Ethics Advisory Opinion 14-03

Utah State Bar
Ethics Advisory Opinion Committee

Opinion Number 14-03

Issued April 22, 2014

ISSUE

1.         Do the Utah Rules of Professional Conduct prohibit referral agreements between two attorneys that require one of the attorneys (the “Referring Attorney”) to refer to the other (the “Receiving Attorney”) all clients that have a certain specified type of products liability claim?

 OPINION

2.         The Committee concludes that an agreement between two attorneys which requires the Referring Attorney to refer to the Receiving Attorney all clients that have a certain specified type of claim may likely violate various provisions of the Utah Rules of Professional Conduct (the “Rules”).

FACTS

3.         The Referring Attorney, licensed to practice in the State of Utah, and the Receiving Attorney, licensed to practice elsewhere, enter into an agreement governed by Utah law (the “Agreement”) to jointly pursue certain kinds of products liability claims (the “Claims”) of individuals located in the State of Utah.  The Agreement provides in relevant part:

  1. Referring Attorney will generate the cases by placing advertising and/or arranging for medical testing and diagnosis of prospective clients and would be entitled to reimbursement from the Receiving Attorney for the costs of doing so.
  2. In return for the Receiving Attorney’s agreement to pay those expenses, the Referring Attorney would be required to exclusively refer to the Receiving Attorney all clients having such Claims who contact the Referring Attorney.  The Referring Attorney would not be allowed to represent such clients himself or to refer such clients to any other attorney.
  3. The Referring Attorney will place advertising, accept incoming calls from potential clients, obtain medical records from potential clients, arrange for medical testing, and perform certain other related tasks, before turning the clients over to Receiving Attorney for further action.
  4. The Receiving Attorney will decide in his sole discretion the venue, jurisdiction, timing, counts, and content of complaints or petitions, joinder of plaintiffs and/or defendants, and any other strategic issues relating to the Claims.
  5. The Referring Attorney will ask clients to sign new fee agreements directly with the Receiving Attorney, identifying the Receiving Attorney as the clients’ attorney, will inform the clients of the division of fees between the two attorneys, and will inform the clients of any other matters deemed by either attorney to be required by the Rules of Professional Conduct.
  6. The Referring Attorney will not be required to perform any services except those specified in the Agreement or required by the Utah Rules or by any other ethical rules governing the Claims or any resulting cases.
  7. The Receiving Attorney will pay the Referring Attorney specified portions of the fees recovered by the Receiving Attorney for the clients on their Claims.

 ANALYSIS

 

4.         The fee sharing agreement between the two attorneys is governed by Rule 1.5, which provides that there may be a division of fees between lawyers in different firms, but on the following condition:

(e)(1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;

(e)(2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and

(e)(3) the total fee is reasonable.
(more…)

Ethics Advisory Opinion No. 04-01

March 29, 2004
1 Issue:
What action, if any, may a lawyer for an employer ethically undertake on behalf of a vanished former employee who, along with the employer, has been named as a defendant in an action arising when the person was an employee?

2 Answer: Under certain narrowly prescribed conditions, an employer’s lawyer may ethically take limited action to protect the interests of the vanished former employee, provided the lack of direct contact with that defendant is brought to the attention of the relevant tribunal.
3 Facts: Plaintiff filed suit naming a company and its former employee as defendants. The employer concedes that the former employee was acting in the course and scope of his employment and has asked the company’s lawyers to represent the missing defendant. Absence of a formal answer to the complaint may result in a default judgment being entered against the absent former employee. We have no information about the reasons for the employee’s absence, but we assume that a reasonable effort has been made to locate the person and determine the reason for the absence. We also assume that, at this early stage of the proceeding, the interests of the employer and former employee are not in conflict.1The lawyer requesting this opinion also indicated that the employer has liability insurance that covers the incident giving rise to the lawsuit.2The company has requested that the lawyer represent the missing ex-employee.
4 Analysis: This case presents two fundamental, but competing ethical principles: On the one hand, a basic ingredient of the representation of a client is that, under Rule 1.4, the lawyer communicate with the client, keep the client informed about the status of the case, and provide sufficient information to the client that he may make informed decision.3On the other hand, lawyers have a general obligation to advance the administration of justice.4
5 A formal application of Rule 1.4, without reference to any other parts of the Rules of Professional Conduct, would produce the following syllogism: The lawyer hasn’t communicated with the absent ex-employee and cannot formally satisfy the requirements of Rule 1.4; a violation of Rule 1.4 constitutes an ethical transgression; ergo, the lawyer may not ethically represent the ex-employee. Yet, we find this result inconsistent with the greater public policy of providing safeguards for an individual’s rights to the extent practicable and when it can be done without infringing on the rights of others. After all, the Utah Rules of Professional Conduct are “rules of reason . . . [that] should be interpreted with reference to the purpose of legal representation.”5
6 Further, before a mechanical application of Rule 1.4 to the absent defendant leads us to conclude that lack of initial attorney-client communication mandates no representation, we consider the intent of Rule 1.4. It is constructed around the normal relationship of an attorney-client contact already having been established and provides the guidelines that require a lawyer to keep that client properly informed “to the extent the client is willing and able” to be so informed.6Here, for reasons that are not known—and perhaps not contemplated by the drafters and adopters of the Rules—the (prospective) client is not “willing and able.” Without further analysis, we, therefore, decline to conclude that Rule 1.4 prevents all forms of representation of the missing employee.
(more…)

Ethics Advisory Opinion No. 02-03

(Issued February 27, 2002)
1 Issue:
What are the ethical obligations of an insurance defense lawyer with respect to insurance company guidelines and flat-fee arrangements?

