Ethics Question of the Month

Ethics Question of the Month - October 2020

I've Looked at Clouds from Both Sides Now

Attorney Ginger is looking at options for backing up files on her law firm’s server. She considers backing them up to an external storage device each night before leaving the office and taking it home with her.  She’s concerned, however, that this method is cumbersome and that she lacks the discipline to stick with it.    

Ginger likes the idea of a system that will automatically back up her files to backup servers via the internet, more commonly known as backing up to the cloud.  She is considering using a cloud-based service recommended by one of her clients who uses the cloud to back up the files for his online business.  Ginger knows that she has an ethical obligation to secure and keep confidential all client information, and she is concerned that using the cloud may violate that obligation.  After all, cloud servers are owned by private entities over which she has no control and may be located in foreign countries.  She is also worried about employees of these entities or third-party hackers obtaining her client information. 

As Ginger considers her option, which of these statements is most accurate? 

  1. She should not use the cloud to back up her law firm files because of the risk of disclosure
  2. She may use the cloud as long as she is unaware of any reason to believe that the particular cloud service she chooses poses a risk to client information
  3. She may use a cloud service as long as she does reasonable due diligence as to the security of the particular cloud service she chooses 
  4. She may use the cloud service, but must get client approval first
  5. She can use the cloud storage service but only for documents are not confidential or privileged client documents
  6. Both C and D 

Answer:  C

Rule 1.05 of the Texas Disciplinary Rules of Professional Conduct states:

(a) Confidential information includes both privileged information and unprivileged client information. Privileged information refers to the information of a client protected by the lawyer-client privilege of Rule 5.03 of the Texas Rules of Evidence or of Rule 5.03 of the Texas Rules of Criminal Evidence or by the principles of attorney-client privilege governed by Rule 5.01 of the Federal Rules of Evidence for United States Courts and Magistrates. Unprivileged client information means all information relating to a client or furnished by the client, other than privileged information, acquired by the lawyer during the course of or by reason of the representation of the client.

(b) Except as permitted by paragraphs (c) and (d), or as required by paragraphs (e), and (f), a lawyer shall not knowingly:

(1) Reveal confidential information of a client or a former client to:

(i) a person that the client has instructed is not to receive the information; or

(ii) anyone else, other than the client, the clients representatives, or the members, associates, or employees of the lawyers law firm.

Confidentiality requirements in Texas are quite broad, meaning that attorneys must protect virtually any client-related information stored on the cloud.  While storing client information in this manner was obviously not contemplated by the drafters of the Rule, the basic principle still applies.  In  2018 the Professional Ethics Committee of the State Bar of Texas addressed this issue in Ethics Opinion 680 .  The Committee found that attorneys may ethically use the cloud for file back-up so long as they take “reasonable precautions in the adoption and use of cloud-based technology,” including:

  • acquiring a general understanding of how the cloud technology works;
  • reviewing the “terms of service” to which the lawyer submits when using a specific cloud-based provider just as the lawyer should do when choosing and supervising other types of service providers;
  • learning what protections already exist within the technology for data security;
  • determining whether additional steps, including but not limited to the encryption of client confidential information, should be taken before submitting that client information to a cloud-based system;
  • remaining alert as to whether a particular cloud-based provider is known to be deficient in its data security measures or is or has been unusually vulnerable to “hacking” of stored information; and
  • training for lawyers and staff regarding appropriate protections and considerations.  

The committee noted that while lawyers need not be experts in technology, they are required to  “become and remain vigilant about data security issues from the outset of using a particular technology in connection with client confidential information.”  Attorneys who wish to use the cloud should develop the technological competence to evaluate and remain alert to the risks of cloud-based storage systems.  The Committee declined to require client consent, though it did note that attorneys should consult with clients regarding cloud security where appropriate or when raised by the client.  The best answer is C.

Ethics Question of the Month - September 2020

Everybody’s Talkin’

Attorney Will represents the family of Daniel, who perished in a car crash. The driver of the other car, Elizabeth, was driving home from a Vitatek company Christmas party. Elizabeth fled the scene and hid at a friend’s house for three days before turning herself in to the police. She was booked for leaving the scene of an accident and administered drug and alcohol tests, which showed trace amounts of cocaine and alcohol. 

Will files suit on behalf of Daniel’s family against: (1) Elizabeth for negligence in causing the collision, and (2)  Vitatek, alleging that Elizabeth was impaired when she left the Christmas party and her impairment caused the collision. Defense counsel Marsha files an answer and a motion for summary judgment, alleging there is no evidence that Elizabeth was impaired, no evidence she was knowingly over-served at the party, and that Vitatek owed no duty to Daniel. Will is unable to persuade anyone at the party to testify specifically about Elizabeth’s condition at the Christmas party; he only elicits general comments that there was widespread drinking and there appeared to be surreptitious drug use. The trial court grants the motion for summary judgment on behalf of Vitatek. Will appeals to the court of appeals.

The court of appeals reverses the summary judgment, holding that the evidence at least raises a fact issue about Vitatek’s conduct regarding the party being a cause of the collision. Marsha files a petition for review in the Supreme Court of Texas. 

After the petition is filed, Will calls a press conference, and sharply criticizes Vitatek for its “legal shenanigans” calculated to delay and avoid ever facing a jury. To highlight Vitatek’s misconduct, Will says he has received reliable -- but thus far anonymous -- tips about the Christmas party revealing that: (1) Vitatek encouraged heavy drinking but made no arrangements for alternative transportation nor did it warn partygoers about drinking and driving; (2) Vitatek’s CEO was offering cocaine to female partygoers in exchange for sex, and Elizabeth accepted the cocaine, but declined the sex, leading to a confrontation that ended in her  leaving the party in an emotionally fraught condition; (3) after leaving the scene of the accident, Elizabeth called the CEO of Vitatek, who picked her up and hid her at his home until enough time had passed for her test results to be inconclusive; (4) despite this horrific conduct, Vitatek has only offered an “insultingly paltry” sum of money to compensate Daniel’s family.

In response, Marsha calls a press conference of her own and denies everything Will said about the Vitatek party and its aftermath, pointing to the utter lack of proof.  Nonetheless, she says that, out of sympathy for Daniel’s family and in the spirit of compromise, Vitatek offered the policy limits of its first layer of insurance, or $1,000,000, which Will turned down as personally insulting to a lawyer of his stature.

Which is the most accurate?

A.    Will’s and Marsha’s statements are both unethical.

B.    Will’s statement was unethical, but Marsha’s was permissible.

C.    Will’s statement was permissible, but Marsha’s was unethical.

D.    Both statements are permitted under the Rules.

Answer:  D

Texas Disciplinary Rule of Professional Conduct 3.07(a) states: 

In the course of representing a client, a lawyer shall not make an extrajudicial statement that a reasonable person would expect to be disseminated by means of public communication if the lawyer knows or reasonably should know that it will have a substantial likelihood of materially prejudicing an adjudicatory proceeding. A lawyer shall not counsel or assist another person to make such a statement.

Rule 3.07(b) states:

b) A lawyer ordinarily will violate paragraph (a), and the likelihood of a violation increases if the adjudication is ongoing or imminent, by making an extrajudicial statement of the type referred to in that paragraph when the statement refers to:

(1) the character, credibility, reputation or criminal record of a party, suspect in a criminal investigation or witness; or the expected testimony of a party or witness;

(2) in a criminal case or proceeding that could result in incarceration, the possibility of a plea of guilty to the offense; the existence or contents of any confession, admission, or statement given by a defendant or suspect; or that person's refusal or failure to make a statement;

(3) the performance, refusal to perform, or results of any examination or test; the refusal or failure of a person to allow or submit to an examination or test; or the identity or nature of physical evidence expected to be presented;

(4) any opinion as to the guilt or innocence of a defendant or suspect in a criminal case or proceeding that could result in incarceration; or

(5) information the lawyer knows or reasonably should know is likely to be inadmissible as evidence in a trial and would if disclosed create a substantial risk of prejudicing an impartial trial.

Many of the extra-judicial statements made by Will and Marsha appear to violate the general rule articulated in Rule 307(a) and more clearly violate some of the enumerated examples in Rule 307(b). However, Comment 1 to the Rule recognizes the competing interest of transparency in court proceedings and seems to imply that “adjudicatory proceeding” may be more focused on pre-trial public comments:   

Paragraph (a) is premised on the idea that preserving the right to a fair trial necessarily entails some curtailment of the information that may be disseminated about a party prior to trial. This is particularly so where trial by jury or lay judge is involved. If there were no such limits, the results would be the practical nullification of the protective effect of the rules of forensic decorum and the exclusionary rules of evidence. Thus, paragraph (a) provides that in the course of representing a client, a lawyer's right to free speech is subordinate to the constitutional requirements of a fair trial. On the other hand, there are vital social interests served by the free dissemination of information about events having legal consequences and about legal proceedings themselves. The public has a right to know about threats to its safety and measures aimed at assuring its security. It also has a legitimate interest in the conduct of judicial proceedings, particularly in matters of general public concern. Furthermore, the subject matter of legal proceedings is often of direct significance in debate and deliberation over questions of public policy.

The Professional Ethics Committee for the State Bar of Texas addressed the issue in Ethics Opinion 683, which involved a case on appeal to the Texas Supreme Court, where:

the plaintiffs’ lawyer made statements to the news media that the filing of the petition for review is consistent with defendants’ litigation strategy to “delay at all costs so their misconduct is never brought before a jury.”  The plaintiffs’ lawyer also stated that the defendants “brazenly stole trade secrets worth millions of dollars from my clients and are now just as brazenly trying to take this case away from a Texas jury.”  The statements of the plaintiffs’ lawyer were widely published by the media.

The Committee stated  that “[u]nder the facts presented here, the Committee concludes that the lawyer’s statements do not have a substantial likelihood of materially prejudicing an adjudicatory proceeding given that the case is pending on appeal and it is unknown when (or if) the case will be tried.”  Noting the tension between court transparency and free speech on the one hand and prejudicial statements in the press on the other, the Committee drew a sharper distinction between statements made before a trial and statements made while an appeal is pending, finding that:

Fortunately, a precise resolution of that tension is not necessary under the question presented because the timing of the statements here—made while the case is pending on appeal—renders them permissible under Rule 3.07.  To be sure, Rule 3.07 by its terms applies to “adjudicatory proceeding[s],” which include cases pending on appeal.  See Terminology to the Rules (defining “Adjudicatory Proceeding” and “Tribunal”).  But Comment 1 to Rule 3.07 contemplates that the likelihood of material prejudice is highest where trial by jury is involved.  See also Comment 6 to ABA Model Rule of Professional Conduct 3.6 (noting that the “likelihood of prejudice may be different depending on the type of proceeding” and that “[n]on-jury hearings” may be less affected than jury trials). And that makes sense because judges are trained to apply the law to the legally-relevant facts, and are therefore less susceptible to being materially prejudiced by extrajudicial statements.  This is particularly true on appeal, where an appellate judge’s analysis of the case is carefully confined by appellate standards of review.  In short, the likelihood of a lawyer’s statements “materially prejudicing” a proceeding on appeal is, as a general matter, fairly low.

Because the public statements made here were made after trial and while the case was pending in the Supreme Court of Texas, the best answer is D. 

If the statements were made before trial, the analysis would be considerably different. Will’s statement appears to violate several specifically prohibited categories of statements in Rule 307(b):

  • Sub-section (b)(1) prohibits statements referring to the character or reputation of a party or witness. Will’s depiction of the Vitatek CEO as encouraging drinking, offering cocaine to female partygoers in exchange for sex, concealing a witness, and interfering with obtaining evidence seems to refer to his character and reputation, and violates this sub-section.
  • Sub-section (b)(3) prohibits statements about “the refusal or failure of a person to allow or submit to an examination.” Will’s allegation that Elizabeth was hidden for several days to avoid timely drug and alcohol testing runs afoul of this rule.
  • Subsection (b)(5) prohibits “information the lawyer knows or reasonably should know is likely to be inadmissible as evidence in a trial and would if disclosed create a substantial risk of prejudicing an impartial trial.” The first three parts of Will’s statement are based on what he describes as an anonymous tip, which would make them unsubstantiated hearsay and therefore “inadmissible as evidence in a trial.” His final statement, about settlement offers, is inadmissible under Rule of Evidence 408.

On the other hand, Marsha’s first statement that simply denies Will’s allegations in a general way does not violate the general rule of Rule 3.07(a) or any of the specific provisions of Rule 3.07(b). Her second comment would be inadmissible at trial under Rule of Evidence 408, and therefore ordinarily would violate Rule 3.07(b)(5). However, Comment 3 to Rule 3.07(a) provides that, “an otherwise objectionable statement may be excusable if reasonably calculated to counter the unfair prejudicial effect of another public statement.” Marsha’s comment about the actual settlement offer of a million dollars was reasonably calculated to counter Will’s unfairly prejudicial suggestion that no substantial offer had been made.

If these statements had been made before trial, the best answer would have been B.

Ethics Question of the Month - July 2020

Let’s Make a Deal

Attorneys Jerry and Janine are attempting to settle a dispute between their respective clients.  Jerry’s client, ABC Custom Parts, supplies electronic components for goods produced by Janine’s client, XYZ Manufacturing.  The dispute involves a large shipment of parts sold to XYZ by ABC that were defective, preventing XYZ from filling some orders.    

Janine has approached Jerry to work out a solution because, if they go to court, the litigation costs and business disruptions could be substantial for both parties. She suggests a deal: (1) ABC ramps up production to quickly remedy the backlog issue, and (2) ABC provides a discount on several future shipments to cover XYZ’s damages.     

Jerry suspects that he has some negotiating leverage because XYZ will experience more significant delays if it has to locate a new supplier and wait for them reconfigure their facility.  He also knows that XYZ has a reputation for avoiding litigation and believes that they are especially eager to avoid it here.  He wants to use his perceived advantage to force Janine to agree to a quick settlement on favorable terms to his client.  

During the course of his settlement discussions with Janine, he makes the following representations, none of which are accurate: 

  1. Jerry’s client cannot accept any discount over $10,000; his client specifically authorized him to offer a discount up to $17,500. 
  2. An employee of ABC, Carl, will testify that the defect in ABC’s shipment was due to a mistake made by an XYZ employee who provided the wrong specifications; Jerry knows this is not true.
  3. Carl is an excellent witness; Jerry knows from experience that Carl is a terrible witness.  
  4. Our clients’ dispute needs to get settled quickly because ABC is now negotiating with another potential customer and, if they reach a deal, ABC will not have the capacity to do any more work for XYZ; Jerry knows ABC has the capacity to accommodate the new customer and XYZ. 
  5. His reading of the applicable precedents suggests that XYZ’s damages are far less than Janine says they are; Jerry knows Janine’s assessment of damages is probably accurate.    

Under the Texas Disciplinary Rules of Professional Conduct, which is most accurate?    

A.    All of Jerry’s comments are improper because the rules state that a lawyer shall not “make a false statement of material fact or law to a third person” or “engage in conduct involving dishonesty, fraud, deceit or misrepresentation.”  
B.    All of Jerry’s comments are proper because the rules permit “puffing” by an attorney when negotiating with opposing counsel. 
C.    2 is improper, but the rest are not.  
D.    2 and 4 are improper, but the rest are not. 
E.    2, 4, and 5 are improper, but the rest are not. 
F.    1 is proper, but the rest are improper.  

