April 1 2014 1 TIMED AGENDA 2 Introduction 5 minutes Truth and confidences in negotiation and litigation 35 minutes When must a lawyer correct an opponents errors 25 minutes The nocontact rule including in entity representation when the opponent is the government and in the us ID: 647846
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Slide1
Ethics Marathonwith Stephen Gillers
April 1, 2014
1Slide2
TIMED AGENDA 2
Introduction (5 minutes)
Truth and confidences in negotiation and litigation (35 minutes)When must a lawyer correct an opponent’s errors? (25 minutes)The no-contact rule including in entity representation, when the opponent is the government, and in the use of testers. (25 minutes)
Playbook conflicts (15 minutes)
Q&A (15 minutes)Slide3
TRUTH AND CONFIDENCESIn Negotiation and Litigation
3Slide4
The Problem
4
In a negotiation, what do you do if your client makes a false statement of fact (whether or not knowingly), or you do (innocently), and you then come to know of the falsity as a result of a confidential communication?
In a litigation, what if your client or your witness makes a false statement (whether or not knowingly), or you do (innocently), and you then come to know of its falsity as a result of a confidential communication?Slide5
Negotiation and Confidentiality
5Slide6
NY Rule 1.2*6
(d) A lawyer shall not counsel a client to
engage, or
assist
a
client, in conduct that the lawyer knows is
illegal or
fraudulent, except that the lawyer
may discuss
the legal
consequences
of any
proposed course
of conduct with a
client.
*The
ABA
rule is substantially the same.Slide7
New York Rule 8.4
7
A lawyer [or law firm] shall not:…(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation…
The ABA rule is the same except the ABA lacks the bracketed words.Slide8
NY Rule 1.68
(a) A lawyer shall not knowingly
reveal confidential information, as defined in
this Rule, or
use
such information to
the disadvantage
of a client or for
the advantage
of the lawyer or a third
person.Slide9
NY Rule 1.6
9
“Confidential information” consists of information
gained during or relating to
the representation of a client, whatever its source, that is
(a) protected by the
attorney-client privilege,
(b) likely to be embarrassing or detrimental
to the client if disclosed, or
(c) information that the client has requested be kept confidential.
“Confidential information” does not ordinarily include (
i
) a lawyer’s legal knowledge or legal research or (ii) information that is
generally known
in the local community or in the trade, field or profession to which the information relates.
So non-privileged information is confidential only if it is within (b) or (c). Slide10
NY Rule 1.6(b)(the OPM “noisy withdrawal” exception)
10
“A lawyer may reveal or use confidential information to the extent that the lawyer reasonably believes necessary:...
(3) to withdraw a written or oral opinion or representation previously given by the lawyer and reasonably believed by the lawyer still to be relied upon by a third person, where the lawyer has discovered that the opinion or representation
was based on materially
inaccurate
information
or
is being used to further a crime or fraud.”
But what if you have not given a
witten
or oral opinion but unwittingly aided the fraud or crime?Slide11
ABA Rule 4.1
11
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 assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by
Rule
1.6.
[Paragraph (b) is not in the NY rule.]Slide12
ABA Rule 1.612
(a) A lawyer shall not
reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).Slide13
ABA Rule 1.6(b)13
(b) A lawyer may reveal
information relating to the representation of a client to the extent the lawyer reasonably believes necessary:(2) to
prevent the client from committing a crime or fraud
that is reasonably certain to result in substantial injury to the financial interests or property of another and
in furtherance of
which
the client has used or is using the lawyer's services;
(3) to
prevent, mitigate or rectify substantial injury
to the financial interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud
in furtherance of which
the client has used the lawyer's services;Slide14
Litigation and Confidentiality
14Slide15
NY Rule 1.0(w)ABA Rule 1.0(m)
15
“Tribunal” denotes a court, an arbitrator in
an
[ABA: a binding]
arbitration proceeding or a legislative body, administrative agency or other body acting in an adjudicative capacity.
