The California State Bar has solicited comment on its proposed Formal Opinion No. 17-0003 regarding duties of confidentiality to and avoidance of conflicts of interest to prospective clients. The deadline for comment is March 22, 2021. – gwc
Here are my thoughts on the new Formal Opinion 479 from the ABA Standing Committee on Ethics and Professional Responsibility offering guidance about what constitutes “generally known” information under ABA Model Rule 1.9, as published in the March 2018 issue of the ABA Journal.
“I agree that this definition makes sense, though I don’t think it necessarily resolves what is generally known in every instance,” says Renee N. Knake, who teaches legal ethics at the University of Houston Law Center and recently co-wrote Professional Responsibility: A Contemporary Approach. “Inevitably gray areas will arise, but I do think that the opinion offers helpful guidance as to what may constitute ‘generally known.’ ”
She says questions remain as to what “minimum threshold of publications” are necessary to establish that the information is generally known.
“What about other sources, such as a public survey or opinion poll?” she says. Regarding wide recognition in the former client’s industry or profession, Knake asks whether it is “possible to rely as well on expert opinions.”
Further, “information that is publicly available is not necessarily generally known,” the opinion reads. “Certainly, if information is publicly available but requires specialized knowledge or expertise to locate, it is not generally known within the meaning of Model Rule 1.9(c)(1).”
“The opinion is striving to achieve a balance here,” Knake says. “Defining ‘generally known’ to include any public record would address the gray area problem, but it doesn’t sufficiently protect the sort of information contemplated under the umbrella of confidentiality afforded by Model Rule 1.9.”
Model Rule 1.9(c)(2) prohibits a lawyer from “revealing information about a former client,” Knake says. “The difference between ‘reveal’ versus ‘use’ is significant, and the lawyer may only use a public record that has otherwise been revealed by another source and spread widely.”
You can read the full article here: http://www.abajournal.com/magazine/article/ethics_opinion_makes_confidentiality_exception_for_generally_known_info
The ABA Journal has a nice summary of the recent Seventh Circuit decision affirming the lower court’s dismissal of the malpractice lawsuit against Mayer Brown, which represented General Motors, for the erroneous release of a 1.6 billion dollar security interest against General Motors. The plaintiffs were the lenders whose security interests were released.
The Court held that Mayer Brown didn’t owe a duty to third parties who aren’t clients and that Mayer Brown’s representation of JPMorgan Chase Bank in different matter did not create a duty of care in the loan/security interest matter. According to the Court, Plaintiff had offered 3 theories as to why Mayer Brown owed a duty of care to plaintiffs: (a) JP Morgan was a client of Mayer Brown in unrelated matters and thus not a third‐party non‐client; (b) even if JP Morgan was a third‐party non‐client, Mayer Brown assumed a duty to JP Morgan by drafting the closing documents; and (c) the primary purpose of the General Motors‐Mayer Brown relationship was to influence JPMorgan.
Among other things, the Court stated: ““Consider the consequences of the rule plaintiffs advocate, that a law firm owes a duty of care to a party adverse to its client because the adverse party is a client in unrelated matters and has waived the conflict of interest.” The Court’s opinion is here.
1. Conflict of Interest and Informed Consent
To avoid a conflict of interest, a lawyer needs to be informed client consent to engage in substantive job negotiations with a law firm that is adverse to the client. Likewise, hiring firms must avoid serious job talks with opposing counsel unless its own client consents. See North Carolina State Bar Ethics Comm., Formal Op. 20163, 1/27/17.
North Carolina Rule of Professional Conduct 1.7 forbids a lawyer from representing a client if the lawyer’s own interests may materially limit the client’s representation unless the lawyer reasonably believes he or she can provide competent and diligent representation and the client gives informed consent, confirmed in writing. N.C. Rules of Prof’l Conduct, Rule 1.7(b)(2) (2003). This type of conflict may arise when a lawyer has discussions about possible employment with a client’s opponent or a law firm representing the opponent. N.C. Rules of Prof’l Conduct, Rule 1.7, cmt. 10.