Answer:  D

The two operative rules here are Texas Disciplinary Conduct Rules 4.01 and 8.04.  Rule 4.01 reads:

In the course of representing a client a lawyer shall not knowingly:

(a) make a false statement of material fact or law to a third person; or

(b) fail to disclose a material fact to a third person when disclosure is necessary to avoid making the lawyer a party to a criminal act or knowingly assisting a fraudulent act perpetrated by a client.

Comment 1 to Rule 4.01 acknowledges, however, that there is some wiggle room when it comes to negotiations between attorneys:

Paragraph (a) of this Rule refers to statements of material fact. Whether a particular statement should be regarded as one of material fact can depend on the circumstances. For example, certain types of statements ordinarily are not taken as statements of material fact because they are viewed as matters of opinion or conjecture. Estimates of price or value placed on the subject of a transaction are in this category. Similarly, under generally accepted conventions in negotiation, a party's supposed intentions as to an acceptable settlement of a claim may be viewed merely as negotiating positions rather than as accurate representations of material fact. Likewise, according to commercial conventions, the fact that a particular transaction is being undertaken on behalf of an undisclosed principal need not be disclosed except where non-disclosure of the principal would constitute fraud.

Rule 8.04(a)(3), meanwhile, strictly prohibits any dishonesty, stating that “A lawyer shall not . . . engage in conduct involving dishonesty, fraud, deceit or misrepresentation.”  The comments to the rule do not contain any language regarding exceptions for statements made during negotiations. 

So what are the parameters for being, um, “dishonest” during negotiations?  Although commentators often disagree with one another – and some readers may disagree as well -- the expert consensus is generally that making a false and material factual statement is not permitted, while subjective opinions about the strength of the case or the amount the client will be willing to pay are an acceptable part of the negotiation process. 

In ABA Formal Ethics Opinion 06-439 (2006), the  ABA Standing Committee on Ethics and Professional Responsibility considered this question and found that “statements regarding a party’s negotiating goals or its willingness to compromise, as well as statements that can fairly be characterized as negotiation ‘puffing,’ ordinarily are not considered ‘false statements of material fact’ within the meaning of the Model Rules.”  The Committee provided some examples of both permissible and impermissible statements during negotiation:

lt is not unusual in a negotiation for a party, directly or through counsel, to make a statement in the course of communicating its position that is less than entirely forthcoming. For example, parties to a settlement negotiation often understate their willingness to make concessions to resolve the dispute. A plaintiff might insist that it will not agree to resolve a dispute for less than $200, when, in reality, it is willing to accept as little as $150 to put an end to the matter. Similarly, a defendant manufacturer in patent infringement litigation might repeatedly reject the plaintiff's demand that a license be part of any settlement agreement, when in reality, the manufacturer has no genuine interest in the patented product and, once a new patent is issued, intends to introduce a new product that will render the old one obsolete. In the criminal law context, a prosecutor might not reveal an ultimate willingness to grant immunity as part of a cooperation agreement in order to retain influence over the witness.

 A party in a negotiation also might exaggerate or emphasize the strengths, and minimize or deemphasize the weaknesses, of its factual or legal position. A buyer of products or services, for example, might overstate its confidence in the availability of alternate sources of supply to reduce the appearance of    dependence upon the supplier with which it is negotiating. Such remarks, often characterized as "posturing" or "puffing," are statements upon which parties to a negotiation ordinarily would not be expected justifiably to rely, and must be distinguished from false statements of material fact. An example of a false statement of material fact would be a lawyer representing an employer in labor negotiations stating to union lawyers that adding a particular employee benefit will cost the company an additional $100 per employee, when the lawyer knows that it actually will cost only $20 per employee. Similarly, it cannot be considered "posturing" for a lawyer representing a defendant to declare that documentary evidence will be submitted at trial in support of a defense when the lawyer knows that such documents do not exist or will be inadmissible. In the same vein, neither a prosecutor nor a criminal defense lawyer can tell the other party during a plea negotiation that they are aware of an eyewitness to the alleged crime when that is not the case

The State Bar of California Standing Committee on Professional Responsibility and Conduct has also considered this issue in Formal Opinion No. 2015-194 (2015) and provided six helpful hypotheticals to guide California attorneys as to what constitutes “puffery” and therefore permissible versus what is a misrepresentation of fact and therefore impermissible. Here are three of them: 

Example Number 1: Attorney’s misrepresentations about the existence of a favorable eyewitness and the substance of his expected testimony.

 Attorney’s misrepresentations about the existence of a favorable eyewitness and the substance of the testimony the attorney purportedly expects the witness to give are improper false statements of fact, intended to mislead Defendant and his lawyer. Attorney is making representations regarding the existence of favorable evidence for the purpose of having Defendant rely on them. Attorney has no factual basis for the statements made. Further, Attorney’s misrepresentation is not an expression of opinion, but a material representation that “a reasonable [person] would attach importance to . . . in determining his choice of action in the transaction in question . . .” (Charpentier v. Los Angeles Rams Football Co., Inc. (1999) 75 Cal.App.4th 301, 313 [89 Cal.Rptr.2d 115] quoting Rest.2d Torts, § 538). Thus, Attorney’s misrepresentations regarding the existence of a favorable eyewitness constitute improper false statements and are not ethically permissible. This is consistent with Business and Professions Code section 6128(a), supra, and Business and Professions Code section 6106, supra, which make any act involving deceit, moral turpitude, dishonesty or corruption a cause for disbarment or suspension.

Example Number 2: Attorney’s inaccurate representations to the settlement officer which Attorney intended be conveyed to Defendant and Defendant’s lawyer regarding Plaintiff’s wage loss claim.

Attorney’s statement that Plaintiff was earning $75,000 per year, when Plaintiff was actually earning $50,000, is an intentional misstatement of a fact. Attorney is not expressing his opinion, but rather is stating a fact that is likely to be material to the negotiations, and upon which he knows the other side may rely, particularly in the context of these settlement discussions, which are taking place prior to discovery. As with Example Number 1, above, Attorney’s statement constitutes an improper false statement and is not permissible.

Example Number 3: Attorney's inaccurate representation regarding Client's "bottom line" settlement number.

Attorney’s inaccurate representation regarding Client’s “bottom line” settlement number. Statements regarding a party’s negotiating goals or willingness to compromise, as well as statements that constitute mere posturing or “puffery,” are among those that are not considered verifiable statements of fact. A party negotiating at arm’s length should realistically expect that an adversary will not reveal its true negotiating goals or willingness to compromise. Here, Attorney’s statement of what Plaintiff will need to settle the matter is allowable “puffery” rather than a misrepresentation of fact. Attorney has not committed an ethical violation by overstating Plaintiff’s “bottom line” settlement number.

Although commentators often disagree with one another – and some readers may disagree as well -- the expert consensus is generally that making a false and material factual statement is not permitted, while subjective opinions about the strength of the case or the amount the client will be willing to pay are an acceptable part of the negotiation process.  Jerry’s representations 1, 3, and 5 fall into the latter category, while 2 and 4 do not because they are disprovable factual assertions.   The best answer is D. For a more in-depth discussion, to legalethicstexas.com. 

Ethics Question of the Month - June 2020

Yelp! I Need Somebody!

Paul is a plaintiff’s personal injury lawyer in solo practice who wants to jump-start his practice. He is aware that many clients resort to the internet when choosing a lawyer to check their ratings by clients. His office has a Yelp listing, but no reviews. His website has a feature for client reviews, but none are posted.

Paul sends an e-mail blast to all his current and former clients and generates a Facebook post soliciting help in elevating his online presence. He encourages clients to post glowing reviews of his practice on as many platforms as they can.

This mass solicitation pays off, as favorable reviews of Paul’s practice begin appearing online. Paul monitors the reviews, and notices that one comment, from an early client, Sarah, appears in identical language on Yelp and on his website client reviews. It says, “Paul is a rock star! He did a great job on my small case, but I know that he has obtained million-dollar judgments for many clients.” 

This gives Paul pause because he has obtained only one judgment of over a million dollars. He had one other jury verdict over a million dollars, but the judgment was reduced to under one million dollars because of a comparative causation finding attributing 20% responsibility to the plaintiff. He also has had several settlements in the high six figures. So the statement is only slightly inaccurate, and Paul no longer knows how to reach Sarah to ask her to correct it

Consider the following possibilities:  

  1. Paul’s active solicitation of favorable reviews was unethical.
  2. Paul is required to correct both comments, because he knows they are inaccurate and convey the wrong impression to potential clients
  3. Paul is required to correct the review on his website, but not the Yelp comments.
  4. Paul is required to correct the comment on Yelp, but not the review on his website.
  5. Paul is not required to correct the inaccurate comments because they are statements by a client and not by him. 

According to a recent ethics opinion from the Committee on Professional Ethics, which of the above statements are most accurate?

A.  2 only
B.  3 only
C.  1 and 2
D.  1 and 3
E.  1 and 4
F.  1 and 5

Answer:  B

The initial question here is whether it is permissible to solicit favorable online reviews at all. Many attorneys are uneasy about violating the general cultural assumption that those reviews are voluntary, spontaneous, and reviewer-initiated.

The Committee on Professional Ethics issued an opinion earlier this year that “addresses whether lawyers may encourage current and former clients to leave positive reviews or star ratings online.” Ethics Opinion No. 685 (January 2020). The Committee notes that the availability of user reviews on the internet is a relatively “new development” and clearly not considered by the drafters of the Rules. Accordingly, the Committee determined that “the Texas Disciplinary Rules of Professional Conduct do not expressly prohibit a lawyer from requesting search engine or social media reviews” and that the Committee “has not previously addressed whether a lawyer may encourage current and former clients to post positive reviews.” Id. The Committee mentioned reviewing ethics opinions from other jurisdictions, specifically noting that Connecticut has expressly approved of attorneys soliciting favorable online reviews.

Accordingly, the Committee on Professional Ethics concluded, “[U]nder the Rules, a Texas lawyer may ask current and former clients to post favorable star ratings and online reviews about the lawyer.” Thus, possibility 1 (stating that “Paul’s active solicitation of favorable reviews was unethical”) is inaccurate, excluding answers C, D, E, and F.  

However, Opinion 685 is quick to caution that “a lawyer has a duty not to make or sponsor any communications that are ‘false or misleading.’” Id. (citing Tex. R. Disc. Cond. 7.02(a)). Although the Rule does not expressly mention online reviews, Comment 2 explains the broad reach of the Rule: “Whatever means are used to make known a lawyer’s services, statements about them must be truthful and nondeceptive.” Moreover, the Opinion notes that Rule 8.04(a)(3) prohibits a lawyer from “engag[ing] in conduct involving dishonesty, fraud, deceit or misrepresentation.” Tex. R. Disc. Cond. 8.04(a)(3).

Thus, although Opinion 685 concludes that a lawyer may solicit favorable online reviews, it makes clear that “[t]he lawyer must not, however, encourage anyone to make false or misleading statements or statements that the person has no factual basis for making.” Opinion 685. 

But the prohibition against soliciting inaccurate statements begs the question of the lawyer’s duties if and when inaccurate statements appear in online reviews, even if not directly solicited. The Opinion stops short of saying that attorneys have a duty to monitor social media to identify inaccurate statements. “But, if a lawyer becomes aware that a client made a favorable false or misleading statement or a statement that the client has no factual basis for making, the lawyer should take reasonable steps to see that such statements are corrected or removed in order to avoid violating Rules 7.02(a) and 8.04(a)(3).” Id. (emphasis added).  What constitutes “reasonable steps” depends on whether the platform or website is under the control of the lawyer:  

•    “If the lawyer controls the content of the website or platform where the false, misleading, or unfounded statement resides, the lawyer has an affirmative obligation either to encourage the author to correct the false, misleading, or unfounded statements or to remove the statements entirely.”  

•    “If the lawyer does not control the website or platform and cannot remove the false, misleading, or unfounded statements, the lawyer should address the matter with the author of the review or consider addressing the concern with the administrator of that platform to see if the review can be removed or revised.  Alternatively, the lawyer should consider making a curative comment on the website or social media platform.”

    Applying that framework to this month’s question, Paul has an affirmative obligation to correct or remove the inaccurate statement by Sarah in his website client reviews. Because Yelp is not subject to his control, he has no affirmative duty to remove or correct that statement. Although he is encouraged to consider contacting the platform administrator for Yelp, it is a massive operation and it is far from clear how successful he will be in altering someone else’s review, whether positive or negative.

    In any event, possibility 2 states that “Paul is required to correct both comments because he knows they are inaccurate. . . .” Because he is only required to correct the review on his own website, possibility 2 is not entirely accurate.

    Only possibility 3 is clearly correct. The best answer is B. 
 

Ethics Question of the Month - May 2020

Hide? Or Seek?

Attorney Gertrude is a well-respected and successful appellate attorney with a thriving practice.  She has been engaged to appeal a civil district court judgment to a Texas Court of Appeals. The appeal turns on whether a particular statute applies to her client.  Her opposing counsel is primarily a trial lawyer, and Gertrude knows that he rarely handles appeals and is not particularly adept at legal research.  
Gertrude is aware of her duty to make the court aware of authority that is contrary to the position that she is arguing, even if her opponent does not disclose that authority.  After thorough research, she finds the following cases where the court specifically rejected her position: 

1.    An opinion from the Supreme Court of another state from six months ago interpreting an almost identical statute in that state
2.    A unpublished opinion from 2002 issued by another intermediate court of appeals in Texas 
3.    A published opinion from another intermediate court of appeals in Texas from 1995 
4.    Language from a footnote in a recent Texas Supreme Court opinion that clearly constitutes obiter dicta 

As expected, opposing counsel did not mention any of these cases in his brief.  Under the Texas Disciplinary Rules of Professional Conduct, which of these cases is Gertrude required to disclose to the Court in her reply brief?  

A.    Only 3
B.    Only 2 and 3
C.    Only 2.3, and 4
D.    All of them

Answer: A. 

Rule 3.03(a)(4) states that “A lawyer shall not knowingly . . . fail to disclose to the tribunal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel.”  While expert opinion varies somewhat widely on what constitutes “authority in the controlling jurisdiction,” we can reasonably conclude that

  • Out-of-state courts interpreting out-of-state statutes are not “in the controlling jurisdiction.”  
  • Obiter dicta have no precedential value, and, therefore, are likely not subject to Rule 3.03(a)(4).  
  • Unpublished opinions before 2003 do not have precedential value, and, therefore, do not need to be cited.  Tex. R. App. P.47.7.
  • The decision from a different court of appeals in Texas is not binding on Gertrude’s court, but it may be persuasive authority. If we assume that all of Texas is “the controlling jurisdiction,” counsel should disclose adverse authority from a sister court interpreting Texas law.  At least one Texas Court of Appeals has so stated.  See Jones v. WKB Value Partners, No. 04-07-00865-CV, 2008 WL 2261192, *2 n.1 (Tex. App.—San Antonio June 4, 2008, no pet.) (“Counsel are reminded of their obligation to alert the court of contrary authority,” referring to “this court, as well as several of our sister courts”).

The correct answer is A.  

A caveat: As always, this is a discussion of what the rules require, i.e., the bare minimum standard of conduct. What an attorney must do and what she should do is not always the same.  An attorney’s professional obligations of honesty and candor suggest that an advocate should raise and effectively address any adverse authority in which the court would reasonably be interested, regardless of jurisdiction or precedential value.  For further analysis of this issue, go to legalethicstexas.com.  

