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.

Dishonesty in settlement negotiations

This is a topic I’ve spoken about on a number of times over the years as it can make for a pretty decent CLE presentation.  Any such presentation almost always involves use of a hypothetical to explore issues that seem (or at least can sound) academic to a large extent.  The usual jumping off point is the language set out in Comment [2] of Model Rule 4.1 that speaks of “generally accepted conventions in negotiation,” and that indicates that “a party’s intentions as to an acceptable settlement of a claim” is a type of statement “ordinarily not taken as statements of material fact.”  From time-to-time there are real world situations that can be used to demonstrate that lawyers can end up paying a real price for making a known, false statement in connection with settlement negotiations, as opposed to things that are just chalked up as being “puffery.”

In my reading stack for a couple of months now has been a situation though that falls into the category of dishonesty in settlement negotiations, but looks like nothing I’ve quite seen before.

In late February 2016, the ABA Journal online had an article about a Seattle judge imposing $32,000 in sanctions against two lawyers who were representing Pierce County, Washington in the defense of a false arrest lawsuit.  The sanctions were imposed for the lawyers’ role in “misleading settlement negotiations,” and not telling opposing counsel that there client had rejected a proposed settlement dollar amount.  Which, at least sounds bad on its face, of course, but at that same time — given the fluidity of settlement negotiations — doesn’t necessarily sound all that far away from what the rules speak of as a generally-accepted convention of negotiations.

Both the ABA piece, and this more expansive article from The News Tribune , elaborate a bit on the details, but that elaboration only makes it seem a bit more remarkable to me that these lawyers were sanctioned.  And, since it is a Friday and to cut to the chase it is for this reason, yes it does look like the client contact for these lawyers did tell the lawyers that he would not agree to a $250,000 settlement payment, and that the lawyers continued the effort to negotiate other important aspects of the proposed deal for about a week without telling opposing counsel that the client was saying it wouldn’t agree to the monetary component, but an important aspect of the context is left out of the ABA Journal story for example:  The client who had said it wouldn’t do $250,000 had actually previously offered to settle the case for $210,000.  In a vacuum, it does not seem beyond the pale that lawyers, knowing that the gap to surmount was just $40,000, would continue to work on getting some non-monetary concessions in hopes that they might have a client that would change its mind when it saw additional bells and whistles.

So, why the sanctions really?  I can only guess, but my guess is that the rest of the context matters probably even more and you will get a feel for that context if you read the two stories already linked and this earlier July 2015 story in The News Tribune.

The false arrest suit involves a woman who has been arrested for child molestation, and the charges against her dismissed, twice; one of the dismissals was specifically premised on a finding of prosecutorial vindictiveness.  There is also a separate federal lawsuit filed by the same plaintiff over things done since the first lawsuit was filed, and the elected prosecutor for Pierce County who hired the lawyers to defend the false arrest suit because of his office’s conflict of interest is also facing ethics charges and whistleblower complaints over various aspects of the efforts to prosecute this plaintiff and, if that weren’t enough, also a recall petition.

Oh yeah, and like a week after the sanctions ruling, the same prosecutor appeared on Nancy Grace in the middle of a murder trial to talk about the murder trial his office was prosecuting, prompting a motion for a mistrial in that case.

With the popularity of the “Making a Murderer” documentary, I’m not sure what this one would be called — perhaps just “Making a Mess,” but it sounds like it would make a good sequel.