Wisconsin Rules of Professional Conduct and Contract Law
Eric Goldman
November 2003
These rules reflect the current Wisconsin Rules of Professional Conduct. These rules will likely change over the next couple of years. Note that many other legal parameters may apply to the same conduct described here. Failure to abide by these rules jeopardizes an attorney’s license, but other doctrines may create liability for damages or other sanctions.
1. Lawyer’s Involvement in Fraud.
Knowingly helping a client commit fraud violates the Rules.
- SCR 20:1.2(d). A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.
- SCR 20:8.4(c). It is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation.
When an attorney represents an organization engaged in fraud, or where the client contact is engaged in self-dealing, the attorney is expected to escalate the matter internally.
- SCR 20:1.13(b) and (c). If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization. If, despite the lawyer’s efforts in accordance with paragraph (b), the highest authority that can act on behalf of the organization insists upon action, or a refusal to act, that is clearly a violation of law and is likely to result in substantial injury to the organization, the lawyer may resign in accordance with Rule 1.16.
Should an internal escalation fail (or where the client is an individual) and the client persist in fraudulent conduct, the attorney may be required to withdraw, in some cases “noisily.”
- SCR 20:1.6(b). A lawyer shall reveal such information to the extent the lawyer reasonably believes necessary to prevent the client from committing a criminal or fraudulent act that the lawyer reasonably believes is likely to result in death or substantial bodily harm or in substantial injury to the financial interest or property of another.
2. Good Faith Negotiations.
An attorney cannot knowingly make misrepresentations during negotiations. An attorney may have an affirmative duty to disclose information to avoid client crime or fraud.
- SCR 20:4.1. In the course of representing a client a lawyer shall not knowingly: (a) make a false statement of a material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.
- SCR 20:8.4(c). It is professional misconduct for a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation.
An attorney cannot communicate with the other party’s principal if the other party is represented by counsel (unless the other party’s attorney permits that communication). This can come up in places like conference calls and replies to emails. Most attorneys do not even know this rule exists, but adhering to this rule can help both the client and your professional standing.
- SCR 20:4.2. In representing a client, a lawyer shall not communicate 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.
Where your client is dealing with an unrepresented party, you need to proceed with special care. This can especially come up in negotiations between you, your client and the other principal, where your statements can be misinterpreted.
- SCR 20:4.3. In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.
3. Gotchas.
Watch out for conflicts that can arise when you represent and negotiate contracts between interrelated parties. This can arise among parent/subsidiary, a founder or employee and the company, a corporate investor and the corporation, or a partnership and one or more of its partners. Always make sure you know who your client is!
- SCR 20:1.7. (a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless: (1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and (2) each client consents in writing after consultation. (b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests, unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents in writing after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
If you are representing a party in contract negotiations, but someone other than that party is paying the bill, you need to jump through some special hoops. This can arise in situations like insurance settlements and parent/subsidiary negotiations. Keep track of who your client is!
- SCR 20:1.8(f). A lawyer shall not accept compensation for representing a client from one other than the client unless: (1) the client consents after consultation, provided that no further consent or consultation need be given if the client has given consent pursuant to the terms of an agreement or policy requiring an organization or insurer to retain counsel on the client’s behalf; (2) there is no interference with the lawyer’s independence of professional judgment, or with the client-lawyer relationship; and (3) information relating to representation of a client is protected as required by Rule 1.6.
If you are negotiating a contract, you can run into some tricky problems about practicing in another jurisdiction. Are you practicing law in another state when you specify that the contract will be governed by the governing law of that other state? If you conduct negotiations there by telephone? If you conduct negotiations there in person?
- SCR 20:5.5(a). A lawyer shall not practice law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction.
4. Lawyer Independence.
You are not expected to advance your client’s interests at the expense of other considerations. If you disagree with your client, speak up!
- SCR 20:2.1. In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client’s situation.