A legislative body, administrative agency or other body acts in an adjudicative capacity when a neutral official, after the presentation of evidence or legal argument by a party or parties, will render a
[
ABA: binding
]
legal
judgment
directly affecting a party’s interests in a particular matter.Slide16
NY and ABA Rule 3.3(a)16
A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a
false
statement of material fact or law previously made to the tribunal by the lawyerSlide17
NY and ABA Rule 3.3(a)17
A lawyer shall not knowingly:
(3) offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a witness called by the lawyer, has offered material evidence and the lawyer
comes to know
of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. ....Slide18
NY and ABA Rule 3.3(b)
18
A lawyer who represents a client before a tribunal and who knows that a person intends to engage, is engaging or has engaged in
criminal or fraudulent conduct
related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.Slide19
ABA Rule 3.3 cmt. [12] (NY Rule 3.3
cmt. [12] is similar)
19
Lawyers have a special obligation to protect a tribunal against criminal or fraudulent conduct that undermines the integrity of the adjudicative process,
such as bribing, intimidating or otherwise unlawfully communicating with a witness, juror, court official or other participant in the proceeding, unlawfully destroying or concealing documents or other evidence or failing to disclose information to the tribunal when required by law to do so
. Slide20
ABA and NY Rule 3.3
20
(b) A lawyer who represents a client [
in an adjudicative proceeding]
[
before a tribunal
] and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.
(c) The duties stated in paragraphs (a) and (b)
continue to the conclusion of the proceeding, and
apply even if compliance requires disclosure of information otherwise protected by Rule 1.6.
[
Red
in ABA rule only.
Green
in NY only.]Slide21
When is a statement “false?”
21Slide22
The “False” Statement Riddle
22
Lawyers are forbidden to make a “false statement of fact or law to a tribunal” and have certain remedial obligations in matters before a tribunal. NY and ABA Rule 3.3(a)
In negotiation, lawyers are forbidden to make a “false statement of
material
fact or law to a third person.” NY and ABA Rule 4.1(a). (The NY version of Rule 4.1(a) omits “material.”)Slide23
But We’re In Lawyer Land..
23
So what is
false
? When is exaggeration or posturing allowed? When is a literally true if overly precise statement disallowed?
NB
: A statement can be false even if the speaker does not mean to lie at the time the statement is made. The word “false” refers to the statement, not the speaker’s state of mind.
So a statement may be “false” though not “fraudulent” or perjury (even if under oath). Slide24
What Can You Say in Negotiation: ABA Opinion 06-439
24
“My client won’t take less than $200.”
Client has authorized $150
“We have an eyewitness that will [identify] [exonerate] the accused.”
None exists.Slide25
What Can You Say in Negotiation: ABA Opinion 06-439
25
In labor negotiation, “That benefit will cost the company $200.”
In fact, it would cost $20.
“Immunity is off the table. We’ll be researching possible charges.”
Prosecutor has no intention of indicting the defendantSlide26
What Can You Say in Negotiation: ABA Opinion 06-439
26
“We have documentary proof of the claim.”
None exists.
“If you don’t lower your price, my client will buy elsewhere.”
Client has said there is no other sourceSlide27
What is False?27
A
good rule of thumb is that an incorrect statement of historical
fact will be “false” within the meaning of the rule, as contrasted with a prediction or perhaps an opinion. Slide28
When Is There A Duty to CorrectAn Opponent’s Drafting Error?
28Slide29
Questions to Ask (to begin with)
29
Is it an error of law or fact? If it’s an error of fact, is it mechanical (arithmetical) or based on superior investigation?
The death of a clientSlide30
Death of a Party30
If it’s
the death of a party in a matter in court, you will likely have to reveal that under court rules for substitution or the jurisdiction’s ethics rules.Virzi v. Grand Truck Warehouse (E.D.Mich
. 1983); Matter of Forrest, (N.J. 1999Slide31
Arithmetical Error
31
If it’s an arithmetical or transmittal error, the issue becomes harder but the courts seem to require correction.
Sumerel
v. Goodyear Tire & Rubber Co. (Colo. App. 2009)
“When plaintiffs' counsel reviewed
Brooks's
charts, they immediately recognized the cause of the parties' six-figure discrepancy. At this point, the proper course was obvious to us: plaintiffs' counsel should have called Brooks, identified the discrepancy, and concluded the matter without further delay.” Slide32
Drafting Error32
An error in drafting a provision to which the parties have orally agreed will likely have to be corrected.
California Op. 2013-189Slide33
An Opponent’s Errors:Additional Authorities
33
State v. Addison (Neb. 1987)(discipline for failure to correct opponent’s misunderstanding of insurance policy amounts)
Brown v. County of Genesee (6
th
Cir. 1989)(because of misunderstanding, plaintiff’s lawyer in discrimination case bargained for reinstatement at a lower pay grade than plaintiff was entitled)
Whitaker v. Assoc. Credit Services, Inc. (6
th
Cir. 1991)(typographical error in offer to settle)
ABA Op 86-1518 (error in draft memorializing an agreement)
California Op. 2013-189 (a detailed analysis with many authorities cited and two helpful hypothetical problems)Slide34
Lawyer Liability for Negligent Misrepresentation(or other theory)
34Slide35
Slotkin v. Citizens Casualty Co (2nd Cir. 1979).In re McGrath (1
st Dep’t 1983)
35
Lawyer stated that “to the best of his knowledge” defendant had only $200,000 in insurance. Plaintiff settled for $185,000.
