Ethics Advisory Opinion No. 04-04

Utah State Bar Ethics Advisory Opinions
Opinion No. 04-04
Issued August 25, 2004
Issue: In litigation to enforce an oral contract allegedly made by a corporate defendant’s former employee on behalf of the corporation, where the former employee was not a member of the control group, may the plaintiff’s attorney contact the ex-employee without the consent of the corporate defendant’s attorney?

Answer: The contact with the former employee is not unethical. Utah Rules of Professional Conduct 4.2 (2004) does not bar a lawyer’s unauthorized contact with former employees of a represented corporate defendant except in very limited circumstances not applicable to this opinion.
Facts: A corporate defendant is represented by a lawyer in the defense of a claim based on an oral agreement allegedly made by a former employee of the corporate defendant while employed by the corporate defendant. The former employee was not a member of the “control group” as this term is defined in Utah Rules of Professional Conduct 4.2(c) (2) (2004), but the former employee did have authority to enter into contracts. The former employee is not separately represented by legal counsel with respect to the matter. We are asked whether the lawyer representing the corporate defendant represents the former employee with respect to the matter under Rule 4.2(c)(1)(B)(iii), thereby precluding plaintiff’s counsel from communicating with the former employee with respect to the matter without complying with Rule 4.2(a).
Analysis: In 1991, the ABA’s Committee on Ethics and Professional Responsibility addressed whether Model Rule 4.2 limits contacts with former employees. In ABA Formal Opinion 91-359 (1991), the ABA Committee concluded it does not. In pertinent part, the opinion provides:
While the Committee recognizes that persuasive policy arguments can be and have been made for extending the ambit of Model Rule 4.2 to cover some former corporate employers [sic], the fact remains that the text of the Rule does not do so and the comment gives no basis for concluding that such coverage was intended. Especially where, as here, the effect of the Rule is to inhibit the acquisition of information about one’s case, the Committee is loath, given the text of Model Rule 4.2 and its Comment, to expand its coverage to former employees by means of liberal interpretation.
Accordingly, it is the opinion of the Committee that a lawyer representing a client in a matter adverse to a corporate party that is represented by another lawyer may, without violating Model Rule 4.2, communicate about the subject of the representation with an unrepresented former employee of the corporate party without the consent of the corporation’s lawyer.
The only Utah court to have carefully considered this issue followed the ABA’s interpretation of Model Rule 4.2 at a time when Utah Rules of Professional Conduct 4.2 mirrored the Model Rule. In Shearson Lehman Bros., Inc. v. Wasatch Bank, 139 F.R.D. 412 (D. Utah 1991), plaintiff’s counsel sought to interview 24 former bank tellers regarding bank practices during the time an employee allegedly fraudulently endorsed checks. The court held:
Today this court joins the ranks of those which have construed Rule 4.2 consistently with the position taken by the ABA Committee on Ethics and Professional Responsibility. Under this court’s rules of practice, Utah Rule of Professional Conduct 4.2 as well as ABA Model Rule 4.2 do not prohibit ex parte contact with the former employees of an organizational party that is represented by counsel.
(more…)

Ethics Advisory Opinion No. 04-01

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

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

04-02 – May a plaintiff’s lawyer continue to represent the plaintiff in a legal malpractice action when opposing counsel has announced an intention to call plaintiff’s lawyer as a witness?

April 19, 2004
¶1 ISSUE:
May a plaintiff’s lawyer continue to represent the plaintiff in a legal malpractice action when opposing counsel has announced an intention to call plaintiff’s lawyer as a witness?

¶2 OPINION: There is no per se disqualification of a lawyer in a case where she may be called as a witness. The lawyer must determine whether, under the facts of the case, she is a “necessary witness” in the litigation under Rule 3.7. If she is, and if disqualification of the lawyer would not work a substantial hardship on the client, she must withdraw prior to trial. If the lawyer does not withdraw, the lawyer must insure that the client’s interests are and can be protected in a timely manner. This could include the filing of a motion in limine or other pleading to resolve the issue prior to trial. Concurrently, the lawyer must determine if there is a conflict of interest under Rule 1.7.
¶3 FACTS: C, a former client of lawyer L, has sued L for legal malpractice for failure to protect client assets from waste by a former spouse in a divorce case. L’s lawyer has advised C’s current lawyer F that F will be called as a witness on the issues of apportionment and contribution for her alleged failure to protect the assets of the client she now represents.
¶4 ANALYSIS: L’s decision to call C’s current lawyer F as a witness as to the issue of responsibility of F for damages to her own client for malpractice engages Utah Rules of Professional Conduct 3.7, “Lawyer as Witness,” and 1.7, “Conflict of Interest.”
Rule 3.7, Lawyer as Witness. Rule 3.7 addresses the lawyer-witness issue and provides:
(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be necessary as a witness unless:
(1) The testimony relates to an uncontested issue;
(2) The testimony relates to the nature and value of legal services rendered in the case; or
(3) Disqualification of the lawyer would work substantial hardship on the client.
(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer’s firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9.
¶5 Rule 3.7 does not automatically require withdrawal.1Rather, Rule 3.7(a) provides that a lawyer may not act as an advocate at trial if she is likely to be a “necessary” witness. Whether or not this lawyer’s testimony is necessary is a fact-specific question the lawyer being summoned must resolve. If the testimony is duplicative and obtainable from other sources, her testimony may not be necessary, and the lawyer should not withdraw or should not be subject to disqualification.2 “The naming of a party’s attorney does not ipso facto render the named attorney a ‘necessary witness’ . . . nor does the availability of other competent witnesses for the same testimony automatically render the named attorney ‘unnecessary’.”3
¶6 The attorney should not continue the representation when she is or ought to be a witness with respect to issues that are not incidental or insignificant. “[A]pplication of this rule does not depend on whether an attorney will be called but rather, as the Code provides, on whether he ‘ought to be called as a witness’ in the underlying action.”4 (more…)

