Traps for the Unwary – RPC 2.2: Lawyer as Intermediary

Press releases on public discipline issued by the BPR can be something of an art form and sometimes, but not always, don’t tell the whole story.  So setting aside any tea-leaf reading that might otherwise go into this one involving what sounds like a situation in which a lawyer was perhaps unknowingly used by clients to assist with some hinky efforts to shield assets, the reference to RPC 2.2 as being among the rules violated raises a fine opportunity to remind Tennessee lawyers about another trap for the unwary.

Tennessee is one of only two U.S. jurisdictions (Mississippi is the other) that still has such a rule on their books.  RPC 2.2 is pattered upon an ABA Model Rule that was quickly scuttled after adoption by the ABA.  As such, the existence of RPC 2.2 in Tennessee presents both a blessing and a curse.

If you are aware of it, and understand when it applies, it is a blessing because it makes excruciatingly clear what needs to be in your engagement letter with your various clients, what you need to say about your role, what your duties and obligations are, and when you have to terminate representing any of the clients because the situation has blown up.  If you are not aware of its existence, then it’s a curse because, given its very detailed requirements, a lawyer could find themselves incorrectly looking to RPC 1.7 and complying with those provisions to try to obtain informed consent to a joint representation only to learn later that s/he followed the wrong rule altogether.

For the lawyer involved, and the fact that this whole set-up apparently turned out to involve a gratuitous transfer, this might have become a second-level trap as Comment [4] to RPC 2.2 indicates that where what is going on is a gratuitous transfer, RPC 1. 7 and not RPC 2.2 is the relevant rule with which to comply.

But, for everyone other than the lawyer involved, this still presents a decent teachable moment to remind Tennessee lawyers that if you are undertaking to represent multiple parties in an undertaking that involves “provid[ing] impartial legal advice and assistance” to multiple parties who “are engaged in a candid and non-adversarial effort to accomplish a common objective with respect to the formation, conduct, modification, or termination of a consensual legal relations between them,” then your engagement would be as an intermediary and RPC 2.2 is the rule on point.  RPC 2.2 thoroughly details how to determine whether you have a conflict that would prevent undertaking the representation at all, what you need to do to go about getting informed consent of the multiple clients involved, and what the rules of the road are for the engagement going forward.

Traps for the unwary – Mid-stream changes to your client’s fee agreement

When lawyers think about problematic business transactions with a client, they usually think about things like loans or, perhaps, situations in which a lawyer is joining a client as an investor in a business venture.  The ethics rule regarding business transactions with clients, RPC 1.8(a), is broader in its coverage than just those situations and, in fact, broader than many lawyers realize.  A particular issue that pops up from time-to-time to cause trouble for lawyers is failure to understand that RPC 1.8(a) applies when you renegotiate a fee agreement with a client.  Given the nature of the attorney-client relationship and the broad fiduciary duties attorneys owe their clients, it should be logical that a lawyer faces a heavier than normal burden when trying to turn an existing fee agreement with a client into something more favorable for the lawyer.

It was but one of two problems involving handling of client fees, but failure to comply with RPC 1.8(a) when changing the terms of his client’s fee agreement was part of the reason a Tennessee lawyer was publicly censured at the end of last month.

The trap for a lawyer who does not realize that RPC 1.8(a) applies to such a change is that, even a change that would still amount to a reasonable fee arrangement in compliance with RPC 1.5, amounts to a violation of the rules unless it meets all of the additional requirements of RPC 1.8(a).  (Because the purpose of this rule is to prevent the lawyer from taking advantage of the client, RPC 1.8(a) does not apply when a lawyer is re-doing the terms of a fee agreement to make it more favorable to the client (i.e. marking down or walking away from a bill for example or agreeing to lower their hourly rate)).

Though numbered as three sub-parts, there are actually five additional requirements  to be met: (1) there has to be a writing transmitted to the client that discloses the transaction and the terms in a manner reasonably understood by the client; (2) the transaction and terms have to be fair and reasonable to the client; (3) the client has to be advised in writing that it is desirable to seek independent legal counsel for advice on the transaction; (4) the client must be given a reasonable opportunity to seek independent legal counsel; and (5) there has to be a writing, signed by the client, showing the client’s informed consent to the terms and the lawyer’s role (including whether the lawyer was also representing the client in the transaction.

