact prior to her departure with clients with whom she has no family or client-lawyer relationship. After she has left the firm, she may contact any firm client by letter.
Formal Opinion 99-413Protecting the Confidentiality of Unencrypted E-Mail
A lawyer may transmit information relating to the representation of a client by unencrypted e-mail sent over the Internet without violating the Model Rules of Professional Conduct (1998) because the mode of transmission affords a reasonable expectation of privacy from a technological and legal standpoint. The same privacy accorded U.S. and commercial mail, land-line telephonic transmissions, and facsimiles applies to Internet e-mail. A lawyer should consult with the client and follow her instructions, however, as to the mode of transmitting highly sensitive information relating to the client's representation.
Formal Opinion 98-412Disclosure Obligations of a Lawyer
Who Discovers That Her Client Has
Violated a Court Order During Litigation
A lawyer who discovers that a client has violated a court order prohibiting or limiting transfer of assets must reveal that fact to the court if necessary to avoid or correct an affirmative misrepresentation by the lawyer to the court. A lawyer also must disclose the client's conduct or, in the alternative, withdraw from continued representation of the client in the litigation if necessary to avoid assisting the client in a fraud on the court. Continued representation of the client in the litigation may constitute assistance in a fraud on the court where the client's conduct destroys the court's ability to award effective relief to the opposing party. Upon withdrawing from the representation, the lawyer must make a disclosure sufficient to avoid continued reliance by the court on prior representations of the lawyer that now are known to be untrue but, absent such a necessity, the lawyer may not disclose the client's misconduct to the court or successor counsel without the client's consent.
Formal Opinion 98-411Ethical Issues in Lawyer-to-Lawyer Consultation
When one lawyer consults about a client matter with another lawyer who is not associated with him in the matter, both the consulting lawyer and the consulted lawyer must take care to fulfill their ethical obligations to their respective clients. Hypothetical or anonymous consultations thus are favored where possible. The consulting lawyer is impliedly authorized to disclose certain information relating to the representation without client consent, but may not disclose information that is protected by the attorney client privilege or that would otherwise prejudice the client. No client-lawyer relationship between the consulting lawyer’s client and the consulted lawyer arises as a result of the consultation, but the consulted lawyer may be obligated to protect the confidentiality of the information disclosed to the extent that she expressly or implicitly agrees to do so or to the extent that such obligation is imposed by law. In that event, the consulted lawyer and her firm may be limited in their ability to undertake or continue representation of their own clients if the representation will be materially limited by her duty to protect the consulting lawyer’s client information.
Formal Opinion 98-410Lawyer Serving as Director of Client Corporation
The Model Rules of Professional Conduct do not prohibit a lawyer from serving as a director of a corporation while simultaneously serving as its legal counsel, but there are ethical concerns that a lawyer occupying the dual role of director and legal counsel should consider. The lawyer should reasonably assure at the outset of the dual relationship that management and the other board members understand the different responsibilities of legal counsel and director; understand that in some circumstances matters discussed at board meetings with the lawyer in her role as director will not receive the protection of the attorney-client privilege; and understand that conflicts of interest could arise requiring the lawyer to recuse herself as a director or to decline representation of the corporation in a matter. During the dual relationship, the lawyer should exercise reasonable care to protect the corporation's confidential information and to confront and resolve conflicts of interest that arise. From the discussion of these ethical concerns, the Committee derives general guidelines that a lawyer, once having agreed to serve on the board of a corporate client, should follow in order to minimize the risk of violations of the Model Rules.
Formal Opinion 97-409Conflicts of Interest: Successive Government and Private Employment
The conflict of interest obligations of a former government lawyer under the Model Rules of Professional Conduct are determined by Rule 1.11 and not by Rule 1.9(a) and (b). A former government lawyer is, however, subject to the provisions of Rule 1.9(c), which prohibits the use of information relating to her representation of the government to the disadvantage of her former government client where the information has not become generally known, and the disclosure of such information, except as permitted or required by Rules 1.6 and 3.3.
