Ethics Advisory Opinion No. 04-06

December 2, 2004
Issue:
Under what circumstances is it permissible for corporate counsel to assert that counsel concurrently represents present and former corporate employees whose testimony is relevant to a claim and ethically preclude opposing counsel’s access to those corporate employee witnesses?

Opinion: If corporate counsel has actually formed an attorney-client relationship with these employee-witnesses, and has fully complied with Utah Rules of Professional Conduct 1.7 (including obtaining informed consent from all multiple clients to joint representation and informing them of the possible need for withdrawal from representing any of them should an actual conflict arise), this is permissible and opposing counsel may not interview them. However, in the absence of such a fully formed and proper attorney-client relationship, it is improper for corporate counsel to block opposing counsel’s access to other current corporate constituents, by asserting an attorney-client relationship unless these individuals were control group members, their acts could be imputed to the organization or their statement would bind the corporation with respect to the matter under Utah Rules of Professional Conduct 4.2. Similarly, it is improper to block opposing counsel’s access to any former employee in the absence of a current fully formed and proper attorney-client relationship.
Facts: The tort action asserts one corporate employee and an outside individual were negligent, but names only the corporate entity (and the outside individual) as defendants. Counsel for plaintiff seeks to interview other employees who are fact witnesses and who are not alleged to be negligent. Corporate counsel informs plaintiff’s counsel that s/he is representing all corporate employees (current as well as former employees) and thus plaintiff’s counsel may not informally interview any of these individuals without violating Rule 4.2.
Analysis: Whether corporate counsel’s actions are proper must be determined by reference
to Rule 1.7 regarding conflicts of interest, Rule 4.2 as it governs counsel’s ability to interview “represented persons” in the corporate context, and Rule 3.4 as it permits corporate counsel to request that corporate employees not talk with opposing counsel.
Rule 4.2 1 provides in relevant part:
(a) General Rule. A lawyer who is representing a client in a matter shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by [other law or judicial order].
Utah’s Rule 4.2 2 expressly addresses “Organizations as Represented Persons” and defines when an individual constituent of that organization, not separately represented, should be considered to be “represented” by corporate counsel. With respect to non-governmental organizations, Rule 4.2 states:
(c)(1)(B) When the represented “person” is an organization, an individual is “represented” by counsel for the organization if the individual is not separately represented . . . and . . . is known by the lawyer to be
(c)(1)(B)(i) a current member of the control group of the represented organization; or
(c)(1)(B)(ii) a representative of the organization whose acts or omissions in the matter may be imputed to the organization under applicable law; or
(c)(1)(B)(iii) a representative of the organization whose statements under applicable rules of evidence would have the effect of binding the organization with respect to proof of the matter.
Accordingly, whether or not the corporate attorney had formed an individualized attorney-client relationship with a particular corporate employee, this rule would prohibit the opposing counsel from interviewing any current member of the “control group” or any current employee whose acts or omissions would be imputed to the corporation or whose statements would be imputed to the corporation. Under these circumstances the employee would be acting and speaking for the corporation.3
Here, however, the opposing attorney posits that the employee is NOT a “person” “represented” by corporate counsel due to any of these factors, but a mere fact witness whom corporate counsel has (inexplicably in opposing counsel’s view) undertaken to represent as well.
Utah Rules of Professional Conduct 3.4, “Fairness to opposing party and counsel” must also be consulted. This rule is designed to permit both counsel to have access to relevant evidence in order that the adversary system function appropriately. Under Rule 3.4(f), a lawyer ordinarily may not ask a person who is not the lawyer’s client “to refrain from voluntarily giving relevant information to another party” with one exception relevant here. There is an exception to this prohibition if “[t]he person is . . . an employee or other agent of a client; and (2) [t]he lawyer reasonably believes that the person’s interests will not be adversely affected by refraining from giving such information.”4 Thus, in accordance with this rule, corporate counsel may request any current employee (including fact witnesses) whose interests will not be adversely affected to refrain from informally speaking with opposing counsel. However, corporate counsel may not direct opposing counsel not to contact corporate employees who have the right to talk or to decline to talk to opposing counsel, unless, of course, these corporate employees are actually individually represented by corporate counsel.
The situation posits corporate counsel taking one further step, making all employees who have any information about the issue individual clients, and thus conclusively preventing opposing counsel from informally contacting any of them. The first question in analyzing whether this strategy is ethical is whether these employee-fact-witnesses have actually formed an individual attorney-client relationship with corporate counsel. If they have not, corporate counsel would be guilty of violating Rule 3.4 in unlawfully obstructing access to these witnesses and Rule 4.1 in making a false statement of material fact.5
It is permissible for corporate counsel to undertake to represent an employee opposing counsel believes is a mere fact witness provided there is no actual conflict of interest (Rule 1.7(a)) between the corporation and the employee-witness with respect to the matter and provided corporate counsel fully complies with Rule 1.7(b) regarding potential conflicts of interest. Such compliance would require that all clients (the corporation and each employee-witness) be fully informed as to the implications of common representation, and give consent to common representation after such advice. The advice should include the possibility that if a conflict of interest arises between the corporation and the witness, counsel may be required to withdraw from the representation entirely.6
It may be helpful to illustrate a possible scenario where common representation might be undertaken and a scenario where it should not be. Imagine allegations that the corporation has been negligent due to the acts of one employee, and the named employee, the corporation and all other employee witnesses tell counsel that the alleged negligent act never occurred. Under these circumstances, counsel should be able to obtain informed consent to represent the corporation, the alleged negligent employee and other employee witnesses, should they all desire representation. However, if one employee witness will testify that the negligent act occurred and the employee alleged to be negligent denies the act; then clearly corporate counsel cannot represent both (and might be required to withdraw from the representation entirely if this came to light after common representation had been undertaken).
