(Approved January 23, 1998)
Issue: May an elected county attorney or other prosecutor who is allowed to engage in private practice continue to act as attorney in a civil matter in which the opposing party in the civil matter commits a crime or otherwise comes under suspicion as a potential criminal defendant in that county? Is it enough that the prosecutor refers any criminal matter involving the opposing litigant to another prosecutor, or must the attorney withdraw from both matters?
Opinion: As a general rule, a Utah prosecuting attorney acting as a private practitioner should avoid engaging in a civil action that involves parties and facts that have been or become the subject of criminal investigation within the prosecutor’s jurisdiction. Provided the attorney has not become personally substantially involved in and has no meaningful control over any investigation of the criminal matter, the attorney already involved in civil litigation need not withdraw from the civil matter and can avoid inherent conflicts by referring the criminal matter to an appropriate conflicts attorney.
Analysis: The Utah Rules of Professional Conduct do not expressly address the obligations of attorneys in public office or of public prosecutors where potential conflicts of interest may arise from simultaneous private civil practice. The question posed to the Committee supposes that the prosecutor at all times is “adverse” to the opposing party, both in the civil as well as the potential criminal matter. This situation is therefore governed by Rule 1.7(b) of the Rules of Professional Conduct, which prohibits representation of one client if the representation may be materially limited by the attorney’s responsibilities to another client or to a third person. As the Comment to Rule 1.7 sets forth, the rule applies not only where there is actual, immediate conflict between the interests involved, but wherever there exists “the likelihood that a conflict will eventuate [which] will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client.”
In evaluating the possible likelihood for conflict in this regard, the Committee joins in the opinion expressed by the majority of courts and others who have opined:
We can extend [the general rule’s] prohibition beyond cases of actual present conflict to those in which the interests may with some reasonable degree of probability become conflicting. Even the possibility of conflict should deter a lawyer in public office from engaging in a civil action involving parties and facts which have been the subject of previous criminal investigation, as later developments may indicate, notwithstanding previous decision to the contrary, that criminal action should be taken.1
This general caution can logically be extended to ongoing litigation during which an opposing party becomes the subject of criminal investigation:
A lawyer should not be permitted to accept other or subsequent employment in a matter which may conflict with the interest covered by his professional obligation or which may be adverse to interests which are closely related to the law and facts involved in a matter which he has previously handled. The attempted double role is fraught with many conceivable inconsistencies and antagonisms. Public duty and fealty to private client, involving subordination of the interest of one or the other, may embarrassingly challenge the conscience of the lawyer who attempts to serve both.2 (more…)
(Approved April 17, 1998)
Issue: May an attorney represent both a county and a city that lies within the jurisdiction of the county as to civil matters?
Opinion: The Utah Rules of Professional Conduct do not require a blanket prohibition of an attorney’s representation of both a city and county on civil matters. This general conclusion is, in part, in conflict with Utah Ethics Advisory Opinion No. 81, which is accordingly overruled in part. In the event the two entities are directly in conflict as to a particular matter, however, the attorney may not represent both (and perhaps neither) of the parties in that matter or other matters, unless the attorney can comply with the provisions of Rule 1.7(a). Similarly, in some circumstances the attorney may be unable to represent one or both entities under Rule 1.7(b).
Analysis: Utah Ethics Advisory Opinion No. 81 holds categorically that an attorney cannot simultaneously represent the civil interests of a county and city within the county’s jurisdiction. That opinion was issued in 1987, prior to the adoption of the current Rules of Professional Conduct and is based on concerns of divided loyalties, improper use of confidential information, and the appearance of impropriety. The current Rules of Professional Conduct no longer require such a blanket prohibition.
Utah Rule of Professional Conduct 1.7 establishes the ethical bounds of representation in conflict-of-interest situations.1When the city and county are directly adverse to each other, such as in negotiating or preparing a contract between the two entities, Rule 1.7(a) prohibits the attorney from representing either, unless the attorney reasonably believes it will not adversely affect either client and unless each client consents. While we do not decide who is capable of giving consent on behalf of a governmental entity, both the city and county may consent to the attorney’s representation of one or both of them. We also note that Rule 2.2 specifically contemplates the situation where the attorney acts as an intermediary between two parties,2but only if Rule 1.7 is satisfied. If, however, the attorney is not comfortable with representing either or both under the circumstances, or if the attorney is unable to consult adequately with either party in order to get consent due to Rule 1.6 confidentiality-of-information issues, the attorney must withdraw from representation in that matter.
