This issue generates decisions mostly on the neglect of matters once undertaken, rather than on the competence or expertise of counsel to undertake a matter in the first place. However, in a specialized area, like intellectual property law, claims are possible that a generalist should not act without expert co-counsel.

There is developing law on a lawyer’s obligation, justified partly by the obligation to render competent service, to preserve documents relating to a representation. This obligation, of indefinite scope in terms of the documents to be preserved, has resulted in at least one decision potentially sanctioning a lawyer in the course of a malpractice case against that lawyer. The obligation may precede any indication of litigation relating to the subject of the representation.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.1: Competence

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RULE 1.3 Diligence

RULE 1.4 Communication

ABA MODEL RULES

COMMENT to RULE 1.1

A lawyer need not necessarily have special training or prior experience to handle legal problems of a type with which the lawyer is unfamiliar…. Competent representation can also be provided through the association of a lawyer of established competence in the field in question.

A lawyer may accept representation where the requisite level of competence can be achieved by reasonable preparation.

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References:

NYS Bar Association Op. 75-407 (1975) (consistent failure of a lawyer to respond to telephone calls and correspondence from fellow attorneys violates duty of diligence)

Duty to Preserve Documents

FDIC v. Malik, 09-CV-4805 (E.D.N.Y.) NYLJ 1202547356624, at *1 (March 26, 2012)

New York City Bar Association Ethics Opinion 2008-1 “A Lawyer’s Ethical Obligations to Retain and to Provide a Client with Electronic Documents Relating to a Representation”

New York City Bar Association Ethics Opinion 1986-4

ABA Inf. Op. 1384 (1977) (lawyer should not discard matter that (i) “probably belongs” to the client, (ii) that the lawyer knows or should know may be necessary or useful in the assertion or defense of a client’s position, before expiration of the statute of limitations, (iii) not given to the client that the client may reasonably expect the lawyer to preserve; also, lawyer should probably keep a record of discarded files)

This issue caused a stir in 1998, when the California Supreme Court refused a fee to a New York law firm that had represented a California client in California in a California arbitration of a dispute arising under California law, on the ground that the work was illegal as unauthorized practice of law. Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 17 Cal.4^th 119, 949 P.2d 1, 70 Cal. Rptr. 2d 304 (1998). The Court made it clear that the prohibition extended beyond appearing in California courts or arbitrations, to any activity defined as the practice of law, including counseling and negotiation.

The ethical rules are relatively uninformative about lawyers acting in jurisdictions where they are not admitted or about advising clients about out-of-state law. Some of the more important cases are noted below. The rules appear to vary from state to state, so that the ethical rules’ admonition that (Model Code DR 3-101(B)) “A lawyer shall not practice law in a jurisdiction where to do so would be in violation of regulations of the profession in that

jurisdiction” does in fact require consideration of the rules in each out-of-state jurisdiction involved.

While the courts say that no one factor determines whether unauthorized practice is occurring, the key issues appear to be the location of the client and the place where the services are actually performed. The law governing the transaction, oddly, appears to be a distant, although recognized, third factor. Birbrower relied on all three to find unauthorized practice. A later California decision distinguished Birbrower on the ground that the client was out-of-state, holding that “California has no interest in disciplining an out-of-state attorney practicing law on behalf of a client residing in the lawyer’s home state.” Condon v. McHenry, 65 Cal. App. 4^th 1138, 76 Cal. Rptr. 2d 922 (1^st Dist. 1998). The Condon Court did not insist on reserving California law to California lawyers: “Surely the citizens of states outside of California should not have to retain California lawyers to advise them on California law.” If this proves to be the prevailing rule, much of the concern caused by Birbrower should disappear. See also, Cal. Code Civ. P. § 1282.4 (new section enacted in 1999 allows non-resident lawyers to participate in California arbitrations, creating limited exception to Birbrower).

Special Rule For In-House Counsel

The ABA has adopted a new rule that would do away with the duty of in-house counsel to obtain admission in the state in which they practice. Model Rule 5.5(d)(1) exempts in-house counsel who confine their practice as follows:

Several states have adopted this new model rule. New York has adopted a different rule, allowing non-admitted in-house counsel to register, instead of seeking admission to the bar. 22 NYCRR Part 522. See also New Jersey Rule 1:27-2 (“Limited License: In-House Counsel”).

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 5.5 Unauthorized Practice Of Law

NEW YORK RULES OF THE COURT OF APPEALS FOR THE REGISTRATION OF IN-HOUSE COUNSEL

22 NYCRR § 522.1 Registration of In-House Counsel

§ 522.4 Scope of legal services

An attorney registered as in-house counsel under this Part shall:

22 NYCRR 523.2. Scope of temporary practice

ABA MODEL RULES

See RULE 5.5 - Unauthorized Practice Of Law; Multi-Jurisdictional Practice Of Law

References:

New York:

In re Antoine, 74 A.D.2d 67, 899 N.Y.S.2d 41 (1^st Dep’t 2010) (foreign legal consultant stripped of license for holding self out as New York lawyer)

El Gamayel v. Seaman, 72 N.Y.2d 701, 536 N.Y.S.2d 406 (1988) (Lebanese lawyer who assisted New York client with legal matters in Lebanon governed by Lebanese law, who acted principally in Lebanon, permitted to collect fee in New York court)

Spivak v. Sachs, 16 N.Y.2d 163, 263 N.Y.S.2d 953 (1965) (California lawyer could not collect fee for work performed in New York assisting New York client with her New York divorce)

Matter of New York County Lawyers Ass’n (Roel), 3 N.Y.2d 224, 165 N.Y.S.2d 31 (1957), app. dis., 355 U.S. 604 (1958) (practice of Mexican law by Mexican lawyer at office in New York State was unauthorized practice of law)

NYS Bar Association Ethics Opinion 709 (1998). Lawyers may practice on the Internet, but must consult rules of states where clients are located to assess whether advising them will constitute unauthorized practice of law.

