Ethics Lecture Outline Pritchard(Corporate Lawyer) PDF

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very detailed outline of all of the lecture notes in pritchard's corporate lawyer class. ...

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Ethics Outline Pritchard Introductory Ethics Scenario: The Honey Tree, LLC MPRC: 1.4, 1.6, 1.7, 1.13, 1.16 Conflict of interest: Pooh and Piglet  Representation in setting up enterprise – allowed by rules? – R1.7 o R1.7(a)(1): as long as there’s no direct adverse representation (or not an insurmountable conflict of interest) o Lawyer still needs to walk both Pooh and Piglet through what may go wrong later o R1.7(a)(2): will this rep be materially limited by prior representation of Pooh?  Comment 28: alignment of interest here outweighs conflict of interest of individual success o Joint representation okay here – duty on lawyer to determine whether or not he can maintain impartiality throughout representation (comment 29) o Even if a conflict of interest  Confidentiality during representation – R1.6 o Pooh’s prior honey addiction – can Owl ever reveal to Piglet? o Matters in what context Pooh divulged information to Owl – friend or lawyer?  All information relating to representation, whatever the source or context, is covered by confidentiality obligation  Helps to build trust with lawyer and help provide better representation  Communication obligations – R1.4 o 1.4(a)(3) lawyer shall keep client “reasonably informed” o 1.4(b) explain information reasonably necessary to permit client to make informed decisions regarding representation  Honey addiction may be reasonably necessary  Conflicting duties: informing Piglet v. keeping Pooh’s confidence o Which obligation trumps? Alignment of interests currently but potential that impartiality obligation won’t be met o If Pooh allows Owl to tell Piglet about addiction, Owl can keep representing both parties and go forward with entity formation o R1.7 comment 32: duty of lawyer to explain that having joint representation may mean not as good representation as if each client had a separate lawyer  Can Owl represent Piglet in getting rid of Pooh? o Who is current client? – R1.13  Honey Tree, LLC is the client – responsible to the LLC  Duty on Owl to make this clear from the beginning o Conflict? R1.7  Owl can’t represent here because representation involves clear conflict of interest – probably unwaivable o Termination of Representation – R1.16  Must withdraw if representation would result in violation of MRPC or law  Owl must terminate representation of all parties because conflicts of interest infringe on duties owed to all respective parties

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Ethics Scenario 1: I can’t do that! MRPC: 1.2, 1.4, 1.16, 4.1, 4.2, 4.3, 4.4, 5.1, 5.2, 5.3, 8.4 On top of agency duties, lawyers have to follow ethical rules  R3A § 8.09(2): Agent has duty to comply with all lawful instructions from principal concerning actions on behalf of principal  Lawyer’s obligation: follow instructions of client, so long as they are within the boundaries of law – R1.2 o Follow objectives – also have to consult on means to achieve the objectives o Can’t counsel or assist client in unlawful/fraudulent conduct o Duty to communicate limitations of representation and actions to the client – R1.4  Purpose: to bring expectations of client to a reasonable level  If client continues to insist on unlawful conduct/means, lawyer has duty to terminate representation – R1.16  Partner tells associate to “do whatever it takes” to get the software code – decides to deceive corporation to get code o R4.1: Lawyer shall not knowingly make false statement of material fact to a 3P  Problem of false statement, even in assisting client to commit fraudulent act o R4.4: Lawyer shall not use methods of obtaining evidence that violate the legal rights of another person  Confidentiality agreement with developers – would be violating it o R5.1: partners have responsibility to make sure subordinates conform to MRPC and are responsible for violations of subordinates  Partner on the hook for actions of associate (P-A type relationship) o R5.2: subordinate lawyers still responsible for following MRPC themselves  Not a defense to say partner told you to do it  Only not responsible if acting in accordance with supervisory lawyer’s reasonable resolution of arguable question of professional duty o Subordinate should go to ethics counsel at firm or talk to another partner o If that doesn’t work, she has duty to withdraw from representation – R1.16 (applies to individuals as well as firms)  Going ahead with deception – offers bribe to third party to obtain software code o Not just illegal bribe, but also violation of ethics rules o R5.3: lawyer can’t avoid ethics obligation by acting through third party, liability not avoided by delegation o R4.3: can’t give legal advice to unrepresented person that is in conflict of interests of your client  Implying that this action is legal violates ethical duty here o R8.4: misconduct to violate MRPC, even through another person

