Two more ethics opinions explore restrictions on lawyers’ ability to enter (or even offer) certain contracts.

First, this is not being titled as a “Friday Follow Up” post because, like the rest of you, I have no idea what day of the week it is at this point.

Second, there is way much more important events afoot in the world and if you want to know my thoughts about those you can go find me on Twitter. Given the complete lack of even a fig leaf to connect to legal ethics on that front, I’m sticking to sports here.

Third, two ethics opinions from two different states came out late last year addressing two different variations on ways that the ethics rules makes lawyers “special” when it comes to the right to contract. Because states like mine have been engaged in the issuance of ethics opinions really pushing the boundaries of this concept (at least as to the scope of RPC 5.6), it seems worth mentioning these two opinions albeit each for slightly different reasons.

The first of the two is almost entirely straightforward in addressing something that I certainly think is undoubtedly clear from the Comment to the ABA Model Rule — whether the scope of RPC 5.6 is somehow different for in-house counsel. Nevada, in Formal Op. 56, has made plain that the scope is not different, explaining that an in-house counsel cannot accept a stock award agreement that is made contingent upon agreeing to a one-year covenant not to compete. It somewhat helps to understand why Nevada would have to issue an ethics opinion on this question to know that Nevada has no Comments adopted along with its rules. Instead, Nevada’s Supreme Court has offered that both the preamble and the comments to the ABA Model Rules are something that “may be consulted for guidance in interpreting and applying the Nevada Rules of Professional Conduct.”

Here in Tennessee, we actually have our own Comment identical to the ABA Model Rule version so an ethics opinion wouldn’t really be necessary to cover the fact that the Comment specifically says it applies to organizational employers as well as private firms. One nuance that the opinion introduces but does not explore in any real depth is that an in-house counsel could agree to a non-compete that would only apply to the performance of business functions, rather than legal services, at a competitor. Thus, an in-house lawyer serving as both General Counsel and Executive Vice President at one corporate employer could be required to agree as part of a stock bonus not to take any similar employment with a competing company in the future by focusing only on the executive portion of the existing job.

The Nevada opinion also delves a bit into a way that a confidentiality agreement as part of such a stock award could also run afoul of RPC 5.6 by extending beyond the requirements of RPC 1.6 and RPC 1.9 under the ethics rules.

The other opinion I wanted to touch on comes from Los Angeles. LA County Bar Op. 532 tackles a question that does not require application of RPC 5.6 to resolve but that is not entirely unrelated to that rule — whether a lawyer can agree to indemnify the adverse party as a condition of a settlement. The LA County opinion correctly reaches the conclusion that the lawyer cannot do so because of the conflict that creates between the personal interests of the attorney and the client’s interests. It is an uncontroversial conclusion as the opinion admits because there are some 20+ other jurisdictions, including here in Tennessee, that have likewise made such a settlement provision improper.

Two other aspects of the opinion are much more interesting, however. One is that the primary ground on which the opinion nixes the possibility is that doing so would be the lawyer improperly paying the client’s business or personal expenses in violation of California’s RPC 1.8(b)(5). The other is that the opinion also involves RPC 8.4(a) to create the same dynamic that is in play when RPC 5.6 is triggered – it is unethical for a lawyer to propose such an agreement to the plaintiff’s lawyer because it would be unethical for the plaintiff’s lawyer to agree to it. While RPC 5.6 states plainly that it is an unethical for a lawyer to “participate in offering or making” the kind of agreement addressed by Nevada as discussed above, the potential reach of RPC 8.4(a) when it comes to negotiating contracts is often overlooked. California’s rule, like the ABA Model, makes it a disciplinary violation for a lawyer to “knowingly … induce another” lawyer to violate the ethics rules.

Disturbing development in a recent disciplinary case

Late this Summer, the Tennessee Supreme Court issued an opinion, over a dissent, that imposed a public censure against a lawyer for what were, pretty clearly, a series of failures on the part of the lawyer’s staff in the handling of a client’s matter.  What makes the case, Garland v. BPR, interesting, and worthy of that dissent, is not the level of discipline imposed but the choice of the particular rules the lawyer was charged with violating.  The things that make it interesting and dissent-worthy are also the things that make it potentially disturbing as precedent for lawyers and lawyers (like me) who defend lawyers.

Even though the case was clearly one in which the staff to whom the lawyer delegated tasks and responsibilities failed to do their job correctly, the Board did not charge the lawyer with a violation of the rule that is tailor-made for that situation, RPC 5.3.

RPC 5.3 requires the following of a lawyer in Garland’s position:

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer;

(b) a lawyer having direct supervisory authority over a nonlawyer shall make reasonable efforts to ensure that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer; and

(c) a lawyer shall be responsible for conduct of a nonlawyer that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:

(1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or

(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the nonlawyer is employed, or has direct supervisory authority over the nonlawyer, and knows of the nonlawyer’s conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Instead of trying to build a case against Garland for any failures under RPC 5.3, the Board charged him with violations of RPC 1.3 and RPC 1.4, contending that he personally failed to act diligently in the client’s matter and failed to properly communicate directly with the client.  The Board also charged Garland with what is often an add-on violation, RPC 8.4(a), but appears to have done so with an unusual twist — justifying it on the argument that the lawyer committed violations of the rules “through the acts of another,” where the “another” was a member of his own staff.