 

Ethics Question of the Month - April 2020

You’ve Got a Friend in Me

Lawyer Eric has a general practice in a small Texas town, mostly handling small matters that generate a modest income.  He is approached one day by a potential client with a serious personal injury claim, and he agrees to take the case on a contingency fee basis because of the potential for a large verdict.  For two years, Eric devotes substantial time and resources to getting the case ready for trial, to the detriment of the rest of his practice. His efforts pay off when he secures a favorable jury verdict and a judgment well into the eight-figure range.

The solvent and well-insured defendant appeals the judgment to a large metropolitan court of appeals with multiple justices who sit in three-justice panels. Eric is not familiar with the court of appeals because few of his cases are appealed and many of the justices joined the court after his last appeal more than a decade ago. 

After the briefing is completed, the court grants oral argument.  The notice of oral argument reveals, for the first time, the names of the three justices on the panel that will decide the case. Eric reviews the justices’ online bios and realizes that one of the justices was a law school classmate of his with whom he has not had contact in over 30 years.  He did not recognize her previously because she got married and changed her name sometime after law school.  She also started using her full first name of “Elizabeth” instead of “Betsy,” as she was known in law school. It was only when he saw her picture and read her bio that he made the connection.  He recalls that she was near the top of their class and that she let him copy her outlines on a couple of occasions when he had missed a few classes they had together.   

Because Eric fondly remembers how kind she was to him in law school , and he is confident that she is probably an excellent jurist, he decides to make a $4,000 contribution to her re-election campaign before the primary election, which is about a month away.

Which is most accurate?

A.    The contribution is unethical because Eric has a case currently pending before Justice Elizabeth 
B.    The contribution is unethical because of the timing on the donation, just days before oral argument
C.    The contribution is unethical because $4,000 exceeds the amount that individuals are permitted to make to judicial campaigns  
D.    The contribution is permissible under the ethical rules in Texas

Answer:  D

The Texas Disciplinary Rules of Professional Conduct provide that “A lawyer shall not seek to influence a tribunal concerning a pending matter by means prohibited by law or applicable rules of practice or procedure.” Rule 3.05. Comment 1 to that Rule provides, “a lawyer should avoid any conduct that is or could reasonably be construed as being intended to corrupt or to unfairly influence the decision-maker.” 

The text of the Rule and the Comment seem to articulate different standards. The Rule only prohibits conduct “prohibited by law or applicable rules of practice or procedure.” There do not appear to be any laws or rules of practice or procedure that prohibit campaign contributions to judges or justices before whom the contributor has a case pending.  

On the other hand, the Comment urges counsel to “avoid any conduct that . . . could reasonably be construed as being intended to . . . unfairly influence the decision-maker.” Certainly, a substantial contribution to an appellate court justice just days before an oral argument could be construed by an objective observer as intended to influence her. 

The only Ethics Opinion addressing this question is Ethics Opinion 328, which was issued under the old Canons of Ethics that governed lawyers until they were replaced by the Texas Disciplinary Rules of Professional Conduct in 1989:

It is the unanimous opinion of the Committee that attorneys may ethically assist judicial candidates in the defrayment of campaign expenses either by direct contributions or by soliciting contributions so long as there is no improper motivation. . . . [T]he amount of the contribution is not controlling.

Canon 2 seems to impose a duty upon lawyers to support suitable candidates for the judiciary, and probably the support most often needed is financial support. Of course such support could be improperly motivated for the purpose of currying favor. If so, there would be a violation of Canon 3. The impropriety, however, would lie in the motive and the mere possibility of such an improper motive is not a sufficient basis for withholding from lawyers generally the right to give financial support to judicial candidates.

Opinion 328 makes it clear that campaign contributions to judges by lawyers are not inappropriate unless they result from an “improper motivation.” Here, Eric could (honestly) argue that his contribution was motivated by his high regard for the justice’s abilities and his warm feelings about her past kindnesses to him. Although the timing of the contribution is suspect, Eric could also plausibly argue that he just now became aware that his onetime friend is serving in an elected office, and everyone knows elected officials require financial support to run for office.

In terms of the amount of the contribution, the Campaign Finance Guide for Judicial Candidates and Officeholders (rev’d October 2019), published by the Texas Ethics Commission, provides: 

A judicial candidate may not accept political contributions from a person that exceed the following limits in connection with an election in which the candidate’s name appears on the ballot:

  • $5,000 for candidates for courts of appeals, district courts, statutory county courts, or statutory probate courts if the population of the judicial district is more than one million.

Because all of the courts of appeals in the major metropolitan areas of the state are in judicial districts with populations of more than one million, the campaign limit for this contribution is $5,000. Eric’s contribution of $4,000 does not violate this restriction. 

Therefore, absent any evidence of an “improper motivation,” Eric’s contribution does not violate the ethics rules.   
 

Ethics Question of the Month - March 2020

To File or Not to File? That is the Question

Attorney Deidre is opening her own boutique law firm that focuses on corporate and transactional work throughout Texas.  She is working with an outside expert to create a marketing campaign to advertise the firm’s opening and to highlight the nature of her practice.  The elements of this marketing effort include: 

1.    A professionally-designed firm website with web pages covering an overview of the firm and its practice areas, Deirdre’s biography, her blog on corporate law, and descriptions of a select number of legal matters that Deirdre has previously handled on behalf of her clients.  These matters include several large corporate mergers, several general corporate matters, and a few real estate matters. 
2.    A one-page “tombstone” ad announcing the opening of the new firm to be mailed to specific attorneys and potential clients identified by the marketing expert.  The ad includes only the firm’s contact information, the attorneys in the firm, and the firm’s practice areas.  
3.    An advertisement in the Texas Bar Journal that includes the same information as the tombstone ad plus the description of past legal matters from the website. 
4.    Advertisements in the Dallas Business Journal, the Houston Business Journal, the San Antonio Business Journal, and the Austin Business Journal that are identical to the advertisement in the Texas Bar Journal.     

Deidre is aware that she is required to submit certain marketing materials to the State Bar of Texas Advertising Review Committee for review and approval. Under the Texas Disciplinary Rules of Professional Conduct, which of Deirdre’s marketing materials must be submitted for approval to the State Bar? 

A.    All of them  
B.    Only 1, 3, and 4 must be submitted  
C.    Only 3 and 4 must be submitted
D.    Only 1 and 4 must be submitted  
E.    None of them are required to be submitted

ANSWER:  D.   

Rule 7.07 of the Texas Disciplinary Rules of Professional Conduct requires that “an advertisement in the public media” be filed with the Advertising Review Committee of the State Bar of Texas no later than its first dissemination in the public media.  While each piece of Deirdre’s marketing effort may appear to “an advertisement in the public media,” they are each treated differently under the TDRPC:

1. Websites.  A law firm website is considered “an advertisement in the public media” and must be filed with the State Bar.  Rule 7.07(c) defines “website” as “a single or multiple page file, posted on a computer server, which describes a lawyer or law firm's practice or qualifications, to which public access is provided through publication of a uniform resource locator (URL).”   The “intended initial access page” must be filed no later than its first posting on the internet or “other comparable network of computers information concerning the lawyer's or lawyer's firm's website.”  

Deirdre is required to file the “initial access page” with the Advertising Review Committee.  

2. Tombstone ads.  So-called “tombstone ads” are exempt from the filing requirements under Rule 7.07(e), which reads: 

(e) The filing requirements of paragraphs (a), (b), and (c) do not extend to any of the following materials, provided those materials comply with Rule 7.02(a) through (c) and, where applicable, Rule 7.04(a) through (c):

  • (1) an advertisement in the public media that contains only part or all of the following information,
    • (i) the name of the lawyer or firm and lawyers associated with the firm, with office addresses, electronic addresses, telephone numbers, office and telephone service hours, telecopier numbers, and a designation of the profession such as "attorney," "lawyer," "law office," or "firm";
    • (ii) the particular areas of law in which the lawyer or firm specializes or possesses special competence;
    • (iii) the particular areas of law in which the lawyer or firm practices or concentrates or to which it limits its practice;
  • *   *   *
  • (4)  an announcement card stating new or changed associations, new offices, or similar changes relating to a lawyer or firm, or a tombstone professional card;

Because Deirdre’s tombstone ad falls under these exceptions, she is not required to file it with the Advertising Review Committee.  

3. Ads in legal publications.  According the Advertising Review Committee, advertisements that are in legal trade publications are exempt from filing requirements because marketing materials directed at other attorneys are not subject to Rule 7.07 filing requirements.   Rule 7.07(e)(5) reads in part: 

  • (5) in the case of communications sent, delivered, or transmitted to, rather than accessed by, intended recipients, a newsletter, whether written, digital, or electronic, provided that it is sent, delivered, or transmitted mailed only to:
    • (i) existing or former clients;
    • (ii) other lawyers or professionals . . . 

While the language of this Rule may seem ambiguous, the Ad Review Committee takes the position that advertisements in publications circulated primarily to lawyers do not constitute an “advertisement in the public media” under the Rule.  To assist attorney in interpreting the advertising rules, the Committee has published a series of interpretive comments that provide guidance on how the Committee interprets the advertising rules.  The very first interpretive comment makes clear that an advertisement in publications like the Texas Bar Journal need not be filed with the Committee:  

1. Public Media Advertisement (Nov. 1995) A public media advertisement is an advertisement broadcast or made available to the general public, such as telephone Yellow Pages, newspapers or other periodicals, outdoor display, the Internet, radio or television. Publications or information disseminated primarily to lawyers, such as legal newspapers, legal directories, firm brochures mailed to other lawyers, and on-line services provided to lawyers are not considered to be in the public media.

Because Deirdre’s ad in the Texas Bar Journal is “disseminated primarily to lawyers,” she is not required to file this ad.    

4. Ads in general media publications.  The ad in the four business journals is treated differentlyfrom the identical ad in the Texas Bar Journal because those publications, sold to and read by non-lawyers, are considered to be directed at the general public are.  So even though the ad is identical, the intended audience – here the “general public” – is different and brings the ad under the filing requirement of Rule 7.07.  

Deirdre must file this ad with the Advertising Review Committee. 

Under the TDRPC, only the first and fourth ad must be filed.  D is the correct answer.  
 

Ethics Question of the Month - February 2020

I’ve Got a Secret

Bob and Ray are solo practitioners who have known each other for many years and have litigated against each other numerous times.  They have a friendly personal and professional relationship, and both have high regard for the other’s legal skills.  In a case they are currently litigating against one another, Bob has become increasingly concerned about Ray and his ability to practice law.  Ray has uncharacteristically missed deadlines, failed to take basic steps to protect his client’s interests in the proceeding, and made some bizarre and illogical legal arguments.  

Additionally, Bob believes he has smelled alcohol on Ray’s breath on multiple occasions.  He recently saw Ray at a local restaurant drinking several glasses of wine at lunch before he encountered Ray at a docket call that afternoon.  Bob is alarmed by what he is witnessing and is convinced that Ray is sufficiently impaired by alcohol – and perhaps mental health issues as well – to the point that he is unable to competently represent clients in his current condition.  Bob considers whether he should report Ray to either the Chief Disciplinary Counsel’s office (CDC) or the Texas Lawyer’s Assistance Program (TLAP), or both.    

Which of these is most accurate? 

A.    Bob is required to report the ethics violation to CDC, but contacting TLAP regarding Ray’s apparent alcohol problems is discretionary. 

B.    Bob must notify both CDC and TLAP of Ray’s behavior.

C.    Bob is not required to report Ray’s behavior because he does not know for certain whether Ray has an alcohol problem and reporting Ray’s behavior could disadvantage Bob’s client in the current litigation.

D.    Bob must report Ray’s behavior, but he can choose whether to report it to either CDC or TLAP. 

 

ANSWER: D. 

The pertinent rule here is Texas Disciplinary Rule of Professional Conduct 8.03, which reads in part: 

Reporting Professional Misconduct. 

(a) Except as permitted in paragraphs (c) or (d), a lawyer having knowledge that another lawyer has committed a violation of applicable rules of professional conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate disciplinary authority.

The initial question here is whether Ray’s conduct raises a “substantial question” as to Ray’s “honesty, trustworthiness or fitness as a lawyer in other respects.”  Clearly, Ray’s behavior meets that threshold.  Being under the influence of alcohol is never appropriate when appearing in court or otherwise representing a client; however, there can be scenarios where the evidence of impairment is significantly less than what Bob has witnessed here.  Note that official Comment 2 to Rule 8.03 states that “[t]he terms ‘substantial’ refers to the seriousness of the possible offense and not the quantum of evidence of which the lawyer is aware.”  In other words, Bob could have witnessed fewer instances of potential impairment by Ray and yet still have an obligation to act under our Rules.  In general, this Rule does not obligate the reporting lawyer to be absolutely certain about either the misconduct of the other lawyer or the existence of a “fitness” issue, such as chemical dependency, or mental illness.  The Rule errs on the side of reporting where the conduct observed otherwise meets its threshold requirement.

Likewise, missing deadlines, making illogical arguments, and failing to protect the client’s interests in a court proceeding does not meet the minimal standard expected of attorneys.  See Rule 1.01(a) (“A lawyer shall not accept or continue employment in a legal matter which the lawyer knows or should know is beyond the lawyer's competence”) and Rule 1.01(b) (a lawyer should not “ neglect a legal matter” or “frequently fail to carry out completely the obligations that the lawyer owes to a client or clients”).  

Moreover, Bob is witnessing a recent and significant decline in Ray’s competence in practicing law that – given Bob’s long familiarity with Ray’s abilities as a lawyer – indicates that his behavior here meets the “substantial” requirement.  

So to whom is Bob required to report Ray’s behavior?  While Rule 8.03(a) requires him to “inform the appropriate disciplinary authority,” that requirement is subject to the exceptions of paragraphs (c) and (d), which read: 

(c) A lawyer having knowledge or suspecting that another lawyer or judge whose conduct the lawyer is required to report pursuant to paragraphs (a) or (b) of this Rule is impaired by chemical dependency on alcohol or drugs or by mental illness may report that person to an approved peer assistance program rather than to an appropriate disciplinary authority. If a lawyer elects that option, the lawyer's report to the approved peer assistance program shall disclose any disciplinary violations that the reporting lawyer would otherwise have to disclose to the authorities referred to in paragraphs (a) and (b).

(d) This rule does not require disclosure of knowledge or information otherwise protected as confidential information:

  • (1) by Rule 1.05 or
  • (2) by any statutory or regulatory provisions applicable to the counseling activities of the approved peer assistance program.

Texas lawyers are often surprised to discover that there is narrow exception to the general rule to report misconduct to the CDC when the case involves chemical dependency or mental illness.  In these cases, Rule 8.03(c) permits the reporting lawyer to report the lawyer’s action to “an approved peer assistance program rather than to an appropriate disciplinary authority.”  The Texas Lawyer’s Assistance Program is an approved peer assistance program pursuant to this Rule.   

Therefore, Rule 8.03(c) allows Bob to choose between CDC and TLAP when fulfilling his duty to report Ray’s conduct, which clearly implicates alcohol abuse.    
Even though many lawyers will assume that A is the right answer, D is the most accurate response.  

EDITOR’S NOTE:  The State Bar of Texas created The Texas Lawyer’s Assistance Program (TLAP) in 1989 to provide attorneys help with substance abuse and mental health issues. Texas attorneys can contact TLAP 24/7 to seek help for themselves or to attempt to get help for a colleague. By law, all calls are completely confidential.  

To reach TLAP, call 800-343-TLAP (8527) or text TLAP to 555888.