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Ethics Scenario 2: All In? Inside Counsel MRPC: 1.4, 1.6, 1.7(a), 1.13, 1.16, SOX § 307 Public corporation (traded on NASDAQ) – Inside counsel is also VP Corporate Social Responsibility  R1.13(a): lawyer employed or retained by organization represents the organization acting through its duly authorized constituents  Offering documents, being reviewed for filing by inside counsel, state corporation has 10 new desalination facilities in place and has 25 new facilities in development process o CFO says still on track with new facilities o Manager says only 5 still really happening and then discloses, because “privilege”, that there’s really nothing still happening o Duty on lawyer to look into problem higher up – R1.13(b)  Loyalty/obligations under ethics rules are to corporation, not CFO – R1.13 o Should go to the board, but does she have to? o R1.13 – not unless she knows  But hindsight bias: looking back on situation, authorities likely to say she knew because of situation o Safest course of action is to go to the board  Lawyer can’t draft/assist in fraudulent activity because of ethics obligations o R1.2: shall not assist client in fraudulent conduct o R1.4: shall not make a false statement to third party, or fail to disclose material information to third party, when disclosure is necessary to avoid assisting in criminal or fraudulent conduct  Lurking issue: lawyer has stock options in company – R1.7 o Potential conflict of interest o In ordinary course of business, not a problem, but when stock ownership is at risk during conflict, may have to at least disclose to board when giving advice that you have stock so they can properly assess advice  What if board still says activity is okay? o If you still believe there’s a violation of law, must withdraw – R1.16 o Before withdrawal, must consult/communicate with client and tell them that you must withdraw due to their behavior/continued conduct – R1.4 o After terminating representation  R1.13(c)(2): lawyer may reveal information whether or not protected by R1.6 only to extent necessary to prevent substantial injury to organization  In this context, can go to SEC  Federal Overlay o SEC Rules of Practice 205: shall report when you become aware of material violation (this only applies to public corporations)  Aware < know  Material violation defined broadly o SOX § 307: requires lawyer to report evidence of material violation of securities law or breach of fiduciary duty or similar violation by company or agent

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Ethics Scenario 3: Can You Keep a Secret? Confidentiality MRPC: 1.0, 1.2, 1.6, 1.8, 1.13, 1.16, 3.3, 4.1, 8.4 R3A § 8.05: duty of confidentiality  Agent has duty not to communicate confidential information of principal for agent’s own purposes of those of a third party (quasi-property right of information)  Principal’s decision whether or not to share info R1.6: confidentiality of information  Lawyer shall not reveal information relating to representation of client, unless permission given by client o Much broader than agency duty – not just confidential info, but all info o Also broader than attorney-client privilege and work-product protection  LIMIT on confidentiality: can reveal if o Certain death/bodily harm; to prevent client from committing fraud or certain financial/property injury to another; to prevent, mitigate, or rectify injury to another; or to comply with other law or court order o All in furtherance of using lawyer’s services Lawyer here has done prior business for corporation and has sent opinion letter to financier of corporation confirming corporation’s title of collateral  Finds out that CFO probably bribed Philippine Minister to transfer land title o R1.2: lawyer shall not assist client in criminal or fraudulent conduct o R1.16: probably duty to withdraw at this point – would be violating duty of truthfulness to third parties and problem of fraudulence  Counterargument – may not know, but maybe good reason to suspect  R1.0(f): knowledge may be inferred from the circumstances o R1.0 comment 5: fraud does not include negligent misrepresentation or negligent failure to appraise another of relevant information  Seems best course is to withdraw rather than potentially be on the hook for fraud  Before withdrawal, has to go above the head of CFO (the board) and report what’s going on o If not satisfied after going to the board, can reveal information regardless of R1.6 to the extent necessary to prevent/rectify substantial injury – R1.13©  2 voicemails left for Lawyer after withdrawal o Corporation’s new lawyer: wants to be briefed  Lawyer can say he can’t reveal confidentiality  Also probably wants to disavow prior work product (say don’t rely on it) – but doesn’t have to tell why  Has option to disclose why he left if client gives informed consent – not likely because corporation doesn’t want others to know o Financier’s counsel  Shouldn’t disclose because R1.6 confidentiality  Potential for this falling under R1.6 exceptions  R4.1: can’t knowingly make false statement to third party or fail to disclose material fact when necessary to avoid assisting in criminal or fraudulent conduct  Indemnification promise from CFO of corporation o R1.8(h)(1): lawyer can’t make agreement limiting his liability for malpractice unless client is independently represented in making the agreement