We also interpret Rule 1.7 to be consistent with Rule 3.4. If an employee’s interest might be adversely affected by refraining from giving information to opposing counsel under Rule 3.4, then a conflict of interest exists such that common representation should not be permitted under Rule 1.7. For example, if the corporate employee had suffered the same discrimination as that complained of in the claim against the corporation, it would be impermissible for corporate counsel to undertake to represent this employee fact witness in the case.
While corporate counsel may certainly consult with the corporate constituent called as a witness in a deposition, this consultation is part of counsel’s representation of the corporation and does not render the attorney counsel to the witness as an individual. Nor does such corporate representation block opposing counsel’s ability to attempt to interview such a fact witness separate and apart from formal discovery.
Finally, we note that, in prohibiting communications with persons represented by counsel, Utah’s Rule 4.2(a) provides explicit exceptions: “the lawyer . . . is authorized to do so by: . . . (2) decision . . . of a court of competent jurisdiction; (3) a prior written authorization by a court of competent jurisdiction obtained by the lawyer in good faith. . . .” Accordingly, an attorney who seeks to informally interview employees who are mere fact witnesses has the possibility of having this issue resolved by the court.7
Footnote
1. This portion of Utah Rules of Professional Conduct 4.2 (2004) is identical to ABA Model Rule 4.2 (1993). This Committee has previously opined regarding when Rule 4.2 prohibits or permits contact with various persons in Utah Ethics Advisory Op. No. 04-04, 2004 WL 1921150 (Utah St. Bar) (contact with former employees of opposing party permitted), Utah Ethics Advisory Op. No. 98-07, 1998 WL 493028 (Utah St. Bar) (contact with insurance adjuster), Utah Ethics Advisory Op. No. 96-01, 1996 WL 227376 (Utah St. Bar) (contact with former plaintiffs whose claims have been settled), Utah Ethics Advisory Op. No. 95-05, 1996 WL 73351 (Utah St. Bar) (relationship to U.S. Department of Justice regulation purporting to authorize certain ex parte contacts), and Utah Ethics Advisory Op. No. 113 (1991), 1991 WL 634794 (Utah St. Bar) (counsel for individual members of tribe communicating with Tribal Counsel). None of these opinions is determinative in this case.
2. The ABA Model Rules include these concepts in the Comment to Rule 4.2, as did Utah before the current version was adopted in 1999. See Featherstone v. Schaerrer, 34 P.3d 194 (Utah 2001) interpreting Utah’s prior Rule 4.2 to prohibit contacts with the corporation’s secretary given this language in the Comment to the rule.
3. This interpretation of prior Utah Rule 4.2, which included these provisions in the Comment rather than in the text of the rule itself, was adopted by the Utah Supreme Court in Featherstone v. Schearrer, 34 P.3d 194, 201 (Utah 2001).
4. Utah Rules of Professional Conduct 3.4(f)(1),(2)(2004).
5. Utah Rules of Professional Conduct 4.1(a)(2004) provides: “In the course of representing a client a lawyer shall not knowingly: (a) [m]ake a false statement of material fact or law to a third person.”
6. See Utah Rules of Professional Conduct 1.9 and Utah Ethics Advisory Op. No. 96-11, 1996 WL 45138 (Utah St. Bar) (attorney appointed to represent both mother and father in an abuse/neglect proceeding must withdraw from representing either of them after a conflict of interest arises).
7. See e.g., Shearson Lehman Brothers, Inc. v. Wasatch Bank, 139 F.R.D. 412 (D. Utah 1991) (brokerage firm sought and obtained court’s permission to conduct ex parte interviews with former bank employees where bank was represented by counsel).

Ethics Advisory Opinion No. 03-04

Issued October 14, 2003
¶1 Issue
: May a lawyer threaten to present criminal charges against an opposing party or witness during negotiations in a private civil matter?

¶2 Opinion: In the course of representing a client in a civil matter, it is not per se unethical for a lawyer to threaten that the client may pursue criminal charges against an adverse party where the civil and criminal matters are related. However, such a threat will be a violation of the Utah Rules of Professional Conduct if it constitutes “extortion,” if the lawyer does not have a reasonable belief that such charges are warranted by the law and the facts, or if it involves “abusive treatment” of a witness.
¶3 Background: This query arose when counsel, during a mediation, stated that the opposing party’s witness was in violation of Utah law and that the County Attorney’s office “would be interested” to learn of the alleged violation.
