Ethics and Conflict Issues in Business Representation; Conour Questions –

BUSINESS ETHICS FOR LAWYERS

I will be doing a seminar on Feb. 28 for ICLEF, the legal education provider created by the Indiana State Bar Association in the 1970s to help get lawyers better prepared to handle their clients’ legal matters. Now a stand-alone not for profit corporation ICLEF is the leading provider of Continuing Legal Education in Indiana..

The seminar title is Developing and Representing the Business Entity, and my portion is Ethics in a Business Practice. We will be discussing the Rules of Professional Conduct, the Traps of working with businesses and the Remedies for lawyers and businesses if unethical events occur.

In focusing on the Rules of Professional Conduct, we will discuss recent cases in state and federal courts where the clients complained that their lawyer had jumped sides, and how the courts and lawyers handled that issue. Motions to Disqualify some of the biggest law firms you know will be reviewed, and we will review how the courts’ findings and orders, when presented with valid conflict issues protect the business or the lawyers.

We will also review other events that may prompt a client to think that the loyalty obligation discussed in comment 1 to Rule 1.7 has been violated.

Program chair, Jeffrey Nickloy (a lawyer I have sent clients to for complex issues) has brought together a faculty of some of the brightest lawyers in Indiana to present on various topics that day. The Business Law Section and the Ethics Committee of the ISBA will be well represented.

Registration materials are available here.

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Bill Conour

The Indianapolis Star had a long story about Bill Conour on Sunday, here.  I never worked with Bill, but you could not be a lawyer in the state for the past 30 years and not know about him, his practice, or his atrium.

I will do a more thorough analysis of his fall, his plea, and his resignation in a few weeks, but I would like a few comments about Bill from those of you who knew him, worked with him, did or did not get cheated by him.

I will say (treading carefully as a Maurer grad, talking about our friends and fellow IU law siblings at McKinney) that the first time I walked into the Inlow Hall atrium, and saw the decor, I overheard a comment (it has been years ago, maybe it was my comment) that “the decor looks like a 1950s prison cell block,” with the metal wrapped columns to the ceiling.  So long as it carries Bill Conour’s name (together with that of his ex-wife Jennifer), the image will fit.

Please share comments on Bill and his situation, if you will.

Win One, Still Trouble; Charge for That? Neglect of Client in several ways

This is a Win?
The lawyer got sued for malpractice for failure to talk client out of a litigation financing deal. The court ruled that he wins since the lawyer did not refer the client to the lender, did not recommend the use of a litigation financing  program, and did not offer an opinion supporting the deal with the lender when the client made the loan.

Elwin Francis suffered a personal injury. He filed suit, but found himself needing funds up front, So, he borrowed funds from Law Bucks, who submitted a lien for $96,000 on the settlement.

The law firm representing Mr. Francis settled the personal injury matter for $150,000, with consent, and when all the expenses were  paid, Mr. Francis got a check for $111. He did not think that was enough, so he sued his lawyers. [Apparently the client forgot the $$ he got from Law Bucks]. The NY court looked at the documents, at the duty that the lawyer took on in representing Mr. Francis, and at the facts to see if there was conflicting duties that extended to Law Bucks, and found there was no endorsement or contacts between the firm and Law Bucks.

Getting sued by a client is trouble, but winning is good.

Lesson for us?  Stay out of endorsing a lender in a litigation financing program. You may become the guarantor.

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Charge for that?

Rule 1.8(j) has been around for a while. It is a pretty straightforward rule: “A lawyer shall not have sexual relations with a client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.”  Pretty close to a “Thou shalt not ….” with fewer exceptions than the Rule on Hearsay.

Tom Lowe, a lawyer from Minnesota is old enough to have been around when the MN Supreme Court enacted that rule there.  Sexual relations rulings in ethics cases have been around for decades, and the Rule changes started popping up in several states in the late 1990s (IL 1997, Kan 1998). The no-sex Rule came about as a part of the McCrate Amendments to the Model ABA Rules of Professional Conduct in 2002. Indiana adopted the current Rule 1.8(j) on Sept. 30, 2004, as part of the comprehensive update of the RPC (at p. 39 of the Order)*

So Lowe not only violated that rule, but, to add insult to injury he added the time he spent with her (a family law client) while he breached the rule to her bill.  [insert your inappropriate hourly billing (or quarter-hour or one/tenth hour) or other time based billing quip at this spot – I am trying desperately to leave those and other puns out of the post.]

