Law and Ethics of Lawyering Sample Answer
I’ve noticed that some students misinterpret their grades in this course, believing that a lower-than-desired grade labels them as an unethical lawyer. Of course, that’s not the case. Your grade merely reflects your performance on a particular exam on a particular day. I’m confident that all of you have the potential to engage in the highest levels of ethical practice, regardless of your grade. There were 4 As, 5 ABs, 14 Bs, 4 BCs and 2 Cs.
About computer use: 28 of you typed your exams; only 1 of you chose the Bluebook route. Ten of you downloaded the exam by email, and 17 of you returned your exam by email.
This question is based on my experiences in my first week at Epinions. I joined the company just as it was launching a multi-million dollar TV ad campaign. You can read reviews of the ads athttp://www.epinions.com/tvad-Minivan and http://www.epinions.com/tvad-iMac. Salon also wrote a story on the iMac ad at http://archive.salon.com/tech/log/2000/03/20/imac_attack/. Just a reminder—I have liberally embellished the facts in Question 1, so do not attribute any statements or actions to the named parties.
Average word count: 1464. Median word count: 1551. Highest word count: 1800. Lowest word count: 847.
Who is DC’s Client?
Based on this fact pattern, there’s significant ambiguity over who DC is representing. There are at least four options:
- Goodby only
- Goodby only but with some fiduciary duties to Epinions as a non-client
- Epinions only
- Goodby and Epinions jointly
DC must identify its client(s) if it wants to adequately fulfill its duties and avoid malpractice (such as for breaching confidentiality obligations or blowing an evidentiary privilege).
We are fairly confident that Goodby is DC’s client. Goodby initiated the relationship with DC out of concern over its liability, DC sent the advice memo to Goodby, Goodby paid the fee to DC, and Goodby participated in the conference call. These interactions are entirely consistent with an attorney-client relationship, and it would be reasonable for Goody to think of DC as its lawyer.
If Goodby is DC’s only client, then DC has to worry about blowing the attorney-client privilege, which it did on the conference call. The entire contents of the conference call should be discoverable, and if DC didn’t warn Goodby, malpractice liability could attach.
In addition, the conference call raised issues under Rule 4.2/4.3. Either Epinions was represented by counsel on the matter, in which case DC needed to comply with Rule 4.2 (i.e., the lawyer needed to be on the phone, DC needed to get permission from Epinions’ counsel to have the call without the lawyer, or DC broke the rule), or Epinions was not represented by counsel in the matter, in which case DC needed to comply with Rule 4.3 (no evidence if DC did or didn’t). Some of you mentioned that DC had a duty to investigate if Epinions had counsel on the matter; I disagree. Rule 4.2 attaches if DC “knows” Epinions is represented; if DC doesn’t know, then it can have the call without fear (and without asking questions, although I would often ask as a matter of courtesy).
Epinions Only/Goodby Only But Fiduciary Duty to Epinions
There are a number of reasons why DC might have had duties to Epinions. Epinions was the ultimate decision-maker/principal regarding the ads, Epinions paid the bills, and DC communicated legal advice directly to Epinions. Therefore, Epinions could have had a reasonable subjective belief that DC was its attorney.
The analysis is complicated by Goodby’s status as an “agent.” In theory, this could mean that Goodby was merely acting solely on Epinions’ behalf and Goodby’s interaction with DC were merely for Epinions’ benefit. I’m not sure that this agency works as a legal matter, but if it does, then we might conclude that Epinions was the only client or that the DC-Epinions relationship was a non-client fiduciary one. Otherwise, we don’t have any facts to support that DC has fiduciary duties to a non-client, such as a promise of confidentiality like the Westinghouse case.
If Epinions was the only client (and Goodby was not a client), then DC’s behavior might be questionable (such as sending the memo to Goodby and not Epinions). However, the principal/agent relationship might be adequate to preserve the evidentiary privileges and not violate the duty of confidentiality.
Because both Goodby and Epinions may think that DC is representing it, the most likely scenario is that DC jointly represented both companies. This has a number of implications for DC and likely means that DC has violated a number of duties.