Other States:

In re Charge of Unprofessional Conduct in Panel File No. 39302, 2016 Bloomberg Law 284077, No. A15-2078 (Minn. 8/31/16) (out-of-state lawyer admonished for trying to negotiate settlement on behalf of in-laws)

Matter of Kingsley, 950 A.2d 659 (Del. 2008) (Pennsylvania-New Jersey lawyer who regularly drafted instruments for Delaware clients “disbarred” and prohibited from advising Delaware clients on matters of Delaware law.

Fogarty v. Parker, Poe, Adams and Bernstein, No. 1040335 (Ala. Sup. Ct. 8/18/06) (private cause of action for unauthorized practice of law in Alabama sustained against North Carolina firm that misled nonclient

South Carolina adversaries about right of inspection of books of Alabama companies)

Maryland Attorney Grievance Commission v. Johnson, 363 Md. 598, 770 A.2d 130 (2001) (out-of-state lawyer disbarred for practicing without a license [sic]).

Office of Disciplinary Counsel v. Pavlik, 89 Ohio St. 458, 732 N.E.2d 985 (2000) (public reprimand for lawyer who permitted out of state lawyer employed by his office to consult with clients and sign documents without disclosing lack of admission in Ohio)

Chandris v. Yanakakis, 668 So.2d 180 (Fla. 1995) (contingent fee agreement made in Florida by Massachusetts lawyer with Greek client to represent client in action arising under federal law unenforceable)

Kennedy v. Bar Association, 316 Md. 646, 561 A.2d 200 (1989) (D.C. lawyer not permitted to maintain office in Maryland advising on federal and D.C. law)

Lozoff v. Shore Heights, Ltd., 66 Ill. 2d 398, 362 N.E.2d 1047 (1977) (lawyer licensed in Wisconsin rendering services in connection with Illinois real estate could not recover fee)

Appell v. Reiner, 43 N.J. 313, 204 A.2d 146 (1964) (New York lawyer allowed to collect fee for assisting New Jersey residents in workout of their debts where creditors located both in New York and New Jersey)

Philadelphia Ethics Opinion 2007-4. Lawyer requested to perform services by someone outside of state should research the unauthorized practice laws of that other state.

Matter of Hughes, 833 N.E.2d 459 (2005) (lawyer reprimanded for sending out of state lawyer employed by him to handle court proceedings)

Illinois Ethics Opinion 02-04 (2003). Lawyer may negotiate from his home state a claim for medical matters in another state, at least when no lawsuit has been filed. Similarly, Pennsylvania Ethics Opinion 90-02.

Ohio Ethics Opinion 99-9. Internet legal advice service permitted, with provisos, including assuring that law of distant clients’ states allows giving legal advice to clients.

Pennsylvania Bar Association Formal Opinion 90-02. Permissible for D.C. firm to prepare real estate loan documentation for Pennsylvania property and opine on Pennsylvania law so long as it does not represent that it is licensed to practice in Pennsylvania.

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Restatement (3rd) of Law Governing Lawyers, §3 Comment e (permissible to advise a client in lawyer’s home state about the law of another state)

Non-hourly fee arrangements receive close scrutiny. There are some textual differences between New York Rule 1.8 and ABA Model Rule 1.8, which both require terms of agreements with clients to be fair and reasonable, and which raise the possibility that clients must be warned to seek independent counsel on deals where the lawyer accepts, as a fee, an interest in the client’s business or property, but their practical construction is similar. In addition, Rule 1.8 forbids the lawyer to even negotiate with the client or the lawyer’s own potential assigns or transferees concerning literary or media rights relating to the subject of the representation until the representation is over.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.5 Fees And Division Of Fees

RULE 1.8 Current Clients: Specific Conflict Of Interest Rules

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References:

Bloom v. Lugli, 2011 NY Slip Op 00635 (N.Y. App. Div. 2011) (lawyer who received 45% of real estate venture in exchange for all required legal services sold his share to co-partners; sale agreement not enforceable by New York procedure allowing summary judgment in lieu of complaint because lawyer’s continuing services were condition, and agreement therefore not one for payment of money only)

Reznor v. J. Artist Management, Inc., 365 F. Supp. 2d 565 (S.D.N.Y. 2005) (summary judgment denied on claim of fiduciary breach in agreements between client and lawyer acting as manager)

In re Cimino, 2000 Colo. LEXIS 630 (Sup. Ct. May 1, 2000) (lawyer sanctioned for representing company and self in loan to company)

Rhodes v. Buechel, NYLJ March 18, 1998 (Sup. Ct. N.Y. Co.), aff’d, 258 A.D.2d 274, 685 N.Y.S.2d 65 (1^st Dep’t 1999), app. den., 93 N.Y.2d 806, 689 N.Y.S.2d 708 (1999)

Matter of Cooperman, 83 N.Y.2d 465 (1994) (non-refundable fees forbidden)

NYS Bar Association Opinion 913 (2012) “Acceptance of Securities as a Legal Fee” (must advise client to consult other counsel regarding stock as fee agreement)

Missouri Sup. Ct. Advisory Comm. Formal Op. 128 (5/18/10) (nonrefundable fees forbidden)

NYC Bar Association Formal Opinion 2000-3, “The Acceptance of Securities in a Client Company in Exchange for Legal Services To Be Performed” (prudent, but not always necessary to advise client to obtain other counsel to negotiate deal)

NYC Bar Association Formal Opinion 1996-5, prohibiting non-refundable fees.