2. Substantive Discussion or Negotiation
While the exact point at which a lawyer’s own interest may materially limit his representation of a client may vary, the ethics committee advised substantive discussions and negotiations materially limit the lawyer’s representation of a client. Similarly, The Restatement (Third) of the Law Governing Lawyers advises that once the discussion of employment has become concrete and the interest is mutual, the lawyer must promptly inform the client. Restatement (Third) of the Law Governing Lawyers: A Lawyer’s Personal Interest Affecting the Representation of a Client, § 125, cmt. d. (2000).
The ethics committee relied on the ABA definition of “substantive discussion”, which “entails a communication between the job-seeking lawyer and the hiring law firm about the job-seeking lawyer’s skills, experience, and the ability to bring clients to the firm; and the terms of association.” ABA Formal Ethics Op. 96-400 (1996). To find a “substantive discussion,” the ethics committee opined that there must be a discussion or negotiation that is substantive. See North Carolina State Bar Ethics Comm., Formal Op. 20163, 1/27/17.
The committee further provided examples as to what constitutes a “discussion” and what is “substantive.” “Sending a resume blind to a potential employer is not a ‘discussion.” Id. “Speaking generally with a colleague at a social event about employment opportunities is not ‘substantive.’” Id.
To read the full opinion, click here.
Richard Emery, a name partner in a well-known New York City law firm, is also Chairman of New York City’s Civilian Complaint Review Board, which investigates complaints against police officers. The New York Daily News reports that the City’s Conflict of Interest Board permitted him to “keep his name on the firm’s shingle, and [granted him] a ‘waiver’ allowing his firm to represent plaintiffs in lawsuits against the City.” A spokesman for the CCRB added that “Mr. Emery recuses himself from any matters in which the firm represents a party associated with the CCRB,” but the Daily News reports that “[n]either the Conflicts Board, nor Emery, would provide a copy of the waiver.” Although the Board may have been applying government ethics law, Emery’s recusal from matters involving his firm would appear to satisfy Rule 1.11 (d). Similarly, his law firm’s representation of plaintiffs who formerly had matters before the CCRB would appear to satisfy Rule 1.11 (a)(2) so long as “the appropriate government agency gives its informed consent, confirmed in writing,” as happened here. Note that the language of the Rule 1.11 refers to former government officers but the comment expressly includes current government officers with regard to former matters. In addition, even without consent, Rule 1.11(b) would permit the representation so long as Emery is timely screened, and the agency receives timely notice.
Judge Jesse Furman of the Southern District of New York recently refused to permit a plaintiff in a civil rights action from substituting a new lawyer on the ground that the lawyer was barred under Rule 1.11. Furman found that lawyer “participated personally and substantially as a public officer” (Rule 1.11) in investigating plaintiff’s bias complaints when lawyer was Senior Director for Equal Employment Opportunity — not a lawyer position — at plaintiff’s employer agency.
Here’s a basic infographic I use when teaching the Rules re: screening for conflicts.
You can use without an account with this link: https://magic.piktochart.com/output/7124791-lawyer-screening-who-when-how
Just click “Present” in the top right corner.
Questions? Ellen @ firstname.lastname@example.org
A excerpt from the article appearing in Sunday’s NYT Magazine:
Hedge funds, banks and insurance companies have long been quietly funding the occasional lawsuit, but no major United States investment outfit in the commercial arena specialized in the practice until Juridica was founded in 2007. The industry’s early growth was driven in part by the recession, which made lawyers at big companies eager to hand off risk and also increased the demand among investors for opportunities that could pay off no matter what was happening in the world’s markets. Today the industry seems to have become a permanent part of the financial landscape, with shares of prominent funders trading every day on stock exchanges in London and Sydney.
Anthony Sebok, a professor at Cardozo Law who advises Burford, says he sees the practice as part of a broader trend toward the financialization of the law. ‘‘Why can’t I promise a stranger some piece of the game?’’ he asked me, paraphrasing Bentham’s writings. ‘‘Is there something icky about it, like I’m commodifying my rights? Bentham says these legal rights are our property. Why shouldn’t we be able to sell them?’’ Jonathan Molot, a professor at Georgetown Law who serves as Burford’s chief investment officer, has written that stock offerings by law firms could improve morale, lower rates and help lawyers focus on maximizing long-term profits. Like lawsuits, the firm itself should evolve into an asset. ‘‘It’s a mistake for lawyers to hunker down and say we’re different, we’re excluded, we’re not part of the economy,’’ he said.