Similarly, Rule 1.7(c) prohibits an attorney from representing the city or county in a matter when those two entities are adverse to each other in a separate matter.3So, for example, if th(a)e city and county are negotiating a contract between them and have hired separate counsel because of the Rule 1.7 conflict, the city/county attorney may not be able to represent either the city or the county and, perhaps, neither of them-in any other matter until the contract is resolved. Again, however, if the attorney believes the representation will not be affected, and if both clients consent to the representation of one or both of them, the attorney may proceed consistent with the consent. If not, the attorney must withdraw until the matter on which the two entities are in direct conflict is resolved. (more…)
(Approved April 17, 1998)
Issue: May a lawyer hired by an insurance company to defend an insured in a lawsuit submit billing statements to an outside audit service?
Opinion: Before a lawyer may submit billing statements to an outside audit service, the lawyer must have the client’s consent. If the lawyer is relying on an insurance agreement for consent, the lawyer must review the agreement with the client to renew the client’s consent before sending any billing statements to the outside audit service.
Facts: An insurance company hires a lawyer to represent an insured client. The lawyer routinely bills the insurance company for the representation. The lawyer’s billing statements, as required by the insurance company, are detailed and specific as to the services done by the lawyer on behalf of the client. The insurance company requests that the lawyer submit the billing statements directly to an outside audit service.
Analysis: Rules 1.6, 1.7, and 1.8 of the Utah Rules of Professional Conduct govern the relationship among a lawyer, a client, and third party paying for the lawyer’s services on behalf of the client.1Rule 1.8(f) states:
A lawyer shall not accept compensation for representing a client from one other than the client unless:
(1) The client consents after consultation;
(2) There is no interference with the lawyer’s independence of professional judgement or with the client-lawyer relationship; and
(3) Information relating to representation is protected as required by Rule 1.6.
Rule 1.8(f) applies whenever an insurance company pays a lawyer to represent a client.2The client’s consent is usually included in the agreement between the client and the insurance company. However, because Rule 1.8(f) requires that the “client consents after consultation,” the lawyer must consult with the client to make sure that the client understands and renews the consent.
Rule 1.6(a) states: “A lawyer shall not reveal information relating to representation of a client except as stated in paragraph (b), unless the client consents after disclosure.”3A lawyer’s billing statement is “information relating to the representation of a client.” This is especially true where the billing statement is detailed and specific as to the services done by the lawyer on behalf of the client. Therefore, unless one of the exceptions under Rule 1.6(a) applies, the lawyer may not reveal a billing statement to anyone other than the client “unless the client consents after disclosure.”
The client’s consent to release the billing statement to the insurance company is usually included in the agreement between the client and the insurance company. However, because the client must consent “after disclosure,” the lawyer should review the insurance agreement with the client and renew the client’s consent before sending any billing statements to the insurance company.4Whether the lawyer has an attorney-client duty to the insurance company in addition to the insured client is immaterial. Except as Rule 1.6(b) provides, a lawyer may not release information relating to the representation of a client to anyone, even another client, unless the first client consents after disclosure.
Likewise, before a lawyer may release any billing information to an outside audit service, the lawyer must have the client’s consent.5However, if the lawyer relies upon an insurance agreement for consent, the lawyer must review the agreement with the client and renew the client’s consent before sending any billing statements to the audit service. (more…)
(Approved April 17, 1998)
Issue: May a private practitioner who has been appointed as special deputy county attorney to investigate and prosecute a single matter continue to represent criminal defendants in any jurisdiction in Utah?
Opinion: No. Even assuming such conduct is permitted by Utah statute, Rule 1.7(a) of the Utah Rules of Professional Conduct and the reasoning of Utah Ethics Opinion No. 126 prevent a special deputy county attorney from representing criminal defense clients in any jurisdiction in the State. In addition, Rule 1.10 prohibits any member of the special deputy’s law firm from representing criminal defendants in any jurisdiction in the State during the period of the appointment.
Analysis: A county attorney proposes to appoint a special deputy county attorney. The appointment would authorize the special deputy “to investigate and take whatever action, if any, you deem appropriate” regarding alleged misconduct by certain public officials. We have been asked whether the attorney appointed as special deputy or his law firm may continue to represent criminal defendants during the tenure of the special deputy’s appointment.
Before we turn to the Utah Rules of Professional Conduct, we note that Utah statutes directly prohibit a county attorney from representing criminal defendants in any jurisdiction within the state.1Although the elected county attorney is authorized by statute to appoint deputies as necessary to fulfill the requirements of the position,2these statutes do not provide that deputies or special deputies are exempt from the prohibition against representing criminal defendants under §§ 17-18-1(9) and 17-18-1.5(7)(a). Indeed, we think it unlikely that this prohibition could be circumvented merely by the appointment of deputies or special deputies. Therefore, we believe that §§ 17-18-1(9) and 17-18-1.5(7)(a) directly control and prohibit the specially appointed deputy from representing criminal defendants any place in Utah.3Utah Rule of Professional Conduct 1.10 then imposes the same restriction on other members of his firm.