Under Rule 1.11, a former government lawyer is disqualified from representing private clients where she "participated personally and substantially as a public officer or employee" in the same "particular matter" at issue in the subsequent representation, whether or not she would be adverse to her former government client; she is not forbidden from representing private parties in matters in which she did not so participate, or in any matters not involving "a discrete and isolatable transaction or set of transactions between identifiable parties," except where she has obtained "confidential government information" about an adverse third party. See Rule 1.11(a) and (b); ABA Formal Opinion 342.
A former government lawyer who is personally disqualified from representing a private client in a matter may be screened pursuant to Rule 1.11(a) to enable other lawyers in her new firm to undertake the representation, whether her disqualification arises under Rule 1.11(a) or Rule 1.9(c).
A lawyer formerly employed by a government claims administration agency is not disqualified under Rule 1.11 from representing private claimants before the agency except in connection with particular claims she personally handled while in government service. She may also represent a private party in a challenge to generally applicable agency rules, even though she was herself personally involved in the development and implementation of those rules, subject only to the constraints imposed by Rule 1.9(c) on her use or disclosure of information relating to her representation of the government that has not become generally known. In any case, if the lawyer is herself personally disqualified, members of her firm may undertake the representation if she is appropriately screened.
Formal Opinion 97-408Communication with Government Agency Represented by Counsel
Model Rule 4.2 generally protects represented government entities from unconsented contacts by opposing counsel, with an important exception based on the constitutional right to petition and the derivative public policy of ensuring a citizen's right of access to government decision makers. Thus Rule 4.2 permits a lawyer representing a private party in a controversy with the government to communicate about the matter with government officials who have authority to take or to recommend action in the matter, provided that the sole purpose of the lawyer's communication is to address a policy issue, including settling the controversy. In such a situation the lawyer must give government counsel reasonable advance notice of his intent to communicate with such officials, to afford an opportunity for consultation between government counsel and the officials on the advisability of their entertaining the communication. In situations where the right to petition has no apparent applicability, either because of the position and authority of the official sought to be contacted or because of the purpose of the proposed communication, Rule 4.2 prohibits communication without prior consent of government counsel. ABA Informal Opinion 1377 (1977) is limited to the extent of the conclusions in this opinion.
Formal Opinion 97-407Lawyer as Expert Witness or Expert Consultant
A lawyer serving as an expert witness to testify on behalf of a party who is another law firm's client, as distinct from an expert consultant, does not thereby establish a client-lawyer relationship with the party or provide a "law-related service" to the party within the purview of Model Rule 5.7 such as would render his services as a testifying expert subject to the Model Rules of Professional Conduct. However, to avoid any misunderstanding, the testifying expert should make his limited role clear at the outset. Moreover, if the lawyer has gained confidential information of the party in the course of service as a testifying expert, the lawyer may as a matter of other law have a duty to protect the party's confidential information from use or disclosure adverse to the party.
Model Rules 1.7(b) and 1.10(a) apply to the lawyer's representation of a client adverse to a party for whom he is serving as a testifying expert. If the duty of confidentiality to the party on whose behalf the lawyer serves as a testifying expert would "materially limit" the responsibilities of the lawyer to one of his clients, the lawyer and any firm with which the lawyer is associated may be prohibited from concurrently representing that client. Ordinarily it would not be reasonable for the lawyer to believe in those circumstances that the representation of the client will not be adversely affected, and thus client consent would not permit the representation. Moreover, even though these requirements of the Model Rules are satisfied, other law, including the law of client-lawyer privilege and the law of agency, may prohibit the lawyer and his law firm from representing the client, unless the party on whose behalf the lawyer serves as a testifying expert waives its right to object.