See also Weinstein on Evidence §503.13[3][c] suggesting that the possible loss of attorney-client privilege due to lawyer’s association with the enterprise as investor or officer as danger that must be raised with client (no case authority cited).

See also Chang v. Chang, 190 A.D.2d 311, 597 N.Y.S.2d 692 (1^st Dep’t 1993) (lawyer who participated in corporation’s affairs and who was a co-defendant with corporate officers could not represent corporate officers and himself due to potential conflict of interest)

A lawyer may not represent more than one client in a transaction unless all clients consent after a full explanation of the implications of using one lawyer. Even if they consent, the lawyer may violate ethical rules and even commit malpractice if the interests of the parties are in fact in conflict or if the lawyer’s representation of one client may be adversely affected by the joint representation. The easiest case is when more than one party is on the same side of a deal. The most dangerous case is representing parties on both sides of a deal; even if the lawyer is not later accused of any wrongdoing by a disgruntled former client, the lawyer will be unable to continue representing the party that brought the lawyer into the deal when a dispute arises.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.7 Conflict Of Interest: Current Clients

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RULE 1.8 Current Clients: Specific Conflict Of Interest Rules

RULE 1.10 Imputation Of Conflicts Of Interest

RULE 1.13 Organization As Client

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References:

e2Interactive Inc. v. Interactive Comm. Int’l, Inc., 09-CV-629 (W.D. Wash. 2010) (law firm representing client could oppose client’s subsidiary in unrelated litigation)

Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hills, Inc., 10 A.D.3d 267, 780 N.Y.S.2d 593 (1^st Dep’t 2004) (motion to dismiss malpractice claim denied; law firm retained by parent corporation while suing subsidiary)

In re: Holsberger, 223 A.D.2d 920, 637 N.Y.S.2d 322 (3d Dep’t 1996) (improper to represent borrower while representing lenders in other financial transactions)

Fischer v. Deitsch, 198 A.D.2d 327, 605 N.Y.S.2d 703 (2d Dep’t 1993) (“substantial identity of interest” among multiple clients)

NYC Bar Ass’n Formal Opinion 2006-1, “Multiple Representations; Informed Consent; Waiver of Conflicts”

NYC Bar Ass’n Formal Opinion 2005-5, “Unforeseeable Concurrent Client Conflicts”

NYC Bar Ass’n Formal Opinion 2001-2, “Conflicts of Interest; Waivers; Imputation of Conflicts” (when conflicts are waivable, either where lawyer represents adverse party in unrelated matter, or where lawyer represents multiple parties with differing interests)

NYC Bar Ass’n Formal Opinion 1999-07, prohibiting disclosure of sensitive and confidential personal information concerning one former client to another where they had been jointly represented

Ethical obligations to former clients may preclude the lawyer from representing other clients adverse to the former client. If the lawyer represented more than one party in an earlier transaction, the lawyer will be prohibited from representing any of them against another in a dispute arising out of the transaction. In other circumstances, the lawyer’s right to represent a party adverse to a former client turns on whether the lawyer has confidential information from the former client that would come into play in the new transaction. In all events, the lawyer may not disclose the former client’s confidential information.

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NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.9 Duties To Former Clients

RULE 1.10 Imputation Of Conflicts Of Interest

References:

Poma v. Ipek, NYLJ 3/15/10, p. 18 (one lawyer in two-person firm was former partner of lawyer who had represented defendants in negotiating contract at issue; two-person firm disqualified as plaintiff’s counsel in the litigation due to likely access to confidential information concerning transaction)

This section of the New York rules is an innovation. It regulates obligations to persons who communicate with the lawyer but do not retain the lawyer. It protects the communication as if it were an attorney-client communication and also gives the prospective client protection similar to that of a former client when it comes to conflicts issues.

RULE 1.18 Duties To Prospective Clients

RULE 1.10 Imputation Of Conflicts Of Interest

The lawyer is constrained not only by ethical rules, but also by considerations of civil and criminal liability from deceptive or illegal conduct. Yet, it is certain that negotiations proceed without a full and unreserved exchange of information and opinions between the adverse counsel; indeed, counsel has a duty to preserve client confidences, which is a countervailing obligation. Reconciling these obligations is probably the trickiest ethical issue for transactional lawyers. The Comments to the ABA rules (below), confining the lawyer’s duty to matters of fact, and then defining “fact,” are key to a proper understanding of this area.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.2 Scope Of Representation And Allocation Of Authority Between Client And Lawyer

RULE 1.6 Confidentiality Of Information

“Confidential information” consists of information gained during or relating to the representation of a client, whatever its source, that is (a) protected by the attorney-client privilege, (b) likely to be embarrassing or detrimental to the client if disclosed, or (c) information that the client has requested be kept confidential. “Confidential information” does not ordinarily include (i) a lawyer’s legal knowledge or legal research or (ii) information that is generally known in the local community or in the trade, field or profession to which the information relates.

RULE 1.16 Declining Or Terminating Representation

RULE 4.1 Truthfulness In Statements To Others

In the course of representing a client, a lawyer shall not knowingly make a false statement of fact or law to a third person.

