The State Bar Council had no action items from the Ethics Committee this quarter. However, the Ethics Committee considered a total of eight inquiries at its meeting on January 17, 2019. Five of those inquiries were sent or returned to subcommittee for further study, including Proposed 2018 Formal Ethics Opinion 8, Advertising Membership in Marketing Company with Misleading Title, as well as inquiries concerning informal communications with a judge, a lawyer’s ability to receive Bitcoin and other cryptocurrency in connection with a law practice, attorney’s eyes only discovery agreements, and a lawyer’s ability to access the social media presence of represented and unrepresented persons. Lastly, the committee approved three new opinions for publication, which appear below.
Rules, Procedure, Comments
All opinions of the Ethics Committee are predicated upon the North Carolina Rules of Professional Conduct. Any interested person or group may submit a written comment – including comments in support of or against the proposed opinion – or request to be heard concerning a proposed opinion. The Ethics Committee welcomes and encourages the submission of comments, and all comments are considered by the committee at the next quarterly meeting. Any comment or request should be directed to the Ethics Committee c/o Lanice Heidbrink at lheidbrink@ ncbar.gov no later than March 29, 2019.
Proposed 2019 Formal Ethics Opinion 1
Lawyer as an Intermediary
January 17, 2019
Proposed opinion rules that a lawyer may not jointly represent clients and prepare a separation agreement.
Lawyer represents clients in domestic relations matters. Lawyer has been contacted by a married couple wishing to separate and then later obtain a divorce. No litigation has been initiated. The married couple agree on the terms of separation. The couple does not have sufficient funds to pay two lawyers and wants Lawyer to prepare the separation agreement for both parties. May Lawyer prepare a separation agreement for both parties?
No. Rule 1.7 provides that a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if the representation of one client will be directly adverse to another client, or the representation of one or more clients may be materially limited by the lawyer’s responsibilities to another client. Rule 1.7(a).
Rule 1.7(b) recognizes that a conflict can be resolved by client consent. However, some conflicts are nonconsentable, meaning that the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent. Rule 1.7, cmt. . The commentary to Rule 1.7 further provides,
Consentability is typically determined by considering whether the interests of the clients will be adequately protected if the clients are permitted to give their informed consent to representation burdened by a conflict of interest. Thus, under paragraph (b)(1), representation is prohibited if in the circumstances the lawyer cannot reasonably conclude that the lawyer will be able to provide competent and diligent representation. See Rule 1.1 (competence) and Rule 1.3 (diligence).
Rule 1.7, cmt. .
In 2013 FEO 14, the Ethics Committee determined that, in most instances, common representation in a commercial loan closing is nonconsentable. Common representation was found to be inappropriate because of the “numerous opportunities for a lawyer to negotiate on behalf of the parties” and “numerous opportunities for an actual conflict to arise between the borrower and the lender.” 2013 FEO 14.
These same issues and concerns are present in the case of a separation agreement. Although the parties may believe they have agreed on the terms of separation, there are potentially numerous opportunities for Lawyer to negotiate on behalf of the parties regarding, inter alia, custody, property division, and family support. In the event an actual conflict arises, the prejudice to the parties would be substantial.
Lawyer has a professional duty to provide competent and diligent representation to each client and ensure that the legal interests of each client are protected. Rules 1.1 and 1.3. When the clients are legally adverse to each other in the same matter and there are numerous opportunities for Lawyer to negotiate on behalf of the parties, impartiality is rarely possible. See 2013 FEO 14. Lawyer, therefore, cannot adequately advise one client without compromising the interest of the other client. Because Lawyer cannot adequately represent the interests of each client, Lawyer has a nonconsentable conflict and cannot prepare the separation agreement for both parties.
Proposed 2019 Formal Ethics Opinion 2
Conditions Imposed on Lawyer by Client’s ERISA Plan
January 17, 2019
Proposed opinion rules that lawyer may not agree to terms in an ERISA plan agreement that usurp client’s authority as to the representation.
Lawyer represents an injured worker in a denied workers’ compensation claim. Client participated in a self-funded health benefits plan (Plan) though his workplace. The Plan was established under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001 et seq. As a precondition to issuing payments for Client’s medical expenses, the Plan requested that Client and Lawyer sign an Agreement that includes the provisions described below.