However, even if the Utah statutes could be construed or were changed to allow a special deputy appointed to prosecute a particular matter to continue to represent criminal defendants, such conduct would violate the Utah Rules of Professional Conduct.
In Opinion No. 126,4we concluded that:
* A city prosecutor may not represent a criminal defense client in any jurisdiction.
* A city attorney with no prosecutorial functions who has been appointed pursuant to statute may represent criminal defendants in any jurisdiction but that city.
* A city attorney with no prosecutorial functions who is retained on a contract basis may represent criminal clients in any jurisdiction, provided Rule 1.7(a) is satisfied.
* An attorney who is a partner or associate of a city attorney is bound by the same proscriptions as the city attorney.
We based this opinion on Rule 1.7(a), which generally prohibits an attorney from representing directly adverse clients, and found that “a criminal defendant’s interests are, almost by definition, adverse to the interests of the sovereign and the political subdivisions to which the sovereign has delegated law-enforcement authority.”
Rule 1.7(a) provides an opportunity for a client to consent to an otherwise conflicted representation, but only if the attorney could “reasonably believe” that the dual representation would not be “adversely affected.” As we noted in Opinion No. 126, no attorney could reasonably believe she could represent a defendant charged with violation of the city’s ordinances, when the attorney is also that city’s prosecutor. (more…)
(Approved April 17, 1998)
Issue: Is it unethical for a defense attorney to offer a “full satisfaction” settlement, conditioned upon plaintiff’s waiving a claim for attorneys’ fees against a defendant?
Opinion: It is not unethical for a defense attorney to present an offer of settlement conditioned on waiver of attorneys’ fees. The defense attorney in such a case has an obligation to represent the defendant zealously within the limits of the law.1Moreover, it is the defendant and not the defense attorney who controls settlement offers. The defense attorney in such a case is bound to convey settlement proposals, and to accept settlement offers, as dictated by the client.2
This answer, however, does not fully address possible ethical issues raised in a situation in which a client is a plaintiff pursuing a claim under which the plaintiff may be able to recover attorneys’ fees for pursuing the cause of action. Such a circumstance could arise, for example, in many civil rights and employment discrimination actions.
Practitioners representing plaintiffs in such circumstances should be aware of a potential conflict of interest between the plaintiff’s attorney and the client if the plaintiff receives a settlement offer that is conditioned on a waiver or dismissal of the claim for attorneys’ fees. This conflict of interest can arise where the plaintiff’s attorney has pursued the case in anticipation of recovering attorneys’ fees from the defendant at the conclusion of the proceedings.3
Plaintiffs’ attorneys in such circumstances should be aware that this potential for a conflict of interest can be resolved by full disclosure in advance of this potential problem and the execution of an appropriate attorney-client fee agreement addressing this eventuality. So long as an attorney complies with the requirements of Rule 1.5 regarding fees,4the establishment of fees between lawyer and client and the method by which those fees are to be collected are matters of business and contract between the attorney and the client.
Attorneys representing plaintiffs in such cases are advised, however, to review carefully the language of Rule 1.2 5regarding the scope of representation of clients-specifically the requirement that a lawyer must abide by a client’s decision to accept or reject an offer of settlement of a legal matter.
It is not the purpose of this opinion to advise attorneys of all the possible ways to address the issue raised here; it is merely to alert practitioners to this issue. However, it is possible to address the problem by recognizing the issue early in the representation and agreeing with the client in advance concerning how the client will pay the attorney’s fee if attorneys’ fees are not recovered from the defendant. This might be accomplished by an agreement that the attorney would normally be paid on a contingent-fee basis, but alternately on an hourly fee basis if there is no recovery of attorneys’ fees from the defendant.
It is important to note also what a practitioner cannot do to resolve this problem. It would be unethical for an attorney to contract in advance with a client that the client may not accept or that the attorney may veto a particular offer in settlement of a case. An attorney must convey all offers of settlement to a client, and the client must always have final say whether or not it will be accepted.6This ultimate client authority cannot be contracted away.
(Approved October 30, 1998)
Issue: Members of a county attorney’s office have requested an advisory opinion concerning conflicts between (1) attorney-client relationships between a county attorney and county officers and (2) statutory duties of a county attorney under Utah Code Ann. § 17-5-206 to institute suits to recover or restrain unlawful payments of county funds.
Opinion: If a current attorney-client relationship exists between a county attorney or a deputy county attorney and a person who may be a defendant in an action under Utah Code Ann. § 17-5-206 to recover or restrain unlawful payments of county funds, the attorney with such an attorney-client relationship may not ethically participate in such an action, whether by way of investigation, evaluation, filing, prosecution, direction, supervision, or otherwise.1The rules of imputed disqualification of Utah Rules of Professional Conduct 1.10 do not apply to the office of a full-time county attorney, so that individual county attorneys or deputy county attorneys who are free from conflicts in the matter may participate in actions under § 17-5-206, provided that appropriate screening procedures are established and maintained. Past representations by individual members of a county attorney’s office must be evaluated for conflicts under the provisions of Rule 1.9.