Comment [1] to the rule offers a pretty specific pointer to try to make it harder for a lawyer to be unwary and, thus, prevent this rule from serving as a trap.  The next sentence in Comment [1] makes clear that this rule does not apply to standard commercial transactions (e.g. you represent a large bank and you also obtain a home mortgage from that bank) not only because requiring compliance would be impracticable but also because there is no real concern of an imbalance between lawyer and client in such situations.

When there is any real doubt about what the net outcome of a midstream fee change would be, the safe course is to make sure to comply with RPC 1.8(a).  Thus, while a lawyer who has been handling a plaintiff’s case on a hourly fee basis may be able to argue that moving the arrangement over to a contingent fee agreement was for the client’s benefit to avoid a burden of continuing to pay fees on a case that might not be successful, it’s a very risky endeavor to proceed without making sure that you tick each of the boxes to comply with RPC 1.8(a).

A promised update about that CLEUI/CLEWI situation.

A little while back, I posted about a Virginia lawyer who had been suspended after being drunk and disruptive while attending a CLE.  At the time, I speculated about what the ethics infraction might have been – making a false statement in terms of filling out the paperwork on attendance.  I was in the ballpark, but not correct.  The order regarding the suspension makes clear that the lawyer was disciplined for violating Virginia’s version of RPC 8.1 by falsely denying that he was intoxicated in his response to the bar accusations against him.  RPC 8.1 in many jurisdictions, including Tennessee, requires a lawyer not only to refrain in connection with a disciplinary matter from “knowingly mak[ing] a false statement of material fact,” but also prohibits lawyers from “fail[ing] to disclose a fact necessary to correct a misapprehension” the lawyer knows has arisen in the disciplinary proceedings.

Thus, RPC 8.1 presents a powerful weapon that disciplinary authorities can wield when they so desire and amounts to something that is very much the polar opposite of a Fifth Amendment right against self-incrimination even though disciplinary proceedings are often described as “quasi-criminal” in nature.

Of course, we all should still be able to agree with the general concept that being drunk at a CLE is a bad, bad idea.  There are lots of other ways that problems with alcohol can get lawyers into disciplinary trouble.  A more straightforward example of a Tennessee lawyer whose now been publicly censured, in part, because of a DUI and a judicial finding, in a custody dispute, that he had serious alcohol problems can be read about in this pithy press release from the BPR.

Speaking of prejudicial to the administration of justice …

It is not every day that a contempt case against a Tennessee lawyer gets some national coverage, but it also is not every day that a celebrity former television judge and former candidate for District Attorney has a criminal contempt ruling and sentence of 5 days in jail against him affirmed on appeal.

The appellate ruling is a relatively straightforward one released yesterday.  (Coincidentally, almost exactly 1 year to the day of the incident in question.)  My fellow Memphians will likely recall that the in-court exchange in question took place during the 2014 campaign season.

Were it not for the celebrity status of the lawyer involved, the ruling would likely not be worthy of much note.  It does stand as another pretty good example, despite the effort to argue otherwise on appeal, of a lawyer who loses sight of when they stopped being engaged in zealous advocacy for a client and started engaging in conduct that really has nothing to do with advancing their client’s interests.

Pointing out exactly where that line was crossed can be something of an art form, but here it looks like it can be pinpointed to somewhere around the time where the lawyer started trying to hand two $10 bills to the judge.

Tennessee’s ethics rules get implicated by acts of criminal contempt in a number of facets.  RPC 3.5(e) prohibits lawyers from engaging in conduct intended to disrupt the court; RPC 8.4(b) prohibits certain criminal acts, including ones that can reflect adversely on fitness as a lawyer; RPC 8.4(d) prohibits conduct prejudicial to the administration of justice; Typically, lawyers in Tennessee who are found in contempt of court end up also finding themselves hit with discipline, more often than not in the form of a public censure, so this is likely not the last wave of publicity regarding this story.

Post-discharge communications with jurors

To clarify about that forthcoming revision to the comment to RPC 3.5(c) w/r/t restrictions on communicating with discharged jurors after trial: it impacts only the ability of trial court’s to enter routine orders — such as standing orders or local rule provision — that would place jurors off-limits from lawyers after discharge.  It will not change the fact that such contact is unethical if the lawyer’s “communication involves misrepresentation, coercion, duress, or harassment.”

Why does this seem like a point worth making?  Well, because of things like this remarkable public censure out of New York, that demonstrates (1) the long memories of certain lawyers, (2) how much lawyers hate to lose, and (3) the double-edged sword that is the ability to send email to anyone at any time you want.