RULE 8.4 Misconduct

A lawyer or law firm shall not:

ABA COMMENT 5 TO RULE 1.0

Fraud

[5] When used in these Rules, the terms “fraud” or “fraudulent” refer to conduct that is characterized as such under the substantive or procedural law of the applicable jurisdiction and has a purpose to deceive. This does not include merely negligent misrepresentation or negligent failure to apprise another of relevant information. For purposes of these Rules, it is not necessary that anyone has suffered damages or relied on the misrepresentation or failure to inform.

ABA COMMENT 10 TO RULE 1.2

Criminal, Fraudulent and Prohibited Transactions

… A lawyer may not continue assisting a client in conduct that the lawyer originally supposes is legally proper but then discovers is criminal or fraudulent. Withdrawal from the representation, therefore, may be required.

NEW YORK COMMENTS 9, 10 TO RULE 1.2

[9] Paragraph (d) prohibits a lawyer from counseling or assisting a client in conduct that the lawyer knows is illegal or fraudulent. This prohibition, however, does not preclude the lawyer from giving an honest opinion about the consequences that appear likely to result from a client’s conduct. Nor does the fact that a client uses advice in a course of action that is illegal or fraudulent of itself make a lawyer a party to the course of action. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.

[10] When the client’s course of action has already begun and is continuing, the lawyer’s responsibility is especially delicate. The lawyer is required to avoid assisting the client, for example, by

drafting or delivering documents that the lawyer knows are fraudulent or by suggesting how the wrongdoing might be concealed. When the representation will result in violation of the Rules of Professional Conduct or other law, the lawyer must advise the client of any relevant limitation on the lawyer’s conduct and remonstrate with the client. Rules 1.4(a)(5) and 1.16(b)(1). Persuading a client to take necessary preventive or corrective action that will bring the client’s conduct within the bounds of the law is a challenging but appropriate endeavor. If the client fails to take necessary corrective action and the lawyer’s continued representation would assist client conduct that is illegal or fraudulent, the lawyer is required to withdraw. See Rule 1.16(b)(1). In some circumstances, withdrawal alone might be insufficient. In those cases the lawyer may be required to give notice of the fact of withdrawal and to disaffirm any opinion, document, affirmation or the like. See Rule 1.6(b) (3); Rule 4.1, Comment [3].

NY AND ABA COMMENT TO RULE 4.1

Misrepresentation

[1] A lawyer is required to be truthful when dealing with others on a client’s behalf, but generally has no affirmative duty to inform an opposing party of relevant facts. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows is false. Misrepresentations can also occur by partially true but misleading statements or omissions that are the equivalent of affirmative false statements….

Statements of Fact

[2] This Rule refers to statements of fact. Whether a particular statement should be regarded as one of fact can depend on the circumstances. Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are ordinarily in this category, and so is the existence of an undisclosed principal except where nondisclosure of the principal would constitute fraud. Lawyers should be mindful of their obligations under applicable law to avoid criminal and tortious misrepresentation.

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Illegal or Fraudulent Conduct by Client

[3] Under Rule 1.2 (d), a lawyer is prohibited from counseling or assisting a client as to conduct that the lawyer knows is illegal or fraudulent. Ordinarily, a lawyer can avoid assisting a client’s illegality or fraud by withdrawing from the representation. See Rule 1.16 (c) (2). Sometimes it may be necessary for the lawyer to give notice of the fact of withdrawal and to disaffirm an opinion, document, affirmation or the like. See Rules 1.2 (d), 1.6 (b)(3). [Rule 1.2 (d) provides that “A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, except that the lawyer may discuss the legal consequences of any proposed course of conduct with a client.”]

ABA GUIDELINES FOR SETTLEMENT NEGOTIATIONS (2002) (p. 36)

Whether a misstatement should be so characterized [as a statement of fact] depends on whether it is reasonably apparent that the person to whom the statement is addressed would regard the statement as one of fact or based on the speaker’s knowledge of facts reasonably implied by the statement or as merely an expression of the speaker’s state of mind.” Restatement, § 98, comment c. Factors to be considered include the past relationship among the negotiating persons, their apparent sophistication, the plausibility of the statement on its face, the phrasing of the statement (for example, whether the statement is presented as a statement of fact), related communications, the known negotiating practices of the community in which both are negotiating and similar circumstances. Restatement, § 98, comment c. In making any such statements during negotiation, a lawyer should consider the effect on his/her credibility and the possibility that misstatements in negotiation can lead not only to discipline under ethical rules, but also to vacatur of settlements and civil and criminal liability for fraud. Model Rule 4.1., comment 2.

References:

US v. Quest Diagnostics Inc., 734 F. 3d 154 (2d Cir. 2013) (former in-house counsel may not disclose privileged information as plaintiff in whistleblower – qui tam – action where disclosure went beyond whar was necessary to prevent ongoing crime)

Cromeans v. Morgan Keeler & Co., 2014 Bloomberg Law 336302, 12-cv-04269 (W.D. Mo. 12/1/2014) (recognizing possible claim for negligent

misrepresentation in stating in opinion letter, regarding offering statement “no facts have come to our attention which lead us to believe that the Offering Statement contains misrepresentations or omitted facts”)

Crews & Assoc., Inc. v. City of Port Gibson, 2014 Bloomberg Law 320552, 14-cv-37 (S.D. Miss. 11/12/14) (recognizing possible claim for legal malpractice in stating in opinion letter that use of funds from proposed municipal lease purchase agreement complied with law)