Analysis: A. Introduction. In Utah, a county attorney is an officer of the county elected to a four-year term of office.2The county attorney must be an attorney duly licensed to practice law in Utah who is an active member in good standing of the Utah State Bar.3By statute, “[t]he county attorney is the legal adviser of the county.”4Among other duties, the county attorney must defend all actions brought against the county and must give, when required and without fee, an opinion in writing to the county, district, precinct, and prosecution district officers on matters relating to the duties of their respective offices.5
Lawyers in a Utah county attorney’s office may include both the elected county attorney and unelected deputy county attorneys.6By Utah statute, whenever the official name of any principal officer of a county is used in law conferring powers or imposing duties or liabilities, it includes deputies.7
County attorneys in Utah have a statutory duty to institute suits in the name of the county to recover or restrain unlawful payments of county funds. Utah Code Ann. § 17-5-206 provides:
Whenever any county legislative body shall without authorization of law order any money paid for any purpose and such money shall have been actually paid, or whenever any other county officer has drawn any warrant in his own favor or in favor of any other person without being authorized thereto by the county legislative body or by law and the same shall have been paid, the county attorney of such county shall institute suit in the name of the county against such person or such officer and his official bondsman to recover the money so paid, and when the money has not been paid on such order or warrants, the county attorney of such county upon receiving notice shall commence suit in the name of the county to restrain the payment of the same; no order of the county legislative body shall be necessary in order to maintain either of such actions. (more…)
(Approved August 7, 1998)
Issue: May the lawyer for the plaintiff in a personal-injury case directly contact the adjuster for defendant’s insurer without first obtaining the consent of the defendant’s attorney?
Opinion: Such a contact is improper if the lawyer for the plaintiff knows or reasonably should know that the insurer is represented by counsel in the case, either when the insurer has separate counsel or when it is represented by the same counsel as defendant. If defendant’s attorney does not also represent the insurer, plaintiff’s attorney need not obtain the consent of defendant’s attorney to contact the insurer or its attorney.
Analysis: Rule 4.2 of the Utah Rules of Professional Conduct prohibits a lawyer, in representing a client, from communicating “about the subject of the representation with a party 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 by law to do so.”
In connection with the typical insurance claim, the adjuster has been hired by the insurance company and acts as its agent. The contract between the insurance company and the insured provides for counsel for the insured, paid under the insurance contract. If there are no conflicts between the insurance company and the insured, counsel for the insured may act on behalf of both the insured and the insurance company. If there are conflicts, the insurance company will retain separate counsel if it wishes representation. The insured may also retain counsel outside of the insurance contract.
The question posed to the Committee involves one of two different situations: (a) the injured person has contacted a lawyer and is pursuing settlement of a claim on an informal basis; (b) the injured person and the insurance company have not been able to achieve a satisfactory resolution of the complaint, and the matter seems headed to litigation.
(a) In the first situation, the injured person has contacted a lawyer and is pursuing settlement of a claim on an informal basis. At this stage of informal dispute resolution, the plaintiff’s lawyer may wish to contact the insurance adjuster to achieve efficient claim resolution. Most typically in this situation, although the defendant’s contract of insurance provides for legal representation, a lawyer for defendant will not yet be involved. At this early stage, it is reasonable for the lawyer for the plaintiff to believe that neither defendant nor the insurance company is a “represented party” for purposes of Rule 4.2,1unless the lawyer has been informed by the adjuster or otherwise. So long as the attorney complies with the other Rules of Professional Conduct -for example, does not pretend to be a neutral party when he is representing the injured person2- the direct contact with the adjuster is proper.
(b) In a second situation, the injured person and the insurance company have not been able to achieve a satisfactory resolution of the claim, and the matter is either in or likely to proceed to litigation. The insured’s contract provides for defense from the insurance company, and pursuant to that contract, the company has provided the insured with counsel. Such insurance-provided counsel clearly represents the interests of the insured.3The question raised in the inquiry is, then, whether the insurance company should now be considered to be a “represented party” in the “matter.” (more…)
(Approved September 11, 1998)
Question: May a law firm wholly own an accounting-practice subsidiary that is staffed by employees other than the firm’s lawyers and would perform services for the lawyer’s clients and others?
Response: Yes, although the law firm will be subject to the Utah Rules of Professional Conduct with respect to the provision of these law-related services in certain circumstances.