After the testifying expert relationship has concluded, the testifying expert and his law firm may be precluded from representing a client in a matter in which use of the party's confidential information would be necessary. Model Rules 1.9(a) and 1.9(c) do not apply because the party for whom the lawyer was asked to testify is not a former client. Nevertheless, the responsibilities of the lawyer under other law to maintain the confidentiality of the party's information may materially limit the representation in the subsequent matter, and it may not be reasonable for the lawyer to believe that the representation would not be adversely affected; if so, Model Rules 1.7(b) and 1.10(a) would bar the subsequent representation.
Formal Opinion 97-405Conflicts in Representing Government Entities
A lawyer who is engaged to represent a government entity, whether on a full-time or part-time basis, may not agree simultaneously to represent a private party against her own government client, absent the informed consent of both clients. See Model Rule 1.7(a). However, the lawyer may represent a private client against another government entity in the same jurisdiction in an unrelated matter, as long as the two government entities are not considered the same client, and as long as the requirements of Model Rule 1.7(b) are satisfied.
The identity of the government client for conflict of interest purposes, like that of any other organizational client, will be established in the first instance between the lawyer and government officials who are authorized to speak for the government client, in accordance with the general precepts of client autonomy set forth in Model Rule 1.2. The lawyer may not, by agreeing to a narrow definition of the government client, seek to defeat the reasonable expectation of her other clients that they will get a conflict-free representation from their lawyer.
In the absence of an express agreement, the identity of the government client may be inferred from the reasonable understandings and expectations of the lawyer and responsible government officials, taking into account such functional considerations as how the government client presented to the lawyer is legally defined and funded, whether it has independent legal authority with respect to the matter for which the lawyer has been retained -- e.g., contracting, litigating, or settling a claim -- and the extent to which the matter involved in the proposed representation has general importance for other government components in the jurisdiction. Uncertainty in identifying the government client should be resolved in favor of disclosure -- disclosure of the government representation to any private clients the lawyer may be representing against the government, and disclosure to the government client of any arguably conflicting private representations.
Even if two representations involving government entities are not "directly adverse," because the two government entities involved are not considered the same client for conflict of interest purposes, under Rule 1.7(b) the lawyer must satisfy herself that her responsibilities to one client will not be "materially limited" by her responsibilities to the other. Whether or not the lawyer's representation of a government client in one matter may be "materially limited" by her responsibilities to other clients (or vice versa) depends on the extent to which either client would be adversely affected by the outcome of the other's matter, and on whether the lawyer's diligence or judgment on behalf of one client would be compromised by her relationship or identification with the other. This in turn may depend upon the issues at stake in a matter, the particular role the lawyer is playing in it, and the intensity and duration of her relationship with the lawyers she is opposing. There may be situations in which a lawyer's representation of the government on an important issue of public policy so identifies her with an official public position that she would be effectively compromised in her ability convincingly to oppose any part of the government on behalf of a private client, even in an entirely unrelated matter.
Formal Opinion 96-404Client Under a Disability
A lawyer who reasonably determines that his client has become incompetent to handle his own affairs may take protective action on behalf of the client, including petitioning for the appointment of a guardian. Withdrawal is appropriate only if it can be accomplished without prejudice to the client. The protective action should be the least restrictive under the circumstances. The appointment of a guardian is a serious deprivation of the client's rights and ought not be undertaken if other, less drastic, solutions are available. With proper disclosure to the court of the lawyer's self-interest, the lawyer may recommend or support the appointment of a guardian who the lawyer reasonably believes would be a fit guardian, even if the lawyer anticipates that the recommended guardian will hire the lawyer to handle the legal matters of the guardianship estate. However, a lawyer with a disabled client should not attempt to represent a third party petitioning for a guardianship over the lawyer's client.
