No proposed formal ethics opinions were considered by the State Bar Council at its meeting on October 28, 2016.
Ethics Committee Actions
At its meeting on October 27, 2016, the Ethics Committee voted to continue to table proposed 2016 Formal Ethics Opinion 1, Contesting Opposing Counsel’s Fee Request to Industrial Commission, pending the conclusion of appellate action on related cases. The committee also voted to publish a revised proposed opinion and a new proposed opinion. Both appear below.
The comments of readers on proposed opinions are welcomed. Comments received by January 12, 2016, will be considered at the next meeting of the Ethics Committee. Comments may be emailed to email@example.com.
Proposed 2016 Formal Ethics Opinion 3
Negotiating Private Employment with Opposing Counsel
October 27, 2016
Proposed opinion rules that a lawyer may not negotiate for employment with another firm if the firm represents a party adverse to the lawyer’s client unless both clients give informed consent.
Note: This opinion is limited to the explanation of the professional responsibilities of a lawyer moving from one place of private employment to another. Rule 1.11(d)(2)(B) governs the conduct of a government lawyer seeking private employment.
May a lawyer negotiate for employment with a law firm that represents a party on the opposite side of a matter in which the lawyer is also representing a party?
Yes, with client consent.
A lawyer shall not represent a client if the representation of a client may be materially limited by a personal interest of the lawyer unless the lawyer reasonably believes that he can provide competent and diligent representation to the affected client and the client gives informed consent, confirmed in writing. Rule 1.7(b)(2). As observed in Rule 1.7, cmt. , when a lawyer has discussions concerning possible employment with an opponent of the lawyer’s client, or with a law firm representing the opponent, such discussions could materially limit the lawyer’s representation of the client.
On the same issue, ABA Formal Ethics Op. 96-400 (1996) advises that there are two overriding factors affecting the “likelihood that a conflict will eventuate” and “materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclosing courses of action”: the nature of the lawyer’s role in the representation of the client; and the extent to which the lawyer’s interest in the firm is concrete, and has been communicated and reciprocated. The ABA opinion states:
[t]he likelihood that a lawyer’s job search will adversely affect his “judgment in considering alternatives or foreclosing courses of action” is far greater when the lawyer has an active and material role in representing a client. Thus, if the posture of the case is such that there is no call on the lawyer’s judgment in representing a client during the period of his job search, it is not likely that his search and negotiations will adversely affect his judgment. Furthermore, if a lawyer’s interest in another firm, or its interest in him, is not reciprocated, it seems unlikely, in most cases, that such unreciprocated interest will have a material effect on a lawyer’s judgment in a matter between them.
While the exact point at which a lawyer’s own interest may materially limit his representation of a client may vary, the committee believes that clients, lawyers, and their firms are all best served by a rule that requires consultation and consent at the earliest point that a client’s interests could be prejudiced.
The ABA opinion concludes that a lawyer who is interested in negotiating employment with a firm representing a client’s adversary must obtain the client’s consent before engaging in substantive discussions1 with the firm or the lawyer must withdraw from the representation.
The Restatement (Third) of the Law Governing Lawyers advises that once the discussion of employment has become concrete and the interest is mutual, the lawyer must promptly inform the client; without effective client consent, the lawyer must terminate all discussions concerning the employment, or withdraw from representing the client. Restatement (Third) of the Law Governing Lawyers: A Lawyer’s Personal Interest Affecting the Representation of a Client, §125, cmt. d (2000). See also Kentucky Ethics Op. E-399 (1998) (lawyer may not negotiate for employment with another firm where firms represent adverse parties and lawyer is involved in the client’s matter or has actual knowledge of protected client information, unless the client consents to negotiation).
We agree: a job-seeking lawyer who is representing a client, or has confidential information2 about the client’s matter, may not engage in substantive negotiations for employment with the opposing law firm without the client’s informed consent.
To obtain the client’s informed consent, the job-seeking lawyer must explain to the client the current posture of the case, including what, if any, additional legal work is required, and whether another firm lawyer is available to take over the representation should the lawyer seek to withdraw. If the client declines to consent, the job-seeking lawyer must either cease the employment negotiations until the client’s matter is resolved or withdraw from the representation but only if the withdrawal can be accomplished without material adverse effect on the interests of the client. Rule 1.16(b)(1). Because personal conflicts of interests are not imputed to other lawyers in the firm, another lawyer in the firm may continue to represent the client. Rule 1.10(a).
Similarly, the hiring law firm must not engage in substantive employment negotiations with opposing counsel unless its own client consents. If the client does not consent, the firm must cease the employment negotiations or withdraw from the representation. The firm may only withdraw if the withdrawal can be accomplished without material adverse effect on the interests of the client. Rule 1.16(b) (1).
1. A substantive discussion entails a communication between the job-seeking lawyer and the hiring law firm about the job-seeking lawyer’s skills, experience, and the ability to bring clients to the firm; and the terms of association. ABA Formal Ethics Op. 96-400 (1996). Thus there is a two-prong test for “substantive discussions.” There must be (1) a discussion/negotiation that is (2) substantive. Sending a resume blind to a potential employer is not a “discussion.” Speaking generally with a colleague at a social event about employment opportunities is not “substantive.”
2. A job-seeking lawyer who is only peripherally involved in a client’s matter and does not have confidential client information is not required to seek the client’s consent before engaging in substantive employment negotiations with the opposing law firm.
Proposed 2016 Formal Ethics Opinion 4
Disclosing Confidential Information to Execute on a Judgment for Unpaid Legal Fees
October 27, 2016
Proposed opinion rules that lawyer may not disclose financial information obtained during the representation of a former client to assist the sheriff with the execution on a judgment for unpaid legal fees.
A lawyer with Firm represents Client in a domestic matter. Client fails to pay Firm for legal services and Firm withdraws from representation. Firm provides Client written notice of the North Carolina State Bar’s Fee Dispute program. Client waives the right to participate in the program. Firm files a lawsuit against Client to recover the unpaid legal fees and obtains a default judgment against Client. Firm now wants to execute on its judgment against Client.
During the course of Firm’s representation of Client, Firm learned financial information about Client, including the location of Client’s bank accounts and the account numbers. Firm does not know if that information is still accurate. Firm would like to provide this information to the sheriff to aid the sheriff in executing on a writ of execution.
May Firm provide the sheriff with information about Client’s bank accounts to execute on Firm’s judgment for unpaid fees against Client?
No. Disclosing Client’s financial information to the sheriff would violate Rule 1.6(a) of the Rules of Professional Conduct.
Rule 1.6(a) provides that a lawyer “shall not reveal information acquired during the professional relationship with 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).” None of the exceptions set out in Rule 1.6(b) applies to the instant scenario.
It is true that Rule 1.6(b)(6) allows a lawyer to disclose information 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.” Comment  to Rule 1.6 specifically addresses actions to collect legal fees and provides that “[a] lawyer entitled to a fee is permitted by paragraph (b)(6) to prove the services rendered in an action to collect it.”
The instant scenario does not fall within the Rule 1.6(b)(6) exception because the action to collect the unpaid legal fees has concluded. Firm has proven the legal services rendered and has obtained a default judgment against Client. The purpose of the exception to the duty of confidentiality having been fulfilled, Firm may not now use Client’s confidential information to collect on the judgment. Firm may utilize post-judgment procedures to obtain information about Client’s assets without breaching the duty of confidentially set out in Rule 1.6.