Upon receiving information regarding a colleague, if appropriate, TLAP will confidentially reach out to the attorney in question directly or by means of a trained local volunteer attorney familiar with the problem faced by the attorney in need. TLAP helps connect lawyers in need to professional care, funding for such care, peer support, and group support.  The identity of any attorney who calls TLAP regarding a colleague will not be revealed to anyone, and all callers can remain anonymous. 

For more information – including self-help info and helpful resources – go to TLAPHelps.org or to the TLAP Facebook page.  

As always, if there is an emergency, call 911.
 

Ethics Question of the Month - January 2020

Lawyer Andrew and Lawyer Beatrice are involved in contentious litigation on behalf of their clients.  During a heated argument in court over a pretrial motion, Andrew says “Well, judge, you know how emotional women lawyers get sometimes.”  Beatrice decides to let this comment go, not wanting to create a distraction or run the risk of annoying the judge while she is trying to be persuasive on what she considers to be an important matter for her client.  Over the next few minutes, things deteriorate and Andrew again disparages Beatrice, saying things like “Your Honor, I think my opponent’s behavior in this case demonstrates conclusively why women attorneys are not cut out to be litigators.”   

Finally, Beatrice has had enough and asks the judge to put a stop to Andrew’s comments regarding her and her gender.  The judge says “well, let’s see if we can keep this on topic” and then asks a specific question about the merits.  The judge does not address Beatrice’s complaints during the rest of the hearing. 

Which of the following is most accurate? 
A.    Both Andrew and the judge violated their ethical obligations under the applicable rules
B.    Lawyer Andrew violated the Disciplinary Rules of Professional Conduct, but the judge did not violate the Code of Judicial Conduct. 
C.    The judge violated the Code of Judicial Conduct, but Andrew did not violate the Disciplinary Rules of Professional Conduct. 
D.    Neither violated any enforceable ethical rules because the behavior in question, at worst, violated the Texas Lawyer’s Creed, which is, by its terms, merely “aspirational.”     

Answer:  A. 
    
Texas Lawyers are bound by the Texas Disciplinary Rules of Professional Conduct (TDRPC), while Texas judges are bound by the Texas Code of Judicial Conduct.  Both have provisions dealing with bias.  

Rule 5.08 of the TDRPC reads: 

Prohibited Discriminatory Activities

(a) A lawyer shall not willfully, in connection with an adjudicatory proceeding, except as provided in paragraph (b), manifest, by words or conduct, bias or prejudice based on race, color, national origin, religion, disability, age, sex, or sexual orientation towards any person involved in that proceeding in any capacity.

(b) Paragraph (a) does not apply to a lawyer's decision whether to represent a particular person in connection with an adjudicatory proceeding, nor to the process of jury selection, nor to communications protected as confidential information under these Rules. See Rule 1.05(a),(b). It also does not preclude advocacy in connection with an adjudicatory proceeding involving any of the factors set out in paragraph (a) if that advocacy:

  • (i) is necessary in order to address any substantive or procedural issues raised by the proceeding; and
  • (ii) is conducted in conformity with applicable rulings and orders of a tribunal and applicable rules of practice and procedure.

Lawyer Andrew clearly is exhibiting “bias or prejudice” on the basis of sex by “words or conduct” toward Lawyer Beatrice simply because she is a woman.  The various exceptions outlined in Rule 5.08(b) do not appear to apply here.  

The only question is whether Andrew was acting “willfully” when he made his remarks.    It appears that he was – his comments were made  more than once, and were made with the obvious intention of criticizing Beatrice based on her gender in an attempt to prejudice the judge against her apart from any substantive argument.  Andrew’s behavior is a clear violation of Rule 5.08.  

The judge is bound by Canon 3 of the Texas Code of Judicial Conduct, which reads in part:

B. Adjudicative Responsibilities 

(6)  A judge shall not, in the performance of judicial duties, by words or conduct manifest bias or prejudice, including but not limited to bias or prejudice based upon race, sex, religion, national origin, disability, age, sexual orientation or socioeconomic status, and shall not knowingly permit staff, court officials and others subject to the judge's direction and control to do so. 

(7)  A judge shall require lawyers in proceedings before the court to refrain from manifesting, by words or conduct, bias or prejudice based on race, sex, religion, national origin, disability, age, sexual orientation or socioeconomic status against parties, witnesses, counsel or others. This requirement does not preclude legitimate advocacy when any of these factors is an issue in the proceeding.

The judge did not say anything that could be construed as biased, so he (or she) did not violate Canon (3)(B)(6).  However, the judge failed to require that Andrew refrain from making his biased and prejudiced remarks, even after being asked to do so by Beatrice.  The judge’s failure to respond to this direct request to prevent Lawyer Andrew from making statements  manifesting clear bias and prejudice did violate Canon (3)(B)(7).  

The Texas Rule pertaining to bias or prejudice by lawyers is in accordance with the ABA Model Rules.  Rule 8.4 states in part: 

It is professional misconduct for a lawyer to: 

g) engage in conduct that the lawyer knows or reasonably should know is harassment or discrimination on the basis of race, sex, religion, national origin, ethnicity, disability, age, sexual orientation, gender identity, marital status or socioeconomic status in conduct related to the practice of law.

Comment 3 to Rule 8.4 states that: 

Discrimination and harassment by lawyers in violation of paragraph (g) undermine confidence in the legal profession and the legal system. Such discrimination includes harmful verbal or physical conduct that manifests bias or prejudice towards others. Harassment includes sexual harassment and derogatory or demeaning verbal or physical conduct.

Finally, the Texas Lawyer’s Creed does address this issue, stating in Section III(10) that “l will avoid disparaging personal remarks or acrimony towards opposing counsel, parties and witnesses.”  As noted, however, the Creed is “aspirational” in nature because it is a statement of professionalism and civility and not a set of mandatory rules on par with the TDRPC:   

These rules are primarily aspirational. Compliance with the rules depends primarily upon understanding and voluntary compliance, secondarily upon re-enforcement by peer pressure and public opinion, and finally when necessary by enforcement by the courts through their inherent powers and rules already in existence. These standards are not a set of rules that lawyers can use and abuse to incite ancillary litigation or arguments over whether or not they have been observed.

While the judge clearly could have used inherent contempt powers to address Andrew’s behavior in the courtroom, Texas lawyers are disciplined only for violations of the TDRPC.  A is the correct response.  
 

Ethics Question of the Month - December 2019

Lawyer A, Lawyer B, and Lawyer C are all members of a closed group on a social media site open only to Texas lawyers.  Judges are not permitted to join.  The site allows attorneys to connect with one another, to privately seek guidance and advice from other attorneys, and to exchange ideas and information.  

On a recent day, these three lawyers each posted a message to the group:

Lawyer A: “I am a family law attorney and I represent a father in a divorce matter.  My client struggled with alcohol and drug addiction for many years, but successfully completed treatment about a year ago.  I’ve represented in court filings that he’s clean and sober and is no risk to the children. I learned today, however, that he has suffered a relapse.  Do I need to disclose this to the court or opposing counsel?  Can I continue to claim that he is sober?  The case is in Dallas County, if that makes a difference.” 

Lawyer B: “I have a niche practice in a highly-specialized area of the law, and I’ve just been retained by a major airline based near my office.  I’ve never dealt with a large legal department like this before.  Any advice from someone who has experience representing airline clients and dealing with their in-house lawyers?”

Lawyer C: “I represent a local car dealership in their efforts to relocate and expand the business.  Yesterday, my client’s owner was privately approached by the owner of the property next door to see if she was interested in purchasing it.  The only catch is the seller wants to close quickly or he will be forced to put it on the open market.  My client is eager to purchase.  Can anyone give me some guidance on drafting the purchase documents to protect my client against any environmental problems with the property? 

Assuming that none of the lawyers’ clients have authorized or approved of these posts, do any of them violate the ethics rules?  

A.    All of them do, because all three attorneys reveal details protected by the attorney/client privilege or attorney confidentiality.  
B.    Lawyer A does because the details he discloses are highly damaging to his client, but   Lawyers B and C do not. 
C.    Lawyer B does not because she does not disclose any details about the nature of the representation, but Lawyers A and C do.  
D.     Lawyer B does; Lawyer A does not; we need more information about Lawyer C to determine whether he violated the rules.  
E.    None of them do, because none discloses their clients’ identities.  

ANSWER: D. 

Attorneys frequently discuss current and past cases with one another in informal settings and now in online settings.  The common wisdom is that discussing cases and seeking advice from other lawyers is an important way for lawyers to represent their clients effectively and efficiently.  Most CLE programs involve speakers using their past experience to teach law to other attorneys.   

So what are the appropriate parameters of these disclosures?  The primary consideration is the restrictions set forth by Rule 1.05 of the Texas Disciplinary Rules of Professional Conduct.  It provides: 

(a) Confidential information includes both privileged information and unprivileged client information. Privileged information refers to the information of a client protected by the lawyer-client privilege of Rule 5.03 of the Texas Rules of Evidence or of Rule 5.03 of the Texas Rules of Criminal Evidence or by the principles of attorney-client privilege governed by Rule 5.01 of the Federal Rules of Evidence for United States Courts and Magistrates. Unprivileged client information means all information relating to a client or furnished by the client, other than privileged information, acquired by the lawyer during the course of or by reason of the representation of the client.

(b) Except as permitted by paragraphs (c) and (d), or as required by paragraphs (e), and (f), a lawyer shall not knowingly:

  • (1) Reveal confidential information of a client or a former client to:
    • (i) a person that the client has instructed is not to receive the information; or
    • (ii) anyone else, other than the client, the clients representatives, or the members, associates, or employees of the lawyers law firm.

Attorneys must ensure that their online discussions do not reveal any confidential client information. With respect to sharing information regarding past or existing clients online, the Committee on Professional Ethics considered this specific question in Ethics Opinion No.673 and concluded that “[t]he Texas Disciplinary Rules of Professional Conduct do not categorically prohibit informal lawyer-to-lawyer consultation for the benefit of a client” when communicating in  an online discussion group.  The Opinion states: 

It is the opinion of the Committee that Rules 1.05(d)(1) and (2) allow a lawyer to reveal a limited amount of unprivileged confidential information to lawyers outside the inquiring lawyer’s law firm, without the client’s express consent, when the inquiring lawyer reasonably believes that the revelation will further the representation by obtaining the responding lawyers’ experience or expertise for the benefit of the client, and when it is not reasonably foreseeable that revelation will prejudice the client. 

Where does that leave our three attorneys? All the communications seem reasonably calculated to help the lawyers better represent their clients, but each requires a different analysis: 

Lawyer A revealed some very personal and damaging details, but did not tie it back to a specific client.  Did he reveal enough that someone could figure out who his client is?  Probably not.  We know that Lawyer A is a family law attorney in Dallas County, where there are a large number of family law attorneys.  The details he shares are not publicly known and are very common in divorce cases.  Based on this description, the client’s identity is likely not knowable.     

Lawyer B revealed no confidential details, except for the fact that she made it pretty obvious who her client was.  There are two “major” airlines headquartered in Texas, but narrowing the possibilities down to two is not sufficient to protect the client’s identity.   Furthermore, depending on her “niche” expertise, the nature of her practice could reveal compromising details.  For example, assume that her practice is related to assisting companies with crisis management.  Disclosing that a publicly-traded company has a public relations problem is far too prejudicial to the client to discuss in a public forum.  Reporters could easily use that information to chase down that lead and uncover confidential client information as well as the client’s identity.  Client identity should never be revealed without the client’s permission.  

Lawyer C presents a more difficult case.  The need for confidentiality here is clear, but can the client’s identity – and therefore the purchase opportunity – be identified?  The answer may depend on where the attorney practices.  Metropolitan areas like Dallas/Fort Worth or Greater Houston may have hundreds of car dealerships, making it nearly impossible to identify this particular dealership.  Smaller towns, however, may only have a handful of dealerships, making identification of the client potentially much easier.  Without knowing where Lawyer C practices, we may not be able to determine his ethical obligations.  Generally, though, the lawyer’s social media profile will provide his practice location or it will be discernible from the lawyer’s name or other information.    

Attorneys should be very careful that any disclosure of Rule 1.05 confidential information cannot reasonably be used to identify the client.  Here, context matters a great deal.  Lawyers sharing information in public online forums should think through all the pertinent details carefully before typing, and they should be alert to whether an opposing counsel might also be a member of the social media site such that a stray specific detail might tip off an opponent to a key admission or confidential fact.
   
 

Ethics Question of the Month - November 2019

Lawyer A represents Client Z in a difficult, contentious divorce case.  When the case settles, Lawyer A closes the file.  Lawyer A later discovers that Client Z has posted the following on a review website:

“Lawyer A is awful and I cannot recommend her. She told me my ex would not get visitation rights but my terrible ex (who everyone knows should not be around children) still gets the kids every other weekend. She forced me to settle my case even though she previously told me we would win at trial.  She did so because she knew I was running out of money. Lawyer A doesn’t care about her clients or their children; she just wants to make money off the misery of others.”  

Lawyer A considers posting one of the following responses: 

  1. “I am sorry that you are unhappy with the outcome of your case, but I am more than willing to discuss any issues you have with my representation privately.”     
  2. “Because our ethics rules prevent me from revealing any client confidences publicly, I am not comfortable discussing these matters in this forum.  But for the record, I do not believe that your post presents a fair and accurate picture of the events you describe.”  
  3. “I never said that your ex would not get visitation rights, or that we would win at trial.  Under the circumstances, I got you the best possible outcome you could have expected.   You told me you chose to settle because you were worried about the cost of going to trial. You are now dealing with the consequences of your own choice, not any poor performance by me ”   
  4.  “Everything you said here is false.  You were uncooperative throughout and changed your story and your mind frequently.  You complained about my bills constantly, and even though I got a great result for you, you attack me online hoping that you won’t have to pay me the money you still owe me.  Well, it won’t work.”    

Which of these is most accurate?   
A.    None of the responses above is permitted; lawyers should not discuss anything about their clients’ cases or even acknowledge online comments and criticisms. 
B.    Option 1 is acceptable, but the rest are not. 
C.    Options 1 and 2 are acceptable because the lawyer didn’t reveal any confidential information in the responses. 
D.    Options 1, 2 and 3 are acceptable because the attorney limited her online discussion to items the client raised first. 
E.    All are acceptable because the ethics rules permit lawyers to disclose client confidences when defending themselves against a client’s accusations of wrongdoing.

ANSWER: C

The advent of online reviews has created a particularly thorny ethical dilemma for attorneys who want to preserve their reputations in the face of public criticism.  The internet allows anyone to broadcast negative messages to the world with no filters and little or no recourse for an attorney who wishes to stay within the boundaries of the ethics rules. 

The primary consideration here is Rule 1.05 of the Texas Disciplinary Rules of Professsional Conduct (emphasis added):

a) Confidential information includes both privileged information and unprivileged client information. Privileged information refers to the information of a client protected by the lawyer-client privilege of Rule 5.03 of the Texas Rules of Evidence or of Rule 5.03 of the Texas Rules of Criminal Evidence or by the principles of attorney-client privilege governed by Rule 5.01 of the Federal Rules of Evidence for United States Courts and Magistrates. Unprivileged client information means all information relating to a client or furnished by the client, other than privileged information, acquired by the lawyer during the course of or by reason of the representation of the client.

(b) Except as permitted by paragraphs (c) and (d), or as required by paragraphs (e), and (f), a lawyer shall not knowingly:

(1) Reveal confidential information of a client or a former client to:

  • (i) a person that the client has instructed is not to receive the information; or

  • (ii) anyone else, other than the client, the clients representatives, or the members, associates, or employees of the lawyers law firm.