¶4 The Former Rule. Prior Disciplinary Rule 7-105 of the Model Code of Professional Responsibility barred a lawyer from using criminal charges to gain leverage in a civil action: “A lawyer shall not present, participate in presenting, or threaten to present criminal charges solely to obtain an advantage in a civil matter.”1 The stated intent of DR 7-105 was to prevent lawyers from using the criminal justice system for oppressive purposes, and the rule set the boundaries of acceptable lawyer conduct clearly.
¶5 The drafters of the American Bar Association Model Rules of Professional Conduct (“Model Rules”), however, deliberately left out the provisions of DR 7-105. The rationale behind this omission was the drafters’ belief that “extortionate, fraudulent, or otherwise abusive threats were covered by other, more general prohibitions in the Model Rules and thus that there was no need to outlaw such threats specifically.”2 The prior rule was thought to be overbroad because it prohibited legitimate pressure tactics and negotiation strategies.3 The current Utah Rules of Professional Conduct also include no analog to DR 7-105, but instead prohibit a lawyer from using “means that have no substantial purpose other than to embarrass, delay or burden a third person”4 and from engaging “in conduct involving dishonesty, fraud, deceit or misrepresentation [or] . . . in conduct that is prejudicial to the administration of justice.”5
¶6 ABA Opinion 92-363: The American Bar Association addressed the permissibility of threats in 1992 in Formal Opinion 92-363 (“Opinion 363”). Opinion 363 concluded that a lawyer may use the possibility of presenting criminal charges against the opposing party in a private civil matter to gain relief for the client, as long as the criminal and civil matters are related, the lawyer has a reasonable belief that threat is warranted by the law and the facts, and the lawyer does not suggest she possesses improper influence over the criminal process or try to exert such influence.6 Correspondingly, a lawyer may agree to refrain from presenting criminal charges as part of a settlement so long as the agreement does not violate applicable law.7
¶7 The same factors apply to threats against an opposing party’s witness. Opinion 363 notes that “abusive treatment” of witnesses may implicate Model Rule 4.4. Abusive treatment exists if the lawyer’s purpose in suggesting charges may be brought is merely to embarrass, delay or burden a third person. If, however, the lawyer has a well-founded belief that criminal charges related to the civil action may be justified, and the lawyer does not suggest the presence of improper influence over the criminal process, the conduct is not abusive.
¶8 Analysis: Given the deliberate omission of DR 7-105 from the current Model Rules and the reasoning of Opinion 363, we conclude that threats of possible criminal charges are sometimes permissible under the Utah Rules of Professional Conduct. As Hazard & Hodes explain:
In reality, many situations arise in which a lawyer’s communications on behalf of a client cannot avoid addressing conduct by another party that is both criminal and tortious. . . . An example is where a lawyer for a financial corporation must deal with an employee who has been discovered in embezzlement. . . . In these circumstances it is counterproductive to prohibit the lawyer from discussing with the employee, or the employee’s counsel, the possibilities [of having the employee pay back the money without the adverse publicity that a criminal trial would bring].8
Such threats, however, are subject to limitations on the manner with which an advocate may proceed.
¶9 Under the current rules, as with the old, behavior that is “extortionate” is impermissible,9 because extortion is a “crime that reflects adversely on a lawyer’s honesty.”10 Whether lawyer conduct is extortionate and qualifies as an ethical violation is to be determined by the facts on a case-by-case basis.11
¶10 For example, a 1993 New Hampshire case involved a lawyer being disciplined for such improper behavior. In that case, when a plaintiff’s civil rights lawyer publicly maligned city officials and threatened them with serious criminal charges, his behavior was found to be “decidedly intimidating” and “beyond the parameters of zealous advocacy.”12 An ethical violation also occurred when a plaintiff’s lawyer, on the eve of trial, sent a letter to defendant’s lawyer threatening to send the prosecutor’s office certain documents that could incriminate the defendant, her sister and other members of her family, unless the plaintiff was immediately paid for rent due.13
¶11 The possible criminal action must, moreover, be related to the current civil matter.14 This helps insure that a lawyer’s conduct does not compound another crime. The relatedness requirement also ensures that permissible negotiation will be focused on the merits of the civil litigation and that parties will not become distracted by unconnected matters.
¶12 The use of threats also implicates Utah Rules of Professional Conduct 3.1, 4.1, 4.4 and 8.4. A lawyer must conform to these rules when using the possibility of criminal prosecution as leverage. Rule 3.1, for example, prohibits a lawyer from asserting claims in court that are not meritorious. Rule 4.1 requires lawyers to be truthful in dealing with others on a client’s behalf, forbidding a lawyer from “knowingly” making a “false statement of material fact or law to a third person.” Accordingly, a lawyer violates Rule 4.1 if he threatens criminal prosecution where he knows the facts do not support such charges. Further, Rule 4.4 says, “In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a third person.” Thus, an off-hand threat without any informed opinion that criminal charges are well-founded may violate Rule 4.4.
