OTHERWISE: When Must a Lawyer Plotting a Lateral Move Obtain a Client’s Informed Consent? | Legal Ethics in Motion

Source: OTHERWISE: When Must a Lawyer Plotting a Lateral Move Obtain a Client’s Informed Consent? | Legal Ethics in Motion

When Must a Lawyer Plotting a Lateral Move Obtain a Client’s Informed Consent? | Legal Ethics in Motion
by Anibal Manzano

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.

Private Practice Conflicts for Civilian Police Review Board Chair

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.

Reminder that Rule 1.11 Applies to Government Officials and not Only Lawyers

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.

“Should you be allowed to invest in a lawsuit?” asks the NYT

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.

Lawyer in MasterCard Settlement Admits Relying on Improperly Disclosed Client Info in Counseling the Card Company on Settlement

According to a brief filed yesterday in the Eastern District of NY, Wilke Farre partner Keila Ravelo admits to using improper disclosures from opposing counsel in advising MasterCard about it’s $5.7 billion settlement in the decade long class action by a group of merchants.
See previous posts on this case here and here.

Federal Judge Rejects Class Action Settlement in Decade Old AmEx/Merchant Case Based on Lawyer Disclosure of Confidential Info

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.