To undertake the joint representation, DC would need to procure a written Rule 1.7(b) waiver from both parties. This scenario seems like a good candidate for joint representation. Both Epinions and Goodby want the same thing—ads that create a minimum amount of liability.
While their interests are fairly well-aligned, they are not perfectly correlated. For example, the parties may have different risk tolerances—Goodby may be willing to reduce risk if it means more billable-hour work for Goodby, while Epinions may be willing to live with some risk if it means avoiding paying more today to Goodby. Alternatively, if Epinions has promised to indemnify Goodby, Goodby might be willing to risk a little and Epinions might be very conservative. For now, I don’t think the conflict is too fundamental, but there is some conflict.
To get the waiver, DC would need to make disclosures such as:
- DC may not be as zealous in protecting one party’s interests as it could be
- the parties will not have attorney-client privilege against each other for communications with DC
- if the parties’ interests diverge too much or a dispute between them arises, DC will have to withdraw from the representation completely
Assuming DC gets the 1.7(b) waivers, then its disclosures (i.e., the delivery of the memo and the conference call) do not waive the evidentiary privileges as applied to third parties. However, DC appears to have a Rule 1.8(f) issue—from its perspective, Goodby is paying the bills for both representations. This requires compliance with Rule 1.8(f), including a written waiver.
Further, if there’s a joint representation, why is DC sending the advice memo only to Goodby and not Epinions? See Rule 1.4. This favoritism reminds me of Callahan and Fassihi, where the attorney had a hierarchy among jointly represented clients.
DC’s Issues Beyond Client Identity
If DC knows that Goodby is marking up its legal bills, DC may have an issue under Rule 5.4(a) about sharing fees with non-lawyers.
If Goodby is engaged in practicing law (see below), then DC cannot assist Goodby in doing so (Rule 5.5(b)).
What Should DC Do Differently?
DC should clearly identify who it thinks its clients are. DC should then enter into written engagement letters with each client.
If DC is taking on a joint representation, then written waivers from both parties are required. If DC and Goodby have an ongoing relationship (i.e., Goodby hires DC to review every client’s ads), then DC may want to consider a prospective waiver (if it can) allowing DC to represent Goodby in future matters against Epinions in the event that the Goodby-Epinions relationship goes sour.
If DC is representing just Goodby, DC might want to send a non-engagement letter to Epinions to avoid any confusion that Epinions might have.
DC should make sure it communicates its legal advice only to clients so that it preserves the evidentiary privileges for these communications.
Unauthorized Practice of Law
Goodby looks a lot like a lawyer in this circumstance. It is taking a share of the legal fees, conducting factual investigations to validate the legal position, and forwarding on legal advice (the memo). While we don’t have a rigorous definition of law “practice,” Goodby is treading on dangerous ground here. Goodby can’t cure this problem simply by inserting the right language into a contract with Epinions; Goodby must conform its behavior to the substantive UPL statutes. If DC is representing Epinions, this situation is alleviated somewhat as Goodby can more authoritatively claim that it is merely following DC’s instructions and not providing legal advice independently. However, if DC is just representing Goodby, I think Goodby has a non-trivial UPL issue. At minimum, I think it needs to avoid marking-up DC’s bills.
Loss of Privileges
If Epinions isn’t a “privileged” party, then Goodby loses the attorney-client privilege for the memo (by sending it to Epinions) and for the conference call. Given the possibility of litigation here, Goodby really would prefer not to lose the privilege.
If Goodby loses the attorney-client privilege, it could still try to claim that the memo is protected by the attorney work product privilege. I think a good argument can be made that the memo was prepared in anticipation of litigation; while no litigation is pending or imminent, the research is being undertaken because of a bona fide concern about being sued by Chrysler or Apple.
We didn’t discuss in class the standards for waiving the work product privilege (so I didn’t expect you to discuss this point), but it’s worth mentioning here. Unlike the attorney-client privilege, disclosing the memo to Epinions (as a non-privileged party) does not automatically waive the work product privilege. For example, work product disclosed to a non-adversary with a “common interest” might retain the privilege. However, disclosing the memo to Epinions does increase the risk that the privilege is waived.
