Ethics Advisory Opinion 13-05

Utah State Bar

 Ethics Advisory Opinion Committee

Opinion Number 13-05

 Issued September 10, 2013

 ISSUE

 

1.         To what extent may an attorney participate in an “on-site” fee/retainer funding program to obtain and finance attorney retainer or litigation funds?

 OPINION

 

2.         A lawyer may not participate in an “on-site” fee/retainer funding program, under the circumstances set forth herein, as such would violate the provisions of Rules of Professional Conduct 1.7(a) (Conflict of Interest: Current Clients), Rule 1.8(a) (Acquire a pecuniary interest adverse to the client).  The lawyer may, however, obtain a waiver of the conflict by complying with the terms of Rules 1.7(b) and 1.8(a), including making full disclosure and obtaining “informed consent” confirmed in writing.  Adequate measures must also be taken to safeguard the lawyer’s independent judgment under Rule 5.4(c) (A third party may not direct or regulate the lawyer’s professional judgment.)

 BACKGROUND

 

3.         A financing company, “Instant Legal Fee Funding” (the “finance company”), offers a same as cash funding program for law firm retainers and fees.  The finance company provides the physical equipment necessary to carry out the mechanics of the arrangement on site at the lawyer’s office.  To initiate the process at the lawyer’s office, the client swipes an item of personal financial identification through the finance company’s identifying device.  The finance company also provides the law firm with an imaging machine that scans the client’s personal check in order to facilitate the finance company’s collection of periodic loan repayments directly from the client’s banking account.

4.         The finance company then may qualify the client for a loan of up to $5000.  The finance company charges a transaction fee ranging from 9.95% interest to 28.95% depending on risk factors it considers, including the repayment period.  If the client qualifies, the law firm provides the client with the finance company’s contractual agreement to repay the finance company.  The finance company has no recourse against the lawyer if the client does not pay the money.

 ANALYSIS

 

5.         Rule 1.7(a)(2) requires an attorney to refrain from representation if “There is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to …a third person or by a personal interest of the lawyer.”  Comment 10 to that section provides:

The lawyer’s own interests should not be permitted to have an adverse effect on representation of a client…In addition, a lawyer may not allow related business interests to affect representation, for example, referring clients to an enterprise in which the lawyer has an undisclosed interest.

6.         Because of the necessarily close relationship which must exist between the finance company and the lawyer, it is apparent that a conflict exists under 1.7(a) which may create a “significant risk” that the lawyer’s representation of the client would be “materially limited.” Additionally, Rule 1.8(a) prohibits a business transaction or other pecuniary interests adverse to a client.[1]  For the reasons set forth herein, the arrangement contemplated is sufficiently adverse to the client so that a conflict appears to exist under 1.8(a) as well.

7.         Under both rules, the material question concerns the involvement of the attorney in both the attorney obtaining the retainer by this method and the finance company’s ability to collect the retainer fee back from the client.  We presume from the stated facts that the attorney has no direct interest in the finance company.  That, however, does not resolve all issues.  The question that must be answered is whether the financial arrangement, albeit indirect, between the lawyer and the finance company, may adversely affect the representation of the client.  Although, the finance company has no recourse against the lawyer if a client defaults on a loan, it is only natural that the lawyer will want to keep the finance company happy in order to assure perpetuation of the relationship between the lawyer and finance company.  The lawyer will be under pressure to assure that the finance company is repaid.  The lawyer may very well feel obliged in litigation to make certain the client achieves a recovery, even if it requires settlement at a lesser amount than would otherwise be accomplished, in order to avoid the risk that the finance company would go unpaid.  Thus, the lawyer obviously has a financial and personal interest adverse to the client in continuing the advancement of fees program solely for the benefit of the lawyer in future cases.  This places both Rules 1.7(b) and 1.8(a) in issue.
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Ethics Advisory Opinion 13-04

Utah State Bar

Ethics Advisory Opinion Committee

Opinion Number 13-04

Issued September 30, 2013

ISSUE

 1.        The question before the Committee concerns federal criminal law practice in the District of Utah.  Although it may have general application, this Opinion is confined to that arena.   The question is whether it is ethical under the Utah Rules of Professional Conduct for a criminal defense attorney (hereafter “the attorney”) to advise a client/defendant (hereafter “the client”) to negotiate and enter into a plea agreement whereby the client, as an integral part of his plea of guilty, waives all post-conviction claims the client may have, including claims of ineffective assistance of the attorney, except for claims of ineffective assistance of counsel based upon negotiating or entering in to the plea or waiver.