Analysis: In 1994 the American Bar Association addressed the general issue of attorneys who are involved with “law-related” services, such as those raised in this inquiry. After much debate, the ABA determined that it was not unethical for lawyers to offer non-legal services in conjunction with their law practices, but that the lawyers should be subject to the Rules of Professional Conduct with regard to those services.1
Model Rule 5.7 provides that a lawyer is subject to the Rules of Professional Conduct if the lawyer provides the law-related services in circumstances that are not distinct from the legal services offered or when the lawyer controls the entity that provides the law-related services and has not made reasonable efforts to inform clients that they are not receiving legal services and thus are not protected by an attorney-client relationship.
Although the Utah Supreme Court has not adopted Model Rule 5.7, its provisions are not inconsistent with the existing Utah Rules of Professional Conduct and our Ethics Advisory Opinions. Rules 5.1 and 5.3, for example, provide that a lawyer is responsible for the ethical conduct or misconduct of lawyers and non-lawyers whom the lawyer directs or controls in the context of offering legal services. Rule 8.4(a) prohibits a lawyer from directing others to do what the lawyer cannot ethically do herself. The controlling concept is that the lawyer is responsible for the ethical conduct or misconduct of others when the lawyer is in control of their actions, and cannot abrogate that responsibility merely by delegating the action to a non-lawyer.
Several Utah Ethics Advisory Opinions conclude that a lawyer is held to the ethical standards of a lawyer when performing non-legal services.2Utah Ethics Opinion 1513in particular holds that the Rules of Professional Conduct will apply to a lawyer acting as an appraiser, unless the lawyer makes clear to the client, in writing, that she is not providing legal services and that an attorney-client relationship is not established.
One basis for those opinions is that a lay person receiving advice and service from a lawyer may not distinguish between legal and non-legal services and may expect to receive the protections of an attorney-client relationship-protections of confidences and against conflicts, for example.
That a lawyer is responsible for the ethical conduct or misconduct of those whom she controls and is held to the standards of the Rules of Professional Conduct when acting as a non-lawyer under certain circumstances are the concepts that underlie Model Rule 5.7.
Other states that have not adopted Model Rule 5.7 have allowed lawyers to provide law-related services under strict guidelines designed to protect the clients receiving the non-legal services.4While we may not agree with the particular restrictions imposed, we agree with the prevailing concern of protecting the clients receiving the law-related services. (more…)
(Approved October 30, 1998)
Issues: Is the Office of the Guardian ad Litem sufficiently similar to the Attorney General’s Office to render it a “government agency” within the meaning of the Utah Rules of Professional Conduct, and if so, does Rule 1.10 concerning imputed disqualifications, apply to the Office of the Guardian ad Litem? Does Rule 1.11, “Successive Government and Private Employment,” apply to the Office of the Guardian ad Litem?
Opinion: Both rules apply to the Office of the Guardian ad Litem. For purposes of Rule 1.10 the Office of the Guardian ad Litem is a “firm,” but the Office of the Guardian ad Litem’s government sponsorship and statutory duties also make that office a “government agency” for Rule 1.11 application. Under the Rules, the terms “firm” and “government agency” are not mutually exclusive and, in certain cases as with the Office of Guardian ad Litem both terms apply. Application of Rule 1.10 and Rule 1.11 serves to maintain confidentiality without unduly hampering the Office of the Guardian ad Litem from performing its duty to protect the best interests of children through hiring qualified attorneys.
Analysis: In response to an inquiry from the Office of the Guardian ad Litem, the Ethics Advisory Opinion Committee previously decided that that office is a “firm” for purposes of imputed disqualifications under Rule 1.10.1The Office of the Guardian ad Litem has submitted another request asking the Committee to reconsider the conclusion of Opinion 95-08 and to find that Rule 1.11 is the appropriate rule to apply to that office instead of Rule 1.10. As a request for reconsideration of a prior opinion, this request was not timely filed under our rules.2Nevertheless, because the request also raises a somewhat new issue involving Rule 1.11, we will grant a waiver of the 30-day requirement of Rule V(e)(1) and treat this as a late-filed request for reconsideration under our Rules of Procedure.
In Opinion 95-08, we found that the opportunity to discuss cases with other Guardian ad Litem attorneys, access to common files and common supervision required the Office of the Guardian ad Litem to be considered as a firm for Rule 1.10 purposes. It is, accordingly, subject to the application of rules dealing with conflicts, including Rule 1.7 and its companion rule, Rule 1.10.