Even if the work product privilege has not been waived, Goodby would rather not rely on the work product privilege because it can be overcome with sufficient need by plaintiffs (and it does not protect the conference call). Thus, Goodby should manage its affairs to avoid disclosing information in a manner that blows the attorney-client privilege. This means either avoiding disclosures to Epinions if Epinions isn’t a privileged party or making sure that Epinions is a privileged party (such as a jointly represented client) before making the disclosures.
Epinions has the same concerns about loss of evidentiary privileges as Goodby does. In addition, Epinions may be concerned about the conduct of the factual investigation and communication of the results. If the factual investigation is done by Goodby, a non-lawyer, then none of it has an evidentiary privilege. In contrast, if DC conducts the factual investigation, then part of the investigation may be protected by one or both evidentiary privileges.
Epinions also wants to be clear if DC is representing its interests. If DC isn’t, then Epinions may want to procure its own counsel.
Comments on Student Answers
- As should be obvious from my discussion, you really needed to discuss the evidentiary privileges. If you didn’t mention them at all, you received a dramatic penalty in your score.
- Rule 1.13 wasn’t really relevant to this question. 1.13(d) applies when an organization’s constituent (such as a director, employee or shareholder) might be confused that the organization’s counsel is representing him or her as an individual.
- DC’s disclosures on the conference call do not violate Rule 1.6(a)—any disclosures should be covered by the implied authorization.
- I didn’t discuss Rule 2.3 in class to save some time, so I didn’t expect you to discuss it on the exam. If DC is representing Goodby only, then Rule 2.3 would apply to any DC memo/opinion undertaken for Epinions’ benefit. I cut Rule 2.3 from class discussion because, in part, it likely will be eliminated in Ethics 2000.
- A lot of you were ready to zing non-engagement letters to every party mentioned in the fact pattern. This is fine—on one level, you really can’t send too many non-engagement letters to minimize risks of confusion—but in the field you’re not likely to be zinging these letters all that often. I think they are really appropriate only where you identify a party who might be confused. In this case, Epinions legitimately could be confused because of the inherent ambiguities, so a non-engagement letter might be warranted. However, I would not expect to send non-engagement letters to, say, the users featured in the commercials unless some unstated fact gave me concern about their expectations.
- It was OK if you said that DC had a Rule 1.1 to conduct the factual investigation instead of relying on Goodby to do so, but I don’t think this is true in practice. For example, the client might prefer to have Goodby conduct the investigation (although, as mentioned above, from a privilege standpoint this isn’t the best move). Depending on the circumstance, it may be entirely appropriate for DC to rely on the results, in which case there’s no abdication of the competence rule for doing so.
- Some of you discussed DC’s duties if there’s fraud. Note, of course, that fraud requires intent, and this may not be implicated by “false” advertising. (If anything, the parties’ diligence suggests that there’s nothing close to fraud taking place here). In this vein, some of you discussed DC’s duties under Rule 4.1 for misrepresentations/omissions. Rule 4.1(a) does not apply because DC is not “speaking” the ads (Epinions is). Rule 4.1(b) applies only when there’s fraud.
- Some of you discussed how DC should manage its possible tort liability for the ads. I had a tough time constructing a cause of action where DC could be liable. Attorneys ordinarily do not have tort duties to non-clients.
- Some of you argued that Goodby was breaching a duty of confidentiality by disclosing the memo to Epinions. This, of course, is incorrect; the facts did not provide any duty (like a confidentiality agreement) limiting Goodby’s disclosure, and Goodby isn’t governed by the RPC. Goodby might be waiving an evidentiary privilege by making the disclosure, but this is not a breach of a “duty,” and it is the client’s (i.e., Goodby’s) choice to waive the privilege.
This is a morally challenging question, isn’t it? On the one hand, this question shows you how an attorney can be technically precise on the legal front yet disappoint a business client. Under a situation like this, an attorney expressing legal concerns will have these concerns realized only 1% of the time, so it’s almost inevitable that empirically the attorney’s concerns will not materialize.