OPINION

 

2.         The Committee concludes that it is a violation of Rule of Professional Conduct 1.7 for an attorney to counsel his client to enter into a plea agreement which requires the client to waive the attorney’s prospective possible ineffective assistance at sentencing or other postconviction proceedings.[1]

BACKGROUND AND ANALYSIS

3.         Numerous federal courts, including the Tenth Circuit Court of Appeals, have concluded that waivers of post-conviction rights by criminal defendants are valid and enforceable so long as there is an adequate plea colloquy and such pleas are entered knowingly and voluntarily.[2] The Committee’s opinion is confined to the limited question of whether the attorney can negotiate and advise a client to enter into a guilty plea agreement which waives all postconviction claims, including those based upon ineffective assistance of counsel, consistent with the Utah Rules of Professional Conduct.  The Committee concludes that doing so would be a violation of Rule 1.7.  Under Rule 1.7(a), “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.”  In relevant part, the Rule defines a “concurrent conflict of interest” as the existence of “a significant risk” that the lawyer’s representation of “one or more clients” “will be materially limited” “by a personal interest of the lawyer.”  Utah R. Prof. C. 1.7(a)(2).[3]

4.         A defendant’s waiver of the statutory right to direct appeal contained in a plea agreement is enforceable if the defendant has agreed to its terms knowingly and voluntarily.  United States v. Atterberry, 144 F.3d 1299, 1300 (10th Cir.1998).  The issue of waiving the right to appeal is analyzed in the Tenth Circuit using the following factors:

(1) whether the disputed appeal falls within the scope of the waiver of appellate rights; (2) whether the defendant knowingly and voluntarily waived his appellate rights; and (3) whether enforcing the waiver would result in a miscarriage of justice . . . (Citation omitted).

United States v. Hahn, 359 F.3d 1315, 1325 (10th Cir. 2004).  Thus, given the third prong of the analysis, even in the presence of a waiver of appeal, a criminal defendant does not subject himself to being sentenced entirely at the whim of the district court.  Id.  Nevertheless the Committee’s Opinion is launched from the premise that the law is settled, certainly in the Tenth Circuit where this question arises, that a valid plea agreement waiver of either the right to appeal or  other collateral attack is entitled to be enforced according to its terms either on appeal or by way of collateral attack.  Such a waiver is subject to certain exceptions, e.g., where the agreement was involuntary or unknowing, where the court relied on an impermissible factor such as race, or where the agreement is otherwise unlawful, et cetera.  Numerous authorities exemplifying such exceptional circumstances are identified in the Tenth Circuit’s pivotal decision, United States v. Cockerham, supra n. 2, 237 F.3d at 1182.
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Ethics Advisory Opinion No. 13-03

UTAH STATE BAR

ETHICS ADVISORY OPINION COMMITTEE

Opinion No. 13-03

Issued September 11, 2013


ISSUE

      1.   Whether a lawyer violates her duty to diligently represent a client who wishes to appeal a juvenile court’s order, but refuses to sign the Notice of Appeal (which will be dismissed without appellant’s signature pursuant to statute) due to her diminished capacity.

OPINION

      2.   Under Rule 1.14, if the lawyer believes the client is at risk of substantial harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer should take reasonable steps to protect the client’s interests.

FACTS

      3.   Lawyer has defended Client’s parental rights in child welfare proceedings.  Client has been found permanently criminally incompetent and was receiving extensive services through Division of Services for People with Disabilities (DSPD).  DSPD determined that Client has diminished capacity.  Lawyer has always been able to effectively communicate with Client and has defended Client’s parental rights in accordance with her wishes.  The State filed a Verified Petition for Termination of Parental Rights, and Lawyer represented Client at trial.  On four occasions—at the beginning of trial, during trial, and after the Court ruled to terminate Client’s parental rights—Lawyer advised Client of her right to an appeal and advised Client that she would be required to sign a Notice of Appeal.  On all four occasions, Client indicated she would refuse to sign anything but wanted to appeal.  Utah Code Ann. § 78A-6-1109 requires an appellant’s signature on every Notice of Appeal from a juvenile court order.  If the Notice of Appeal is submitted without signature, the appeal is dismissed and the appellant loses his or her right to the appeal.  Lawyer filed a Motion for Extension of Time and an Affidavit of Diligence and awaits a response from the Court.

ANALYSIS

      4.   Rule 1.3 requires that lawyers “act with reasonable diligence and promptness in representing a client.”  Utah R. Prof. Conduct 1.3.  Moreover, the Rules specifically address representation of clients with diminished capacity in Rule 1.14.  The Rule states:

(a) When a client’s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.

(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian.

(c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests.

Utah R. Prof. Conduct 1.14.  The Rules define the term “substantial” as “a material matter of clear and weighty importance.”  Utah R. Prof. Conduct 1.0(m).
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Ethics Advisory Opinion No. 13-01


UTAH STATE BAR

ETHICS ADVISORY OPINION COMMITTEE

Opinion No. 13-01

Issued April 9, 2013

ISSUE

When a lawsuit or claim is filed against a government entity, the attorney’s office of that entity sends all relevant employees an e-mail including a litigation hold notice and certain questions regarding the location of documents possibly relevant to the pending claim.  If the claim has been brought by an employee, such as an employment discrimination claim, the complaining employee would also receive the e-mail.  In this situation, does the attorney’s office sending this e-mail to all relevant employees, including a represented plaintiff or complaining employee, constitute a violation of Utah Rule of Professional Conduct 4.2?

OPINION

It is a violation of Rule 4.2 for a government entity’s attorney’s office to send a litigation hold e-mail to an adverse represented employee because the e-mail relates to the subject of litigation and none of the exceptions listed in Rule 4.2 apply.