Formal Opinion 96-403Obligations of a Lawyer Representing an Insured Who Objects to a Proposed Settlement Within Policy Limits
A lawyer hired by an insurer to represent an insured may represent the insured alone or, with appropriate disclosure and consultation, he may represent both the insurer and the insured with respect to all or some aspects of the matter. So long as the insured is a client, however, the Rules of Professional Conduct -- and not the insurance contract -- govern the lawyer's obligations to the insured. A lawyer hired to defend an insured pursuant to an insurance policy that authorizes the insurer to control the defense and to settle within policy limits in its sole discretion must communicate the limitations on his representation of the insured to the insured, preferably early in the representation. After the lawyer has communicated the necessary information to the insured, the lawyer may settle at the direction of the insurer. If a lawyer for an insured knows that the insured objects to a settlement, the lawyer may not settle the claim against the insured at the direction of the insurer, without giving the insured an opportunity to reject the defense offered by the insurer and to assume responsibility for his own defense at his own expense.
Formal Opinion 96-402Propriety of Payments to Occurrence Witnesses
A lawyer, acting on her client's behalf, may compensate a non-expert witness for time spent in attending a deposition or trial or in meeting with the lawyer preparatory to such testimony, provided that the payment is not conditioned on the content of the testimony and provided further that the payment does not violate the law of the jurisdiction.
Formal Opinion 96-401Lawyers Practicing in Limited Liability Partnerships
The Model Rules of Professional Conduct permit lawyers to practice in a limited liability partnership or a limited liability limited partnership if the applicable law provides that the lawyer rendering legal services remains personally liable to the client, the requirements of the law of the relevant jurisdiction are met, and the form of business organization is accurately described by the lawyers in their communications. Use of the abbreviated designation of the business form that is required or permitted by state law (e.g. LLP or LLLP) is sufficient.
Formal Opinion 96-399Ethical Obligations of Lawyers Whose Employers
Receive Funds from the Legal Services Corporation
to Their Existing and Future Clients When Such
Funding is Reduced and When Remaining Funding
is Subject to Restrictive Conditions
Legislative proposals currently pending in Congress are expected to significantly reduce funding for the Legal Services Corporation. The legislation will also restrict whom an LSC funded lawyer may represent, the subject matter of such representation and the manner in which such representation may be pursued. Finally, in the case of contested matters, the legislation mandates disclosures the client is required to make. All of this presents serious ethical questions for the lawyers who work for agencies that receive this funding.
Duties to Existing Clients
The Obligation to Prepare: In order to prepare for the impending funding cuts and restrictions, LSC funded lawyers must give notice to their clients, establish a system of priorities for the retention of cases, and seek alternative funding and representation for their current clients. In setting the priorities for retention of existing cases, a legal services lawyer may not solely consider whether cases conflict with the funding restrictions. Legal Services Lawyers must explore the limits of continuing representation (e.g., the permissibility of co-counsel arrangements) as well as all avenues for obtaining replacement counsel for existing clients. In arranging for substitute counsel, both the Legal Services Lawyer and the new counsel must work to ensure that the new counsel has or can acquire the needed expertise in the matter being referred.
When An Existing Client's Representation Violates the Restrictions: Some Legal Services Lawyers will be confronted with high priority representations that conflict with funding restrictions, and must choose between their obligations to ineligible clients and their obligations to eligible clients who will not be served if LSC funding is lost. Where retaining an ineligible client or representation would deprive the office of a substantial amount of funding, a Legal Services Lawyer may, but is not required to, withdraw from the prohibited representation under Model Rule 1.16(b)(5).
Once a Lawyer Has Opted to Accept LSC Funding: Legal Services Lawyers should advise all of their clients of the restrictions contained in the new funding legislation. A Legal Services Lawyer may ask an existing client to agree prospectively to abide by the funding restrictions on what matters the lawyer may handle and what means may be used, as long as the lawyer does not believe that such restrictions will adversely affect the representation. However, a Legal Services Lawyer may not ask a client to consent to limitations on the scope of representation that would in her judgment effectively preclude her from providing competent representation. A fortiori, a Legal Services Lawyer cannot ask an existing client to agree to the future termination of her representation in the event that client becomes ineligible because, for example, of a change in immigration status or incarceration. If such a change in eligibility occurs, however, the lawyer may withdraw under Rule 1.16(b)(5) after balancing the interests of that client against the interests of those existing clients who will not be served if funding is lost.