¶13 A lawyer who threatens criminal proceedings must be sure that both the present civil suit and the threat of criminal action are well-founded. The lawyer, therefore, can only threaten criminal prosecution in the good-faith belief that such prosecution may be warranted by the law and facts. While a lawyer in a civil action may not use the criminal justice system to make frivolous, patently untruthful or otherwise unjustified threats against an opposing witness, the threat of criminal charges that are warranted would not violate these rules.
¶14 Various provisions of Rule 8.4 also affect the permissibility of threats of criminal prosecution. A lawyer’s failure to report criminal wrongdoing may be unethical under Rule 8.4(b) if it facilitates another crime. More generally, under section (c) of Rule 8.4, it is professional misconduct for a lawyer to “[e]ngage in conduct involving dishonesty, fraud, deceit, or misrepresentation.” Additionally, section (d) of the rule prohibits a lawyer from behaving in a manner that is “prejudicial to the administration of justice,” and section (e) says that a lawyer may not “state or imply an ability to influence improperly a government . . . official.” These provisions, also, prohibit the lawyer from dishonestly stating that another has committed a crime. Similarly, a lawyer is prohibited from suggesting that he can ensure that the prosecution or the court will act in a particular way if criminal charges are in fact considered.
¶15 Finally, although in certain circumstances it is ethically permissible for a lawyer to discuss both the civil and criminal implications of certain matters (e.g., embezzlement), this does not give a lawyer unfettered license to threaten parties or witnesses with criminal prosecution. In suggesting the possibility of criminal prosecution, a lawyer needs to be very careful not to violate ethical standards set forth in Rules 3.1, 4.1, 4.4 and 8.4, that the comments are not subject to being misinterpreted as attempted extortion, and that whatever is said about the possibility of criminal prosecution is directly related to the pending civil matter.
¶16 Conclusion. We adopt the position of a number of other states’ ethics committees15 and conclude that, in the course of representing a client in a civil matter, it is not per se unethical for a lawyer to threaten that the client may pursue criminal charges against an adverse party where the civil and criminal matters are related. However, a lawyer should use these tactics with a watchful eye on whether their use constitutes “extortion” under Utah Law, whether the lawyer reasonably believes that such charges are warranted by the law and the facts, and whether they involve “abusive treatment” of a witness.
Footnotes
1. The Model Code of Professional Responsibility governed Utah attorneys’ professional behavior until January 1988, when the Utah Supreme Court adopted a version of the ABA’s Model Rules of Professional Conduct.
2. C.W. WOLFRAM, MODERN LEGAL ETHICS § 13.5.5, at 718, citing ABA Model Rule 8.4, legal background note (Proposed Final Draft, May 30, 1981) (1986) (hereinafter “Wolfram”).
3. G.C. HAZARD & W.W. HODES, THE LAW OF LAWYERING § 40.4, at 40-7 (2003) (hereinafter, “Hazard & Hodes”).
4. Utah Rules of Professional Conduct 4.4 (2003).
5. Id. Rules 8.4(c) and (d).
6. See also ABA/BNA, Lawyers’ Manual on Professional Conduct § 1001:117 (1984).
7. The situation is somewhat different, however, when it involves threats against a party’s lawyer. Rule 8.3 imposes an affirmative duty of reporting when a lawyer has knowledge of another lawyer’s violation of the Rules of Professional Conduct “that raises a substantial question as to that lawyer’s honesty, trustworthiness, or fitness.”
8. Hazard & Hodes § 40.4, at 40-7 to 40-8 (2003). See Committee on Legal Ethics v. Printz, 416 S.E.2d 720 (W. Va. 1992), permitting negotiations regarding embezzlement as described above.
9. See id. and Wolfram, supra note 1.
10. Utah Rules of Professional Conduct 8.4(b).
11. Utah Code Ann. § 76-6-406(2) defines “theft by extortion.” Our opinion here is limited to the ethical implications of a lawyer’s conduct. It is not our purview to render legal opinions about whether specific conduct may or may not cause a prosecutor to conclude that the conduct constitutes the crime of extortion under Utah law.
12. In re Robertson’s Case, 626 A.2d 397, 400 (N.H. 1993).
13. In re Office of Disciplinary Counsel v. King, 617 N.E.2d 676 (Ohio 1993).
14. See Kate A. Toomey, Practice Pointer: The Rule Against Threatening Criminal Prosecution to Gain an Advantage in a Civil Matter. UTAH BAR J., Dec. 2002, at 12.
15. For example, in Opinion No. 1995-2, www.dsba.org/ethics95-2.pdf, the Delaware State Bar Commission on Professional Ethics held that a lawyer may threaten criminal charges to gain relief for a client in the administration of an estate matter. The charges must be related and be warranted by law and facts. Opinion 97-2 (1997) of the Ethics Commission of Alaska Bar Association, www.alaskabar. org/index.cfm?ID=4870, holds similarly. The West Virginia Committee on Legal Ethics found that a lawyer’s threat to press criminal charges against his client’s former employee unless he made restitution of embezzled funds was a legitimate negotiating technique. Committee on Legal Ethics v. Printz, 416 S.E.2d 720 (W. Va. 1992).