  • (2) Use confidential information of a client to the disadvantage of the client unless the client consents after consultations.

  • (3) Use confidential information of a former client to the disadvantage of the former client after the representation is concluded unless the former client consents after consultation or the confidential information has become generally known.

  • (4) Use privileged information of a client for the advantage of the lawyer or of a third person, unless the client consents after consultation.

    (c) A lawyer may reveal confidential information:

  • (1) When the lawyer has been expressly authorized to do so in order to carry out the representation.

  • (2) When the client consents after consultation.

  • (3) To the client, the client's representatives, or the members, associates, and employees of the lawyer's firm, except when otherwise instructed by the client.

  • (4) When the lawyer has reason to believe it is necessary to do so in order to comply with a court order, a Texas Disciplinary Rule of Professional Conduct, or other law.

  • (5) To the extent reasonably necessary to enforce a claim or establish a defense on behalf of the lawyer in a controversy between the lawyer and the client.

  • (6) To establish a defense to a criminal charge, civil claim or disciplinary complaint against the lawyer or the lawyer's associates based upon conduct involving the client or the representation of the client.

  • (7) When the lawyer has reason to believe it is necessary to do so in order to prevent the client from committing a criminal or fraudulent act.

  • (8) To the extent revelation reasonably appears necessary to rectify the consequences of a client's criminal or fraudulent act in the commission of which the lawyer's services had been used.

    (d) A lawyer also may reveal unprivileged client information.

  • (1) When impliedly authorized to do so in order to carry out the representation.

  • (2) When the lawyer has reason to believe it is necessary to do so in order to:

  • (i) carry out the representation effectively;

  • (ii) defend the lawyer or the lawyer's employees or associates against a claim of wrongful conduct;

  • (iii) respond to allegations in any proceeding concerning the lawyer's representation of the client; or

  • (iv) prove the services rendered to a client, or the reasonable value thereof, or both, in an action against another person or organization responsible for the payment of the fee for services rendered to the client.

Therefore, a lawyer cannot reveal any confidential information in an online post unless one of the exceptions in parts (c) or (d) applies.  Option 1 clearly is not a violation of Rule 1.05 because it does not reveal any confidential information.  But what about the rest?  
The Professional Ethics Committee for the State Bar of Texas considered this question in its 2016 Ethics Opinion 662

“Absent an applicable exception found in Rule 1.05, a lawyer may not post a response to a negative review that reveals any information protected by the lawyer-client privilege, or otherwise relating to a client or furnished by the client, or acquired by the lawyer during the course of or by reason of the representation of the client. This is true even though the information may have become generally known.”

Rule 1.05(c)(5) and Rule 1.05(d)(2)(ii) both permit revealing confidential information when necessary to “establish a defense . . . in a controversy between the lawyer and the client” or to “defend the lawyer . . . against a claim of wrongful conduct.”  But do online reviews fall within the realm of a “controversy between the lawyer and the client” or “claim of wrongful conduct” as contemplated by the rules? 
The Professional Ethics Committee was not persuaded that this language constituted an exception to the general rule: 

“It is the opinion of the Committee that each of the exceptions stated above applies only in connection with formal actions, proceedings or charges. The exceptions to Rule 1.05 cannot reasonably be interpreted to allow public disclosure of a former client’s confidences just because a former client has chosen to make negative comments about the lawyer on the internet. This approach is consistent with the guidance issued by the ethics authorities in other jurisdictions.”

This makes sense because these rules were written long before the internet existed, so the words “claim” or “controversy” suggest an official proceeding of some sort.  Like many things pertaining to lawyers and the internet, the rules often don’t speak directly to the ethical boundaries of attorney communication online.  

Therefore, Options 3 and 4 and clearly violate Rule 1.05 because they reveal client confidences that the attorney is clearly prohibited from revealing.  No attorney should discuss in an online format any conversations that were held between lawyer and client or reveal legal strategies.  

That leave Option 2 as the closest call.  Can a lawyer refuse to discuss details online yet state publicly that she disagrees with the client’s account of the representation? Although the language of the Rule does not address this, Ethics Opinion 662 says she can, citing a Pennsylania Ethics Opinion for an example of an appropriate online response.  Opinion 662 states that this comment would be allowed by the Texas Disciplinary Rules:  

“A lawyer’s duty to keep client confidences has few exceptions and in an abundance of caution I do not feel at liberty to respond in a point by point fashion in this forum.  Suffice it to say that I do not believe that the post presents a fair and accurate picture of the events.”

Because Option 2 is very similar to this language, it is permissible under the Texas rules per Opinion 662. The correct answer is C. 

A final note: the Committee specifically notes that nothing in the ethics rules or this opinion prevents an attorney from filing a lawsuit against clients who defame the lawyer online or commit other “actionable misconduct” through an internet publication.  

Ethics Question of the Month - October 2019

That’s What Friends Are For

Lawyer A is an attorney in a West Texas county . He knows all the lawyers and judges in the county, including the lone District Court judge, Judge B, who was a college roommate and has remained a close friend.

Lawyer A tried a case in Judge B’s court representing Client C, who was rendered paraplegic by an accident while working as a subcontractor on a construction project. Lawyer A sued the General Contractor on behalf of Client C, his wife, and their three young children. The jury failed to find that the General Contractor exercised or retained control over Client C, but it did find $18 million in damages. 

Applying Chapter 95 of the Civil Practice & Remedies Code, Judge B signed a take-nothing judgment in favor of the General Contractor. Lawyer A filed a lengthy motion for new trial challenging the jury’s failure to find control by the General Contractor, with extensive quotations from the trial transcript. 

While the motion was pending, Lawyer A and Judge B attended a birthday party for a mutual friend at his ranch. When they found themselves alone at the keg, Judge B said, “I spent the day poring over your motion for new trial. You did a solid job on that. Gave me a lot to think about. This one won’t be easy.” 

Lawyer A responded, “I appreciate that. Just trying to do the best job I can do for my clients. This means everything to them.” 

Judge B replied, “Of course it does, I get that. But you know I’m going to have to do what I think is right.” 

Lawyer A responded, “You always do. That’s what I respect about you.” They did not speak again the rest of the evening.

With respect to the rules prohibiting ex parte conversations, which is most accurate?

A:  Neither violated the rules, this was a harmless social conversation.
B.  Both Lawyer A and Judge B violated the rules.
C.  Judge B violated the rules, but Lawyer A did nothing improper.
D.  Judge B did nothing wrong because he was not addressing the merits of the pending matter, but Lawyer A violated the rules by trying to influence Judge B.

ANSWER:  B

Lawyer A’s conduct is governed by Rule 3.05(b) of the Texas Disciplinary Rules of Professional Conduct, which says “A lawyer shall not . . communicate . . . ex parte with a tribunal for the purpose of influencing that entity or a person concerning a pending matter.” Lawyer A is a certainly a lawyer communicating ex parte with a tribunal, Judge B, about a pending matter. The question is whether he was trying to influence Judge B. 

If Lawyer A had merely acknowledged the compliment and made a general comment about doing the best he can do, there would be no violation. The tricky part is his offhand comment that, “This means everything to them.” This sounds as if he is trying to engender sympathy while urging the judge to rule based on the economic hardship to this family, rather than on the merits of the control argument. On the other hand, after sitting through the trial, the judge has probably heard extensive evidence of the family’s hardships and is aware that personal injury cases are often an all-or-nothing proposition for the injured party. So nothing in this remark tells the judge anything he does not already know or reveals any off-the-record information to nudge him toward a ruling. 

The remark would have been far worse if the lawyer had injected something about his own financial situation relative to this case.  Imagine he had said something like, “Well you know I have this on a contingency fee, and if you don’t grant a new trial I not only don’t earn a penny, I lose about $250,000 in expenses. And you know I’m going through a divorce and she is cleaning me out, so I really need this one.” There may be some implied nobility in speaking up for his client, but certainly not when he is speaking of his own interests.

Nevertheless, Lawyer A should not have said anything that could be even remotely construed as trying to influence Judge B. The comment about the importance of this matter to Client C and his family certainly falls into that category. 

Or to put it another way, Lawyer A may have genuinely felt he did not do anything improper, but you can bet that his opposing counsel would have a far different view, were she to find out about it.  

As for Judge B, Canon 3.B(8) of the Texas Code of Judicial Conduct provides, “A judge shall not initiate, permit, or consider ex parte communications or other communications made to the judge outside the presence of the parties . . . concerning the merits of a pending or impending judicial proceeding.” Judge B definitely initiated a communication outside the presence of all the parties. The question is whether the communication was “concerning the merits” of the pending case. 

The judge mentioned a critical pending motion, mentioned that he was conflicted about how to rule, and made a general comment about what would guide his ruling. That’s certainly closer to being about the merits than if Judge B simply said, “It was good to have you in my court last month.” On the other hand, the violation  would be even more clear-cut if Judge B had said, “I’m almost persuaded by your argument on the actual exercise of control, but how do you overcome the foreman’s testimony?” 

Clearly, however, the Judge does not need to mention a specific argument for a communication to be “concerning the merits.” And even if the Judge’s own comments did not address specific arguments, his comments could be construed as an invitation for Lawyer A to discuss the merits—which would clearly be improper. 

Judge B should not have initiated a conversation about his ruling on this critical pending motion without both lawyers present.  Lawyer A should have said nothing more about the case in response.
 

Ethics Question of the Month - September 2019

Sharing is Caring

Lawyer A has a corporate transactional practice at Law Firm X.  She announces to the firm that she is leaving the firm in two weeks to join Law Firm Y.  She lets the firm know which matters she will be taking with her to the new firm.  

Unbeknownst to anyone at Law Firm X, she photocopies some paper documents and downloads electronic versions of many other documents onto a flash drive. These documents are from client matters she handled for clients of law Firm X who are not going with her to Law Firm Y.  She intends to keep these documents in her personal files for use as forms in drafting documents for her new clients at Law Firm Y.  

Once she begins working at Law Firm Y, her new colleague, Lawyer B, asks Lawyer A for a form for a specific type of transaction.  Because Lawyer A only has a paper copy of that particular form, Lawyer A makes a photocopy of that document and gives it to Lawyer B.  Before she does so, she confirms that the client of Law Firm X identified in the document is not adverse to Law Firm Y. 

Lawyer B is so pleased with the form that he asks Lawyer A if she has any forms on another specific type of transaction.  Lawyer A replies that she does, but before giving him the document, she again checks conflicts and discovers that the client for whom it was prepared at Law Firm X is adverse to Law Firm Y.  Fortunately, the document is electronic and stored on her personal flash drive, so before providing it to Lawyer B she deletes all information that specifically identifies, or could reasonably lead to identifying, the client.  She provides the redacted document to Lawyer B.  

Which is most accurate? 

A.    Lawyer A has violated the ethics rules by not securing Law Firm X’s permission to take copies of documents from her matters at Law Firm X before leaving the firm.  
B.    Lawyer A violated the ethics rules by sharing an unredacted form with one of her new colleagues at Law Firm Y. 
C.    Lawyer A violated the ethics rules by sharing the redacted form with a colleague at Law Firm Y because the document was prepared for a client of Law Firm X and that client paid for its creation.    
D.    All of the above. 
E.    None of the above 

ANSWER: B.

Rule 1.05 of the Texas Disciplinary Rules of Professional Conduct states that “confidential information” includes both privileged information and unprivileged client information.  

“Privileged information” refers to information protected by attorney-client privilege under Texas Rule of Evidence 503 or Federal Rule of Evidence 501.  

“Unprivileged client information” means all information relating to a client or furnished by the client, other than privileged information, acquired by the lawyer during the course of or by reason of the representation of the client.

Rule 1.05(b)(1) states: 

(b) Except as permitted by paragraphs (c) and (d), or as required by paragraphs (e), and (f), a lawyer shall not knowingly:

(1) Reveal confidential information of a client or a former client to:

  • (i) a person that the client has instructed is not to receive the information; or

(ii) anyone else, other than the client, the clients representatives, or the members, associates, or employees of the lawyers law firm.

While the Rule contains a number of exceptions in paragraphs (c) and (d), none of those apply here.  So what can an attorney do when she leaves her firm and wants to take documents that she prepared for clients? 

Texas Ethics Opinion No. 670 (March 2018) provides useful guidance.  The opinion states that an attorney may, upon leaving a firm, and at her own expense, make and retain copies of documents regarding client matters in which the attorney personally represented the clients while at the firm she is leaving.  The consent of neither the firm nor the clients is required to make and retain copies of these client documents, as long as the attorney is responsive to a former client’s request for copies of the documents retained by the lawyer.  

However, an attorney should be aware that all confidential client information, as defined by Rule 1.05, must be protected as long as the attorney retains the documents.   Therefore, the prudent attorney will take steps to ensure that only she has access to unredacted paper copies and that the electronic copies are stored in a manner that is not accessible by anyone at the new firm. Any documents that are provided to members of the new firm must be redacted of all confidential information prior to sharing.  If the documents are so specific and unique that even using a redacted document could reasonably lead to the discovery of client-specific information, those documents cannot be shared.   

In this scenario, the attorney had the right to make and take copies of clients’ documents from matters in which she personally represented those clients to use as forms in her next firm, and she did not need to notify either the client or Firm X that she was doing so.  She has a right to retain the documents as long as they are copies.  

Sharing the forms in the new firm is also acceptable as long as she redacts the documents of any identifying information to protect the clients’ confidentiality.  Here, she did delete all identifying information from the electronic form, so that does not violate Rule 1.05.  Unfortunately, she failed to make any redaction from the paper copy that she shared with a lawyer at Firm Y.  Disclosure of a client’s confidential information – including even the client’s identity – violates Rule 1.05.  

The best answer is B.    
 

Ethics Question of the Month - July 2019

Partner Y sued Partner X for breaching their partnership agreement when kicked Y out of the partnership.  X concedes kicking Y out of the partnership, but contends he was justified because Y was stealing company monies and acting contrary to the partnership’s best interest. Lawyer A represents Partner X, and Lawyer B represents Partner Y in the breach of partnership suit.  

Partner X has counterclaimed against Y for fraud and conversion of partnership monies.  The litigation has continued for months, and settlement discussions have gone nowhere.  In a conversation before trial, Lawyer A tells Lawyer B, “Look, let’s get real about what is going to happen next.  Your client faces significant liability at trial and has no real defenses to his misappropriation.  Plus, your client could end up in jail for stealing partnership money.  What am I missing here?”

Lawyer B responds by claiming that Lawyer A has violated a disciplinary rule by saying anything about the possibility of Partner Y going to jail during settlement discussions.  Lawyer B files a grievance against Lawyer A and hopes that the grievance will be enough to get Lawyer A to recommend that that his client come back to the negotiating table with a reasonable offer.  Lawyer A receives the State Bar notice of Lawyer B’s grievance by mail two days before a mediation between the parties.

Which of the following is most accurate?  

A.    Only Lawyer A has violated a disciplinary rule by threatening criminal prosecution in a civil matter; Lawyer B cannot violate a disciplinary rule because complainants have absolute and unqualified immunity in filing grievances
B.    Only Lawyer B has violated a disciplinary rule by filing a grievance against Lawyer A; Lawyer A’s conduct does not rise to the level of an actual threat 
C.    Lawyers A and B have both violated disciplinary rules.
D.    Neither A nor B has violated disciplinary rules.