Akron Bar Ass’n v. Gibson, 944 N.E.2d 228 (Ohio 2011) (divorce lawyer sought authorization to pay for property maintenance work without saying that she and husband had done the work)

Petition against Lyons, 780 N.W.2d 629, 2010 Minn. LEXIS 184 (Minn. 2010) (lawyer suspended indefinitely for negotiating settlement without disclosing that client had died)

In re PRB Docket No. 2007-046, 989 A.2d 523 (Vt. 2009)(lawyer falsely told potential witness that lawyer was not recording phone call)

Thompson v. Paul, 547 F.3d 1055 (9^th Cir. 2008) (10b-5 liability of attorney for falsely denying that company was subject to criminal proceedings during settlement negotiations)

In re Rosen, 198 P.3d 116 (Colo. 2008) (plaintiff’s counsel told insurance company that client’s “brain wasn’t working” and client needed further medical treatment; client was actually dead)

Mega Group, Inv. v. Pechenik & Curro, P.C., 32 A.D.3d 584, 819 N.Y.S.2d 796 (3d Dep’t 2006) (law firm not obliged to disclose pending litigation denied in client’s asset sale agreement)

In re Winthrop, 219 Ill. 2d 526, 848 N.E.2d 961, 979-80 (2006) (lawyer lied to state officer about use of client’s funds by other client)

In re Edison, 724 NW 2d 579 (N.D. 2006) (reprimand for filing pleading in name of deceased client)

Banco Popular v. Gandi, 184 N.J. 161; 876 A.2d 253 (2005) (opinion letter case; claim by lender against lawyer upheld because lawyer knew that guarantor’s guarantee was worthless and guarantor made financial representations and warranties in guarantee that lawyer knew were untrue when made)

Statewide Grievance Committee v. Gillis, 36 Conn. L. Rptr. 464, 2004 WL 423905 (Conn. Super. Ct. 2004) (representation that accident victim “has been unable to participate in any activity which requires the

slightest bit of physical exertion due to the injuries suffered” held mere puffery under generally accepted conventions” of negotiation)

Dean Foods Company v. Pappathanasi, 18 Mass. L. Rptr. 598, 2004 WL 3019442 (Super. Ct. 2004) (“no litigation” clause in opinion letter that negligently omitted grand jury investigation resulted in law firm being liable to buyer of business for $7 million criminal fine paid by company, plus counsel fees)

Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone, No. B151730 (Calif. Ct. App. 2d Dist. 2003) (lawyer liable for inducing settlement by falsely stating that insurance policy did not cover willful acts)

Kingsdorf v. Kingsdorf, 797 A.2d 206 (N.J. App. Div. 2002) (refusing enforcement to divorce settlement made when husband had died and jointly owned property had already reverted to wife – wife gave up jointly owned property in settlement)

In re Wagner, 744 N.E.2d 418, 420-21 (Ind. 2001) (lawyer knew that lien had been avoided in bankruptcy “or at least knowledge that he did not have any basis to make the representation” – reprimanded and admonished)

Davin, L.L.C. v. Daham, 329 N.J. Super. 54, 746 A.2d 1034 (App. Div. 2000) (unethical to draft lease with covenant of quiet enjoyment when lawyer knew client was likely to lose title to property)

Office of Disciplinary Counsel v. Surrick, 749 A.2d 441 (Pa. 2000) (reckless misrepresentations violated Rule 8.4(c))

McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 792-93 (Tex. Super. 1999) (law firm liable for negligent misrepresentation to adversary who settled claim based on incorrect opinion letter stating that FSLIC would be bound to settlement agreement with financially troubled bank)

In re Forrest, 158 N.J. 428, 730 A.2d 340 (1999) (lawyer appeared at arbitration, stated one of his clients was unavailable; client had been dead for more than six months); reciprocal discipline imposed in New York at In re Forrest, 271 A.D.2d 12, 706 N.Y.S.2d 15 (1^st Dep’t 2000)

Rubin v. Schottenstein, Zox & Dunn, 143 F.3d 263 (6^th Cir. 1998) (fraud claim against lawyer from statements made in negotiation)

Trust Company of Louisiana v. N.H.P. Inc., 104 F.3d 1478 (5^th Cir. 1997) (fraud and negligent misrepresentation)

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Florida Bar v. Joy, 679 So. 2d 1165 (Fla. 1996) (lawyer transferred escrow funds into wife’s account, then represented that he no longer controlled the funds)

Matter of Westreich, 212 A.D.2d 109, 629 N.Y.S.2d 417 (1st Dep’t 1995), app. den., 87 N.Y.2d 812 (1996)

Kline v. First Western Gov. Sec., Inc., 24 F.3d 480 (3d Cir. 1994), cert. den., Arvey, Hodes, Costello & Burman v. Kline, 513 U.S. 1032 (1994)

Ackerman v. Schwartz, 947 F.2d 841 (7^th Cir. 1991) (securities fraud liability for opinion letter to investors)

Brown v. County of Genesee, 872 F.2d 169 (6^th Cir 1989) (no duty to advise adversary of factual error absent lawyer’s misrepresentation)

State v. Addison, 226 Neb. 585, 412 N.W.2d 855 (1987) (lawyer suspended from practice for six months for failing to disclose existence of third policy of insurance to hospital seeking payment for medical expenses, knowing that hospital was unaware of third policy; violation of DR 1-102(1) and (4) and DR 7-102(A)(5))