On the other hand, given that the attorney doesn’t know, this fact pattern illustrates how attorneys can rationalize their way to an unethical position. Consider it from a payoff standpoint:
Option #1: Attorney tells client not to do it, client does it, client saves $250,000/year, no legal harm results. Consequences: attorney looks alarmist, client thinks attorney doesn’t understand the client’s needs, attorney-client relationship suffers when the attorney’s advice was ignored.
Option #2: Attorney tells client not to do it, client listens, client gives up $250,000/year. Consequences: client is unhappy about the outcome.
Option #3: Attorney gives client a green light, client does it, client saves $250,000/year, no harm results. Consequences: client is thrilled, attorney never suffers any adverse legal or relationship consequence.
Despite what many of you wrote in your exam, I think almost everyone in the class will find Option #3 seductive because it dominates Options #1 and 2 from a payoff standpoint. How will you resist the temptation? But if you give into this temptation, where will you draw the line?
Average word count: 651. Median word count: 665. Highest word count: 799. Lowest word count: 386.
The problem here is that the blacklist may constitute a criminal violation of antitrust law. What do you do?
Investigate. Unless you are an antitrust expert, you will likely need to do some additional investigation to fulfill your Rule 1.1 duty (or outsource the question to an expert). See Smith v. Lewis.
Counsel. Under Rule 1.2(d), you are always allowed to explain the consequences of a decision. But can you help the client implement the blacklist? The applicable standard is know, which means actual knowledge. Because there is 10% doubt, I think the most logical conclusion is that you lack actual knowledge. Therefore, this standard suggests that you can counsel the client.
Withdraw. Rule 1.16(a) requires you to withdraw if continued representation violates the RPC or law. If helping with the blacklist violates Rule 1.2(d), then you must also withdraw from representation. Otherwise, Rule 1.16(b)(1) allows permissive withdrawal if you “reasonably believe” the client is engaged in a criminal act. I think the 90% confidence would allow a permissive withdrawal.
Escalate. Under Rule 1.13(b), you are required to take prudent actions if you know that the client contact is taking an action that violates the law. Those actions may include escalating the matter to your contact’s superior, and if necessary to higher levels of authority until you reach the top. However, because you don’t know, no escalation is required.
Whistleblow. Rule 1.6(b) whistleblowing applies to the extent you “reasonably believe” necessary to prevent an action that you “reasonably believe is likely to result” in substantial financial injury to another. Antitrust violations injure a group of consumers (in this case, the companies’ customers) through coordinated action or the exercise of market power. However, to the extent that the companies are using the blacklist to avoid customer fraud (i.e., buying things that the customers can’t afford), can we really characterize that as a financial injury to avoid the sales in the first place? Furthermore, do you “reasonably believe” this harmful outcome will occur? Therefore, it’s not entirely clear that you meet the standards that require a 1.6(b) whistleblow—you might, you might not, ugly choices ahead.
Recap. If you decide that 90% belief of illegality does not equal knowledge of illegality, then I think you are required to provide competent advice, you may be required to whistleblow, and you have the permissive right to withdraw. If you decide that 90% belief of illegality does constitute knowledge, then you cannot help with the blacklist, you may be required to whistleblow, you will be required to escalate, and you may be required to withdraw.
What I Would Do? I would advise the client of the potential legal problem and the risks/consequences of implementing the blacklist. I believe these disclosures are necessary to avoid malpractice and to fulfill my Rule 1.1 duty. I would further advise my client not to implement the blacklist because I believe that it is illegal. I fully expect the business people to hate my advice, ignore it and think less of my savviness. However, if the client implements the blacklist despite my advice, I would continue with my representation of the client (unless my ego was so bruised that I felt I could no longer be effective as the company’s advisor).
Comments on Student Answers
Some of you changed the question by assuming away the 90% confidence standard, saying things like “If I knew my client was engaged in illegal activity…” I didn’t directly penalize this misdirection, but I wasn’t happy with it either. The whole question turned on whether 90% confidence meant that you had the requisite scienter. In your practice, you will have numerous circumstances where you will have less than 100% confidence of something. WHAT WILL YOU DO?
