Ethics Advisory Opinion 16-02

Ethics Advisory Opinion Committee
Opinion Number 16-02
Issued March 23, 2016

Issues

  1. What are the ethical constraints on lawyers settling potential legal malpractice claims or bar complaints with clients?

Opinion

  1. A lawyer may neither request nor agree to limit his or her duties to the administration of justice regarding filing or participating in a bar complaint.
  2. A lawyer may not request that a present or former client refrain from filing or participating in a bar complaint as a condition to settling disputes between the client and the lawyer.
  3. A lawyer may not participate in an agreement that limits the lawyer’s liability for malpractice or prohibits the lawyer from accepting future clients except as permitted by rule or law.[1]

Background

  1. There are three factual situation to consider:
    1. In the context of settling civil litigation a lawyer for one party demands as a condition of settlement that the lawyer for the opposing party agree to forgo filing or participating in a bar complaint.
    2. A lawyer is settling a dispute with a former client. That client has threatened to file a bar complaint which the lawyer believes frivolous.  As a condition of settling the dispute the lawyer wishes to include a provision precluding the former client from filing or participating in a bar complaint.
    3. Finally, in consideration of settlement, a party demands conditions that would limit the lawyer’s ability to take further cases against the settling party or waives a former client’s malpractice claim.

Discussion

  1. Requesting an opposing attorney, an opposing party, or a client or former client to refrain from filing or participating in a bar complaint as a condition of settlement of outstanding disputes violates several of the Rules of Professional Conduct including Rules 8.3 and 8.4.[2] Agreeing to refrain from filing or participating in such a complaint also violates these same rules.
  2. Rule 8.3 of the Rules of Professional Conduct requires that a lawyer who has knowledge[3] “that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial[4] question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects shall[5] inform the appropriate professional authority” (emphasis added). Accordingly, Rule 8.3(a) would preclude a lawyer from agreeing to refrain from filing or participating in a meritorious bar complaint.
  3. Rule 8.4 (a) provides that “it is professional misconduct” for a lawyer to “knowingly assist or induce another” to “violate . . .the Rules of Professional Conduct.” Because it is unethical for an attorney to agree not to report a serious breach of the Rules of Professional conduct, Rule 8.4 (a) would preclude a lawyer from making such a request as his conduct would knowingly “assist or induce” a violation of the other lawyer’s obligation to report under Rule 8.3.
  4. Demands to forego reporting as a condition of settlement would hinder bar authorities from meeting their responsibilities of deterrence of serious matters and the protection of the public. As the Comment to Rule 8.3 notes, “An apparently isolated incident may indicate a pattern of misconduct that only a disciplinary investigation can uncover.”
  5. Simply because the opposing party or client is a lay person without duties to the public and the bar does not lessen the misconduct in attempting to obtain an agreement not to file a complaint. It is “professional misconduct” to “engage in conduct that is prejudicial to the administration of justice.” Rule 8.4(d). Seeking to prevent a client or opposing party from filing or participating in a bar complaint is “prejudicial to the administration of justice.”
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Ethics Advisory Opinion 14-02

Utah State Bar
Ethics Advisory Opinion Committee 

Opinion Number 14-02 

Issued January 14, 2014

ISSUE

1.         Is an Agreement between a non-lawyer Marketer and a Law Firm where the Marketer conducts telephone marketing to solicit and refer clients to Law Firm in violation of the Rules of Professional Conduct where the payment to the Marketer matches a percentage of the fees paid to the Law Firm by the clients referred to the Law Firm by the Marketer?

2.         If the Agreement is in violation of the Rules of Professional Conduct must the Attorney retained by Marketer to enforce the Agreement inform the appropriate professional authority pursuant to Rule 8.3(a)?

OPINION

3.         The Agreement, which requires payment to the non-lawyer Marketer to be based on a percentage of the fees paid to the Law Firm by the clients referred to the Law Firm by the Marketer, violates Rule 7.2(b) and Rule 5.4 of the Rules of Professional Conduct.

4.         The question of whether it should be apparent to the Attorney retained by Marketer to enforce the Agreement, that the Agreement violates Rule 7.2(b) and/or Rule 5.4 of the Rules of Professional Conduct, in a manner that triggers a duty to inform the appropriate professional authority under Rule 8.3(a), is a fact specific inquiry undertaken by the lawyer presented with a Rule 8.3(a) question.  The Committee expresses no opinion as to whether these specific facts do in fact trigger any obligation of the Attorney under Rule 8.3(a).