Duties to Future Clients
Accepting New Matters: A Legal Services Lawyer may not accept new clients except in cases of extreme need if staff reductions have caused an unacceptable increase in the lawyer's work load. A Legal Services Lawyer is not obligated to find alternative counsel for a potential client who has been turned away.
Screening of New Clients: Before accepting a new client a Legal Services Lawyer subject to LSC funding restrictions must inform the client about all of the restrictions that apply because that lawyer is funded by the LSC, must inform the client that such restrictions would not apply if the lawyer were not funded by the LSC, and must carefully screen the client to ensure that the representation will not endanger funding. A Legal Services Lawyer must inform her new clients that they must maintain their eligibility (i.e., avoid incarceration and maintain an acceptable immigration status) in order to continue the representation. With regard to the restrictions on what matters may be pursued and what means may be used, the lawyer may ask a new client to consent to those restrictions if the lawyer believes that the representation would not be adversely affected by the limitation.
Mandated Pre-Litigation Disclosures
The required disclosure of (a) the client's identity, and (b) certain other facts relating to the representation, conflicts with the lawyer's obligations under Model Rule 1.6, which prohibits revelation of any information relating to the representation without the client's consent.
Disclosure of the Client's Identity: With regard to a client accepted before January 1, 1996, who seeks or has received a Court's permission to proceed anonymously, the Legal Services Lawyer must inform the client of the new disclosure requirement, that the lawyer's acceptance of LSC funding may make it more difficult for the client to proceed anonymously, that the client may refuse to reveal his or her identity or to seek the injunction required to protect anonymity, and whether the lawyer will be able to continue the representation if the client refuses to be governed by the LSC funding restrictions. A Legal Services Lawyer cannot ask an existing client to consent to the imposition of the new standard under the funding legislation if that limitation would adversely affect the representation.
With regard to new clients who wish to proceed anonymously, a Legal Services Lawyer must inform the client that it may be easier to proceed anonymously without an LSC-funded lawyer and ensure that the client understands the standard a Court or an agency will apply in deciding whether to permit the anonymity. The lawyer may not ask the client to agree to continue the representation after denial of a motion to proceed anonymously if the lawyer believes that the representation would be adversely affected.
Required Statement of the Factual Basis of the Case: A Legal Services Lawyer may ask a new or existing client to consent to the preparation and disclosure of the required statement if the lawyer believes that there will be no adverse affect on the representation because of the requirement. If an existing client refuses, the lawyer may withdraw under Model Rule 1.16(b)(5) after balancing that client's interest against the interest of those who will not be served if funding is lost. In all cases, the lawyer should inform the client that the statement could be regarded as a waiver of client-lawyer privilege, and should take all steps reasonably necessary to protect the client from any adverse effects that could result from the preparation of the statement.
Formal Opinion 95-393Disclosure of Client Files to Non-Lawyer Supervisors
A lawyer employed in a government elder care office may disclose to a nonlawyer supervisor information relating to the representation if such disclosure will help to carry out the client's representation. If it will not be so used, disclosure is permissible under Rule 1.6 only if the client has expressly consented to it after consultation. In the absence of such consent the lawyer may disclose data from client files only in a way that does not compromise the confidentiality of any particular client's data or permit the client to be identified or the data to be traced to that client.
Formal Opinion 95-390Conflicts of Interest in the Corporate Family Context
A lawyer who represents a corporate client is not by that fact alone necessarily barred from a representation that is adverse to a corporate affiliate of that client in an unrelated matter. However, a lawyer may not accept such a representation without consent of the corporate client if the circumstances are such that the affiliate should also be considered a client of the lawyer; or if there is an understanding between the lawyer and the corporate client that the lawyer will avoid representations adverse to the client's corporate affiliates; or if the lawyer's obligations to either the corporate client or the new, adverse client, will materially limit the lawyer's representation of the other client. Even if the circumstances are such that client consent is not ethically required, as a matter of prudence and good practice a lawyer who contemplates undertaking a representation adverse to a corporate affiliate of a client will be well advised to discuss the matter with the client before undertaking the representation.