Some of you said with confidence that you would withdraw if the company proceeded with the blacklist. I encourage you to rethink your position. If there was only a 1% chance of being caught, would you really withdraw? It’s typical hyperbole on exams to say things like “well, if the client is willing to do this, they are clearly going down and I’ll lose the client anyways.” No, that’s simply not consonant with the facts. The overwhelming odds are that no negative consequences will occur. Further, companies engage in illegal/apparently illegal activity every day. In our overregulated society, it’s impossible not to. So before pulling the trigger, consider how you will cope with rampant illegal behavior in the real world. The reality isn’t nearly as pretty or pure as the RPC contemplate.
This is a really straightforward question. Unfortunately, many of you did not reach my ultimate question by explaining the circumstances where you could represent BC (instead, many of you waxed philosophical about the fact pattern). Please remember to answer the question that I asked.
Unlike most of my exam questions, this question had a right answer or, more specifically, a wrong answer. If you think that you need a 1.9 waiver from DD, then you must get a 1.7(b) waiver from BC (I’ll explain in a moment). If you didn’t mention BC’s 1.7(b) waiver (or if you said that BC’s waiver was discretionary, not mandatory), your score was subject to a mandatory penalty.
Average word count: 570. Median word count: 575. Highest word count: 700. Lowest word count: 367.
This fact pattern describes representing a current client (BC) against a former client (DD). This implicates Rule 1.9. Because you personally represented DD in the past and you’re now the only in-house attorney at BC, Rule 1.10 imputation is irrelevant to this question.
Rule 1.9(a) applies if the matter is the same or substantially similar to the past representation. I don’t think this is the same matter; it’s not like switching sides on an ongoing litigation or transaction (like Nemours). However, this appears to be a substantially related matter. You represented DD on the form agreement, now you’re adverse to DD on the form agreement. Thus, it’s the same topic, and you will have to foul your nest to do it.
I also think Rule 1.9(b) applies. You may have inside knowledge of DD’s negotiation strategies, what DD can live with and can’t live without, and what compromises DD has struck in the past. You can’t use this information under Rule 1.6, and it’s doubtful that any of that information will be generally known. (The agreement’s text may be generally known, but the inside knowledge presumably will not be).
Therefore, I think a precondition of taking on the matter is getting a Rule 1.9 waiver from DD. At minimum, the waiver should disclose to DD that you may be more effective at negotiating against DD because of the inside knowledge.
If you need a Rule 1.9 waiver from DD, then you also must get a Rule 1.7(b) waiver from BC. At minimum, BC needs to know that DD was a former client of yours and that you worked on the contract; that’s material information that may affect their willingness to retain you for this matter. As I said in class, conflict waivers come in pairs! The waiver might make the following disclosures:
- any limitations on the engagement imposed in DD’s Rule 1.9 waiver
- you might be less zealous because of the nest-fouling problem or based on any personal relationships with the DD team
Although the adversity to both DD and BC isn’t trivial, I don’t think this conflict is too fundamental. Depending on the deal’s importance and the parties’ respective objectives, it may be reasonable for the parties to grant the waivers.
Based on the foregoing, I came up with the following circumstances where you could represent BC (or alternatives if you can’t/don’t want to):
#1: Waivers. You can represent BC if you get the 1.9 waiver from DD and the 1.7(b) waiver from BC. It’s possible that you could have gotten these waivers prospectively (like when you switched jobs) if you met the high disclosure standards.
#2: Different Form. You might be able to represent BC without a waiver if the parties use a different form, such as BC’s standard purchase form instead of DD’s standard sales form. This avoids the direct conflict of commenting on your prior work. However, you still have the inside knowledge about how DD negotiates and how it’s compromised in the past, so this inside knowledge still might make negotiations on a different form “substantially related.”
#3: New Vendor. You can represent BC if it switches to a new vendor that isn’t a former client of yours. However, this seems like a “tail-wagging-dog” option in most cases.
#4: No Counsel. If #1-3 don’t work, you might end up proposing that BC proceed without counsel. In that case, you would need to wall yourself off from the transaction.
#5: Hire Outside Counsel. If #1-3 don’t work, the other alternative is to hire outside counsel to represent BC. Once again, you would need to wall yourself off from the transaction (and, at minimum, not taint the counsel with your knowledge; see Brennan).