The Agreement between the Plan and Lawyer’s client (referred to as “the promisor”) sets out that the promisor was injured on the job; that the promisor is currently proceeding or promises to initiate a claim against his employer; that the promisor’s claim is disputed; and that the promisor is in need of benefits under the Plan.
The Agreement states that, as a condition of receiving Plan benefits, the promisor agrees to fully prosecute his pending claim and agrees not to abandon or settle his claim without the written approval of the Plan. The Agreement states that the promises made in the Agreement are binding upon the promisor and the promisor’s attorney and requires the signature of the promisor’s attorney.
Do the Rules of Professional Conduct permit Lawyer to agree not to abandon or settle the Client’s claim without the approval of the Plan?
No. Lawyer may not agree to any terms in the Agreement that contradict Lawyer’s professional responsibility to abide by Client’s directives regarding the representation as set out in Rule 1.2.
The Agreement requires Client and his counsel to fully prosecute the pending workers’ compensation claim and to obtain written approval from the Plan before abandoning or settling the claim. As to Lawyer, these requirements conflict with Lawyer’s professional responsibilities to Client as set out in Rule 1.2. Pursuant to Rule 1.2, Lawyer has an ethical obligation to “abide by a client’s decisions concerning the objectives of representation” and “abide by a client’s decision whether to settle a matter.” If Client signs the Agreement and subsequently decides to abandon or settle the matter without the Plan’s approval, Lawyer has a professional obligation to follow Client’s directives. Lawyer may not agree to the conditions in the Agreement that usurp Client’s authority as to the objectives of the representation.
Proposed 2019 Formal Ethics Opinion 3
Engaging in Intimate Relationship with Opposing Counsel
January 17, 2019
Proposed opinion rules that an ongoing sexual relationship between opposing counsel creates a conflict of interest in violation of Rule 1.7(a).
The Rules of Professional Conduct apply to all lawyers in their various representative capacities. Accordingly, although this opinion is based upon a scenario involving representation in a criminal matter, the conduct at issue may threaten the integrity of both the criminal and civil justice systems, and therefore the analysis contained herein is applicable to lawyers in both criminal and civil matters.
Lawyer A is an assistant district attorney in District Q. Lawyer B represents criminal defendants in District Q. Lawyer A and Lawyer B engage in a sexual relationship over a one- to three-month period. During the relationship, Lawyer A prosecutes several cases in which Lawyer B represents the defendants. Lawyer A and Lawyer B do not inform their respective clients or superiors about the relationship.
Does Lawyer A’s and Lawyer B’s conduct violate the Rules of Professional Conduct?
Yes. Rule 1.7(a) states that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” The Rule goes on to say that a concurrent conflict of interest exists “if the representation of one or more clients may be materially limited by the lawyer’s responsibilities to another client, a former client, or a third person, or by a personal interest of the lawyer.” Rule 1.7(a)(2). Rule 1.7 addresses situations where there is both an actual material limitation and a potential material limitation. See id. (“...may be materially limited...”) (emphasis added). Comment 8 to Rule 1.7 states that “[t]he mere possibility of subsequent harm does not itself preclude the representation or require disclosure and consent.” Instead, the critical questions to consider in determining whether a material limitation exists as a result of a personal interest during a representation are “ the likelihood that a difference in interests will eventuate and, if it does,  whether it will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client.” Rule 1.7, cmt. . Accordingly, determining whether a materially limiting personal interest exists depends on an examination of the surrounding circumstances of the situation at issue. If a materially limiting personal interest exists, representation may only continue if the lawyer satisfies the terms of Rule 1.7(b), including that the lawyer reasonably believes that s/he will be able to provide competent and diligent representation to the affected client, and the lawyer discloses the conflicting interest to his/her client and obtain the client’s written, informed consent to continue in the representation. See also Rule 1.4(b) (“A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”).