ANSWER:  D

Discussion:

Rule 4.04 of the Texas Disciplinary Rules of Professional Conduct prohibits a lawyer from threatening or bringing criminal or disciplinary charges solely to gain an advantage in a civil matter.

The first question is whether Lawyer A threatened to bring criminal charges.  The alleged “threat” has some ambiguities in the language:

“Look, let’s get real about what is going to happen next.  Your client faces significant liability at trial and has no real defenses to his misappropriation. Plus, your client could very well end up in jail for stealing partnership money.  What am I missing here?”

Lawyer A certainly mentions the possibility of Y going to jail for stealing partnership money and does so in the context of settlement negotiations. However, there is not an overt quid pro quo; Lawyer A did not directly communicate to Lawyer B something along the lines of “Either your client settles with my client by noon tomorrow for $xxxx or my client will be filing criminal charges against your client.”  

So how close can a lawyer get to the line of mentioning possible criminal consequences to opposing counsel without straying over the line?  The Rule doesn’t say more than that lawyers cannot threaten or bring criminal charges solely to gain an advantage in a civil matter.  And what about that other condition: “solely to gain an advantage in a civil matter”?  What does “solely” mean in this context?

The cleanest violation scenario is certainly an express exchange: if you don’t “settle” (or, in another context, “dismiss your case”), criminal charges will be filed.  We could argue that a “settle or else” threat is implied by this communication occurring in the context of settlement negotiations.  This is not a random conversation outside the scope of settlement talks between counsel, although the Rule says nothing about a violation only occurring in settlement negotiations.  

On the other hand, Lawyer A’s statement (“Plus your client could very well end up in jail for stealing partnership money”) is arguably an indisputable factual statement.  There is a difference between stating a fact and expressly linking that fact to a criminal consequence.  And what about that qualifier “solely”?  If Lawyer A had a legitimate motive and an illegitimate motive in making that statement to Lawyer B, would the legitimate motive absolve the illegitimate motive?

Conclusion: Lawyer A’s statement seems to skirt, but not cross, the Rule 4.04 line.  The statement does not contain an express quid pro quo.  It states a likely fact.  If Lawyer A says no more than this and does not make a more explicit demand or threat, then Lawyer A has not clearly violated Rule 4.04—yet.  But Lawyer A would have been on safer ground by not mentioning any criminal consequences. And he probably did not need to do so because the threat of criminal prosecution may be implied if the case doesn’t settle.

As for Lawyer B filing a grievance against Lawyer A for making this statement, Lawyer B has civil immunity from suit for filing his grievance under Rule 17.09 of the Texas Rules of Disciplinary Procedure. Lawyer B does not have immunity, however, from disciplinary charges for violating Rule 4.04.  

But the real issue is whether Lawyer B violated Rule 4.04 by filing a grievance against Lawyer A.  Lawyer B’s intent is mixed: Lawyer B may genuinely believe that Lawyer A violated Rule 4.04 by making his statement about Partner Y potentially going to jail while talking about settlement. Based on these facts, Lawyer B also appears to be hopeful that the grievance against Lawyer A just before mediation might be helpful in pressuring Lawyer A to convince his client to settle with Lawyer B’s client now.  This latter aspect—gaining an advantage in a civil matter--is illegitimate, but the former aspect—whether Lawyer A violated Rule 4.04--is not completely clear of doubt, and Lawyer B has a plausible argument that Rule 4.04 is implicated by Lawyer A’s statement.  

The combination of a legitimate, apparently good faith belief that a disciplinary rule violation occurred with an illegitimate hope that a grievance against opposing counsel will result in settlement should be enough not to trigger the “solely” condition necessary to violate Rule 4.04.  Further, Lawyer B has not expressly offered to dismiss the grievance against Lawyer A if Lawyer A’s client settles.  

Therefore, the smoking gun in either scenario has yet to smoke, but both lawyers are on exceptionally thin ice ethically.

The best answer is D.  But the absence of a clear violation does not mean that these practices should be encouraged.  The line between non-punishable and punishable ethical conduct is often murky.  The better approach here is not to mention criminal charges or disciplinary charges in the context of civil litigation.  
 

Ethics Question of the Month - June 2019

Client X hired Lawyer A to represent him in a tort case three months before the two-year statute of limitations expired.   Lawyer A’s investigation encountered some obstacles, and he was handling numerous other cases at the same time.  He calculated the limitations deadline incorrectly and missed it by two days, but he filed the suit anyway to see if the defendant would raise limitations.  She did, and the court dismissed the case.  Client X filed a grievance against Lawyer A.

Client X then consulted with Lawyer B about his malpractice claim against Lawyer A.  Lawyer B is a two-year family law attorney who has never handled anything other than family law matters; he has no experience with legal malpractice cases.  Further, Lawyer B has argued two motions in court and defended several depositions in family law cases.  He has yet to take a deposition because he has been working with experienced family law attorneys who handle most of the litigation in his matters.  Client X wants Lawyer B to file suit right away and move forward on the malpractice claim.  Lawyer B is worried about taking the malpractice case, but decides that he wants to help Client X because his client says that other lawyers won’t sue Lawyer A.

Which of the following is most accurate?  

A.    Both lawyers have legitimate grievance problems under the Texas rules.
B.    Neither lawyer has a legitimate grievance problem under the Texas rules.
C.    Lawyers A should be sanctioned, but Lawyer B should not. 
D.    Lawyers B should be sanctioned, but Lawyer A should not.
E.    Lawyer A should be sanctioned, but we don’t have enough information about Lawyer B to know whether he has a legitimate grievance problem.

ANSWER:  B  

Rule 1.01, Texas Disciplinary Rules of Professional Conduct, is applicable:

(a) A lawyer shall not accept or continue employment in a legal matter which the lawyer knows or should know is beyond the lawyer's competence, unless:

  • (1) another lawyer who is competent to handle the matter is, with the prior informed consent of the client, associated in the matter; or(2) the advice or assistance of the lawyer is reasonably required in an emergency and the lawyer limits the advice and assistance to that which is reasonably necessary in the circumstances.

(b) In representing a client, a lawyer shall not:

  • (1) neglect a legal matter entrusted to the lawyer; or

  • (2) frequently fail to carry out completely the obligations that the lawyer owes to a client or clients.

(c) As used in this Rule, neglect signifies inattentiveness involving a conscious disregard for the responsibilities owed to a client or clients.

See also this official Comment to Rule 1.01:

7. Perhaps no professional shortcoming is more widely resented than procrastination. A client's interests often can be adversely affected by the passage of time or the change of conditions; in extreme instances, as when a lawyer overlooks a statute of limitations, the client's legal position may be destroyed. Under paragraph (b), a lawyer is subject to professional discipline for neglecting a particular legal matter as well as for frequent failures to carry out fully the obligations owed to one or more clients. A lawyer who acts in good faith is not subject to discipline, under those provisions for an isolated inadvertent or unskilled act or omission, tactical error, or error of judgment. Because delay can cause a client needless anxiety and undermine confidence in the lawyer's trustworthiness, there is a duty to communicate reasonably with clients; see Rule 1.03. (Emphasis added).

This Rule defines what actions or inactions constitute “neglect” and “competence.”  

In Lawyer A’s case, his isolated error does not involve “conscious” neglect in the sense that it was a repetitive, preventable problem that he failed to address.  It may constitute negligence for which the attorney can be sued, but it is not “neglect” under the Rule.  There is one unknown, however: did Lawyer A promptly tell his client about his “missed limitations” error?  If not, then he violated Rule 1.03 and possibly Rule 8.04(a)(3)—as well as his fiduciary duty.

Lawyer B is fine to proceed with representing this client in unfamiliar legal territory as long as she works hard to learn the rules and law for handling this matter and/or associates an experienced lawyer with the representation.  The Comments to Rule 1.01 are clear that a lawyer may undertake representations for which the lawyer is inexperienced or not knowledgeable as long as the lawyer does at least one of those two remedial measures to become competent.  Of course, the lawyer needs to be candid with the prospective client about his or her lack of experience and expertise in that area of law—or generally, if the lawyer is insufficiently experienced overall.  This also means that a lawyer should not hold himself or herself out as, for example, an experienced trial lawyer by implication, if that is not the case.

Therefore, the best answer is B.  

For comparison, consider a third scenario:  Lawyer C is a decent attorney, but disorganized in his calendaring and work habits at times.  He recently missed two court appearances (he forgot), one court-ordered deadline (wrong date on his calendar), and failed to timely file a response to a partial summary judgment motion (he had trouble getting his summary judgment evidence together in time)—all for the same client.  In another case during the same time, he missed one hearing because he overlooked the notice, didn’t show up at two depositions because he had the wrong dates on his calendar (both were rescheduled due to his absence), and missed the expert designation deadline although he had two experts to disclose.  Both clients filed grievances against Lawyer C for his errors.

Under these facts, Lawyer C is in trouble.  He is not simply making isolated errors.  With repetitive errors, he has demonstrated “inattentiveness involving a conscious disregard for the responsibilities owed to a client or clients.”  While Lawyer C may not be intending to commit these errors, he is “conscious” of the need to meet deadlines, appear in court and at depositions, and otherwise attend to his client’s legal needs.  By failing to correct his errors, he has violated Rule 1.01.
 

Ethics Question of the Month - May 2019

Lawyer A represents 33 homeowners in a suit against Company X, which does seismic testing for oil and gas.  The company uses underground dynamite blasts to generate seismic waves.  The homeowners have claimed structural damage to their foundations, walls, driveways, and sidewalks resulting from the seismic waves generated by Company X.  The damage experienced by individual homeowners varies according to the value of their property, the extent of the damage, and the cost of repairs.   

Lawyer A sent individual settlement demands to Company X for all 33 clients.  After initial negotiations, 11 of the clients agreed to accept Company X’s settlement offers.  The remaining 22 clients refused to accept Company X’s original individual offers.   Lawyer A and Company X’s lawyers go to mediation to resolve the remaining 22 claims.  At the end of the mediation, Company X offers a single gross settlement amount to resolve the remaining 22 claims and tells Lawyer A that, in return, it requires 22 releases or the overall offer will be withdrawn.  

Lawyer A decides to apportion the gross amount among her clients, but holds back 10% of the gross amount in case any clients don’t agree to their individual offers.  Two clients refuse their individual settlement offers.  Lawyer A uses most of the 10% that she held back to increase the offers to the two holdout clients, and they agree to the increased offer.  Lawyer A then redistributes what is left of the 10% to the remaining 20 clients involved in the mediation on a pro rata basis so that all of the gross settlement amount offered by Company X is now distributed to the 22 clients involved in the mediation.

Which of these statements is most accurate? 

A.    Lawyer A has done an admirable job of settling all of her clients’ claims in a complicated case and a difficult situation.  Although imperfect in some ways, the settlement method complies with the Texas disciplinary rules.

B.    We don’t know enough detail about the settlement method to judge whether Lawyer A has fully complied with applicable disciplinary rules.

C.    Lawyer A’s solution is permissible, except for holding back 10% of the gross settlement amount to disproportionately reward uncooperative clients.

D.    Lawyer A should not have reached a settlement on behalf of the first 11 clients until the claims of the remaining 22 were also resolved.  Therefore, none of the settlements are permissible under the Texas disciplinary rules.  

ANSWER:  B

DISCUSSION

Rule 1.08 addresses a variety of potential conflicts.  Subsection (f) is applicable here:

(f) A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement to guilty or nolo contendere pleas, unless each client has consented after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the nature and extent of the participation of each person in the settlement.

This provision is the “aggregate settlement rule” and it applies when there is a global settlement to be apportioned among jointly-represented clients.  Though our Rules do not define “aggregate settlement”, we understand it to mean a single settlement amount intended to settle multiple client claims.  

Defendants might make an “aggregate settlement” offer in a large multi-plaintiff case where there are hundreds or thousands of claimants; however, Rule 1.08(f) applies any time there is more than one client represented by a lawyer facing a single settlement offer to all individual claims.  The defendant may take the position that it doesn’t care how the global settlement amount is apportioned among the clients as long as every claimant—or almost every claimant—signs a release (this is often referred to as a “cram-down” settlement).

An aggregate settlement offer can put a lawyer in a difficult position.  On one hand, the lawyer may have little difficulty dividing the money among clients who have identical claims and damages; however, where the damages are more subjective and varied, clients may have sharply different opinions about the apportionment of settlement funds to different clients. Moreover, the lawyer may be tempted to recommend the global settlement—even though it is objectively inadequate compared to the lawyer’s own damages model—because the lawyer’s resulting contingent fee is substantial and it eliminates the risk of not recovering  anything at trial.  And while there can be conflicts between the lawyer’s own interest versus the clients’ interest in settlements under Rule 1.06(b), here we are interested primarily in Rule 1.08(f).

So, what does Lawyer A need to do under Rule 1.08(f)?

•    First, disclose to every client the proposed settlement amount for that client and for each of the jointly-represented clients.

•    Second, explain how each client’s proposed settlement amount was calculated—which requires an explanation of the individual claims of every client and what variables were used to calculate the proposed settlements.

•    Third, after providing these disclosures, ask for each individual client’s consent to his or her proposed individual settlement.

In some instances, the mechanics of apportioning a global settlement is not easy.  To the extent that objective, relevant factors can be used, they should be; however, there also may be relevant factors that are inherently subjective.  In our property damage scenario, damage estimates may be a mix of objective and subjective factors.  Using competent appraisers and/or damage estimators who strive to apply the same criteria for every property is important, even if there is still a degree of subjectivity.  The lawyer’s approach doesn’t have to be perfect – and it won’t be – but it should strive to apply the same standards to every client’s claims so that the clients can understand the lawyer’s methodology.  Further, making financial exceptions for “holdout” clients is suspect because that significantly deviates from using the same methodology for every client and opens the lawyer up to charges of favoritism.  

The primary purpose behind Rule 1.08(f) is full disclosure to every jointly-represented client of how that client is being treated compared to other similarly-situated clients.  Of course, Rule 1.08(f) can make aggregate settlements more difficult to accomplish because, with disclosure, some clients may contest the methodology or the results that it produced.  And the mechanics of disclosure can vary because there is always the risk that specific client settlement amounts may be leaked by clients to third parties that have no right to know this otherwise confidential information.  

Because the question did not describe how the lawyer apportioned the global settlement to individual clients, and did not reveal whether the required disclosures were made, B is the best answer.  If Lawyer A did not make the disclosures required by Rule 1.08(f), then she is in violation of that rule.    
 

Ethics Question of the Month - April 2019

Scenario 1: Lawyer A represents a long-time client, Client B, in various real estate transactions.  After several years, Lawyer A asks to invest in an upcoming real estate development project for which Client B needs investors.  Lawyer A also perceives that her interests are aligned with the client’s interests because both want the project to succeed.  Client B welcomes Lawyer A’s investment.  They agree that Lawyer A will invest $50,000, and contribute her legal services, in exchange for a 10% equity share in the development. As part of her contribution of legal services, the lawyer prepares the paperwork documenting the investment agreement.

Scenario 2:  A few months later, Client B decides to start a company to create and sell real estate development software.  Client B has enough investors and capital to start the company, but is concerned about managing the start-up’s legal costs and other expenses.  Client B offers the lawyer shares of stock in the new company in exchange for legal services.  Client B proposes a formula that awards two shares of stock for every hour of services spent by Lawyer A.  Lawyer A’s hourly rate is $250.  There is a risk that the start-up may fail and Lawyer A’s stock will be worthless; there is also the possibility that the start-up could be successful and that Lawyer A’s shares could be worth significantly more than the value of her legal services at her usual hourly rate.