Justice Kirby, in her dissent, made the point that the rule that should have been the focus of the case was not:

The facts in this case center on the failure of Mr. Garland’s staff to response to [client’s] inquiries, the staff’s failure to make Mr. Garland aware of things that needed his attention, or staff members’ general incompetence in tasks such as filing and mailing.

Despite the fact that, “Rule 5.3 was tailor-made for situations such as the one presented in this case,” Justice Kirby trumpeted that the Board did not pursue any charge against Garland for a violation of that rule but instead leveled RPC 1.3 and 1.4 charges and explained her reluctance to adjudicate the disciplinary matter when the Court had “no findings on what measures Mr. Garland should have had in place to supervise his staff,” “no findings on what efforts Mr. Garland should have made to reasonably ensure that his staff’s conduct was appropriate,” and “no findings on whether Mr. Garland ordered or ratified his staff’s infractions, or whether he learned of them at a time when the consequences to [the client] could have been avoided or mitigated.”

Justice Kirby not only dissented from the ruling but also scolded the Board for not pursuing the case under the correct disciplinary rule — “I fault the Board primarily for the posture of this case. It is important for ethical charges against lawyers to be properly framed, so that the rules adopted to govern certain situations are applied to the intended situations.”

Justice Kirby’s admonition to the Board is important for at least two reasons.  First, as she herself writes:

There are countless lawyers in Tennessee with law practices similar to Mr. Garland’s high-volume practice, in which many daily tasks and interactions with clients are delegated to nonlawyer staff. Delegating such tasks to nonlawyer employees does not
violate ethical rules, but failing to properly supervise nonlawyer employees does. It is important for practicing lawyers to understand what this Court expects from them in terms of supervising nonlawyer staff to whom mundane but important tasks are delegated.

Hopefully, and perhaps even more vitally, Justice Kirby’s admonition to the Board needs to have an impact because of the significant problems that could be created for lawyers if the Board is allowed to use RPC 8.4(a) to impose discipline in situations where RPC 5.3 would not support that outcome.  In other words, Justice Kirby’s words — “Delegating tasks to nonlawyer employees does not violate ethical rules” — need to continue to be the law in Tennessee.  If the Board is permitted to charge lawyers with infractions of RPC 8.4(a) on the basis that the failing of a staff member is the lawyer violating the rules through the “acts of another,” then RPC 5.3 essentially becomes surplusage in the rules altogether.

An exception to “Fool me once, shame on you; fool me twice, shame on me” in Ohio

Lawyers who frequently represent other lawyers in disciplinary proceedings are well aware that the ethics rules in their state offer up an inherent 2-for-1 construction for bar prosecutors because states with versions of RPC 8.4(a) patterned on the Model Rules establish that a lawyer also violates RPC 8.4(a) by violating any other ethics rule.  That same rule also makes it an ethics violation for a lawyer to attempt to violate the ethics rules.

Unlike criminal law where people often find themselves in jail just for a criminal offense of attempting to commit a crime, situations where a lawyer ends up being disciplined merely for attempting to break a rule are rare.

The Supreme Court of Ohio issued a public reprimand against an Ohio lawyer for just such a thing yesterday.  The lawyer was ultimately hoodwinked out of $2,000 by a person posing as a personal injury client (including a fake limp and a bandaged arm).  Despite the fact that the swindler committed a crime and was ultimately sentenced to 8 months in prison, the fleeced lawyer ended up being disciplined as well.  Why?  Because the lawyer provided the $2,000 to the thief intending it to be an advance of living expenses.  The lawyer also entered into a contingent fee agreement to represent the person in pursuit of a lawsuit for the claimed injuries from an industrial accident.

RPC 1.8(e) in Ohio, as in Tennessee, is patterned upon the Model Rules, and prohibits lawyers from “provid[ing] financial assistance to a client in connection with pending or contemplated litigation,” unless the financial assistance involves advancing court costs or expenses of litigation.  Paragraph [10] of the Comment to that rule in Ohio, as is the case here in Tennessee, explains:

Lawyers may not subsidize lawsuits or administrative proceedings brought on behalf of their clients, including making or guaranteeing loans to their clients for living expenses, because to do so would encourage clients to pursue lawsuits that might not otherwise be brought and because such assistance gives lawyers too great a financial stake in the litigation.

So, because the lawyer thought he was dealing with a real client with a real case and provided money for a prohibited purpose — living expenses — it ultimately didn’t matter that the person was not really a client.  The lawyer’s own fastidiousness in terms of record keeping ultimately helped leave no doubt the reason for the financial transaction as the opinion explains that he had the person “sign a photocopy of seven $100 bills with the notation, ‘Temporary loan of $700.00 cash advanced 2/3/14…” and also gave the person a check for $1,300.

All of this came to light only after the lawyer, prompted by a telephone call from another person inquiring about hiring the lawyer in a personal injury matter made a report to local police.  (Presumably, the first guy put the word out that they had a live one in the lawyer and the caller was looking for the same deal.)

So, despite only getting fooled once, the Supreme Court of Ohio still publicly shamed the lawyer.

(P.S.  Readers should be proud of me for avoiding the temptation to load this post up with puns making use of the lawyer’s last name.)