04-04 – In litigation to enforce an oral contract allegedly made by a corporate defendant’s former employee

August 25, 2004

1 Issue: In litigation to enforce an oral contract allegedly made by a corporate defendant’s former employee on behalf of the corporation, where the former employee was not a member of the control group, may the plaintiff’s attorney contact the ex-employee without the consent of the corporate defendant’s attorney?

2 Answer: The contact with the former employee is not unethical. Utah Rules of Professional Conduct 4.2 (2004) does not bar a lawyer’s unauthorized contact with former employees of a represented corporate defendant except in very limited circumstances not applicable to this opinion.
3 Facts: A corporate defendant is represented by a lawyer in the defense of a claim based on an oral agreement allegedly made by a former employee of the corporate defendant while employed by the corporate defendant. The former employee was not a member of the “control group” as this term is defined in Utah Rules of Professional Conduct 4.2(c) (2) (2004), but the former employee did have authority to enter into contracts. The former employee is not separately represented by legal counsel with respect to the matter. We are asked whether the lawyer representing the corporate defendant represents the former employee with respect to the matter under Rule 4.2(c)(1)(B)(iii), thereby precluding plaintiff’s counsel from communicating with the former employee with respect to the matter without complying with Rule 4.2(a).
4 Analysis: In 1991, the ABA’s Committee on Ethics and Professional Responsibility addressed whether Model Rule 4.2 limits contacts with former employees. In ABA Formal Opinion 91-359 (1991), the ABA Committee concluded it does not. In pertinent part, the opinion provides:
While the Committee recognizes that persuasive policy arguments can be and have been made for extending the ambit of Model Rule 4.2 to cover some former corporate employers [sic], the fact remains that the text of the Rule does not do so and the comment gives no basis for concluding that such coverage was intended. Especially where, as here, the effect of the Rule is to inhibit the acquisition of information about one’s case, the Committee is loath, given the text of Model Rule 4.2 and its Comment, to expand its coverage to former employees by means of liberal interpretation.
Accordingly, it is the opinion of the Committee that a lawyer representing a client in a matter adverse to a corporate party that is represented by another lawyer may, without violating Model Rule 4.2, communicate about the subject of the representation with an unrepresented former employee of the corporate party without the consent of the corporation’s lawyer.
5 The only Utah court to have carefully considered this issue followed the ABA’s interpretation of Model Rule 4.2 at a time when Utah Rules of Professional Conduct 4.2 mirrored the Model Rule. In Shearson Lehman Bros., Inc. v. Wasatch Bank, 139 F.R.D. 412 (D. Utah 1991), plaintiff’s counsel sought to interview 24 former bank tellers regarding bank practices during the time an employee allegedly fraudulently endorsed checks. The court held:
Today this court joins the ranks of those which have construed Rule 4.2 consistently with the position taken by the ABA Committee on Ethics and Professional Responsibility. Under this court’s rules of practice, Utah Rule of Professional Conduct 4.2 as well as ABA Model Rule 4.2 do not prohibit ex parte contact with the former employees of an organizational party that is represented by counsel.
(more…)

Ethics Advisory Opinion No. 04-01a

December 2, 2004
Amendment of Opinion No. 04-01: On March 29, 2004, the Utah Ethics Advisory Opinion Committee issued Utah Ethics Advisory Op. No. 04-01, 2004 WL 870583 (Utah St. Bar).1 The Office of Professional Conduct of the Utah State Bar filed a petition for review with the Board of Bar Commissioners pursuant to § III(e)(1) of the Ethics Advisory Opinion Committee Rules of Procedure and § VI(a)(1) of the Utah State Bar Rules Governing the Ethics Advisory Opinion Committee. The Commission asked the Committee to reconsider Opinion No. 04-01. Having reviewed the issues raised by the Office of Professional Conduct, we issue this amended opinion, which revises the conclusion and analysis of Opinion No. 04-01. Accordingly, this amended opinion replaces and supersedes Opinion No. 04-01.
Issue: What action, if any, may a lawyer for an employer ethically undertake on behalf of a vanished former employee who, along with the employer, has been named as a defendant in an action arising when the person was an employee?