There are important reasons for the rule about sex with a client, and I am not making fun of those, but his billing for his time?  That reminds me of this song…

Lowe got an indefinite suspension of his license, with a minimum period of 15 months before he may apply for renewal. Well done MN.

* I chaired the ISBA subcommittee that reviewed the ABA proposals and led to the addition of 1.8(j) to the Indiana Rules of Professional Conduct. Thanks to my subcommittee.

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Client Neglect Stemming from Mental Health Issues

The front page of the Indiana Judges & Lawyers Assistance Program website states: Research has shown that lawyers may suffer from substance abuse and depression at a rate higher than the general population. Experience has shown that lawyers may be more reluctant than others to seek help for their own problems.

One of the critical consequences of mental health problems is the impact on our clients.  As stated by JLAP Ex. Dir. Terry Harrell: “When I hear that a good lawyer, with no history of neglecting clients, is not returning telephone calls — my radar goes up and I start looking for other signs of depression.” She shares statistics on the increased level of mental health problems that should cause every lawyer to take a slow look in the mirror. Women lawyers appear to have a 10% greater problem than the general female population, while male lawyers  reportedly suffer a problem with depression at a rate more than 200% of the general male population.

When lawyers neglect clients for any reason the clients often get upset. If there is not a good reason for the perceived neglect (such as, “I am in trial all month…”) and the client does not see a way to successfully get the lawyer’s attention, a complaint to the Disciplinary Commission may be their only recourse.

Several cases recently have highlighted the issue of mental health, and I will focus on one. This lawyer (I don’t need to name him) recently stipulated to the following facts: The misconduct includes neglecting clients’ cases, failing to do the work for which he was hired, failing to respond to clients’ requests for information, failing to inform clients of the status of their cases, failing to safeguard unearned fees by placing them in a trust account, and failing to completely refund unearned fees. Respondent knew he was suffering from depression and other health related issues that interfered with his ability to attend to his clients’ needs.”

The lawyer and the Commission agreed that these violations of the Rules occurred: “The parties agree that Respondent violated these Indiana Professional Conduct Rules prohibiting the following misconduct: Rule 1.3: Failure to act with reasonable diligence and promptness. 1.4(a)(3): Failure to keep a client reasonably informed about the status of a matter. 1.4(a)(4): Failure to comply promptly with a client’s reasonable requests for information. 1.15(a): Failure to safeguard property of a client. 1.16(a)(2): Failure to withdraw from representation when the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client. 1.16(d): Failure to refund an unearned fee promptly upon termination of representation. 3.2: Failure to expedite litigation consistent with the interests of a client.”  That is quite a list.

There is the specific requirement under Rule 1.16(a)(2) that states the affirmative duty that a lawyer “shall not represent a client…if: (2) the lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client.”

We need to talk about this situation more.  There was this previous post on Age Related Issues in the Law, but it did not tie the violation to 1.16(a)(2). Apparently we need to have more discussion about this.  There are 10,000 Baby Boomers hitting 65 every day. They are not all lawyers, but enough of them are for problems to show up..  65 is not the magic age where age related cognitive disorder hits, but it is one birthday closer to the issue showing up.

Mental illness extends far beyond age related disorder, and beyond depression, bi-polar disorder and other issues.  But it hits lawyers in greater numbers than the general population.  When it hits, all the suffering lawyer’s clients are affected. Be aware.

Zealous Representation?; Alabama joins Indiana on Group Coupon issue; Who is the client?

Zealous? Don’t Talk to me about Zealous! -1-

Wisner v. Laney is an important case on lawyer civility, but an opinion with a problem. First, the issue.  As stated in the opinion, counsel for both sides went over the line. Plaintiff’s counsel was ordered to apologize to the jury for comments about the defense counsel.