Ethics Advisory Opinion No. 00-05

(Approved December 1, 2000)
¶ 1 Issue:
Where a defendant is being represented by a lawyer appointed by defendant’s insurance carrier prior to the entry of any judgment against the defendant, would it be ethical for plaintiff’s lawyer to convey a settlement offer proposing that plaintiff take an assignment of any bad-faith claim that the defendant might have against the insurance carrier in exchange for plaintiff’s agreement not to execute against defendant for amounts exceeding the insurance policy limits?

¶ 2 Opinion: It is ethical for plaintiff’s lawyer to communicate this offer of settlement to the defendant so long as the communication complies with Utah Rules of Professional Conduct 4.1 and 4.2. If the offer of settlement creates a conflict of interest for the defendant’s insurance carrier-appointed lawyer, then the defendant’s lawyer must fully comply with Rule 1.7. Counsel’s presentation of plaintiff’s settlement offer to advance plaintiff’s interests is not unethical, even though it may place defendant’s counsel in a conflict of interest.
¶ 3 Facts: In a lawsuit brought against Defendant by Plaintiff, Defendant is being represented by a lawyer appointed by Defendant’s insurance carrier. There is the potential for a judgment against Defendant for an amount greater than the limits of the insurance policy. Prior to the entry of judgment (or even prior to the filing of a complaint), Plaintiff, through her lawyer, wishes to make a settlement offer to Defendant under which Plaintiff would accept an assignment of any bad-faith claims1Defendant might have against his insurance carrier in exchange for Plaintiff’s agreement not to execute on any judgment against Defendant to the extent that a judgment would exceed the limits of the applicable insurance policy.
¶ 4 The request to the Committee questions whether Plaintiff’s counsel’s conveying such an offer of settlement has ethical ramifications if it creates a relationship between Plaintiff’s lawyer and an adverse party that results in a conflict of interest for Defendant’s counsel. The Committee has been asked to consider the request under two assumptions: that the offer is conveyed (a) by a letter addressed to Defendant, in care of Defendant’s counsel, and (b) by a letter addressed to Defendant, in care of the insurance adjuster for Defendant’s insurance carrier.2
¶ 5 Discussion: The Committee has previously issued an opinion that provides guidance on this issue. In Opinion No. 98-05,3the Committee was asked if it was unethical for a defense lawyer to offer a “full satisfaction” settlement, conditioned upon a plaintiff’s waiving a claim for attorneys’ fees against defendant. The request suggested that these offers of settlement were unethical because they created a conflict of interest for plaintiff’s counsel under Utah Rules of Professional Conduct 1.7(b), as plaintiff’s counsel’s interest in her fees might cloud her judgment as to the merits of the settlement. Opinion 98-05 states that defendant’s counsel does not act unethically in making an offer of settlement that may create a conflict of interest for plaintiff’s counsel. Defendant’s counsel in that case has a duty to represent the interests of his client zealously within the limits of law. It is the duty of plaintiff’s counsel to convey the settlement proposal to her client, to resolve any conflicts of interest arising under Rule 1.7(b), and to respond to the settlement proposal as dictated by her client.
¶ 6 The current request is governed by the same principles. We first observe that it is not for us to decide whether the proposed prejudgment assignment of bad-faith claims in exchange for a covenant not to execute for amounts exceeding insurance policy limits is enforceable. Whether such settlements are void as opposed to public policy or violate a provision of the insurance policy and invalidate insurance coverage are issues of law, not ethics.4If these issues arise, they must be resolved by the Utah courts.
¶ 7 So long as the offer of settlement is communicated in a manner that does not violate Rules 4.1 and 4.2, Plaintiff’s lawyer does not act unethically in making the settlement offer. As we noted in Opinion 98-05, it is Plaintiff, not Plaintiff’s counsel, who controls the settlement offer. It is Plaintiff’s lawyer’s duty to convey Plaintiff’s offers to Defendant. It is the duty of defense counsel to convey the substance of these settlement offers to Defendant5 and to accept or reject the settlement offers, as directed by Defendant.6
¶ 8 Rule 1.7(b). The settlement offer, if accepted, does not place Plaintiff’s lawyer in a conflict of interest. The assignment to Plaintiff of Defendant’s bad-faith claims against Defendant’s insurance carrier does not make Plaintiff’s lawyer the lawyer for Defendant. It does not create a relationship with an adverse party different from that created by an interim stipulation or partial settlement. It is not different from a partial settlement by the parties to resolve all property-loss claims for a stipulated amount and agreement to proceed to trial on the personal-injury claims.
¶ 9 Similarly, nothing in the proposed settlement changes the alignment or interests of Defendant. The Committee assumes that, while the settlement agreement may require Defendant’s later cooperation in Plaintiff’s prosecution of the bad-faith claims against Defendant’s insurance carrier, the settlement agreement does not provide for the cooperation or collusion of Defendant with respect to Plaintiff’s underlying claims. Defendant’s interests in the defense of the underlying claims are, therefore, no different after the assignment than if Defendant had insurance limits in excess of any exposure to liability.
¶ 10 If Defendant’s counsel represents only Defendant, the settlement offer does not appear to create any potential conflict of interest for Defendant’s counsel. The offer affords his client an opportunity to avoid any liability in excess of the insurance policy limits. This is clearly in Defendant’s interest.