FACTS

5.         A Marketer has an agreement with a Law Firm to conduct telephone marketing to solicit and refer clients to the Law Firm.  Marketer is paid by Law Firm, but Marketer receives payment which matches a percentage of the fees paid to the Law Firm by the clients who retain the Law Firm and were referred to the Law Firm by the Marketer.  If the Law Firm is not paid in full by the clients referred by the Marketer, Law Firm’s payment to Marketer is reduced.  An agency of another State requires the Law Firm to refund a substantial portion of fees paid to the Law Firm by residents of that State.  Law Firms payments to the Marketer were reduced correspondingly.

6.         Marketer then retains an Attorney to enforce payments – without reductions – under the agreement between the Law Firm and the Marketer.

ANALYSIS

7.         Rule 7.2(b) states that:  “A lawyer shall not give anything of value to a person for recommending the lawyer’s services[.]”  The comments to Rule 7.2 indicate that:  “Lawyers are not permitted to pay others for channeling professional work.”  [Comment 5].  Here, the arrangement between a Law Firm and Marketer violates the plain language of Rule 7.2(b) and it is not readily apparent from the facts of this matter that any exception to the plain language of Rule 7.2(b) is applicable.

8.         The comments to Rule 7.2 recognize the limited exceptions to this prohibition and mimic the language of Rule 7.2(b)(2) in indicating that:  “A lawyer may pay the usual charges of a legal service plan or a lawyer referral service. . . . A lawyer referral service . . . is an organization that holds itself out to the public to provide referrals to lawyers with appropriate experience in the subject matter of the representation.”  [Comment 6].  “At a minimum, Rule 7.2(b) requires that the lawyer referral service be available to the public and that it provide referrals to multiple lawyers and law firms, not to a single lawyer or a single law firm.”  [Opinion 07-01].  Here, there is no indication that the Marketer is in fact a “lawyer referral service.”[1]
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Ethics Advisory Opinion No. 98-12

(Approved December 4, 1998)
Question:
When a lawyer becomes aware that another lawyer has illegally used or possessed controlled substances, under what circumstances must the first lawyer report such conduct to the Utah State Bar?

Opinion: A lawyer is required to report to the Utah State Bar any unlawful possession or use of controlled substances by another lawyer if two conditions are satisfied: (1) the lawyer has actual knowledge of the illegal use or possession, and (2) the lawyer has a reasonable, good-faith belief that the illegal use or possession raises a substantial question as to the offending lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects. A lawyer is excused from this reporting requirement only if (i) the lawyer learns of such use or possession through a bona fide attorney-client relationship with the offending lawyer, or (ii) the lawyer becomes aware of the unlawful use or possession through providing services to the offending lawyer under the auspices of the Lawyers Helping Lawyers program of the Bar.
Analysis: The unlawful use or possession of controlled substances is criminal conduct and may constitute the commission of “a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects,” which is professional misconduct under Utah Rules of Professional Conduct 8.4(b). If another lawyer has actual knowledge that a lawyer has unlawfully possessed or used controlled substances, such that it raises a substantial question as to the offending lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, the lawyer is bound by the provisions of Rule 8.3(a) to make a report to the Office of Professional Conduct of the Utah State Bar,1unless this disclosure obligation is excused by Rules 8.3(c) or 8.3(d). Rule 8.3(a) provides:
A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority
However, Rule 8.3(a) imposes an obligation to report only if the lawyer has “knowledge” that the other lawyer has committed a violation of the Rules. “Knowledge” as used in Rule 8.3(a) requires actual knowledge of the violation of the Rules by the other lawyer.2In addition, whether the unlawful use or possession of a controlled substance reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects is dependent upon the facts and circumstances.
Rule 8.3(a) imposes a reporting requirement only when the known misconduct raises a “substantial question” regarding a lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects. The Comment to Rule 8.3 recognizes that the rule does not require disclosure of every violation of the Rules of Professional Conduct. Rule 8.3(a) limits the violations that must be reported to “those offenses that a self-regulating profession must vigorously endeavor to prevent.” The Comment further states: “A measure of judgment is, therefore, required in complying with the provisions of this Rule.” Whether a “substantial question” arises is therefore measured by the subjective, reasonable, good-faith belief of the lawyer with knowledge of the violation. But the Comment to Rule 8.3 also states that the use of the “term ‘substantial’ refers to the seriousness of the possible offense and not the quantum of evidence of which the lawyer is aware.” (more…)