Defense counsel still thought that the opponent went too far, and the trial court should have either called a mistrial or dismissed the case. That did not happen. As stated by Justice David, “Again, the trial court judge is in the best position to determine when enough is enough and whether or not the behavior of counsel would warrant a new trial.” and “we nonetheless express our displeasure with the conduct of counsel, particularly that of plaintiff’s counsel.” Also the court found: “Although plaintiff’s counsel’s behavior was most troubling, both attorneys should have acted in a manner more becoming of our profession.”

Now the problem: in the conclusion the court says: “The duty to zealously represent our clients is not a license to be unprofessional.”  In the 2004 amendments to the Indiana Rules of Professional Conduct the Supreme Court deleted the word and standard of “zealous” representation from the Preamble, in favor of an “effective advocate” standard. The ABA Model Rules still use the term “zealous” three times in the Preamble. Section 2 of the MRPC states in part: “As advocate, a lawyer  zealously asserts the client’s position under the rules of the  adversary system.” It is also found in Sections 8 & 9 of the MRPC.  One example of the change in Indiana’s Rule 8 is: “a lawyer can be a zealous an effective advocate”.

So now the court reintroduces the issue of zealous advocacy in the most recent “civility” opinions issued by the court. Was that intentional by the court, or a lapse to the language lawyers used a decade or more ago?

1. Bad take-off on the Jim Mora Playoffs speech from 2001

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GROUP COUPON OPINION SPREADS

Alabama State Bar’s ethics committee joined Indiana in banning lawyers from participating in daily deal coupon programs such as Groupon. An issue that has been ruled on by several states, first Indiana and now Alabama have found the deal plans contain too many “ethical landmines” to pass muster.

Indiana’s 2012 opinion was the first to take aim on the practice, calling it fraught with peril, and identifying eight Rules in the Indiana RPC, plus one guideline that were in peril with the proposal.  NY, NC and SC looked at fewer issues in approving the proposal.   The Legal Examiner in Alabama had an article that hit the highlights of that state committee’s ruling.

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WHO IS THE CLIENT?

Ethical questions to the ISBA Hotline panel are often explored in more detail by asking the caller “Who is your client?”  A recent Minn. case discussed in the Jan. Minn. Ethics Update takes that question a step further.

In Fredrikson & Byron v. Saliterman the law firm started working with the owner and CEO of “LOS” in an arbitration matter where LOS was one of the parties. Saliterman, the contact and CEO of LOS had separate legal counsel in the arbitration. He received LOS’s engagement letter, addressed to him, and it said, among other things, “Thank you for selecting F&B to represent you in the litigation matter concerning [LOS].”

When the matter was over, and LOS was insolvent, Saliterman was billed for the legal  fees due.  The question addressed by the trial and appellate courts was “Who was F&B’s client?” The appellate court decided that ambiguity in a fee agreement goes against the law firm, so F&B did not get paid.

The lesson?  Make sure your engagement letters identify, by name, the client, such as, “In this matter the firm of XYZ is representing only [client’s name].”  If you want a guarantor for payment, get a payment guaranty from the CEO in the CEO’s personal capacity, (or parent in a child’s matter) and not as the representative of the business entity.

Accusing the Accuser: Staff Gone Wild: Ethics of Using ABA Ethics Opinions

What to do when the accuser is accused?

Occasionally the staff of the Disciplinary Commission is accused of committing wrongdoing. Much like a prosecutor  accused of malfeasance, there needs to be a method of resolving such an event, and recently the Indiana Supreme Court addressed this problem.

In the artfully titled Order which the court called:  ORDER FORMALIZING POLICY AND SETTING PROCEDURE FOR THE INVESTIGATION AND PROSECUTION OF GRIEVANCES INVOLVING MEMBERS AND STAFF OF THE INDIANA SUPREME COURT DISCIPLINARY COMMISSION AND ATTORNEYS SERVING AS HEARING OFFICERS IN ATTORNEY DISCIPLINE CASES, the court addressed the issue of the accuser getting accused.  How should it be handled, and what to make of the event.The informal policy needed to be made a formal policy, so grievants would know what to expect. Five pages of analysis and remedy that is in the ranks of the better writings of this Court (notwithstanding the gender bias of referring to the then current and future CJs as “he”).  Well worth your time reading if you have a concern about the impartiality of the staff of the Disciplinary Commission. There is a way to get a fair proceeding.

