Legal Ethics: The “Hollywood” Perspective

Presented by: Steve Atlee, Partner, Winston & Strawn Mark Harrington, SVP, General Counsel and Corporate Secretary, Guidance Software

January 28, 2015

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Legal Ethics in the Movies

• Video clips from “lawyer” movies

• What did the attorneys do wrong – or right?

• Review of applicable rules

• California Rules of Professional Conduct (“CRPC”)

• ABA Model Rules of Professional Conduct

• California Business & Professions Code

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Presenters Steve Atlee Partner, Winston & Strawn satlee@winston.com

• 25 years of litigation experience • litigates complex commercial matters, including class actions,

intellectual property, contract, and other business disputes • first-chairs matters before juries, judges, arbitrators, and

mediators.

Mark Harrington SVP, General Counsel & Corporate Secretary Guidance Software

• 20 years of business and legal experience • Previously at Intel and Munger, Tolles & Olson

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Clip #1 – The Client

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Attorney-Client Relationship

•When does the attorney-client relationship attach?

•Forming the in-house attorney-client relationship

• Who is “the client”?

•What are the limits on an in-house attorney to maintain client confidences?

• Exceptions?

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Attorney-Client Relationship

• The ABA Model Rules of Professional Conduct are silent on the formation of the attorney-client relationship.

• Chapter 2 of the Restatement of the Law (3d) Governing Lawyers provides that the attorney-client relationship is formed when a person manifests an intent that a lawyer provide legal services, and the lawyer either:

• manifests consent; or

• fails to manifest lack of consent and knows or reasonably should know that the person reasonably relied on the lawyer to provide the services.

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Confidences – California

• Business and Professions Code § 6068(e): requires a lawyer "to maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.“

• California Evidence Code § 951: client includes “a person who . . . consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from [the lawyer] in [the lawyer's] professional capacity . . .”

• Ethics Opinion 2003-161 states that a lawyer may be obligated to maintain the confidences revealed during a consultation, even if the representation is not taken on. Factors considered are whether the potential client believed s/he was seeking the advice of the attorney in the attorney’s professional capacity, and whether any advice was rendered.

• This can also conflict the attorney out of representing other parties to the matter.

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For in-house counsel, who is the client?

• The California Rules of Professional Conduct provide that the legal corporate entity -- not its individual directors, officers, or employees – is the client.

• Rule 3-600(A). In representing an organization, a member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement.

• Ethical issues can arise because the attorney-client privilege and confidential information belong to the organization rather than individual employees.

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Avoiding de facto Joint Representations (Organization and Employee)

• ABA Model Rule 1.13(f) obligates attorney for corporation to explain to employees that the lawyer represents the corporation – and not the individual – when “the lawyer reasonably should know” that the employee’s interests may be at odds with the corporation’s interests.

• The Upjohn or “Corporate Miranda” warning.

• ABA-recommended Upjohn warning includes statement that corporation holds the privilege and corporation can waive the privilege at its sole discretion

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Avoiding de facto Joint Representations (Organization and Employee) • Elements of the ABA-recommended Upjohn warning:

• You represent only the corporation and not employees personally

• Communications are privileged/confidential, with privilege held (and waivable by) by the corporation alone

• Employee nonetheless must maintain the substance of the lawyer-employee discussion(s) in confidence

• Potential consequences of failure to define client:

• Former employee may sue in-house counsel for malpractice based on conflict of interest; disqualification motion; ethics complaint.

• See Gerald Buchwald, The Next Target: Corporate Counsel face Their Own Cast of Malpractice Demons, ABA Journal, July 2010

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Clip #2 – The Lincoln Lawyer

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Ethical Duty of Confidentiality

• Once an attorney-client relationship has formed, the lawyer is under a duty to preserve confidential information of the client. (CRPC 3-100 and Cal. Bus. & Prof. Code Sec. 6068).

• Any exceptions?

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Ethical Duty of Confidentiality – Generally

ABA Model Rule 1.6 – Confidentiality of Information

(a) A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by paragraph (b).

(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary:

(1) to prevent reasonably certain death or substantial bodily harm;

(2) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer's services;

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Ethical Duty of Confidentiality – Generally (3) to prevent, mitigate or rectify substantial injury to the financial

interests or property of another that is reasonably certain to result or has resulted from the client's commission of a crime or fraud in furtherance of which the client has used the lawyer's services;

(4) to secure legal advice about the lawyer's compliance with these Rules;

(5) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client; or

(6) to comply with other law or a court order.

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Ethical Duty of Confidentiality – In-House • In the in-house setting, if an attorney knows that an actual

or apparent agent of the organization acts or intends or refuses to act in a manner that is or may be a violation of law reasonably imputable to the organization, or in a manner which is likely to result in substantial injury to the organization, the attorney shall nonetheless not violate his or her duty of protecting all confidential information.

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Ethical Duty of Confidentiality – In-House • Subject to Business and Professions Code section 6068, subdivision

(e), the member may take permissible actions as appear to the attorney to be in the best lawful interest of the organization, including:

1. Urging reconsideration of the matter while explaining its likely consequences to the organization; or

2. Referring the matter to the next higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest internal authority that can act on behalf of the organization.