But the interests of financiers and plaintiffs are not always so well aligned. Depending on the structure of the deal and the ultimate payout, plaintiffs sometimes walk away with a few crumbs after the funders and lawyers take their share. One such outcome happened in 2007, when Altitude Capital, a funder, invested $8 million in an intellectual-property suit filed by DeepNines, a small network security company, against McAfee, a much larger competitor. The case was settled for $25 million, but after expenses ($2.1 million), lawyers’ fees (roughly $11 million) and Altitude’s cut ($10 million), DeepNines took home $800,000, a little over 3 percent of its settlement. Then, Altitude questioned DeepNines’ math, arguing that the company shouldn’t have deducted its own expenses before calculating contingency fees. It sued its former partner for $5 million more, eventually dropping the suit in 2011.
This kind of falling out is unusual, but it shows the fundamental conflict that can occur.
Full article here.
Returning to our One To Watch from last week:
Today U.S. District Judge Nicholas Garaufis rejected the proposed class-action settlement between AmEx and various merchants based on the discovery last week that a lawyer for some of the merchants shared confidential documents with a rival attorney (who was also a friend and former colleague) for MasterCard in a parallel case. While the Court also expressed concerns with the substantive fairness of the settlement, it found it unnecessary to reach a conclusion on the merits because of the lawyer’s to rule on such merits because of the lawyer’s “improper…conduct” that “fatally tainted the settlement process.”
Noting that the opposing lawyer were in “frequent, possibly constant contact” about the settlement, and citing the “procedural unfairness” and “failure of adequate representation,” Judge Garaufis removed the merchants’ lawyer from the case, unfortunate news for the decade-old case.
My PR students frequently struggle with when screening a disqualified lawyer may work, as well as which screening Rule applies. I put together this infographic for my current summer class. Feel free to us the link, or email me if you’d like a pdf version.
The New York Times describes how the practice of providing of medical advice, including the prescription of medicine, through the internet is expanding, and at the same time meeting resistance from some doctors. Although law firms already provide advice to businesses and wealthy individuals through video communication, could internet video calls become a common way for lawyers to meet, and provide services to, middle income clients and small businesses? These developments raise issues relating to creation of the lawyer-client relationship, competence/malpractice, confidentiality, conflicts, and future directions for business and technology of legal practice.
The Colorado Supreme Court recently granted cert in the case of Nathan Yadnez (2015 WL 929996), and the decision likely will provide additional guidance on how far the rule from Cuyler v. Sullivan, 446 U. S. 335 (1980), will extend to conflicts of interest beyond those rising from simultaneous representation of co-defendants or co-participants.
The relevant facts are straightforward. Defendant Yadnez murdered his mother at the age of 16. Yadnez’s father, also husband of Yadnez’s mother, hired and paid a lawyer to represent his son. The father also was a witness for the prosecution. There were allegations of child abuse that were neither investigated nor raised by the defense. There was no conflicts waiver.
The question is whether Yadnez’s lawyer was operating under an actual conflict of interest that adversely affected the representation, constituting ineffective assistance of counsel. The Court of Appeals found that there was a conflict, but arising solely from the fact that the lawyer was being paid by father, not sufficient to meet the ineffective assistance of counsel standard. Defendant Yadnez argues that under Sullivan, the conflict is not merely a Rule 1.8 conflict based on third party payment of fees. Instead, it is a nonconsentable conflict under Rule 1.7, because the father was a victim of the crime and a necessary witness for the prosecution, creating a risk of a material limitation on the representation, not merely a conflict arising from the payment of legal fees by the father.
In class, I have previously asked whether Gibson, Dunn’s representation of the Governor’s office raised conflicts of interest (for contrasting perspectives see here and here) or waived confidentiality by issuing a public report based on evidence gathered during the representation. The latter question may come up in court in the context of defendant Bridget Kelly’s subpoena of the Gibson, Dunn interviews and notes underlying the report. Given that the trial is currently scheduled for the fall, these facts can also be used for timely hypotheticals.