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Susan Martyn – Ethics Scenarios Problem 1: lawyer takes on international arbitration claim without ever having done so  R1.1: competence – lawyer shall provide competent representation to a client; requires legal knowledge, skill, thoroughness, and preparation reasonably necessary o Comment 2: can become competent though necessary study or association of a lawyer of established competence o Objective standard of reasonably necessary competence o When holding yourself out as a lawyer (or even an expert in some area), you are responsible/liable for the advice or opinions that you give  RLGL § 14: relationship of client and lawyer arises when o A person manifests to a lawyer the person’s intent that the lawyer provide legal services to the person; and either  The lawyer manifests to the person consent to do so; or  The lawyer fails to manifest lack of consent to do so, and the lawyer knows or reasonably should know that the person reasonably relies on the lawyer to provide the services  Meeting of the minds-type standard o Accidental client issue  Competency Requirements o Task competence: what law shapes my legal advice?  R1.1 o Client competence: who is my client? Who is not my client but might be owed duties of care?  R1.13; 1.18; RLGL § 14 o Ethics, RLGL competence: what obligations do I owe clients and what can happen if I err? Problem 2: CEO wants to draft deed that transfers vacant land owned by corporation to himself – says “it’s just a liability for corporation  Self-dealing problem, also potential for fraudulent conveyance if insufficient consideration  Actual outcome o Lawyer drafted deed and didn’t even consider issue of self-dealing o When corporation found out, fired CEO and sued lawyer for breach of fiduciary duty of loyalty  Obligations under R1.13(f): lawyer shall explain identity of client o If interests of corporation are adverse to interests of the person you’re dealing with (board members/directors), must explain the problems/issues  Prospective clients, current clients, and former clients o Owe confidentiality to all three o Owe loyalty only to current clients o Prospective: consults with lawyer about possibility of forming relationship  To avoid: non-engagement letter o Current client: offer and acceptance or detrimental reliance  To clarify relationship: engagement letter o Former client: formerly represented in matter  To end relationship: disengagement letter

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Ethics Scenario 5: Where are the bodies buried? Internal Investigation MRPC: 1.2, 1.6, 1.13, 4.2, 4.3, 4.4 Corporate internal investigations: typical timeline  Some bad action comes out and gets back to board  Want information to know what happened and determine exposure/limit liability o More corporation uncovers, more information available for prosecutor or π’s lawyer to make a case o If done by company lawyer, can protect investigation results by work product doctrine because done in anticipation of litigation Issue: lots of cases of food poisoning after people eating company’s brats  CEO’s concerns: potential lawsuits from customers and PR concern of your product making people sick – retains lawyer to do internal investigations (she has experience with FDA regulations) o Potential problem: R1.1 competence issue – she has no investigation experience  CEO wants lawyer to discover problem and keep investigation confidential o R1.2 scope: need clearer statement of client’s objective and need to consult with client as to means by which investigation will be pursued  Need informed consent to limit scope of representation in any way – to know if she needs to limit, needs to know full scope of representation  Lawyer goes to plant manager – says her interest is only in finding “truth” o Problem: R4.3 – lawyer can’t say or imply she’s disinterested – shall also make reasonable efforts to correct any misunderstanding as to her role o Also failed to explain to manager that her obligation is to the corporation, not to the employee – R1.13(f)  Hard line because don’t want to scare him off from being truthful, but also don’t want to create accidental client relationship o Not necessarily a client relationship here yet, but potential for problem  If she created relationship – conflict problem under R1.7?  Can only represent if she has reasonable belief she can represent both parties; representation isn’t prohibited by law; representation doesn’t include claim of one client against the other; AND both give informed consent in writing  Probably couldn’t get informed consent from CEO because knows that interests could potentially become adverse – also doesn’t want problem of confidentiality owed to employee  Lawyer goes to controller of brat factory o Controller thinks lawyer is her lawyer – problem, duty on lawyer to disclose and clear up the misunderstanding – R1.13(f) o Controller now has expectation of confidentiality because lawyer didn’t clear up  Lawyer calls former employee from brat casing company – says she works for corporation o Problem - she never said she’s their lawyer or that she’s doing investigation o Employee says he’s still under duty of confidentiality to casing company  Is he represented? R4.2  Comment 4: doesn’t prohibit communication with employee or agent outside course of representation  Comment 8: only applies if lawyer knows person is represented