Formal Opinion 90-357Use of Designation "Of Counsel"; Withdrawal of Formal Opinion 330(1972) and Informal Opinions 678 (1963),710 (1964), 1134 (1969), 1173 (1971),1189 (1971) and 1246 (1972)
The use of the title "of counsel," or variants of that title, in identifying the relationship of a lawyer or law firm with another lawyer or firm is permissible as long as the relationship between the two is a close, regular, personal relationship and the use of the title is not otherwise false or misleading.
Formal Opinion 84-351Letterhead Designation of "Affiliated" or "Associated" Law Firms
Neither the Model Rules of Professional Conduct nor the Model Code of Professional Responsibility prohibits the communication that one firm is affiliated or associated with another, as long as the relationship between the firms is such that the communication is not false or misleading and the law firms adhere to the applicable rules regulating disclosure of confidential information and conflicts of interest as if they were a single firm. Formal Opinion 330 and Informal Opinion 1265 overruled in part.
Formal Opinion 85-352 Tax Return Advice; Reconsideration of Formal Opinion 314
A lawyer may advise reporting a position on a tax return so long as the lawyer believes in good faith that the position is warranted in existing law or can be supported by a good faith argument for an extension, modification or reversal of existing law and there is some realistic possibility of success if the matter is litigated.
Formal Opinion 87-353Lawyer's Responsibility With Relation To Client Perjury
If, prior to the conclusion of the proceedings, a lawyer learns that the client has given testimony the lawyer knows is false, and the lawyer cannot persuade the client to rectify the perjury, the lawyer must disclose the client's perjury to the tribunal, notwithstanding the fact that the information to be disclosed is information relating to the representation.
If the lawyer learns that the client intends to testify falsely before a tribunal, the lawyer must advise the client against such course of action, informing the client of the consequences of giving false testimony, including the lawyer's duty of disclosure to the tribunal. Ordinarily, the lawyer can reasonably believe that such advice will dissuade the client from giving false testimony and, therefore, may examine the client in the normal manner. However, if the lawyer knows, from the client's clearly stated intention, that the client will testify falsely, and the lawyer cannot effectively withdraw from the representation, the lawyer must either limit the examination of the client to subjects on which the lawyer believes the client will testify truthfully; or, if there are none, not permit the client to testify; or, if this is not feasible, disclose the client's intention to testify falsely to the tribunal.
Formal Opinion 87-355Lawyer's Participation In For-Profit Prepaid Legal Service Plan
Participation of a lawyer in a for-profit prepaid legal service plan is permissible under the Model Rules, provided the plan is in compliance with the guidelines in this opinion. The plan must allow the lawyer to exercise independent professional judgment on behalf of the client, to maintain client confidences, to avoid conflicts of interest, and to practice competently. The operation of the plan must not involve improper advertising or solicitation or improper fee sharing and must be in compliance with other applicable law. It is incumbent upon the participating lawyer to ensure that the plan is in compliance with the Model Rules.
Formal Opinion 88-356Temporary Lawyers
In order to satisfy the requirements of the Model Rules and predecessor Model Code when a lawyer is engaged temporarily to work for clients of a law firm (including a corporate legal department), the lawyer and the firm must exercise care, in accordance with the guidelines in this opinion, to avoid conflicts of interest, to maintain confidentiality of information relating to the representation of clients, to disclose to clients the arrangement between the lawyer and the firm in some circumstances, and to comply with other applicable provisions of the Rules and Code. The use of a lawyer placement agency to obtain temporary lawyer services where the agency's fee is a proportion of the lawyer's compensation does not violate the Model Rules or predecessor Model Code as long as the professional independence of the lawyer is maintained without interference by the agency, the total fee paid by each client to the law firm is reasonable, and the arrangement otherwise is in accord with the guidelines in this opinion.