If you’re teaching conflicts or competence at the moment here are a couple of scenarios to explore, ripped from the headlines over the past week:
- A recent NYT Deal Book column explores the complications and conflicts associated with a marriage between Mary Jo White as she leads the Securities Exchange Commission and her husband John White as he practices law at Cravath, Swaine and Moore. Apparently she’s had to recuse herself from at least 10 investigations involving Cravath representations in addition to cases involving her former firm Debevoise & Plimpton.
- Hillary Clinton’s use of a personal email address for official government business during her time as Secretary of State raises questions about conflicts and security risks. The Legal Ethics Forum blog questions whether this runs afoul of Model Rule 1.1’s duty of competence, which requires in Comment 6 an obligation to be mindful of “the benefits and risks associated with relevant technology.”
In Kaye v. Rosefielde the Appellate Division of Superior Court held that a lawyer who worked as an independent contractor at the jobs of General Counsel and Chief Operating Officer had an implied attorney-client relationship with Kaye the principal of two Atlantic City businesses. That subjected the lawyer to RPC 1.8 governing lawyers business involvements with current clients.
The App Div affirmed most of the trial judge’s findings but limited the remedies. Upheld were voiding the lawyer’s interests in businesses he formed for the client, awarding counsel fees, and punitive damages. But Judge Nugent denied the demand that the lawyer disgorge the $550,000/year he had been paid as in-house counsel and personal counsel. Wages paid are not damages defendants have argued.
The New Jersey Supreme Court granted certification “limited to the issue of whether the Appellate Division erred by affirming the trial court’s holding that economic damages are a necessary prerequisite for disgorgement of the employee’s salary.” – gwc
The rule of thumb in multiple actor crimes is that each defendant should have a separate lawyer. But sometime the band of brothers approach makes sense – financially and on the merits – for the defense. The challenge is to adequately describe the risks, and provide for representation after unbridgeable conflicts of interest appear.
Here Justice Shirley Kornreich finds that two companies jointly charge were adequately informed of the risks and consented to their lawyers’ continued representation of on client only.
Justice Kornreich finds the waiver was adequately informed and thatthe former joint represenation firm can conntinue representing on of the former jointly represented c-defendants.
OTHERWISE: Court Denies Disqualification Motion- sees issues clearly //Legal Ethics Forum.
The New York Supreme Court (New York County) denied a DQ motion filed after a joint defense representation fell apart. The joint rep letter was well written and contained lots of warnings and a good explanation of the consequences of a falling out. The court realized that granting the motion would effectively prevent clients from safely entering into joint defense agreements even when it helped the clients. All in all, a job well done by the trial court. Bonus: the New York court cited California’s Zador v. Kwan. (h/t: Law Firm Risk Management Blog)
Is a federal court-appointed Administrator subject to the Code of Conduct of United State Judges? the judicial disqualification statute 28 U.S.C.455? the RPC’s? And, in any event, was BP misled by Patrick Juneau?
BP appeals rejection of removing spill claims leader – Houston Chronicle
by Janet McConnaughey//AP December 24, 2014
“NEW ORLEANS – BP is asking the federal appeals court in New Orleans to kick out the administrator of damage settlement claims from its 2010 oil spill. A 75-page brief submitted this week to the 5th U.S. Circuit Court of Appeals contends, among other things, that Patrick Juneau had secretly drafted court papers filed against BP before he was appointed claims administrator.
Class actions pose challenges to lawyers who represent competing interests. – gwc
Public Citizen: NFL Concussion Plaintiffs Not Adequate Representatives of Class.
n a post fairness hearing supplemental memorandum filed today Public Citizen’s Allison Zieve argues as amicus curiae that concussion injury class plaintiffs Kevin Turner and Shawn Wooden cannot represent fairly and adequately the many conflicting interests among NFL players and retirees. The relatively limited pot of approximately $765 million has many potential claimants. Although Class Counsel, led by Chris Seeger tried to be fair and balanced it was an impossible task argues Zieve, quoting Justice Ruth Ginsburg in the landmark Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997):
“The settling parties, in sum, achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected. Although the named parties alleged a range of complaints, each served generally as representative for the whole, not for a separate constituency.”