Which statement most accurately addresses whether these Scenarios are acceptable?

A.    Both Scenarios 1 and 2 are acceptable, and are commonplace.
B.    Scenario 2 is acceptable, but Scenario 1 is not.
C.    Scenario 1 is acceptable, but Scenario 2 is not.
D.    Both Scenarios are per se unacceptable.
E.    We don’t have sufficient facts to know whether either Scenario is acceptable.

ANSWER: E

DISCUSSION

Rule 1.08(a), Texas Disciplinary Rules of Professional Conduct, applies to both scenarios:

(a)    “A lawyer shall not enter into a business transaction with a client unless:

  • (1)    the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed in a manner which can be reasonably understood by the client;
  • (2)    the client is given a reasonable opportunity to seek the advice of independent counsel in the transaction; and
  • (3)    the client consents in writing thereto.

The official Comments to Rule 1.08(a) provide some further guidance:

1.    This rule deals with certain transactions that per se involve unacceptable conflicts of interest.

2.    As a general principle, all transactions between client and lawyer should be fair and reasonable to the client.  In such transactions, a review by independent counsel on behalf of the client is often advisable.  Paragraph (a) does not, however, apply to standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, such as banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities services.  In such transactions, the lawyer has no advantage in dealing with the client, and the restrictions in paragraph (a) are unnecessary and impracticable.

Lawyers are not broadly prohibited from engaging in business opportunities with clients, or even from becoming partners or shareholders in those client businesses. However, to be an acceptable transaction, Rule 1.08(a) requires that: 

(1) the terms of the transactions be fair and reasonable to the client — regardless of whether the terms are fair and reasonable to the lawyer; 
(2)  the client have a reasonable opportunity to consult with independent counsel regarding the wisdom of doing a deal with the lawyer, which often means the lawyer must alert the client of this opportunity and its implications; and 
(3)  the client consent in writing to the conflict of interest, which is not the same as the client signing the transactional documents for the deal itself, unless the conflicts disclosure is included in the transactional document.  

Neither scenario provides sufficient information to determine whether these requirements of Rule 1.08(a) were satisfied. We don’t know if Client B was given a “reasonable opportunity” to consult with independent counsel, and we don’t know if an independent counsel determined that these transactions were, in fact, “fair and reasonable to the client.”  Without knowing these facts, one cannot determine if the requirements of Rule 1.08 were met.   

While it is not uncommon for lawyers to enter into business transactions with their clients, it is common for lawyers to be unaware that special ethical considerations apply to those transactions.  Rule 1.08(a) provides a checklist for ensuring that those ethical considerations are at least procedurally protected. Lawyers who do not comply with Rule 1.08(a) risk both a disciplinary rule violation and a breach of fiduciary duty claim.
 

Ethics Question of the Month - March 2019

Lawyer A represents Client B in a partnership dispute against Partner C.  After extensive discovery, the court orders the parties to mediation two months before the trial setting.   

At the mediation session, Partner C makes a credible settlement offer to Client B.  Lawyer A recommends that Client B accept that offer.  Client B refuses and demands to go to trial unless Partner C makes a substantially higher offer.

Lawyer A is concerned that Partner C came across much better in his deposition than Client B, and the documents seem to support Partner C’s position. Lawyer A thinks there is a good chance that Partner C will prevail at trial, or, even if Client B prevails, his damage model is weak, and the jury is very likely to award damages significantly less than Partner C’s current settlement offer. Of course, a modest recovery by Client B means a modest contingent fee for Lawyer A.  Accordingly, Lawyer A tells Client B that he will withdraw his representation unless Client B accepts the settlement offer.  

Lawyer A tells Client B that he can hire a new lawyer and take this case to trial if he wishes. He also tells the client that the court will grant a continuance of the current trial setting because this is only the second trial setting.   The likely continuance should provide Client B plenty of time to hire new counsel.

Which statement most accurately addresses whether Lawyer A can withdraw? 

A.    Lawyer A can withdraw, but only after he secures a continuance of the current trial setting.
B.    Lawyer A can withdraw unconditionally because his client is making the representation unreasonably difficult by not accepting a recommended settlement offer.
C.    Lawyer A cannot withdraw because, under these circumstances, withdrawal would have a materially adverse effect on the client.
D.    Lawyer A cannot withdraw because he cannot guarantee that he will be able to persuade the court to grant a continuance.
E.    We don’t have enough facts to know whether Lawyer A can withdraw.

ANSWER:  C 

DISCUSSION:

Rule 1.15(b) of the Texas Disciplinary Rules of Professional Conduct governs the conditions under which a lawyer is permitted to withdraw:  

(b) Except as required by paragraph (a), a lawyer shall not withdraw from representing a client unless:
(1) withdrawal can be accomplished without material adverse effect on the interests of the client;
(2) the client persists in a course of action involving the lawyer's services that the lawyer reasonably believes may be criminal or fraudulent;
(3) the client has used the lawyer's services to perpetrate a crime or fraud;
(4) a client insists upon pursuing an objective that the lawyer considers repugnant or imprudent or with which the lawyer has fundamental disagreement;
(5) the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services, including an obligation to pay the lawyer's fee as agreed, and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled;
(6) the representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client; or
(7) other good cause for withdrawal exists.

ANALYSIS:

The rule generally prohibits withdrawal, subject to several exceptions. Unless one of the exceptions applies, withdrawal is not permitted. 

These facts do not implicate exceptions (b)(2), (3), and (5). Client B has not perpetrated a fraud or a crime, nor failed to pay a bill. At worst, the client is merely making unwise strategic decisions regarding settlement.  

Exception (b)(4) doesn’t apply where a client merely refuses to accept a settlement that the lawyer recommends.  Under Rule 1.02, clients alone make settlement decisions.  The risk that a client may not accept a settlement that is reasonable to the lawyer is part of the risk that justifies a contingent fee agreement—and risk is essential to justify that type of fee.

Exception (b)(6) should not apply where the only issue is a client’s refusal to accept a settlement offer that the lawyer recommends.  In a contingent fee setting, the mere fact that the lawyer cannot be assured of receiving fees is not “an unreasonable financial burden” that justifies withdrawal.  Nor does a client’s refusal to settle make the representation “unreasonably difficult” as that concept typically means something other than that the client is exercising a right that Texas law recognizes.

Exception (b)(7) is a catch-all basis for other grounds that are not otherwise set out in Rule 1.15. However, this provision does not permit withdrawal where the only basis is that the client is exercising a right to choose whether to settle under Rule 1.02.

The best chance for justifying withdrawal is exception (b)(1), but even that one is fraught with peril.  There is no guarantee that a continuance will be granted. If not, a material adverse effect on the client’s interest is almost certain. While there are lawyers who can competently try a case on two months notice, the mere fact that there are only two months or less remaining narrows the pool of lawyers who are available and willing to undertake a new case.  The short lead-time may prejudice the client’s ability to acquire competent representation on appropriate financial terms; a lawyer hired shortly before trial may want a larger contingent percentage or some other fee arrangement that is less advantageous to the client.  

Although we are told that discovery has been conducted, we don’t know whether the client will be left in the lurch with the withdrawal.  For example, we know nothing about any pending motions or whether the withdrawing lawyer hasn’t yet filed and/or argued all appropriate motions.  Would new counsel be walking into a case where there is too little time to file needed motions or have them heard by the court with a reasonable chance of success—or would new counsel be scrambling to argue already-filed motions with which the new counsel may have some disagreement?  And there might be unfinished discovery or other considerations that might significantly disadvantage a client.

CONCLUSION: The lawyer does not have a legitimate basis for withdrawal, unless he or she can establish that “withdrawal can be accomplished without material adverse effect on the interests of the client.”  While an argument for E could be made, it is very likely that no matter what facts are established, C will turn out to be true.
 

Ethics Question of the Month - February 2019

Lawyer A worked at Firm XYZ.   Firm XYZ represented Company Z in numerous litigation and transactional matters.  While at Firm XYZ, Lawyer A worked on several of Company Z’s employment litigation cases.  

Lawyer A then left Firm XYZ and moved to Firm JKL.  Firm JKL represents clients who are adverse to Company Z in breach-of-contract cases.  Firm JKL wants Lawyer A to be available to represent clients against Company Z, but, for the moment, it is content to have Lawyer A doing other litigation.  

Firm XYZ knows that Firm JKL is adverse to its client, Company Z, and that Lawyer A has joined Firm JKL.  Firm XYZ asserts a conflict and objects to Firm JKL being adverse to Company Z because Lawyer A is has joined Firm JKL.

Which of these statements is the most accurate?

A.    Firm JKL has a conflict in being adverse to Company Z because Lawyer A is a member of Firm JKL and is Company Z’s former attorney.

B.    Firm JKL would have a conflict in being adverse to Company Z, but Firm XYZ didn’t timely object when it learned that Lawyer A was joining Firm JKL.

C.    Firm JKL has a potential conflict, which can be cured by screening Lawyer A from any representation adverse to Company XYZ.

D.    Screening Lawyer A from Company Z won’t cure the conflict because the screen was not in place before Lawyer A arrived at Firm JKL; otherwise it would have worked.

E.    Firm JKL has no conflict arising from Lawyer A being adverse to Company Z in breach of contract cases because they are not substantially related to the employment litigation cases where Lawyer A represented Company Z while at Firm XYZ.  

ANSWER:  E  

Consider Rule 1.09, and two of its official Comments:

(a) Without prior consent, a lawyer who personally has formerly represented a client in a matter shall not thereafter represent another person in a matter adverse to the former client:

  • (1) in which such other person questions the validity of the lawyer's services or work product for the former client;
  • (2) if the representation in reasonable probability will involve a violation of Rule 1.05; or
  • (3) if it is the same or a substantially related matter.

(b) Except to the extent authorized by Rule 1.10, when lawyers are or have become members of or associated with a firm, none of them shall knowingly represent a client if any one of them practicing alone would be prohibited from doing so by paragraph (a).
(c) When the association of a lawyer with a firm has terminated, the lawyers who were then associated with that lawyer shall not knowingly represent a client if the lawyer whose association with that firm has terminated would be prohibited from doing so by paragraph (a)(1) or if the representation in reasonable probability will involve a violation of Rule 1.05.

Comment 3. Although paragraph (a) does not absolutely prohibit a lawyer from representing a client against a former client, it does provide that the latter representation is improper if any of three circumstances exists, except with prior consent. The first circumstance is that the lawyer may not represent a client who questions the validity of the lawyer's services or work product for the former client. Thus, for example, a lawyer who drew a will leaving a substantial portion of the testator's property to a designated beneficiary would violate paragraph (a) by representing the testator’s heirs at law in an action seeking to overturn the will.

Comment 7. Thus, the effect of paragraph (b) is to (a) extend any inability of a particular lawyer under paragraph (a) to undertake a representation against a former client to all other lawyers who are or become members of or associated with any firm in which that lawyer is practicing. If, on the other hand, a lawyer disqualified by paragraph (a) should leave a firm, paragraph (c) prohibits lawyers remaining in that firm from undertaking a representation that would be forbidden to the departed lawyer only if that representation would violate sub-paragraphs (a)(1) or (a)(2). Finally, should those other lawyers cease to be members of the same firm as the lawyer affected by paragraph (a) without personally coming within its restrictions, they thereafter may undertake the representation against the lawyer's former client unless prevented from doing so by some other of these Rules.

Analysis

First, there is no global prohibition against a lawyer acting adversely to a former client—unless one of the sub-parts of Rule 1.09(a) applies.  The most common basis for a conflict from representing a former client arises from a “substantial relationship” between the prior representation and the current adverse representation. See Rule 1.09(a)(3).  Lawyer A’s prior representation of Company Z involved employment litigation.  Firm K’s litigation matters against Company Z involve commercial breach of contract cases.  In the absence of other facts, the prior representations and the current representations do not appear to be “substantially related” within the meaning of Rule 1.09(a)(3).  Further, given the differences in the subject matter of Lawyer A’s prior representations and Firm JKL’s adverse representations, it is unlikely that whatever confidential information Attorney A previously acquired about Company Z is relevant to Firm JKL’s adverse representations.  A lawyer is not presumed to have acquired all of a former client’s confidential information, but only that information that would be reasonably relevant to the prior representation (i.e., within the scope of representation).

Second, even though Firm XYZ is representing Company Z adverse to Firm JKL in matters that were pending while he was at the Firm XYZ, Lawyer A did not “personally represent” Company Z in those matters.  Lawyer A apparently had no involvement in those representations, had no contact with those files, and did not receive any of Company Z’s confidential information regarding those matters.  While Lawyer A was at Firm XYZ, he was disqualified from acting adversely to Company Z in those same matters. Once Lawyer A left Firm XYZ, however, that disqualification did not follow him to Firm JKL and does not prevent Firm JKL from continuing its representations adverse to Company Z.  Further, Lawyer A can now act adversely to Company Z as long as he does not otherwise violate Rule 1.09.  Lawyer A is still obligated to protect Company Z’s confidential information acquired while he represented Company Z.

Therefore, E is the most accurate answer.
 

Ethics Question of the Month - January 2019

A lawyer represents Client A.  During the representation, the lawyer has access to Client A’s files, including documents regarding lawsuits in which the lawyer did not represent Client A.  Some of these documents are filings from lawsuits in which Client A was sued for fraud.  The lawyer’s representation of Client A terminates.  

The lawyer subsequently is asked to represent a new client, Client B, who is adverse to Client A.  This new representation would be factually unrelated to any of the matters in which the lawyer represented Client A. However, Client B has fraud claims against Client A that are similar to prior fraud claims that the lawyer learned of in reviewing Client A’s files during the prior representation.

The lawyer believes that the information that he learned about these prior fraud allegations against Client A could be relevant to Client B’s claims against Client A.  The lawyer wonders whether he could share information about Client A’s other lawsuits, find those filed pleadings at the courthouse, and potentially use that information to show that Client A has a pattern of committing fraud in the same way that Client B now claims.

The lawyer is aware that Rule 1.05(b)(3) of the Texas Disciplinary Rules of Professional Conduct states that a lawyer shall not knowingly “[u]se confidential information of a former client to the disadvantage of the former client after the representation is concluded unless . . . the confidential information has become generally known.”  

The lawyer thinks he can tell potential Client B about these other lawsuits because (1) the lawyer did not represent his Client A in those matters, and (2) the information that he knows is available to anyone who looks for it in the court’s files.  Which is most accurate?  

A.    The lawyer can share the information because he did not represent Client A in those matters, and Client A’s other suits are “generally known” because they were public filings.
B.    The lawyer can disclose to Client B what he remembers about Client A’s documents because he did not represent Client A in those matters. However, the prior fraud lawsuits are not “generally known” under the Rule 105(b)(3) exception.
C.    The lawyer cannot disclose to Client B what he remembers about Client A’s documents, even though he didn’t represent Client A in those matters. But he can direct Client B to the courthouse and suggest looking for other lawsuits against Client A.  
D.    The lawyer cannot reveal what he remembers from Client A’s files, nor can he direct Client B to the courthouse to search for other lawsuits.
E.    The lawyer should not represent Client B at all.  

ANSWER:  E  

While the lawyer raises concerns about Rule 1.05, he is overlooking Rule 1.09(a)(2). It forbids representation of a new client against a former client “if the representation in reasonable probability will involve a violation of Rule 1.05.”