In fact, defendant had an additional $1 million policy which the lawyer had in his file.Slide36
Slotkin, cont’d
36
We believe that the jury could properly find that Christopher McGrath's conduct rendered him liable under New York law as charged…. McGrath stipulated that “to the best of his knowledge” there was only $200,000 worth of coverage in spite of the information in the documents in his possession.
McGrath's
insistence that the policy limit was $
200,000 renders
him liable under the New York definition of
scienter
as “a reckless indifference to error,” “a pretense of exact knowledge,” or “(an) assertion of a false material fact ‘susceptible of accurate knowledge’ but stated to be true on the personal knowledge of the
representer
.” Slide37
From Slotkin…
37
Lawyer’s “insistence that the policy limit was $200,000…renders him liable under the New York definition of scienter as reckless indifference to error, a pretense of exact knowledge, or (an) assertion of a false material fact susceptible of accurate knowledge but stated to be true on the personal knowledge of the representer.” (internal quotes omitted)Slide38
Today, in N.Y. …
38
The claim would likely assert negligent misrepresentation rather than a variety of fraud (why is that?).
Prudential Ins. Co. of America v. Dewey Ballantine (NY 1992)(recognizing negligent misrepresentation claims against lawyers)Slide39
Three other cases that may discomfort lawyers
39
1. Lawyers Title Ins. Co. v.
Baik
(Wash. 2007)
Estate’s lawyer responds to title insurer in connection with sale of estate land:
“By this letter I am informing you that, based on our tax preparation, no estate taxes are due and owing to the state or federal government. Likewise, to my knowledge, no other taxes are outstanding against the estate.”
Insurer does not exclude tax liability from policy and IRS then levies against property for unpaid inheritance taxes.
Insurer sues lawyer.
Slide40
Three other cases that may…
40
2. Hoyt Properties, Inc. v. Production Resource Group, L.L.C. (Minn. 2007)
In settling a suit against a subsidiary with a release to the parent, “Steve Hoyt asked, ‘I don't know of any reason how we could pierce the veil, do you?’ Hoyt alleges that PRG's attorney responded, ‘There isn't anything. PRG and Entolo are totally separate.’”
Effort to open settlement and assert new claims.
Allegation of fraudulent misrepresentation but same allegations could support negligence.Slide41
Three other cases that may…
41
3. Petrillo v. Bachenberg (N.J. 1995)
How many passed perc tests out of how many tried? 2/7 or 2/30?
Did lawyer’s act contribute to buyer’s reasonable false inference?Slide42
How to protect yourself…
42
Do not make statements of fact or implied fact to an opposing counsel or party, at least not without a disclaimer or preceded by “My client tells me….” Don’t endorse (including by repetition) a statement of fact or fact/law you’re not prepared to stand behind.
If you client makes a material false statement in a negotiation, either correct it (with permission if necessary) or withdraw, possibly a noisy withdrawal. Slide43
The No-Contact Rule(see also attached material)
43Slide44
ABA Model Rules 4.2*
44
[1]
In representing a client, a lawyer shall not
[2]
communicate about
[3]
the subject of the representation with a person the lawyer
[4]
knows
to be represented by another lawyer in the matter, unless the lawyer
[5]
has the consent
of the other lawyer
or
[6]
is authorized to do so by law or a court order.
NY Rule 4.2(a) is substantially the same. Numbers in brackets added.Slide45
New York Rule 4.2(b)(not in the ABA Rule)
45
(b) Notwithstanding the prohibitions of paragraph (a), and unless otherwise prohibited by law, a lawyer may cause a client to communicate with a represented person unless the represented person is not legally competent, and may counsel the client with respect to those communications,
provided the lawyer gives reasonable advance notice to the represented person’s counsel that such communications will be taking place.Slide46
NY Rule 4.246
C
mt. [11]: Persons represented in a matter may communicate directly with each other. A lawyer may properly advise a client to communicate directly with a represented person, and
may counsel
the client with respect to those communications, provided the lawyer complies
with paragraph
(b
)…. A
lawyer may also counsel a client with respect to communications with
a represented
person, including by drafting papers for the client to present to the
represented person
.Slide47
ABA Rule 4.2
47
Cmt
. [4]: “Parties to a matter may communicate directly with each other, and a lawyer is not prohibited from advising a client concerning a communication that the client is legally entitled to make.”