Matter of McGrath, 96 A.D.2d 267, 468 N.Y.S.2d 349 (1st Dep’t 1983)

Virzi v. Grand Trunk Warehouse and Cold Storage Co., 571 F. Supp. 507 (E.D. Mich. 1983);

Chase Manhattan Bank, N.A. v. Perla, 65 A.D.2d 207, 411 N.Y.S.2d 66 (1978) (debtor’s lawyer assured creditor that client’s real estate would be sold to pay off creditor at the same time that real estate was being deeded to lawyer’s wife)

Roberts v. Ball, Hunt, Hart, Brown & Baerowitz, 57 Cal. App. 3rd 104, 128 Cal. Rptr. 901 (2d Dist. 1976) (claim for negligent misrepresentation sustained against a demurrer because of failure to disclose partnership dissension over form of organization and members).

Cal. State Bar Standing Comm. On Prof’l Responsibility & Conduct, Formal Op. 2015-194 (negotiating goals or willingness to compromise mere puffery; misrepresenting client’s intention to file bankruptcy may be improper if lawyer knows client is ineligible)

ABA/BNA Lawyers’ Manual on Professional Conduct, February 27, 2013, vol. 29, no. 5, p. 136, “Special Report: Obligations to Third Parties – Truthfulness in Statements to Others”

NYS Bar Assn Ethics Opinions 817, 882, 892 (2007-2011) (lawyers forbidden to participate in real estate transactions where price is artificially

grossed up to permit bigger mortgages unless the papers include full disclosure of all facts)

ABA Formal Op. 439 (2006) (similar to ABA guidance above – “statements regarding a party’s negotiating goals or its willingness to compromise … are ordinarily not considered ‘false statements of material fact’”)

Oregon State Bar Formal Ethics Opinion No. 2005-92 (lawyer may assist client in breaching a contract and in minimizing damages likely to flow from the breach, but may not help with a fraud)

NYS Bar Association Op. 781 (2004) (matrimonial lawyer who has submitted a financial statement with material errors due to fraud by client must withdraw it)

ABA Formal Opinion 95-397; N.Y. County Lawyers Ethics Op. 731 (2003) “Disclosure of Existence of Insurance Coverage in Settlement Discussions” – no duty to reveal insurance coverage in settlement discussions, but may not make misrepresentation about it either voluntarily or in response to question from adversary.

ABA, Ethical Guidelines for Settlement Negotiations 57 (2002) (unprofessional to exploit drafting error); ABA Informal Op. 1518 (1986) (must advise adversary of typographical omission from agreement)

Pennsylvania Ethics Op. 97-107 (settlement agreement invalidated by failure to correct mutual factual premise of settlement which one side learned was wrong before execution)

ABA Formal Op. 95-397 (1995) (lawyer for personal injury client who dies before accepting pending settlement offer must inform court and opposing counsel of client’s death)

NYS Bar Association Op. 674 (1995) “Guidelines When Corporate Officer Co-Client Commits Perjury In An Arbitration Proceeding And When The Officer Refuses To Rectify.” – complex question of when lawyer may or must withdraw from either or both representations.

Rhode Island Ethics Op. 94-40 (1994) (no affirmative duty to advise adverse party of law, even when adversary is mistaken)

Restatement of the Law Governing Lawyers, §98, Comment c (similar to ABA guidance)

NYS Bar Association Op. 73-293 (1973) (improper to threaten litigation if no real intention to litigate)

The rule against communicating with a represented adverse party presents difficult questions because the prohibition, at least in New York, also extends to causing others – your own client included – from doing so. Clients continually seek and receive advice on how and what to say to adverse parties, yet the rule precludes the lawyer from making the client the lawyer’s channel to adverse parties. New York’s 1999 amendment provides a safe harbor for client-to-client communications directed by counsel if the adverse counsel is given reasonable advance notice of the communication. A May, 2002 ethics opinion of the New York City Bar Association substantially removes the prohibition against advising the client concerning communications with the adversary if the client conceives or initiates the communication.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 4.2 Communication with Person Represented by Counsel

RULE 4.3 Communicating With Unrepresented Persons

In communicating 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. The lawyer shall not give legal advice to an unrepresented person other than the advice to secure counsel if the lawyer knows or reasonably should know that the

interests of such person are or have a reasonable possibility of being in conflict with the interests of the client.

RULE 8.4 Misconduct

A lawyer or law firm shall not:

ABA MODEL RULES

See RULES 4.2 and 8.4

COMMENT TO RULE 8.4

[1] … Paragraph (a), however, does not prohibit a lawyer from advising a client concerning action the client is legally entitled to take.

References:

In re Malofiy, 2016 Bloomberg Law 210584, No. 15-2472 (3d Cir., 6/30/16) (unpub.) (lawyer suspended for misleading pro se defendant into believing that he was just a witness)

San Francisco Unified School Dist. v. First Student, Inc., 213 Cal. App. 4^th 1212, 153 Cal. Rptr. 3d 583 (1^st Dist. 2013) (lawyers permitted to advise clients on contacts with adverse parties but not to script conversations or otherwise overreach)

Engstrom v. Goodman, 271 P.3d 959 (Wash. Ct. App. 2012) (lawyer who received email from adverse party complaining about her counsel and saying she wanted to change counsel secured declaration from adverse party fined $3,000; lawyer should have forwarded email to adverse counsel or to court)