For these purposes, the Office of the Guardian ad Litem is not a government agency similar to the Attorney General’s Office. First, the Utah Constitution broadly mandates that the Attorney General shall represent all the State officers, whose departments sometimes have conflicting interests, as well as undertake any other duties provided by law.3The Office of the Guardian ad Litem’s statutory mandate is narrowly defined and limited to representing minors before the court.4
Second, the Attorney General does not always represent specific clients, while the Office of the Guardian ad Litem’s statutory purpose is to represent the best interests of specific individual clients. For the purposes of determining whether an organization is a “firm” within the meaning of Rule 1.10, the identification of the structure and client is far more important than is the source of funding. Despite the fact that the government pays for the Office of the Guardian ad Litem, the office can still be a “firm” for conflicts purpose. For example, the government may hire a law firm to represent poor people in their personal law suits. This may be the only thing that the law firm does, and the government’s funding may be the only source of income. Nevertheless, the law firm would still be a “firm” within the meaning of Rule 1.10. (more…)
(Approved October 2, 1998)
Issue: Is it ethical for an attorney to serve as member of the board of directors of a client corporation?
Opinion: The Utah Rules of Professional Conduct do not prohibit an attorney from serving as a member of the board of directors of a client corporation. However, to avoid ethical violations, an attorney who undertakes a dual role as director and counsel for a corporate client should take adequate precautions both before and during the relationship.
Before a lawyer undertakes the dual role of corporate director and attorney, he must comply with several ethical obligations: (a) determine whether the responsibilities of the two roles may conflict; (b) advise and consult with the client concerning this determination and of the risks of dual service; and (c) decline service as a director if it would create a conflict of interest or compromise the lawyer’s independent professional judgment.
A lawyer who has undertaken the dual role of corporate director and attorney must comply with similar ethical obligations during the existence of the dual role: (i) continue to determine whether the responsibilities of the two roles are in conflict on particular matters; (ii) advise and consult with the client concerning these determinations and of the risks of dual service; (iii) recuse from participation in board decisions where participation would present a conflict; (iv) exercise reasonable care to protect the corporation’s confidential information; and (v) resign service as a director and, if necessary, as counsel if continued service would create a conflict of interest or compromise the lawyer’s independent professional judgment.
Analysis: The request for this opinion notes that the American Bar Association has adopted a formal opinion on this topic and asks that this Committee consider the issue as well. This Committee has not previously addressed whether an attorney may ethically serve on the board of directors of a client corporation. An official Comment to Utah Rule of Professional Responsibility 1.7 recommends caution in undertaking a dual role as a corporate director and attorney:
A lawyer for a corporation or other organization who is also a member of its board of directors should determine whether the responsibilities of the two roles may conflict. The lawyer may be called on to advise the corporation in matters involving actions of the directors. Consideration should be given to the frequency with which such situations may arise, the potential intensity of the conflict, the effect of the lawyer’s resignation from the board and the possibility of the corporation’s obtaining legal advice from another lawyer in such situations. If there is a material risk that the dual role will compromise the lawyer’s independence of professional judgment while acting as counsel, the lawyer should not serve as a director.1
This comment underscores the lawyer’s ethical responsibility carefully to evaluate conflicts and risks to the client both before and during service as a director of a client corporation. Under Utah Rule of Professional Conduct 1.4(b), a lawyer must “explain a matter to the extent reasonably necessary to enable the client to make informed decisions regarding the representation.” A lawyer considering or fulfilling a dual role as a director and attorney of a corporate client must explain to the client matters reasonably necessary to enable the client to make informed decisions regarding the representation. (more…)
(Approved October 30, 1998)
Issue: In a lawsuit against a Utah county, brought by the heirs of a decedent whose medical bills were paid (in part) by the State of Utah’s Medicaid program after the decedent had been in the county’s jail facility, what are the ethical considerations that govern a medical cost-recovery retainer agreement among the heirs, their attorney and the State’s Office of Recovery Services (ORS)?
Opinion: The attorney representing ORS may request the heirs and their attorney to execute a retainer agreement that precludes the heirs’ attorney from acting adversely to ORS and provides that ORS will be paid first from any recovery from third parties as a condition for ORS’s contributing to the heirs’ attorneys’ fees and costs. Whether the heirs’ attorney may execute such a retainer agreement depends on whether the attorney can satisfy the conflict-of-interest requirements of Rule 1.7(b).
Facts: Lawyer represents the surviving widow and daughter of the decedent, who was seriously injured while incarcerated in a county jail and died several months later after incurring significant medical bills. Through the Medicaid program, the State of Utah, Department of Health (the “Department”), paid a portion of these medical bills. Lawyer has commenced a lawsuit on behalf of the surviving widow and daughter (the “Heirs”) against the county.1
The Department has claimed a lien in the action for the medical assistance provided to the decedent (the “Medicaid lien”). Lawyer contacted ORS to negotiate a reduction in the Medicaid lien in an effort to reach a negotiated settlement of the lawsuit. The Heirs have claimed that the damages being sought in the lawsuit are not for “medical assistance” and that the Medicaid lien is inapplicable or invalid as to any recovery in the action.