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Comment 7: consent not required for communication with former constituent  Not covered, so go to R4.3  Lawyer says that’s fine – nope! R4.3: clear conflict of interest between employee and her client because he’s not allowed to disclose  She also gave legal advice by saying it’s okay to talk to her  Potential R4.1 problem because untruthful statement – not okay to talk. False statements of law also apply here Lawyer goes back to plant manager o Comes clean that he didn’t know casings were bad, but that they were super cheap, should’ve tipped him off they weren’t good o Also discloses affair with CEO of casing company – she promises not to disclose  Definitely created client relationship here  Now duty of loyalty attaches and R1.6 confidentiality o Tells manager not to talk to government – BIG obstruction of justice issue Reports back to CEO o Her solution: don’t buy any more casings from company o CEO wants all information learned from investigation  Confidentiality created along the way prevents her from doing so  Definite R1.7 conflict of interest problems – now way to correct and get waiver under R1.7(b) o R1.13(b): if lawyer knows of violation that may be imputed to the corporation, must take the issue to a higher authority in organization. Nondisclosure can also be a violation. A serious pr hit – maybe sanctions from fda, and they’re in a lot of trouble because herman hasn’t shared that info.  Duty to tell CEO what she learned – conflicting duties o Lawyer must withdraw from both sides at this point – R1.16(a)(1): representation of one client directly adverse to another o Rule 1.7 conflict of interest: when you have a duty of disclosure, there’s an issue of the duty to her client. It’s unclear which info she can share and which info she can’t share. o 

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Ethics Scenario 6: You’re Out! Disqualification MRPC: 1.7, 1.8, 1.9, 1.10, 1.11 Circulation of a conflicts issue to make sure representation allowed  R1.6(b)(7): a lawyer may reveal confidential information to the extent necessary to detect and resolve conflicts of interest arising from lawyer’s change of employment or from changes in the composition or ownership of the firm, but only if revealed information wouldn’t compromise privilege or otherwise prejudice the client o Okay to do a conflicts check within a firm  R1.10: Imputation o While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by R1.7 or R1.9  1.7 very stringent, 1.9 not so stringent o Rule seems to be less fitting in today’s world of huge firms  R1.7: Current Clients o (a) Lawyer shall not represent if representation involves a concurrent conflict of interest, exists where:  Representation will be directly adverse to another client; or  There is a significant risk that representation of one or more clients will be materially limited by responsibility to another client, former client, or third person, or by personal interest of the lawyer o (b) But, may represent if  Lawyer reasonably believes he is able to provide competent and diligent representation to each client;  Representation not prohibited by law;  Representation doesn’t involve assertion of a claim by one client against another in the same litigation or other proceeding before tribunal; AND  Each affected client gives informed consent in writing  R1.9: Duties to Former Clients o If you have previously represented a client, you cannot thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client, unless former client gives informed consent in writing o Previous representation used to be a per se rule, now there is more wiggle room  If you can show lawyer involved in prior representation was not in position to obtain confidential information, may allow representation to go forward  R1.10(a)(2): disqualification is required, unless o If disqualification based on 1.9(a), (b)  Disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom;

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Written notice is promptly given to any affected former client, which shall include a description of screening procedures; and  Certifications of compliance with MRPC and the screening procedures are provided to the former client by the screened lawyer o More likely allowed to still represent if  Different department (tax v. litigation)  Larger firm  Lawyer did very little work on previous matter R1.11: conflic...