Lawyers’ Responsibility for Client Fraud
With respect to the duties of lawyers toward third persons in the event of client fraud, the general principle has always been to obligate the lawyer to prevent or rectify the fraud. (Donald C. Langevoort, “Where were the Lawyers? A Behavioral Inquiry into Lawyers' Responsibility for Clients’ Fraud”, Vanderbilt Law Review, Vol. 46, No. 1, January 1993, pp. 75-119).
A lawyer shall not counsel a client to engage, or assist a client, in conduct that he knows is criminal or fraudulent. (Langevoort, id., pp. 81-82, citing 1983 ABA Model Rules of Professional Conduct, Rule 1.2 [d]). With regard to truthfulness in negotiations and other non-litigation contexts, the lawyer may not knowingly make a false statement of material fact or law to a third person or knowingly 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. (id., citing Model Rule 4.1).
The nondisclosure standard, however, is limited by an overreaching duty of confidentiality. The lawyer may not reveal information relating to the client=s representation to anyone without the client=s consent, except to prevent imminent death or substantial bodily harm or in cases where it is necessary for the lawyer’s self-defense. (id., citing Model Rule 1.6). Read together, the Model Rules create a gatekeeper rather than a whistleblower regime. (id.).
New Jersey has revised the duty of confidentiality to oblige lawyers to warn the appropriate authorities when they know of client fraud that threatens severe financial harm. (id., p. 82, citing New Jersey Rules of Professional Conduct, Rule 1.6; Philadelphia Reserve Supply Co. vs. Nowalk & Assoc., No. 91-0449, 1992, U.S. Dist., Lexis 12745 [E.D. Pa. Aug. 25, 1992]).
Although the securities rules of the US Securities and Exchange Commission (SEC) authorize the SEC to disbar securities lawyers practising before it who are guilty of irresponsible and unprofessional behavior, it has not imposed any whistleblowing obligation on securities lawyers but simply prohibits such lawyers from passively acquiescing when they become aware of client fraud. (id., citing US SEC Rule 2 [e]). In securities matters, the SEC is empowered to bring enforcement proceedings leading to possible civil penalties and equitable relief. (id., citing SEC Act of 1934, Sec. 21 [d], 15 U.S.C., Sec. 78u [d], 1988). According to Prof. Donald C. Langevoort, supra, the general contours of the US federal law aiding-and-abetting cases may be synthesized as follows:
1. Attorneys and others will be held jointly and severally liable if they assist with the requisite degree of scienter (i.e., intent to deceive). If the lawyer is said to owe a duty to the defrauded person, then that standard will be satisfied by showing either actual awareness or reckless disregard of the fraud@. (Id., pp. 85-89, citing Armstrong vs. McAlpin, 699 F. 2d 70, 91 [2nd Cir. 1983; FDIC vs. First Interstate Bank, 885 F. 2d 423 [8th Cir. 1989]).
2. A duty exists whenever there is a fiduciary relationship or one of trust and confidence.
Some federal courts find a duty when a lawyer disseminates information under her own name at the client=s behest, such as in an opinion letter and that it is meant to be relied upon by an identifiable class of third-party invest. (id., citing Andrew vs. Friedlander, Gaines, Cohen, Rosenthal & Rosenberg, 660 F. Supp. 1362, 1368 [D. Conn., 1987]; see also Edward F. Donahoe, "Attorney Liability in the Preparation of Securities Disclosure Documents", 18 SEC. Reg. L. J. 115 [1990]; Abell vs. Potomac Insurance Co., 858 F. 2d 1104 [5th Circ. 1988]).