Midwest Motor Sports v. Artic Cat Sales, Inc., 347 F.3d 693 (8^th Cir. 2003) (undercover taping of plaintiff’s employees constituted deception

under Model Rule 8.4(c); evidence excluded; no disciplinary sanctions because issue was unsettled in jurisdiction and area of law was evolving)

Matter of Carmick, 146 Wn. 2d 582, 48 P.3d 311 (2002) (local custom allowing lawyer to negotiate directly with adversary in child support payment case did not overcome Rule 4.2)

Hill v. Shell Oil Co., 209 F. Supp. 2d 876 (N.D. Ill. 2002) (undercover taping not prohibited by Model Rule 4.2 if investigators merely posed as customers and did not otherwise deceive parties’ employees)

Gidatex S.r.L. v. Campaniello Imports Ltd., 82 F. Supp. 2d 119 (S.D.N.Y. 1999) (use of undercover investigators by lawyer technically violated DR 1-102(A)(4) (deception) and 7-104(A)(1) (communication with adverse party), but conduct did not violate interests protected by latter rules – attorney-client privilege – and kind of deception practiced was accepted investigatory technique)

Schmidt v. State, 181 Misc. 2d 499, 695 N.Y.S.2d 225 (Ct. Cl. 1999) (no lawsuit need be pending for rule to apply)

In re Users System Serv., Inc., 22 S.W.2d 331 (Tex. 1999) (permissible to speak directly to adverse party after receiving letter from adverse party stating that adverse party had discharged counsel and was not represented; CAUTION – normal rule is to require confirmation of same from former adverse counsel)

Holdren v. General Motors Corp., 13 F. Supp. 2d 1192 (D. Kan. 1998) (lawyer forbidden to advise client who initiated idea of contacting individuals he knew at former place of employment and obtaining their statements or affidavits)

Apple Corps Ltd. v. Int’l Collectors Soc., 15 F. Supp. 2d 456 (D.N.J. 1998) (similar to Hill)

Jorgenson v. Taco Bell Corp., 50 Cal. App. 4^th 1398, 1401-1402, 58 Cal. Rptr. 2d 178 (1^st Dist. 1996) (known existence of in-house counsel on the other side and likelihood that other side would be represented if litigation started did not make it improper for lawyer to talk to adversary’s employees directly in investigating client’s claim)

Stagg v. New York City Health and Hospitals Corp., 162 A.D.2d 595, 556 N.Y.S.2d 779 (2d Dep’t 1990) (information unethically obtained by investigator still admissible)

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Massa v. Eaton Corp., 109 F.R.D. 312 (W.D. Mich. 1985) (ethical violation to “allow” client to conduct interviews of management employees of defendant)

In re Marietta, 223 Kan. 11, 569 P.2d 921 (1977) (lawyer sent client to try to get adversary to sign release)

Minao v. ACR Advertising, 148 F.R.D. 68 (S.D.N.Y. 1968), report approved, 834 F. Supp. 632 (S.D.N.Y. 1993) (client did interviews and tape recording before adversary represented; lawyer cannot recommend or endorse client’s speaking to represented adversary, but lawyer may give advice as asked – but see Comment to 4.2 – parties can talk to each other – tapes admitted in evidence since no indication of use of lawyer’s “overbearing behavior or superior skill” to get admissions)

ABA Formal Op. 472 (2016) (“If the lawyer has reason to believe that an unrepresented person on the opposing side has received limited-scope legal services, the Committee recommends that the lawyer begin the communication with that person by asking whether that person is or was represented by counsel.”)

NYC Bar Association, Committee on Professional Ethics, Op. 1076 (12/8/15) (cc’g client dangerous because may invite “reply all” by adversary)

Colorado Bar Ass’n Ethics Comm., Op. 127 (2015) (permissible to view public portions of social media)

Massachusetts Ethics Op. 2014-5 (may not “friend” unrepresented person without disclosing in the friend request that lawyer is adversary’s attorney)

Vermont Ethics Op. 2013-4 (seller’s lawyer may tell buyer who is represented, but whose lawyer is not at closing, about “purely clerical” matters but must first warn buyer that lawyer represents seller and cannot give buyer legal advice)

New Hampshire Bar Association Ethics Committee Advisory Opinion #2012-13/05 (lawyer may view public social media postings of adverse witness, but may not communicate through social media with represented adverse witness)

NYC Bar Association Formal Opinion 2012-1, “Obligations Upon Receiving a Document Not Intended For The Recipient” (lawyer receiving document not intended for lawyer must notify sender)

NYS Bar Association Ethics Opinion 879 (2011) (lawyers acting pro se subject to Rule 4.2 prohibiting direct contact with represented adversary)

State Bar of California Standing Comm. On Prof. Resp. and Conduct Formal Op. No. 2011-181 (consent to communication with client may be implied by adversary counsel’s copying client on email between counsel)

NYC Bar Association Formal Opinion 2010-2, “Obtaining Evidence From Social Networking Websites” (lawyer may not attempt to gain access to a social networking website under false pretenses, either directly or through an agent); similarly, NYC Bar Association Formal Opinion 2012-2, “Jury Research and Social Media” (lawyers may use social media for juror research as long as there is no communication with juror); accord New York County Lawyers Ass’n, Formal Opin. 743 (2011)

NYS Bar Association Ethics Opinion 843 (2010) (lawyer may access public Facebook or MySpace pages of adverse client but may not “friend” adverse client); similarly Pa. Bar Association Formal Ethics Op. 2014-300; NYS Bar Association Social Media Ethics Guidelines (2015 update), p. 15.