We have previously opined that spouses cannot participate in a matter as opposing counsel unless their relationship is disclosed to the affected clients and the clients provide written, informed consent to continue in the representation. See RPC 11. Other jurisdictions have similarly determined spousal relationships between opposing counsel constitute a conflict of interest. See generally Mich. Formal Op. R-3 (1989) (“A lawyer whose spouse represents the opposing party in a case may not continue to handle the case unless the parties are informed of the relationship between the lawyers and consent to continued representation.”). At least one jurisdiction (New York) found that dating relationships between opposing counsel can constitute a conflict of interest because “[a] dating relationship between adversaries is inconsistent with the independence of professional judgment[.]” N.Y. State Bar Ass’n Op. 660 (1993). (“Whatever hereafter may be said of friendships in varying degrees, we believe that a frequent dating relationship is clearly over the line that separates ethically cognizable conflicting interests from those which are not.”) That same opinion found that criminal cases required heightened scrutiny in evaluating potential conflicts of interest resulting from personal relationships to preserve the integrity of the criminal justice system. Id. (“Irrespective of the subjective intent of the prosecutor and defense counsel, and regardless of howsoever scrupulous they may be in the conduct of their professional obligations, the appearance of partiality in the administration of justice is so strong that a couple who date frequently should not be permitted to appear opposite one another in criminal cases.”)
In Commonwealth v. Croken, the Supreme Court of Massachusetts vacated a trial court’s denial of the defendant’s motion for a new trial based in part on the question of whether the defendant’s counsel engaged in a conflict of interest by participating in an intimate relationship with a member of the prosecuting office during the representation. Commonwealth v. Croken, 432 Mass. 266, 277 (2000). In reaching its conclusion, the court held:
A lawyer’s personal interests surely include his interest in maintaining amicable relations with his relatives, his spouse, and anyone with whom he is comparably intimate. This interest is, of course, often significantly pecuniary in character, but it also has irreducible emotional and moral dimensions, and it heavily bears on how any ordinary human being goes about making important decisions. It follows that in a case where a lawyer’s representation of a client may be significantly limited by his ties to his relatives and intimate companions, professional ethics are implicated just as they would in a case where the lawyer represents a second client with litigation interests potentially adverse to those of the first client....We do hold that, where a criminal defense lawyer represents a client and a close relative or an intimate companion is a colleague of the prosecutor who seeks to convict the client, the requirements of [Rule 1.7] must be met.
Id. at 273.
We find the reasoning expressed in the New York and Massachusetts opinions persuasive. The nature of a continuing, sexually intimate relationship between opposing counsel during an ongoing dispute creates a personal interest for the participating lawyers that materially limits the lawyers’ respective abilities to exercise independent judgment, preserve confidences, and otherwise render unencumbered representation. Such a relationship could also detrimentally impact the profession and the administration of justice, as the relationship could serve as grounds for post-conviction or post-judgment relief, as well as contribute to the negative image of lawyers. As noted in comment 1 to Rule 1.7, “Loyalty and independent judgment are essential elements in the lawyer’s relationship to a client.” A client should be informed of the possibility that his or her lawyer may be professionally or emotionally compromised due to the lawyer’s ongoing sexual relationship with the opposing lawyer.
This opinion does not undertake the task of determining the point at which a personal relationship with opposing counsel triggers the protection afforded to clients under Rule 1.7(a)(2). However, under the circumstances presented in this inquiry, a lawyer’s representation of a client is materially limited by the lawyer’s personal interest in an ongoing sexual relationship with opposing counsel, and that conflict of interest requires the participating lawyers to satisfy the conditions of Rule 1.7(b) in order to continue the representation, including disclosing the relationship to their clients and obtaining their clients’ written, informed consent. The personal interest conflict is not imputed to members of the lawyer’s firm or office under Rule 1.10 so long as the conflict “does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.” Rule 1.10(a).
Assume Lawyer B notifies his client(s) and the provisions of Rule 1.7(b) were met. Does Lawyer A have an obligation to obtain such consent? If so, from whom?
Yes. Lawyer A also has a conflict and must satisfy the requirements of Rule 1.7(b) to continue in the representation. See Opinion #1. Elected district attorneys are entitled to enact their own internal office policies in accordance with the law of this state. The identification of the person or governmental body to whom the assistant district attorney’s report should be made is a legal and policy question that is beyond the purview of this committee.
Would the answer to Inquiry #1 change if the relationship was a more long-standing, emotionally involved relationship?
No. The relationship described in this inquiry is more akin to a marital relationship and therefore must be disclosed to the client to continue with the representation, in addition to complying with the other requirements of Rule 1.7(b). See RPC 11; see also N.Y. State Bar Ass’n Op. 660 (1993). The added circumstance of a long-standing, emotionally involved relationship enlarges the personal interest conflict and creates a likelihood of material limitation in violation of Rule 1.7(a)(2).