The information of public record about Client A, which the lawyer acquired while representing the client, is “unprivileged client information” as defined in Rule 1.05(a). If no exception applies, use of the information to Client A’s disadvantage is prohibited by Rule 1.05(b)(3), unless “the confidential information has become generally known.” 

Information is not necessarily “generally known” just because it is a matter of public record.  Information may be of public record simply by being included in a government record, such as a document filed with a court clerk, even though there is no general public awareness of the matter. Information that “has become generally known” is information that is actually known to members of the general public and is not merely available to those who look for it. Whether information is “generally known” within the meaning of Rule 1.05(b)(3) is a question of fact.

So, if the prior fraud suits are known only by those involved, they would not be “generally known.”   D might be technically correct. But in light of Rule 1.09(a)(2), E would be the better answer for the prudent lawyer. It is unlikely that the attorney could completely exclude the information from his representation. At the very least, his prior representation would create the appearance of impropriety, and he very likely could be accused of using confidential information against Client A, whether or not he actually did. If accused, proving he did not would be difficult. 
 

Ethics Question of the Month - December 2018

I Know What You Did

Lawyer A represents Client X in a family law case.  Client X has told Lawyer A he has struggled with substance abuse and continues to use cocaine occasionally.  

 Client X’s wife had similar substance abuse issues, but she appears to be in sustained recovery. Client X wants primary custody and appears reconciled to admitting his occasional cocaine use and seeking treatment.  

The wife’s lawyer takes Client X’s deposition and asks him if he still uses cocaine.  Client X denies any cocaine use since the couple separated.  Lawyer A asks no questions at the deposition, but later confronts his client about his denial of current drug use.  Client X promises not to lie about his cocaine use again.  Lawyer A does nothing further, and Client X does not correct his deposition testimony.

At trial, Lawyer A doesn’t raise cocaine use, but does ask Client X to generally tell the jury why he believes that he is a fit parent.  Lawyer A assumes that Client X will avoid talking about drug use, but Client X again says he has not used anything since the couple’s break-up.   Hoping that his client won’t continue to perjure himself, Lawyer A drops the subject and quickly wraps up his direct examination.

On cross-examination, opposing counsel is ready to pounce but doesn’t have any impeachment evidence that Client X is lying.  He can’t shake Client X’s repeated denials of drug use since the couple’s separation.  

The jury awards primary custody to Client X at the end of the first week of trial.  The trial will continue the following week with the property division tried to the Court without a jury.  Over the weekend, Lawyer A confronts his client and insists that he not further perjure himself during the second week.  

Which is Lawyer A’s best course of action?  

A.    Lawyer A has acted appropriately in preserving what he learned from privileged conversations with Client X and should do nothing to undermine the attorney-client relationship.
B.    Lawyer A should withdraw before the second week of trial so that he can avoid disclosing his client’s perjury when court resumes.
C.    Lawyer A cannot withdraw, but does not need to take further action as long as he doesn’t affirmatively encourage Client X to lie.
D.    Lawyer A cannot withdraw and must take steps to address his client’s lies, including disclosure to the court of the true facts.  
 

ANSWER:  D.  

Rule 3.03 of the Texas Disciplinary Rules of Professional Conduct states, in part:

(a)    A lawyer shall not knowingly:

(5) offer or use evidence that the lawyer knows to be false.
    
(b)    If a lawyer has offered material evidence and comes to know of its falsity, the lawyer shall make a good faith effort to persuade the client to authorize the lawyer to correct or withdraw the false evidence. If such efforts are unsuccessful, the lawyer shall take reasonable remedial measures, including disclosure of the true facts.

(c) The duties stated in paragraphs (a) and (b) continue until remedial legal measures are no longer reasonably possible.

Lawyer A has two obligations with respect to his direct examination of Client X at trial: 

First, once Client X lied under oath in response to a question that Lawyer A asked, Lawyer A was obligated to counsel Client X to correct his false testimony.

Second, if Client X refuses to correct his false testimony, Lawyer A is ethically obligated under Rule 3.03 to correct the record, even if that means implicating Client X in perjury.

With respect to Client X’s perjury during his deposition and during cross-examination by opposing counsel at trial (as opposed to his direct examination), Lawyer A has a narrower ethical obligation under Rule 3.03.  Since Lawyer A did not ask questions during Client X’s deposition that elicited his perjury and opposing counsel asked further questions that elicited perjury during his cross-examination, those instances obligated Lawyer A only to advise Client X to correct his false testimony; however, since Lawyer A did not elicit the false testimony by asking those questions, he is not obligated to correct the testimony, even if Client X refuses.

How long does Lawyer A have this obligation?  Under Rule 3.03, “until remedial legal measures are no longer reasonably possible.”  Under our scenario, the trial court still has jurisdiction over this case and Lawyer A’s obligation exists that long.  Therefore, if Lawyer A has learned of his client’s perjury, Lawyer A elicited or offered the false evidence, and the tribunal still has jurisdiction, then Lawyer A’s ethical obligations under Rule 3.03 arise.  Lawyer A cannot wait for the clock to run out.  The best answer is D.

This Rule may come as a surprise to lawyers who assume that the attorney-client privilege requires silence about a client’s perjury as long as the lawyer did not encourage the client to lie under oath.  The old ABA rule permitted a lawyer to withdraw in lieu of disclosing a client’s perjury. However, since 1990 the Texas Rule has not permitted withdrawal alone to solve this problem. The lawyer must take remedial measures, including disclosure of the true facts.
 

Ethics Question of the Month - November 2018

No Free Ride

Scenario 1.  Criminal defense lawyer X agrees to represent Client A in a DWI.  The fee agreement requires a $5,000 nonrefundable retainer that covers all legal services up to trial.  If a trial is required, the agreement provides for a nonrefundable “trial fee” of $10,000.  Client A pays the first $5,000 fee but is unable to pay the $10,000 when it becomes clear that a trial will be necessary.   Lawyer X withdraws from the representation.

Scenario 2.  Criminal defense lawyer Y agrees to represent Client B on an assault charge.  The fee agreement provides for a nonrefundable flat fee of $20,000 for the entire representation, including trial.  Client B becomes dissatisfied and terminates Lawyer Y just before trial.   Client demands a partial refund in order to hire another lawyer for trial.  Lawyer Y refuses any refund because the $20,000 flat fee was expressly “nonrefundable.”

Scenario 3.  Criminal defense lawyer Z agrees to represent Client C on a felony theft charge.  The fee agreement provides for multiple fees: $2500 nonrefundable retainer upfront; $5000 flat fee for services before trial; and then an hourly fee of $350 during and after trial, up to final judgment.

Which fee arrangements are ethical?

A.    All three fee arrangements are ethical.  
B.    Lawyer X’s fee agreement is ethical, but the other two are not.
C.      Lawyer X’s and Lawyer Y’s fee agreements are ethical, but Lawyer Z’s is not.  
D.    Lawyer Z’s fee agreement is ethical, but the other two are not.
 

ANSWER:  D. 
 
There is only one type of truly nonrefundable fee: a nonrefundable retainer for the sole purpose of securing a lawyer’s availability to represent a client.  A nonrefundable retainer does not pay for any legal services.  One that purports to do so is not a nonrefundable retainer. Professional Ethics Committee Opinion 611 (2011) states that “A legal fee relating to future services is a non-refundable retainer at the time received only if the fee in its entirety is a reasonable fee to secure the availability of a lawyer’s future services and compensate the lawyer for the preclusion of other employment that results from the acceptance of employment for the client.”  

Further, a lawyer must justify a nonrefundable retainer, like any other legal fee, by its reasonableness under the circumstances—including, whether the lawyer will be declining new representations or deferring other current client matters to remain available to the nonrefundable retainer-paying client.  In general, true nonrefundable retainers are rare because most lawyers cannot easily demonstrate that they will be declining or deferring other matters to remain available to serve the retaining client.

Similarly, flat fees are refundable even if the lawyer calls them “nonrefundable.”  A flat fee is a fixed fee for legal services, but if the legal services are not substantially completed or earned, then some portion of the flat fee may be refundable. Accordingly, flat fees belong in a lawyer’s trust account until earned, and they are not “earned” upon receipt.  

Like any other legal fee, a flat fee must be “reasonable” under the circumstances and in view of the eight, non-exclusive, factors listed in Rule 1.04 (b) of the Texas Disciplinary Rules for Professional Conduct:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.

Professional Ethics Committee Opinion 611 (2011) states that “[i]t is not permissible under the Texas Disciplinary Rules of Professional Conduct for a lawyer to include in an employment contract an agreement that the amount paid by a client with respect to a matter is a ‘non-refundable retainer’ if that amount includes payment for the lawyer’s services on the matter up to the time of trial.” 

Therefore: 

Lawyer X’s fee agreement is unethical because her fee agreement provided for a “nonrefundable retainer” to pay for legal services leading up to a trial—which a nonrefundable retainer cannot do under PEC Opinion 611.  Furthermore, Lawyer X is charging another “nonrefundable” trial fee.  

Lawyer Y’s fee agreement is unethical because flat fees are refundable if the representation is not completed or not substantially completed. (Fees may be substantially completed when the client prevents completion or terminates on the verge of completion.)  Calling the flat fee “nonrefundable” in the fee agreement makes no difference; a lawyer cannot contract to make an impermissible fee contractually obligated.  

Lawyer Z’s fee agreement may be ethical as long as the initial $2,500 nonrefundable retainer: (1) is not for any legal services, (2) the amount is reasonable under the circumstances, and (3) the lawyer can substantiate that she is giving up or will likely give up representing some other clients to represent Client C.  Having three separate fees is not impermissible—although stacking fees can be problematic depending on their nature and reasonableness.  The nonrefundable retainer portion can be deposited directly into the lawyer’s operating account because it is earned upon receipt. However, even “nonrefundable” retainers may be refundable if, for example, the lawyer is discharged for “cause” or can no longer remain available to serve the client.
 

Ethics Question of the Month - October 2018

Your Results May Differ

A law firm’s website advertises the services of a commercial litigator in the firm. The website touts the lawyer’s past successes, including:

1.    “Won a $2.1 million jury verdict for the plaintiff in a case involving a partnership dispute.”
2.    “Obtained an $8 million settlement in a case between two companies in which the plaintiff company made fraud claims.”
3.    “Negotiated a $450,000 net recovery in a contract dispute in arbitration.”
4.    “Obtained a permanent injunction against a former employee under a non-compete agreement.”
5.    “Served as local counsel in an appeal in which a $5 million tortious interference judgment was affirmed.”
6.    “Obtained a defense jury verdict of no liability in a case alleging $15 million in damages.”

Which of these descriptions of past successes is proper under the Texas lawyer advertising rules?

A.    #1, #5 and #6 are proper, but the rest are improper.
B.    #3 and #4 are proper, but the rest are improper 
C.    #4 is proper, but the rest are improper.
D.    #2 and #4 are proper, but the rest are improper.
 

ANSWER: B. 

Rule 7.02(a) of the Texas Disciplinary Rules of Professional Conduct provides:

A lawyer shall not make or sponsor a false or misleading communication about the qualifications or the services of any lawyer or firm. A communication is false or misleading if it:

(2) contains any reference in a public media advertisement to past successes or results obtained unless

  • (i)    the communicating lawyer or member of the law firm served as lead counsel in the matter giving rise to the recovery, or was primarily responsible for the settlement or verdict,
  • (ii)    the amount involved was actually received by the client,
  • (iii)    the reference is accompanied by adequate information regarding the nature of the case or matter and the damages or injuries sustained by the client, and
  • (iv)    if the gross amount received is stated, the attorney’s fees and litigation expenses withheld from the amount are stated as well;

Consider each of the website’s description of past successes in light of Rule 7.02(a)

1.    This description is improper because the reference to the jury verdict alone does not identify the net recovery by the client.  Further, it is misleading if the jury verdict was or could be reduced or set aside by the trial court or an appellate court.

2.    This description is improper because it does not identify the net recovery by the client.

3.    This description is proper because it reports the net recovery by the plaintiff, and the nature of the plaintiff’s claim is adequately described.

4.    This description is proper because, even though there was no monetary recovery, the successful permanent injunction in a non-compete dispute constitutes a “past success” and the matter is adequately described.

5.    This description is improper for two reasons:  (1) the advertising law firm served only as local counsel, not lead counsel; and (2) the net recovery to the client (or alternatively, the attorney’s fees and expenses) are not identified.

6.    This description is improper because it includes no information describing the “nature of the case.”  

Therefore, only results #3 and #4 are proper.  
 

Ethics Question of the Month - September 2018

What’s in a Name?

Law firm Abel, Baker, Caldwell & Dodd (“ABC&D”) has four name partners.  Partner Abel decides to retire from practicing law and leaves the firm.  Baker decides to leave the firm to open a solo practice under his own name. 

The remaining partners wish to continue to practice under the same firm name because it is well known in the community.  Abel and Baker both agree to allow ABC&D to continue to use their names in exchange for payment. 

Three years later, Abel decides he’s tired of retirement and opens a solo practice under his own name.  Under the current Ethics Opinions issued by the Professional Ethics Committee for the State Bar of Texas, which of the following is accurate?

  1. ABC&D may continue with the same name even though Abel and Baker are practicing elsewhere and no longer have any association with the firm
  2. ABC&D may continue to use Abel’s name, but not Baker’s
  3. ABC&D may continue to use Baker’s name, but not Abel’s 
  4. ABC&D may not use either Abel’s name or Baker’s name 

 

ANSWER: b.

Rule 7.01 of the Texas Disciplinary Rules of Professional Conduct states in part:  

“(a) A lawyer in private practice shall not practice under a trade name, a name that is misleading as to the identity of the lawyer or lawyers practicing under such name, or a firm name containing names other than those of one or more of the lawyers in the firm, except that . . . if otherwise lawful a firm may use as, or continue to include in, its name the name or names of one or more deceased or retired members of the firm or of a predecessor firm in a continuing line of succession. . . .

(d) A lawyer shall not hold himself or herself out as being a partner, shareholder, or associate with one or more other lawyers unless they are in fact partners, shareholders, or associates.”

Ethics Opinion 605 (March 2011) states that:

 “Under the Texas Disciplinary Rules of Professional Conduct, a lawyer or lawyers remaining in a law firm are not permitted to continue to use in their firm name the name of a lawyer who has left the firm to open his own law practice. This conclusion is not affected by whether or not the lawyer who left the firm has consented to such arrangement.”

One might reasonably conclude that Ethics Opinion 605 would prohibit ABC&D from using Abel’s name as well.  Ethics Opinion 466 (October 1990), however, provides otherwise.  In this instance, the Committee determined that a lawyer who first retires and then returns to the practice of law does not prohibit the original law firm from continuing to use his name “so long as the A, B & C law firm does not take any actions that would mislead clients or the public as to the relationship between Lawyer A and the law firm.” 

Because Abel was retired before he started a new practice under his new name, the firm is allowed to keep his own name, according to Ethics Opinion 466.  Because Baker left to open his own practice without retiring, the firm cannot keep using his name under Ethics Opinion 605.

About Ethics Question of the Month

Ethics Question of the Month is a regular feature of the Texas Bar Journal created and sponsored by the Texas Center for Legal Ethics.

DISCLAIMER: The information contained in Ethics Question of the Month is intended to illustrate an ethics issue of general interest in the Texas legal community; it is not intended to provide ethics advice that applies regardless of particular facts.  For specific legal ethics advice, readers are urged to consult the Texas Disciplinary Rules of Professional Conduct (including their official comments) and other authorities and/or a qualified legal ethics advisor.

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