¶ 11 The settlement offer may create a conflict of interest for Defendant’s counsel if he also represents the insurance carrier. In this circumstance, the lawyer’s responsibilities to the insurance carrier may limit his ability to advise and counsel Defendant with regard to the settlement offer. Defendant’s counsel may proceed with the representation only if he complies with Rule 1.7(b). However, the fact that a settlement offer may create a conflict of interest for defense counsel does not make the settlement offer inappropriate or Plaintiff’s counsel’s communication of the settlement offer unethical.
¶ 12 Rules 4.1 and 4.2. Plaintiff’s lawyer’s communication of the settlement offer must comply with Rules 4.1 and 4.2.7Rule 4.1(a) requires that Plaintiff’s counsel not “make a false statement of a material fact or law” to Defendant in the settlement offer.
¶ 13 Rule 4.2(a)8requires that the settlement offer not be communicated directly to Defendant or to Defendant’s insurance adjuster by Plaintiff’s lawyer if she knows that the recipient of the offer is represented by a lawyer in the matter, unless that lawyer consents to the communication or the communication is otherwise authorized by Rules 4.2(a)(1), (a)(2), (a)(3) or (a)(4). For purposes of this Opinion, the Committee assumes that direct communication of the written offer of settlement has not been so authorized.
¶ 14 If the written offer of settlement, regardless of whom it is written to, is contained in an envelope addressed to and delivered to Defendant, it is an ex parte communication in violation of Rule 4.2(a), even if it is also addressed to and delivered to Defendant’s counsel.9If the written offer, regardless of whom it is written to, is contained in an envelope addressed only to Defendant or to Defendant in care of his lawyer, is delivered only to Defendant’s lawyer, and Defendant’s lawyer delivers the envelope unopened to Defendant, the communication is an ex parte communication in violation of Rule 4.2(a). In such cases, Defendant’s lawyer is under no duty to open the envelope and may believe ethical or legal obligations require delivery of the envelope to Defendant unopened.
¶ 15 If the written offer, regardless whom it is written to, is contained in an envelope addressed to Defendant or to Defendant in care of Defendant’s lawyer, is delivered only to Defendant’s lawyer, and Defendant’s lawyer opens the envelope and chooses to deliver the offer to Defendant, the settlement offer is not an ex parte communication in violation of Rule 4.2(a). In these cases, Defendant’s lawyer has consented to the ex parte communication and may control the time, method and manner of communicating the offer. However, if the written offer is written to Defendant or to Defendant in care of his lawyer, and the lawyer chooses to deliver the written offer to Defendant, the content of the communication must comply with Rule 4.2(d)(1).10
¶ 16 Even if the ex parte communication is permitted by Rule 4.2(a) or (b), Rule 4.2(d)(1) prohibits the communication if it seeks to induce the person to forego representation or to disregard the advice of the person’s counsel. Therefore, if the content of the communication contains statements derisive of Defendant’s lawyer or Defendant’s lawyer’s representation of Defendant in the matter, such statements may and often will violate Rule 4.2(d)(1).
¶ 17 If the offer is written to Defendant or to Defendant in care of Defendant’s lawyer and it is contained in an envelope addressed and delivered only to Defendant’s lawyer, and Defendant’s lawyer delivers the written offer to Defendant, Defendant’s lawyer has consented to the ex parte communication and Rule 4.2(a) is not violated.11As in the prior case, the communication of the offer to Defendant is by Defendant’s lawyer, who may control the time, method and manner of communicating the offer. If Defendant’s lawyer delivers to Defendant the offer written to the Defendant or to Defendant in care of Defendant’s lawyer, the content of the communication is subject to Rule 4.2(d)(1).12
¶ 18 Communicating with the Insurance Adjuster. If the offer of settlement is written to Defendant, in care of Defendant’s insurance adjuster, and is delivered to Defendant’s insurance adjuster, the communication may violate Rule 4.2(a). In our Opinion No. 98-07,13we stated that communications by a plaintiff’s counsel directly to a defendant’s insurance adjuster are improper if plaintiff’s counsel knows or reasonably should know that the insurer is represented by counsel in the matter. The Committee stated that, when the injured party and the insurance company have been unable to achieve resolution of the claim and the matter is in or likely to proceed to litigation, the plaintiff’s lawyer reasonably should expect that the insurance company is represented by counsel in the matter.
¶ 19 Under these circumstances, direct contact with the insurance adjuster would be improper unless plaintiff’s lawyer has affirmatively determined that the insurer does not consider itself represented by counsel in the matter. Clearly, if Plaintiff’s settlement offer contemplates an assignment of bad-faith claims, Plaintiff has been unsuccessful in negotiations with the insurance carrier, and the matter would appear to be headed for litigation. It would, therefore, be unethical for Plaintiff’s counsel to direct the settlement offer to Defendant in care of Defendant’s insurance adjuster without first having affirmatively determined that the insurer does not consider itself represented by counsel in the matter.
¶ 20 Summary:
* It is not unethical for Plaintiff’s lawyer to convey the offer of settlement described in the request, as long as she does so in a manner complying with Rules 4.1 and 4.2. The offer of settlement must not, therefore, contain a false statement of material fact or law.