The scope of this language is addressed in ABA Opinion 11-461.Slide48
Niesig v. Team I (NY 1990)
48
“The test that best balances the competing interests... is one that defines "party" to include
[1]
corporate employees whose acts or omissions in the matter under inquiry are binding on the corporation (in effect, the corporation's "alter egos") or
[2]
imputed to the corporation for purposes of its liability, or
[3]
employees implementing the advice of counsel. All other employees may be interviewed informally.”
[Bracketed numbers added]Slide49
Niesig v. Team I (NY 1990).
49
Niesig excludes former agents and employees from the operation of the rule.Slide50
But Be Careful BecauseNiesig Concludes:
50
“Defendants' assertions that ex parte interviews should not be permitted because of the dangers of overreaching, moreover, impel us to add the cautionary note that, while we have not been called upon to consider questions relating to the actual conduct of such interviews, it is of course
assumed that attorneys would make their identity and interest known
to interviewees and comport themselves ethically.”
Do not seek to elicit privileged or strategic information. Slide51
ABA Rule 4.2
51
Cmt
. [7]: “In the case of a represented organization, this Rule prohibits communications with a constituent of the organization who
[1]
supervises, directs or regularly consults with the organization’s lawyer concerning the matter or
[2]
has authority to obligate the organization with respect to the matter or
[3]
whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. Consent of the organization’s lawyer is not required for communication with a
[4]
former constituent.”
[Bracketed numbers added. Accord Restatement of Law Governing Lawyers
§100. NY Rule 4.2
cmt
. [7] is substantially the same.]Slide52
What About Testers?
52
Can a lawyer supervise a tester consistent with the no-contact rule? What is a tester?
Gidatex, S.r.L v. Campaniello Imports, Ltd. (S.D.N.Y. 1999): “These ethical rules should not govern situations where a party is legitimately investigating potential unfair business practices by use of an undercover posing as a member of the general public engaging in ordinary business transactions with the target. To prevent this use of investigators might permit targets to freely engage in unfair business practices which are harmful to both trademark owners and consumers in general.”
See also Hill v. Shell Oil Co. (N.D. Ill. 2002).Slide53
ABA Opinion 95-396
53
[A] lawyer representing the organization cannot insulate all employees from contacts with opposing lawyers by asserting a blanket representation of the organization.Slide54
ABA Model Rule 3.4
54
A lawyer shall not…(f) request a person other than a client to refrain from voluntarily giving relevant information to another party unless:
(1) the person is a relative or an employee or other agent of a client; and
(2) the lawyer reasonably believes that the person's interests will not be adversely affected by refraining from giving such information.Slide55
When the Government is the Adversary
55
ABA Opinion 97-408 reads Rule 4.2 to permit contact with government officials “who have authority to take or to recommend action in the matter, provided that the sole purpose of the lawyer’s communication is to address a policy issue,
including
settling the controversy.”
See also NYS Opinion 812. Slide56
When the Government is the Adversary
56
Contact is forbidden where the official lacks the authority to do these things or where the purpose is to “develop evidence” or learn relevant information.
Also notice of intended contact must first be given to government counsel “to afford an opportunity for consultation…on the advisability of…entertaining the communication.”Slide57
Ethics Opinions
57
ABA Opinion 06-443 and NYC Opinion 2007-1 (contact with organization’s in house lawyer). Slide58
“Playbook” Conflicts
58Slide59
NY and ABA Rule 1.9(a)59
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the
same or a substantially related matter in which that person's interests are materially
adverse to the interests
of the former client unless the former client gives informed consent, confirmed in writing.Slide60
What Does Rule 1.9(a) Protect?60
Confidential information –
But how?The risk of false positives and false negativesAn ongoing duty of loyaltySlide61
“Playbook” Conflicts61
Lawyers
may not switch sides on the same or a substantially related matter.“Same” is easy.“Substantially related” can be hard, requiring judgment, knowledge of the caselaw
, and prediction.
Essentially, the question is this:
Could
the lawyer have acquired information in the former representation that can now be used against the former client in the new adverse matter.Slide62
“Playbook” Conflicts62
“Substantially related” is a proxy or surrogate for an actual investigation of the confidential information, which courts don’t want to do because:
It takes too much timeIt forces disclosure of the very information the former client’s DQ motion seeks to avoid
The inevitability of false positives and false negatives
One possible antidote for false negativesSlide63
“Playbook” Conflicts63
The “playbook” question:
Is DQ appropriate if the former client’s information allegedly at risk is not matter specific information but at a higher level of generality?And how high can you go without preventing the former firm from ever opposing the former client?
“You Don’t Know Anything”
Some authorities in the attached material