Opinion
: The lawyer may not act on behalf of or purport to represent the vanished former employee unless the lawyer has an existing attorney-client relationship with the former employee or the former employee agreed to the representation prior to vanishing and, in either case, the lawyer complies with Rules 1.7 and 1.8(f) of the Utah Rules of Professional Conduct. The lawyer who represents the employer may engage in acts that may benefit the vanished former employee provided the lawyer makes it clear that he is acting on behalf of the employer as the employer’s lawyer and not on behalf of the vanished former employee as the former employee’s lawyer.
Facts: Plaintiff filed suit naming a company and its former employee as defendants. The company concedes that the former employee was acting in the course and scope of his employment and has asked the company’s lawyers to represent the missing former employee. The company is concerned that absence of a formal answer to the complaint by the former employee may result in a default judgment being entered against the absent former employee. We have no information about the reasons for the employee’s absence, but we assume that a reasonable effort has been made to locate the person and determine the reason for the absence. We also assume that, at this early stage of the proceeding, the interests of the employer and employee are not directly adverse with respect to the matter.2 The lawyer requesting this opinion also indicated that the employer has liability insurance that covers the incident giving rise to the lawsuit.3 The company has requested that the lawyer represent the vanished former employee.
Analysis: This case presents two competing concerns: On the one hand, a basic ingredient of the representation of a client is that, under Rule 1.4, the lawyer communicate with the client, keep the client informed about the status of the case, and provide sufficient information to the client that the client may make informed decisions; and, under Rule 1.2, the lawyer must abide by the client’s decisions regarding the goals of the representation. On the other hand, the interests of a party missing from a proceeding will go unprotected with an application of the Rules. The Rules of Professional Conduct are rules of reason,4 to be interpreted to further the administration of justice when the Rules are unclear. However, in this instance, we conclude the Rules are clear and must be applied despite arguments of countervailing public policy.5 (more…)

Ethics Advisory Opinion No. 04-05

December 2, 2004
Issue:
Do the Utah Rules of Professional Conduct preclude a lawyer from forming a cooperative organization that offers certain non-legal, but law-related, services such as trust administration and investment management; referring clients to that organization; and participating in the organization’s profit sharing?

Opinion: It is not per se unethical for a lawyer to refer a client to a cooperative organization created by the lawyer to provide non-legal services and for the lawyer to participate in the organization’s profit sharing. If the lawyer complies with the following, then the arrangement is permissible: (1) objectively concludes that any identifiable conflicts between the lawyer and the cooperative organization would not materially affect the representation of that client; (2) affirms in writing to the client that the referral will not compromise the client’s interests in any way; (3) fairly concludes that the services provided by the cooperative organization are being provided at fair and reasonable fees; (4) discloses that the lawyer will receive a share of profits from the cooperative organization; (5) advises the client to seek independent counsel as to the referral; and (6) secures the client’s consent.
Facts: A group of Utah lawyers proposes the formation of a cooperative organization (the “Co-op”) to offer certain non-legal, but law-related, foundation and charitable trust services and products, such as plan designs, administration, wealth enhancement, insurance and investment management (the “services” and “products”) for a fee or for customary compensation where products are involved. The Co-op would serve as the provider. A lawyer-member of the Co-op would refer a client to the Co-op’s staff, who would, in turn, arrange to provide the desired services and/or products.
Although the lawyers would be members of the Co-op, the legal services they would provide to the clients would be independent from the Co-op. The lawyers would provide and bill for their legal services through their respective law firms. The billed legal services would not involve the Co-op in any way. The lawyer-members would receive a proportionate share of the Co-op’s profits.
Analysis: The most relevant rules to the issue at hand are Rules 1.7 and 1.8 of the Utah Rules of Professional Conduct and ABA Model Rule of Professional Conduct 5.7,1 which provide in pertinent part:
[Utah] Rule 1.7. Conflict of Interest: General Rule
(b) A lawyer shall not represent a client if the representation of the client may be materially limited by the lawyer’s responsibilities to another client or to a third person or by the lawyer’s own interest, unless:
(1) The lawyer reasonably believes the representation will not be adversely affect; and
(2) Each client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation to each client of the implications of the common representation and the advantages and risks involved.2
[Utah] Rule 1.8. Conflict of Interest: Prohibited Transactions
(a) A Lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless:
(1) The transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which can be reasonably understood by the client; and (more…)

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. (more…)