NYC Bar Association Formal Opinion 2009-2, “Ethical Duties Concerning Self-Represented Persons” (elaborating on predecessor to Rule 4.3)

NYC Bar Association Formal Opinion 2009-1, “The No-contact Rule and Communications Sent Simultaneously to Represented Parties and Their Lawyers” (consent to communication with client may be implied by adversary counsel’s copying client on email between counsel under certain circumstances); similarly, N.Y.S. Bar Ass’n Journal, September, 2012, Attorney Professionalism Forum, pp. 46-48.

Oregon State Bar Association Formal Opinion 2005-164 (lawyer may visit public website of adverse client)

NYC Bar Association Formal Opinion 2002-03 (permissible to advise on client-initiated communications with adversary, as long as communication not used to overreach, as by obtaining confidential information or inducing adversary to take action without legal counsel, and noting difference from Model Rules, which do not limit counsel in advising client on communications with adversary).

NYS Bar Association Ethics Opinion 01-749 (2001) (lawyer may not use email metadata to access confidential communications of adverse counsel)

ABA Formal Ethics Opinion 92-362 (1992) (lawyer who suspects that settlement offer has not been transmitted by adversary to adverse client, lawyer may counsel client on communicating directly with adverse client, including on the limitations on lawyer’s right to do so and client’s freedom to do so.)

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Oregon State Bar Assn Legal Ethics Comm (ABA/BNA v. 17, no. 5, p. 124, 1/01)(may visit adversary’s website to download public information, answer surveys and order products)

Contact With In-House Counsel:

- Permitted:

Scanlan v. Eisenberg, 893 F. Supp. 2d 945 (N.D. Ill. 2012)

Connecticut – In re Grievance Proceeding, 2002 WL 31106389 (D. Conn. 2002)

ABA Formal Op. 06-443 (2006) (unless the in-house lawyer is a party)

D.C. Bar Association Ethics Op. 331 (2005) (unless the in-house lawyer is a party)

Restatement (3rd) of the Law Governing Lawyers §100, Comment c (generally permitted)

NYC Bar Association Formal Opinion 2007-01, “Applicability of DR 7-104 (The “No-Contact” Rule) to Contacts With In-House Counsel” (concluding that contact with in-house counsel where organization represented by outside counsel is proper where contacting lawyer has a good faith belief based on objective evidence that the in-house counsel is acting as a lawyer representing the organization - not necessarily on the same transaction, and not merely as outside counsel’s client, and listing 5 factors to consider)

- Prohibited:

Philadelphia Bar Ethics Op. 2000-11 (2001) (ordinarily prohibited)

N.C. State Bar Association Ethics Op. RPC-128 (1993) (in-house counsel appeared in case as management representative)

Rhode Island Ethics Op. 94-81 (1995) (simultaneous communication to outside and in-house counsel)

This issue is of interest to the transactional lawyer only in that it presents the danger that in the future the lawyer or the lawyer’s firm may be disqualified from representing the client in a dispute arising out of the transaction. The lawyer is disqualified when the lawyer ought to testify on a significant issue. The law firm is

disqualified when that testimony will be adverse to the client. In the usual case where the transactional lawyer does not also litigate and where the client and the lawyer tell the same factual story, there is no problem for the firm.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 3.7 Lawyer As Witness

References:

Ayus v. Total Renal Care Inc., 48 F. Supp. 2d 714 (S.D. Tex. 1999)

Kubin v. Miller, 801 F. Supp. 1101 (S.D.N.Y. 1992) (no disqualification of firm – disqualification requires high standard of proof – individual lawyer disqualification because key witness to drafting of contract – but no disqualification of firm because no conflict of interest with client)

Computer Associates International, Inc. v. Computer Automation, Inc., 678 F. Supp. 424 (S.D.N.Y. 1987) (no disqualification – testimony of lawyer might be useful, but wasn’t necessary)

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Owen and Mandolfo, Inc. v. Davidof of Geneva, Inc., 197 A.D.2d 370, 602 N.Y.S.2d 369 (1st Dep’t 1993), app. den. 83 N.Y.2d 751, 611 N.Y.2d 133 (1994) (law firm not disqualified; “of counsel” would be acting as advocate)

Fairview at Old Westfield, L.P. v. European American Bank, 186 A.D.2d 238, 588 N.Y.S.2d 339 (2d Dep’t 1992) (law firm disqualified - documents show that partner in firm might give testimony prejudicial to his client)

Brunette v. Gianfelice, 171 A.D.2d 719, 567 N.Y.S.2d 279 (2d Dep’t 1991) (lawyer disqualified - lawyer submitted affidavit re: meaning of agreement, thus admitting that he would have to testify)

Brill v. Friends World College, 133 A.D.2d 729, 520 N.Y.S.2d 160 (2d Dep’t 1987) (lawyer denied fee in case where he brought lawsuit but should have known that he would be disqualified because called as a witness)

See also Chang v. Chang, 190 A.D.2d 311, 597 N.Y.S.2d 692 (1^st Dep’t 1993) (lawyer who participated in corporation’s affairs and who was a co-defendant with corporate officers could not represent corporate officers and himself due to potential conflict of interest)

Lawyers may not immunize themselves against future malpractice claims, nor settle malpractice claims without warning the client to consult independent counsel.

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.8 Current Clients: Specific Conflict Of Interest Rules

NEW YORK RULES OF PROFESSIONAL CONDUCT

RULE 1.8 Current Clients: Specific Conflict Of Interest Rules