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Staff Gone Wild – Signing Everything

There will be an interesting ethics program at the 2013 Solo and Small Firm Conference on the Ethics For Law Firm Staff, presented by John Conlon and your blogger, Ted Waggoner.  It was not prompted by, but will address the issues raised in the third Chovanec Opinion.  Oops.  Lack of training and supervision of staff, bad documents, that a secretary signed with the lawyer’s name to were filed with the US Bankruptcy Court.  The court rejected the documents, and things got bad for the lawyer, again.

Those federal judges don’t take things like this lightly. The Supremes did not either when it got to them. Read the case, and meet with your staff.

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How Ethical is Using an Ethics Opinion of the ABA?

So the ABA, a not for profit professional association with nearly a million members, creates at considerable expense, a Center for Professional Responsibility, with staff, office space, and all the accoutrements of support for the profession.  It is a dues charging Center, which members of the ABA can, for a fee, join and get the benefits of the Center.  It publishes books on ethical issues, works on the ABA Model Rules of Professional Conduct, and produces the official ABA Ethics Opinions based on those Model Rules.

One of the country’s more prominent lawyers, Ernie Svenson, a recent speaker at the ISBA Solo & Small Firm Conference, provided a link on his website, (I hope it is a profit center to his firm) to an ABA opinion on metadata, and for his effort got a cease and desist letter.  He posts about it and gets a serious conversation going about why the ABA would expect to sell its ethics opinions.

Classmate Joe O’Connor, a state delegate to the ABA House replied:

As the ABA State Delegate, and as a person who like a number of our Indiana colleagues has spent considerable volunteer time working with other lawyers from around the country to keep the ABA vital and relevant to our profession and safeguarding the justice system, I wanted to respond briefly to a couple of posts on this list serve about ABA ethics opinions and resources.

 Since October 2010, the ABA has made its ethics opinions available to the public free of charge by posting them on the website of the ABA Center for Professional Responsibility.  The ABA policy on access to and use of ethics opinions is reasonable and allows individuals to link to ABA ethics opinions and to quote from them within the doctrine of fair use.  The ABA ethics opinions policy, which is titled “ABA Ethics Opinions: Access for All Lawyers,” can be found on abanow.org at the URL: 

 http://www.abanow.org/2010/10/american-bar-association-ethics-opinions/.  

 I believe this represents a well-reasoned policy to provide guidance to all members of the profession and the public but of course opinions can differ.

 Joe O’Connor

I agree that an ethics opinion has some extrinsic value, and if the user needs to use more than “fair use” as defined in the copyright laws, a commercial transaction, including a payment for the product should be made.  I disagree with many about the value of an ABA opinion, which is based on the Model Rules, and not on the rule as actually written and enforced by the various state supreme courts. It is not a government document.

The Indiana State Bar Association does not charge for its opinions, now. They are available on the website. Not well indexed, but if you have the time, the opinion is there.

Some argue that this is one more reason to not join the ABA, but there are plenty of reasons for that, from politics to cheapness or lack or professional self-esteem. A complaint that a product that a seller wants $20 (or whatever) for is not worth  $20 is not the same as the complaint that they should not be permitted to sell the product.

ABA ought to win, and delegates ought to value the product of the organization they represent.

What causes Trouble for Lawyers? Fee Increases w/o Following the Rules: Ranting about the Judge: Dope in Court

Changing the Flat Fee – Oops

Fees are a difficult issue for lawyers, how much to charge and how to get paid are on the lawyer’s mind in nearly every engagement.  More flat fees are being used, as objections to the scope and nature of an hourly fee basis are growing. Indiana’s rule on increasing a firm fee that is to be charged to a client is the minority rule. But it is the rule.