Other courts have found a duty Abased simply on the lawyer=s role as author or editor of disclosure materials. (Id., citing Molecular Technology Corp., 925 F 2d 910 [6th Cir. 1991]; In re Rospatch, Sec. Lit. [Current] Fed. Sec. L. Rep. [CCH], Par. 96,939; SEC vs. Electronic Warehouse Inc., 689 F. Supp. 53, 60 [D. Conn. 1988]; Lubin vs. Sybedan Corp., 688 F. Supp. 1425, 1449 [S.D. Cal. 1988]; SEC vs. Frank, 358 F. 2d 486 [2nd Cir. 1968]).
3. If there is no duty, many courts eliminate recklessness as a possible liability standard. (Id., citing IIT vs. Cornfield,, 619 F. 2d 909, 923 [2nd Circ. 1980]; Woodward vs. Metro Bank of Dallas, 522 F. 2d 84, 96 [5th Circ. 1975]).
Others do not, so long as there is substantial assistance given to the fraud@. (Id., citing First Interstate Bank v. Pring, 969 F. 2d 891 [10th Cir. 1992]).
Of those insisting on a higher scienter standard, most require a showing that the lawyer actually was aware both of the fraud, and usually her role in it as well@.
An increasing number of courts have indicated that in the absence of duty, it is necessary to show high conscious intent, a criminal law derivative that requires proof that the lawyer desired the fraud to succeed. (Id., citing Abell, 858 F. 2d 1127, supra; Schatz c. Rosenberg, 943 F. 2d 485 [4th Cir. 1991]; Barker v. Handerson, Franklin, Starnes & Holt, 797 F 2d. 490, 495 [7th Cir. 1986]; In re AM Int’l Sec.... Lit. 606 F. Supp. 600 [SDNY 1985]).
4. Except in those jurisdictions that adopt the high-conscious-intent locution for all aiding-and-abetting cases, a lawyer faces a threat of liability if she knowingly, or perhaps recklessly, renders >substantial assistance= to the wrongdoer. In defining substantial assistance, most courts invoke a proximate cause construct. (Id., citing Landy v. FDIC, 486 F. 2d 139, 163 [3rd Cir. 1973]; First Interstate Bank of Nevada v. Chapman &Cutler, 837 F. 2d 775, 779-80 [7th Cir. 1988]).
In Schatz c. Rosenberg, 943 F. 2d 485 [4th Cir. 1991], the action against the law firm was dismissed notwithstanding allegations of knowledge of client fraud on the ground that preparing the documents and doing the closing was mere >scrivener=s work= not rising to the level of substantial assistance. (Id., p. 87).
A number of courts have stated that when lawyers’ services simply represent >the grist of the mill= in business settings, then liability will not follow without a showing of the highest version of conscious intent -- a desire to make the fraud succeed. (Id., p. 88, citing Camp v. Dema, 948 F. 2d 455 [8th Cir. 1991]).
The most intriguing question in the law of negligent misrepresentation relates to the lawyer=s duty of investigation or due diligence. (Id., p. 90). If suspicions are raised with respect to client-supplied information, the lawyer must inquire. (Id.). There is little authority for the view that lawyers have an automatic obligation to investigate client-supplied information, except in those situations in which the disclosure strongly indicates to the nonclient that the lawyer had assumed a verifying role. (Id.). The lawyer can limit due diligence exposure through disclosure of limited knowledge, making this a relatively mild form of gatekeeping liability. (id.).
In FDIC vs. O’Melveny & Myers, 969 F. 2d. 744 (9th Cir. 1992), the US Court of Appeals held the law firm could be found liable for not discovering the falsity of information that dishonest bank managers had supplied the law firm in the course of preparing offering materials for securities disclosure purposes. The opinion seems to point to a general duty of inquiry regarding client-supplied information in transactional settings. Between attorney and client, however, the level of diligence required in the preparation of disclosure is implicitly a matter of contract. Management is the most efficient provider of information, and verification is costly@. It can be predicted that with the O’Melveny opinion,
Amore specific risk-allocation language will appear in attorney-client agreements. (Id., pp. 91-92).