• If the highest authority that can act on behalf of the organization insists upon action or a refusal to act that is a violation of law and is likely to result in substantial injury to the organization, the lawyer’s response is limited to the lawyer's right, and, where appropriate, duty to resign in accordance with rule 3-700. CRPC 3-600(C).

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Clip #3 – Rounders

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Attorney Competence – Applicable Rules

• ABA: Rule 1.1 Competence

• A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

• California Rules of Professional Conduct

• CPRC 3-110 states that an attorney must not intentionally, recklessly, or repeatedly fail to perform legal services with competence. A lawyer is competent if s/he uses: 1) diligence, 2) learning and skill, and 3) mental, emotional, and physical ability reasonably necessary.

• Unlike Model Rule 1.1, CPRC 3-110, requires evidence that the lawyer’s incompetence was intentional, repeated, or a product of reckless disregard.

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Clip #4 – My Cousin Vinny

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Attorney Competence – Education

• Both the CRPC and the ABA Model Rules allow attorneys to take on matters for which they initially lack the skill required, provided that they associate or consult with competent counsel and/or take necessary remedial steps.

• CRPC 3-110(C) allows an attorney to cure a lack of learning and skill by associating or consulting with another competent attorney and/or acquiring sufficient learning and skill before performing the work.

• Model Rule 1.1 (Comment 2) allows an attorney to achieve requisite skill for competence through study and/or through the association of a lawyer of established competence.

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Attorney Competence – Discipline

• The California State Bar distinguishes between willful and negligent attorney conduct.

• Willfulness does not necessarily require knowledge of the ethical provision that the attorney violated. Rather, it requires that the attorney knew what she was (or was not) doing and that she intended either to commit (or abstain from committing) the particular act.

• California imposes discipline where the disregard of the client matter was done willfully. See Davis v. State Bar (1983) 33 Cal.3d 231.

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Attorney Competence – CA Ethics Opinion

• The California State Bar committee on professional responsibility opinion No. 11-0004 (Feb 28, 2014)

• ESI hypothetical – electronic search with clawback for “protected ESI”

• Subsequent analysis reveals that files had been deleted (normal document retention policy) plus privileged information had been produced.

• Ethics opinion states that Duty of Competence includes knowledge of electronic and e-Discovery systems

• May require association of non-lawyer technical expert(s)

• “Ethical duty of competence” requires attorney to assess his/her own e-Discovery skills and resources at the outset of matters.

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• Opinion states that attorneys handling e-discovery must have the requisite skill and familiarity (alone and/or with co-counsel or experts) to:

• Assess e-discovery needs • Implement ESI preservation procedures • Analyze and understand client’s ESI systems and storage • Identify custodians of ESI • Perform appropriate searches • Collect ESI in a manner that preserves ESI integrity • Advise client as to options for collection and preservation • Engage in competent meet-and-confer with opposing counsel re e-discovery

plan • Produce responsive ESI in an appropriate manner

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Attorney Competence – CA Ethics Opinion

Clip #5 – The Client

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Settlement Negotiation “Puffery”

• False statements of material fact are impermissible during negotiations.

• However, statements about a party’s negotiating goals or willingness to compromise can include “puffery.” ABA Formal Op. No. 06-439.

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Settlement Negotiation “Puffery”

• What conduct constitutes “puffing” in settlement negotiations as opposed to impermissible false statements of material fact?

• ABA Model Rule of Prof. Conduct 4.1: prohibits an attorney from making a false statement of material fact or law to a third person

• California: Statements made during negotiations are generally subject to rules prohibiting an attorney from engaging in deceit or collusion (Cal. Bus. & Prof. Code 6068(a) and 6128(a))

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Misrepresentation of Facts in Negotiations • CA State Bar: Proposed Ethics Opinion (No. 12-0007)

• A lawyer negotiating on behalf of a client in settlement talks may engage in some “puffery” in regards to the client’s goals or willingness to compromise.

• A lawyer’s false statements of material fact, however, would violate ethics rules that bar a lawyer from engaging in deceit.

• A lawyer may not make a false statement of material fact (i.e., constituting fraud and deceit) upon which the lawyer intends for the listener to rely.

• Example: A lawyer may not state that specific favorable evidence exists, intending to mislead the listener, when the lawyer has not located such evidence and/or knows that such evidence does not exist.

• The CA proposed opinion is consistent with ABA Formal Op. 06-439.

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Unauthorized Practice of Law by Crossing State Lines • Be careful when advising clients or performing legal functions

outside the state where you are admitted.

• This is generally permissible in many states as long as you are providing legal services: • to your employer

• i.e., not to an employee of your employer (a trap for the unwary)

• that do not require pro hac vice admission • ABA Model Rule 5.5(d)(1) – but check the applicable state’s rules.

• If you are employed as in-house counsel in CA but are not admitted in CA, Rule of Court 9.46 permits you to provide legal services and advice to your employer, but you must register with the State Bar and comply with the requirements of the Rule.

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Thank You!

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