ANALYSIS

            This issue is controlled by Rule 4.2.  Rule 4.2(a) provides that:

In representing a client, a lawyer 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.  Notwithstanding the foregoing, an attorney may, without such prior consent, communicate with another’s client if authorized to do so by any law, rule, or court order, in which event the communication shall be strictly restricted to that allowed by the law, rule or court order, or as authorized by paragraphs (b), (c), (d) or (e) of this Rule.

The referenced exceptions in Paragraphs (b), (c), (d), and (e) deal with, respectively, cases involving unbundled legal services, government lawyers engaged in civil or criminal enforcement matters, organizations as represented persons, and inquiries about privileged communications and settlement.  The Committee does not express an opinion regarding these specific, enumerated exceptions, but instead addresses the issue presented only under Paragraph (a)’s general requirement.[1]

Rule 4.2(a) prohibits an attorney from communicating with a represented party “about the subject of the representation.”  The term “subject of the representation” is not clearly defined by the Rule.  However, Comment 5 to the Rule indicates that an ex parte contact with a represented party might be acceptable if “the communication is outside the scope of the representation” or “regarding a separate matter.”  See Utah R. Prof. Cond. 4.2 at cmt. 5.  This language demonstrates that the closer the subject of communication is to the case at issue, the more likely it will violate the Rule.  It also indicates that for a communication to be acceptable, it must relate to a different topic that is unrelated to the case in which the party is represented.

The hypothetical communication described in the issue here presented relates to the subject of the representation.  The e-mail requests that the employee preserve all documents related to the represented party’s claims and answer questions about those documents’ location.  Although there is presumably little substantive information requested or exchanged, the communication is not “outside the scope” of the representation or related to “a separate matter.”  See Utah R. Prof. Cond. 4.2 at cmt. 5.  Therefore, the proposed e-mail would be a communication about the subject of the representation.
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Ethics Advisory Opinion No. 13-02

 UTAH STATE BAR 

ETHICS ADVISORY OPINION COMMITTEE 

Opinion No. 13-02 

Issued April 9, 2013 

Issue 

      1.   The requesting attorney seeks an opinion on several related matters, which the Committee has combined into three general areas of inquiry: (i) may an attorney pay a non-lawyer, directly or indirectly, for a referral; (ii) may an attorney enter into a joint marketing and/or cross-referral arrangement with a non-attorney; and (iii) may an attorney acquire an ownership or equity interest in, or making a loan to, a business, with the expectation of receiving referrals from the business.

Opinion

2.   Subject to the exceptions outlined below, the opinions of the Committee regarding the stated issues are:

(i)  The relevant Rules of Professional Conduct (the “Rules”) expressly prohibit an attorney from giving anything of value to a person for a legal referral, and includes giving anything of value indirectly.  Any compensation for a referral violates the Rules.  Any agreement for reciprocal referrals violates the Utah Rules.

(ii)  The relevant Rules do not expressly prohibit an attorney from engaging in joint advertising with a non-lawyer.  However, due to the multitude of possible arrangements between the participants in any such joint advertising, the Committee does not and cannot give a general opinion endorsing the use of joint advertising or referrals between an attorney and a non-lawyer because of the high probability of violating other Rules, including the prohibition of giving anything of value to a non-lawyer for a referral.

(iii)   The relevant Rules do not specifically prohibit an attorney from acquiring an ownership or equity interest in, or make a loan to, a business that is not a client with the expectation of receiving referrals from the business.   The Rules specifically prohibit an attorney from entering into a business transaction with a client or knowingly acquiring an ownership, possessory, security or other pecuniary interest adverse to a client, without complying with specific conditions.  In any event, because of the multitude of possible arrangements between the participants in any such business arrangements, the Committee does not and cannot give a general opinion endorsing an attorney acquiring an ownership or equity interest in, or making a loan to, a business, with the expectation of receiving referrals from the business.

Background 

3.   The requesting lawyer explains that each question represents a practice that he believes is followed by lawyers in his practice area.  Those questions, as combined by the Committee, which are stated in more detail hereafter, set forth the extent of the background relied upon by the Committee to provide the opinions and views expressed herein.

Analysis 

4.   Issue No. 1:  The relevant Rules expressly prohibit an attorney from giving anything of value to a person for a legal referral, and includes giving anything of value indirectly.  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 reinforce this, stating that, subject to the exceptions discussed below, “[l]awyers are not permitted to pay others for channeling professional work.”  Utah R. Prof’l Conduct 7.2, comment 5.

5.   This committee has not previously defined the scope of the “thing of value” element.  Other jurisdictions, however, have generally interpreted it broadly.  A Connecticut judicial decision held that “it is improper for an attorney to pay non-lawyer employees a $50 bonus for referring cases to the firm.”  Rubenstein v. Statewide Grievance Comm., 2003 WL 21499265 (Conn. Super. Ct. 2003).  Similarly, a Pennsylvania ethics opinion concluded that a lawyer may not give “gift certificates” in exchange for referrals, because gift certificates are a thing of value.  Pa. Eth. Op. 2005-81.
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