ORS responded by refusing to negotiate the Medicaid lien and by requesting that Lawyer enter into a retainer agreement to be executed by Lawyer, the Heirs, and ORS under which Lawyer would agree to represent the interests of ORS in the recovery of the medical assistance provided by the State of Utah. The retainer agreement provided that Lawyer would agree not to represent the Heirs in a manner adverse to the interests of ORS with respect to the matter, and that ORS would be paid first out of any recovery from the defendant county the full amount of the Medicaid lien, without discount or reduction.
ORS made execution of the retainer agreement by Lawyer and Heirs a condition to ORS’s agreeing to pay any portion of the attorneys’ fees or costs incurred by Lawyer in the prosecution of the lawsuit. The retainer agreement contained an acknowledgment of the potential conflict of interest between ORS, Lawyer and the Heirs. It stated that this potential conflict of interest had been fully discussed with the Heirs and stated that the Heirs consented to Lawyer’s undertaking the dual representation. Paragraph 11 of the retainer agreement further provided: “This Retainer Agreement may be terminated only upon a showing of good cause, written notice being given to all other parties. Upon termination, the attorney agrees that he/she shall not continue representation of either ORS or Recipient in the Cause of Action.” The retainer agreement also provided: “A copy of any separate fee agreement between the Attorney and the Recipient shall be provided to ORS.” (more…)
(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…)
(Approved December 4, 1998)
Issue: What are the ethical obligations and considerations that govern a law firm’s acceptance of a financial interest such as stock in a client company in return for performing legal services for that company?
Opinion: A law firm’s acquisition of a financial interest such as stock ownership in a client, whether the investment is made directly by the law firm or through a blind trust, holding company, investment partnership or other investment vehicle, and whether the interest is acquired in exchange for legal services or whether the client’s primary attorney is involved in investment decisions concerning the client’s stock, is not per se unethical. However, in all such arrangements, counsel must comply with the requirements of Rules 1.5, 1.7(b) and 1.8(a) of the Utah Rules of Professional Conduct.
Factual background: It is reportedly common for a law firm for example, those representing high-tech, start-up companies in California to acquire financial interests in its clients in connection with legal services rendered to those firms. This may take the form of the client company’s payment of common stock to a law firm for its legal services. Payment arrangements might also be structured as formal purchases of the client company’s stock by the law firm, with an agreement that the cash paid for the purchase price be used by the company to pay legal fees charged by the law firm as services are rendered over time.
There are other variations on this general approach, including the use of mechanisms such as blind trusts, investment partnerships and other vehicles that operate in such a way that the client’s primary attorney is not involved in the firm’s decision on whether to invest in a client.
Analysis: Utah Rules of Professional Conduct 1.5 provides that a lawyer shall not enter into an agreement for, charge or collect an illegal or clearly excessive fee. A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.
This Committee has previously issued Opinion 97-05,1in which it reached the conclusion that accepting payment for legal services in a form other than money is not per se unethical. Nothing in the rules requires that payment be in money. The fundamental requirement is that the fee be reasonable.
We reach the same conclusion with regard to the application of Rule 1.5 to the present question. However, in addition to the factors specifically listed in Rule 1.5 that must be considered to determine the reasonableness of the fee,2the Committee believes that other factors should be considered by the lawyer in determining whether a fee in the form of equity ownership of a client is reasonable. These other factors include: (a) the liquidity of the client’s stock, including whether the client’s stock trades publicly at the time of the fee agreement and, if the stock is not publicly traded, the risk that the client’s stock will not be publicly traded in the future; (b) the present and anticipated value of the client’s stock, including the risks that a proposed patent or trademark may not be granted, that necessary government approvals (such as FDA approvals) may not be received; (c) whether the stock is subject to restrictions after the law firm receives it, and which affect the value of the stock to the lawyer; (d) the quantity of stock owned by the lawyer and whether the lawyer may exercise voting control over the client after receipt of the stock; and (e) any restrictions placed by the lawyer on the consideration paid for the stock. (more…)
(Approved December 4, 1998)
Issue: Is it unethical for a lawyer in a divorce case to advise a client that she may obtain a protective order pro se or to allow the client to appear pro se in the protective-order case, while the lawyer continues to represent the client in the divorce proceeding?
Opinion: Because a protective-order proceeding is a separate legal action from a divorce proceeding and is clearly delineated as such by state statute, an attorney who represents a client in a divorce proceeding is not automatically counsel for that client within the protective-order proceeding. Further, an attorney representing a client in a divorce proceeding is not ethically bound to represent the same client in a protective-order proceeding filed between the same parties. The lawyer may advise the client of her right to obtain a protective order and to do so pro se.