* If Plaintiff’s counsel knows Defendant is represented by a lawyer in the matter, she must not communicate the offer directly to Defendant unless his lawyer has consented to the communication or it is otherwise authorized by Rule 4.2(a).
* If (a) Plaintiff’s counsel places the offer in an envelope addressed to Defendant or to Defendant in care of his lawyer, (b) the offer is delivered only to Defendant’s lawyer, and (c) that lawyer delivers the offer to Defendant unopened, this violates Rule 4.2.14
* If (a) Defendant’s lawyer opens the envelope addressed to him or his client, (b) the offer is written to Defendant or to Defendant in care of his lawyer, and (c) Defendant’s lawyer chooses to deliver the offer to the Defendant, the offer d onot violate Rule 4.2(a), but the content of the offer must comply with Rule 4.2(d)(1).
* If (a) the offer is written to Defendant or to Defendant in care of his lawyer, (b) the offer is delivered only to Defendant’s lawyer in an envelope addressed only to that lawyer, and (c) Defendant’s lawyer delivers the offer to Defendant, the offer does not violate 4.2(a), but the content of the offer must comply with Rule 4.2(d)(1).
* An offer of settlement contemplating assignment of bad-faith claims against Defendant’s insurance carrier would ordinarily not be made until after settlement negotiations have been unsuccessful with the insurance carrier, and the matter is likely to proceed to litigation. Therefore, the settlement offer should not be communicated directly by Plaintiff’s counsel to the insurance adjuster for the insurance company unless Plaintiff’s counsel has affirmatively determined that the insurer does not consider itself represented by counsel in the matter.
Footnotes
1.Bad-faith claims against an insurance carrier can arise in cases where (i) a defendant is protected up to fixed limits by an insurance policy, (ii) the insurance carrier unreasonably rejects an offer to settle the case at or below the policy limit, (iii) a judgment is ultimately rendered for an amount exceeding the policy limit, and (iv) defendant becomes liable for payment of the judgment amount in excess of that limit.
2.The request before the Committee does not involve circumstances of dishonesty, fraud, deceit or misrepresentation. See Rule 8.4(c).
3.Utah Ethics Advisory Op. 98-05, 1998 WL 199535 (Utah St. Bar).
4.The following authorities provide a discussion of these legal issues: State Farm Fire and Casualty Co. v. Grady, 925 S.W.2d 696 (Tex. 1996); State Farm Mutual Auto Ins. Co. v. Peaton, 812 P.2d 1002 (Ariz. App. 1990); Assignability of Insured’s Right to Recover Over Against Liability Insurer for Rejection of Settlement Offer, 12 A.L.R.3d 1158 (1967 & Supp. 1999).
5.Utah Rules of Professional Conduct 1.4, Comment: “A lawyer who receives from opposing counsel an offer of settlement in a civil controversy . . . shall promptly inform the client of its substance unless prior discussions with the client have left it clear that the proposal will be unacceptable.”
6.Utah Rules of Professional Conduct 1.2(a): “A lawyer shall abide by a client’s decision whether to accept an offer of settlement of a matter.”
7.Utah Rules of Professional Conduct 4.1, 4.2 (2000).
8.(a) General Rule. A lawyer who is representing a client in a matter shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by:
(1) constitutional law, statute, or an agency regulation having the force of law;
(2) a decision or a rule of a court of competent jurisdiction;
(3) a prior written authorization by a court of competent jurisdiction obtained by the lawyer in good faith; or
(4) paragraph (b) of this rule [relating to government lawyers engaged in law enforcement].
Utah Rules of Professional Conduct 4.2(a) (2000). Note that, effective February 1, 1999, the Utah Supreme Court adopted a version of Rule 4.2 that is substantially different from ABA Model Rule 4.2. However, the differences primarily involve attorneys engaged in law enforcement and do not substantially change our analysis in this Opinion.
9.Unless Rule 4.2(a) is complied with, a settlement offer may not be communicated by a lawyer directly to the adverse party even if a copy is simultaneously delivered to the adverse party’s lawyer. See, e.g., Penn. Bar Ass’n, Op. 94-167 (Nov. 10, 1994). It is unethical for an attorney to send a copy of a letter concerning the subject of the representation to a represented opposing party, even if the opposing party’s attorney is copied on the letter, unless the attorney has the consent of the represented party’s attorney or unless the attorney is authorized by law to do so. See 26 A.L.R. 4th 102, “Communication with Party Represented by Counsel as Ground for Disciplining Attorney.” Likewise, unless the attorney has the consent of the represented party’s attorney or unless the attorney is authorized by law to do so, an attorney may not inquire directly of the opposing party about whether a settlement offer has been received, even if the attorney reasonably believes the opposing party’s attorney has not relayed the offer to his client. See ABA Formal Op. 92-362 (July 6, 1999).