It appears the purpose of Indiana’s rule is to protect the client during a change in the relationship, and in theory it does just that. Changing a relationship and fee during the midst of a matter could lead to overreaching or abuse. The rule attempts to alert the client to that possibility.

The lawyer needs to know how to protect herself as well as the client, and while the fees are governed by Rule 1.5 of the Rules of Professional Conduct, the change in relationship rule is in Rule 1.8 of the RPC.

The lawyer is to tell the client, in writing: “You are advised of the desireability of seeking, and be given a reasonable opportunity to seek, the advice of independent legal counsel on the change in our legal fee transaction; and you (the client) are to give informed consent, in a writing signed by the client, to the essential terms of the transaction, and to the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.”

How often a client will seek an independent opinion in a timely way is doubtful. But the file must have these two written documents.

Indiana and at least two other states consider a modification of the fee agreement to be a new business arrangement with the client, and so the Rule 1.8 business warnings are required. Prominent Indianapolis lawyer Bob Hammerle found out the hard way.

Hammerle took on defense of a criminal case for Ed Blinn Jr., and they agreed on a flat fee plus an hourly fee after five days of trial. So far, so good.  As the case went on, the outcome must have looked grim for getting paid after the case was over for the hourly part of his fee. That is for the part billed after the services were rendered, and Blinn might be jailed. The client was refusing to negotiate for a plea.  So, Hammerle orally offered to change the hourly billing portion to a flat fee, no matter how long the trial took.  He forgot to check the rule on the change in the fee. Blinn verbally agreed, paid the fee (which is considered earned when paid, as a flat fee), then changed his mind, took a plea and wanted his extra fee back.

After Blinn sued and the courts decided that case Hammerle’s way (statute of limitations was missed by Blinn, but in addition the Court of Appeals went out of its way to say that no malpractice or unjust enrichment occurred), the Supreme Court Disciplinary Commission took over. The parties agreed to a Public Reprimand, for violation of Rule 1.5(a) charging an unreasonable fee, and Rule 1.8(a) entering a business transaction with a client without giving written notice of the desirability of seeking the advice of independent counsel on the change, and securing a written consent to the essential terms of the transaction.

Lawyers — changes to your fee agreements that could be considered to favor you, the lawyer, instead of your client, will be subject to the double whammy of 1.5/1.8.  The Supreme Court said that the fee charged to Blinn was not unreasonable, if properly vetted by the Rule 1.8(a) standards. Without the 1.8 warnings, it was unreasonable (per se?).

Indiana, New York and New Hampshire have this 1.8 rule interpretation, no other reports are in the ABA Annotated Model Rules (6th Ed.).  Is this the future of Rule 1.8 around the nation, or a misstatement of what the law ought to be?  I think the later, but I give written 1.8 warnings, and get written consents  anyway. You should too.

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Calling the judge a pedophile cannot be a good thing

Outbursts at judges make you eligible for a contempt citation, and some deserve the action.  Carlos Romious apparently missed the “civility day” lessons in law school. After one session where Romious asked sitting judge Mountjoy “if the proceeding is a joke” and stating that the judge was “corrupting and stinking up the case” and “corrupting the system” Romious was told to appear to answer to Contempt of Court charges. Normally the smarter lawyer cools off, apologizes to the court and to the judge, and hopes for a fine.  Not Romious.

He appeared ready to fight.  As reported in the Wall Street Journal law blog, he worked himself up to the point where he finally asked Judge Mountjoy: “Are you a pedophile?” 

A four month sentence is a pretty long time to spend in jail for a lawyer trying to keep an office open. I think it would crimp the style, and cause some clients grave concern. But here it sounds about right.  When in the heat of battle, a suggestion: Do not accuse the judge of anything, much less being a pedophile.

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Dope Should Remain in the Pocket

More than one type of dope showed up in Court in New Orleans.  The assistant city attorney for New Orleans had a bit  of dope in his pocket when he appeared in court. That was a dopey thing to do, and he was the dope when a joint of marijuana fell on the floor in front of the two police officers he was chatting with, and who arrested him there.  Not a serious crime, but Jason Cantrell lost his job and was publicly criticized by his wife, a candidate for city council. Lawyers, don’t be a dope.