2 Opinion: An insurance defense lawyer’s agreement to abide by insurance company guidelines or to perform insurance defense work for a flat fee is not per se unethical. The ethical implications of insurance company guidelines must be evaluated on a case by case basis. An insurance defense lawyer must not permit compliance with guidelines and other directives of an insurer relating to the lawyer’s services to impair materially the lawyer’s independent professional judgment in representing an insured. If compliance with the guidelines will be inconsistent with the lawyer’s professional obligations, and if the insurer is unwilling to modify the guidelines, the lawyer must not undertake the representation. Flat-fee arrangements for insurance defense cases are unethical if they would induce the lawyer improperly to curtail services for the client or perform them in any way contrary to the client’s interests. Obligations of lawyers under the Utah Rules of Professional Conduct, including the duty zealously to represent the insured, cannot be diminished or modified by agreement.
Insurance Company Guidelines
3 Opinion Request Concerning Insurers’ Guidelines. The Ethics Advisory Opinion Committee has received a request for an ethics advisory opinion concerning insurance company guidelines for counsel who are employed to defend litigation brought by a third party against an insured. The requestors state that insurance companies doing business in Utah have incorporated in their defense-counsel retainer agreements certain billing protocols or guidelines governing attorneys’ procedures and payments that raise ethical issues.
4 Prior Opinions. Although issues pertaining to insurance company guidelines have been the subject of considerable discussion elsewhere,1 they have not been addressed directly by this Committee.2 When ethical concerns about insurance company guidelines have been raised in ethics opinions from other jurisdictions, the opinions are generally consistent with the summary set forth in ABA Opinion No. 01-421:
A lawyer must not permit compliance with “guidelines” and other directives of an insurer relating to the lawyer’s services to impair materially the lawyer’s independent professional judgment in representing an insured.
Although most of the ethics opinions on insurance company guidelines take a general approach, a few—while acknowledging that certain guidelines may be appropriate—have taken issue with particular guidelines. For purposes of illustration, portions of selected ethics opinions from other jurisdictions are set forth in Appendix A. We do not intend to imply agreement with the conclusions of these opinions. Rather, we wish to describe more fully the kinds of concerns that have been raised elsewhere, many of which are raised directly in the request before us.
5 Montana Supreme Court Decision. The Montana Supreme Court has issued an opinion that addresses these topics, but only after having determined that the insured is the sole client of the defense lawyer. Under that structure, the court noted that defense counsel (a) does not have a “blank check” to escalate litigation costs, (b) should consult with the insurer, (c) must charge reasonable fees, and (c) can be held accountable for its work. The Montana court then held that “defense counsel in Montana who submit to the requirement of prior approval [obtaining consent of the insurer prior to taking certain actions] violate their duties under the Rules of Professional Conduct to exercise their independent judgment and to give their undivided loyalty to insureds.”3
(more…)

Ethics Advisory Opinion No. 02-10

Issued December 18, 2002
1 Issue:
May a lawyer review pleadings prepared by a non-lawyer mediator for simple, uncontested divorces and advise the mediator on how to modify the pleadings for filing in court?

2 Conclusion: (1) As lawyer for the mediator, a lawyer may advise the mediator on the issues likely to arise in the course of the mediation, but may not advise the mediator how to prepare the divorce agreement and court pleadings for particular parties who are clients of the mediator. This would constitute assisting in the unauthorized practice of law and would violate Utah Rules of Professional Conduct 5.5. (2) An attorney may provide representation to a party engaged in a divorce mediation that is limited to advising the party and assisting with pleadings, but may not so limit the representation without first fully informing the party of the proposed limitation and obtaining the party’s informed consent.
3 Background: A divorce mediator has requested that a lawyer perform a limited service: review pleadings prepared by the mediator and amend them as needed. Prior to the attorney’s involvement, the mediator would meet with the divorcing parties and assist them in reaching a settlement of all issues in their divorce. Then, the mediator would draft the parties’ agreement, which would be filed with the court or incorporated into the judgment of the court. Finally, the mediator would draft the various additional court documents (e.g., complaint, findings of fact and conclusions of law, judgment) needed for the parties’ divorce. The mediator would inform the divorcing parties that the pleadings were not prepared by an attorney, but had been reviewed by an attorney for “sufficiency.” The divorcing parties would pay the attorney a small fee for this service.
4 Analysis: The request raises the following issues:
* Whether the lawyer is representing the mediator or the divorcing parties.
* Whether this plan involves the lawyer’s assisting in the unauthorized practice of law in violation of Utah Rules of Professional Conduct 5.5.
* Whether this plan constitutes an appropriate limitation on the lawyer’s representation for the client under Utah Rules of Professional Conduct 1.2 and 1.1.
A. Whether the lawyer is representing the mediator or the divorcing parties.
5 The original request appears to presume that the lawyer is advising the mediator. However, the advice sought from the Committee focuses on the agreement and pleadings for a divorce between two particular parties. Here, we consider the ethical constraints on both possible relationships.
B. Whether the lawyer, in advising the mediator, is assisting in the authorized practice of law.
6 Rule 5.5 provides that a lawyer shall not “assist any person in . . . the unauthorized practice of law.” However, the Comments to Rule 5.5 state that the rule “does not prohibit lawyers from providing professional advice and instruction to nonlawyers whose employment requires knowledge of law.” Accordingly, it should be permissible for a lawyer to form an attorney-client relationship and provide a mediator with professional advice that the mediator needs for this occupation. In order to understand the limits of what is appropriate legal advice to give a mediator, we first examine what constitutes the practice of mediation under Utah law and current codes of conduct for mediators.
(more…)