10.Rule 4.2(d)(1), Limitations on Communications, provides: “When communicating with a represented person pursuant to this Rule, no lawyer may (1) inquire about information regarding litigation strategy or legal arguments of counsel, or seek to induce the person to forego representation or disregard the advice of the person’s counsel . . . .” This rule applies only when a lawyer is communicating with a represented person, as authorized by Rule 4.2, outside the presence of the represented person’s lawyer—for example, when the represented person’s lawyer has consented to the communication. Accordingly, a letter containing a settlement offer that is delivered directly to Defendant in violation of Rule 4.2(a) is not subject to Rule 4.2(d)(1). Furthermore, a letter containing a settlement offer written to Defendant or to Defendant in care of his lawyer that is not delivered to Defendant does not violate Rule 4.2(d)(1), regardless of its content, as there is no ex parte communication with a person represented by counsel in such cases. However, delivery to Defendant’s lawyer of a settlement offer written to Defendant or to Defendant in care of his lawyer with contents violative of Rule 4.2(d)(1) may constitute professional misconduct in violation of Rule 8.4(a), even if the letter is not delivered to Defendant. Rule 8.4(a) provides that it is professional misconduct for a lawyer to attempt to violate the Rules of Professional Conduct. Whether a settlement offer written to Defendant or to Defendant in care of his lawyer with contents violative of Rule 4.2(d)(1) which is not delivered to Defendant is an attempt to violate Rule 4.2(d)(1) will depend on a fact-intensive inquiry as to whether there is an intention that the offer be delivered to Defendant.
11.Defendant’s lawyer is not obligated in such cases to deliver the written offer to Defendant. Defendant’s lawyer’s obligation to keep Defendant reasonably informed about the status of the matter is satisfied by communicating to Defendant the substance of the offer of settlement. See Comment to Rule 1.4 (“A lawyer who receives from opposing counsel an offer of settlement in a civil controversy or a pro-offered plea bargain in a criminal case shall promptly inform the client of its substance unless prior discussions with the client have left it clear that the proposal will be unacceptable.”)
12.For the reasons explained in note 10, supra, even if the Defendant’s lawyer does not deliver the written offer to Defendant, the offer may constitute a violation of Rule 4.2(d)(1), depending upon an analysis of the content of the offer and the facts and circumstances of its delivery to Defendant’s lawyer.
13.Utah Ethics Advisory Op. 98-07, 1998 WL 493028 (Utah St. Bar).
14.Unless it is otherwise permitted.

Ethics Advisory Opinion No. 96-03

(Approved April 26, 1996)
Issue:
What are the ethical obligations of an attorney who has negotiated an agreement with medical providers on behalf of a personal-injury client whose debts are subsequently discharged in bankruptcy?

Opinion: Absent dishonesty, fraud, deceit or misrepresentation, the attorney has no ethical obligation to honor personally the client’s agreements to pay medical providers out of a settlement or judgment. Disputes resulting from the failure of an attorney to make payment for services rendered by the medical providers should be treated as questions of substantive law, including state and bankruptcy law, and should be examined under traditional contract, agency, and bankruptcy doctrines rather than as questions of the ethical propriety of the attorney’s actions.1
Analysis: In a personal injury action, attorneys on behalf of their clients often negotiate agreements with medical providers for the care the client receives or has received in conjunction with the injury. Such agreements contractually obligate the client, but not the attorney, to pay medical providers for those services out of, or at the time of, any settlement or judgment. Prior to the settlement or judgment, the client may file a bankruptcy and may be discharged of certain of these medical-cost obligations.
The factual background of the present issue is not substantially different from that addressed by Utah Ethics Advisory Opinion No. 98.2In that opinion it was determined that imputation of an ethical obligation for an attorney’s failure to pay a third party for services could create the possibility that the Bar could initiate disciplinary actions against a lawyer for the mere failure to pay creditors. Such a possibility was determined to be beyond the scope of the Bar’s role in maintaining ethical standards among its members. This conclusion seems particularly valid when, as postulated in the present factual variation, the debts themselves may be legally discharged through a bankruptcy proceeding and when such a discharge may have been avoided through proper documentation by the medical provider.
Notwithstanding the foregoing, however, Rule of Professional Conduct 4.1 provides:
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.
Rule 4.3(b) provides:
In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.
Based on the foregoing rules, an attorney’s dishonesty, fraud, deceit or misrepresentation in conjunction with obtaining the medical services could subject the attorney to disciplinary action. For example, an attorney who (1) knows that his client intends subsequently to discharge medical debts in a bankruptcy proceeding, or intends to have his client seek a discharge of such debts in bankruptcy, (2) uses a form of documentation that the attorney knows will not withstand a bankruptcy, and (3) affirmatively states that the medical provider will be paid at settlement or judgment, will have committed an ethical violation.
However, in the absence of these independent ethical considerations, an attorney’s obligations for client-related medical expenses are to be considered as contract, agency, bankruptcy or other substantive issues rather than ethical issues.
Footnotes
1.This Opinion does not deal with agreements that expressly impose an obligation on the attorney or create a lien on the funds that are handled by the attorney. In those cases, the specific language of the agreement would control and might impose obligations on the attorney directly or as a trustee of the funds.
2.Ethics Adv. Op. 98, 1989 WL 509364 (Utah St. Bar 1989).