Analysis: Chapter 3 of Title 30 of the Utah Code governs divorce proceedings,1and Chapter 6 of Title 30 establishes a procedure for obtaining a “protective order” in a protective order or “cohabitant abuse” proceeding.2Sometimes, the relief sought in a protective-order action will overlap with or will be identical to relief sought in a divorce proceeding. The Ethics Advisory Opinion Committee has been asked whether an attorney who is representing a client in a divorce proceeding is required to represent the same client in a protective-order proceeding involving the same opposing party as the divorce proceeding. The request notes that, because the relief sought in the protective-order action may duplicate the relief sought in the divorce action, it may cause difficulty for one or both litigants to the actions, or to the court, if a party appears pro se seeking the issuance of relief pursuant to a protective order.
A lawyer has an obligation to advise a client of all lawful options to resolve a legal problem.3If an attorney believes that a protective order is appropriate in a case, the Rules of Professional Conduct may, therefore, require the attorney to advise the client of the option of obtaining a protective order. Because the protective-order system in Utah allows pro se litigants to obtain protective orders at no cost through the assistance of the court and without incurring attorney’s fees, an attorney may properly advise a client that she has the option not only of obtaining a protective order, but of obtaining one either through counsel or pro se. If an attorney advises a client of the availability of the protective-order system and of the possibility of obtaining a protective order without counsel, the attorney is not breaching any of the Rules of Professional Conduct.
It goes without saying that a lawyer cannot accept representation in a case, promise to represent a client in a protective-order proceeding, and then fail to do so. This would clearly be a violation of Rules 1.1, 1.2 and 1.4. Conversely, however, if the lawyer advises the client of the option of obtaining a protective order, and the client specifically elects to do so pro se, the attorney is ethically prohibited from interfering in the client’s decision, since this would violate the specific instructions from the client as to the scope and direction of the representation.4Once an attorney has advised a client of all her options in any case, it is exclusively the client’s right to determine whether to pursue one course of action or another, and whether to pursue relief pro se or with counsel. Under Rule 1.2(a), the lawyer is bound by the client’s determinations in this regard and may not act adversely to the client’s specific instructions. Indeed, it might violate a lawyer’s ethical obligations to insist upon appearing for a client in a protective-order case, if the client specifically instructed the attorney not to do so. (more…)
(Approved January 29, 1999)
Issue: May a lawyer, who identifies himself as a lawyer, write an article or letter to the editor for a non-legal publication on (a) a legal subject or (b) a non-legal subject?
Opinion: Generally, a lawyer, identified as a lawyer, may write for publication about any subject matter, subject to certain limitations such as compliance with Rule 3.6 on trial publicity.
Background: The Ethics Advisory Opinion Committee has been asked to consider whether a lawyer, who identifies himself as a lawyer, may ethically publish articles and letters to the editor in newspapers, magazines and other publications. This request arises, in part, because of a 1979 Utah Ethics Advisory Opinion, which declared that “It is improper for an attorney to identify himself as an attorney in a letter to the editor.”1
In a short opinion that recites a portion of a 1962 informal ABA opinion, this Committee appears to have concluded that an attorney may only publish a letter to the editor “express[ing] a view point on public matters if, of course, he doesn’t mention the fact that he is a lawyer.”2
The foundation for this restriction is somewhat unclear, but appears to be partially grounded in Canon 27 of the Code of Professional Responsibility, which proscribed lawyers’ advertising.
Discussion: We find that the conclusion and the apparent reasoning behind Opinion 54 are not consistent with the current Utah Rules of Professional Conduct3 and the case law that has addressed the First Amendment rights of lawyers and law firms.4
Turning first to the Rules of Professional Conduct, we find no rule that directly proscribes either a lawyer’s letter to the editor or an article written on any subject-legal or otherwise. Nor do we find anything in the rules that restricts the lawyer from identifying himself as a lawyer. We do note that there are some limitations on communicating through the media about currently pending litigation of a lawyer’s client, and we assume here that the letters and articles in question are not targeted toward or about the lawyer’s client’s legal affairs5or otherwise designed “to embarrass, delay or burden a third person” when representing a client.6
The “advertising rules,” Rules 7.1 through 7.5, do not deal directly with the subject of lawyers’ letters and articles, and we can find no other rules that would have direct application. Perhaps more fundamentally, however, a lawyer should be generally free to communicate about matters of interest, legal or otherwise, and not be constrained to hide his identity as a lawyer. To the extent that Opinion No. 54 was based on the notion that identifying oneself as a lawyer in a letter to the editor or other publication is a form of advertising, the application of the First Amendment in such cases as Bates and the replacement of the Code of Professional Responsibility by the Rules of Professional Conduct has swept this aside.
As the New Jersey Supreme Court Committee on Attorney Advertising recently concluded, “There is nothing inherently improper about the publication of a column discussing a legal topic.”7We agree, and we further conclude that the identification of the author as a lawyer is not inherently improper. The principle is that lawyers’ communications are generally protected by the First Amendment, subject to the restriction that they not be false or misleading. Writing letters and articles about matters of interest does not constitute improper or unethical behavior.8 (more…)