Legal Ethics

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Private Disciplines in Public Matters.

A.   Small Charges Proved, Serious Charges Not Proved. Minnesota’s procedural rules for lawyer discipline include several safeguards against unsustainable public charges against lawyers. These rules safeguard lawyers’ reputations. Nonetheless, occasionally charges cannot be sustained at trial or the charges are sustainable, but the importance of the violations has been over-estimated.

B.   The Genie Back in the Bottle - “Attorney 6244.” On July 27, 2012, in a public matter, No. A11-1834, the Minnesota Supreme Court ordered a private admonition. Charges of neglect and non-communication were sustained, but more serious charges of false or misleading conduct were not proven. To put the genie of confidentiality back in the bottle, the order sealed the file and changed the caption to "In re Petition for Disciplinary Action against Attorney 6244, a Minnesota Attorney." The court also ordered that the Director’s file “remain” confidential, although that file had not been confidential from the time of filing the petition to the date of the court’s order, pursuant to Rule 20(c), R. Law. Prof. Resp.

C.   Precedents. The author is aware that the court has issued similar orders in several matters, with the following references – all, by nature, cryptic:

1.  File No. A08-1643 (Minn. 2009) Minor misconduct proven, intentional false statement not proven.

2.  In re W.L.T., No. C9-93-1616 (Minn. June 2, 1994) Charges proven but not serious enough to warrant public discipline – respondent drafted a client’s will to his benefit, but they had a family-like relationship and the benefit was very small.

3.  In re D.J.H., No. 92-173 (Minn. May 12, 1992) Young lawyer attempted to conceal tardiness in filing a brief from the client. The lawyer omitted the tardiness from her report to the client and, more seriously, deleted the court’s footnote about tardiness from the client’s copy of the order. D.J.H. is apparently unique, in that it includes that the order shall not be cited, and it was issued notwithstanding that D.J.H. agreed to accept public discipline.

Internet Collection Scam – Insurance Coverage Turns on Ethics Rules -- “My Insurance Company Made Me Do It” Would Not Excuse Rule Violation.

A recent federal case shows the importance the Rules of Professional Conduct can have for interpreting basic malpractice insurance coverage terms, such as “claim” and “demand.” O'Brien & Wolf, L.L.P. v. Liberty Ins. Underwriters, Inc., No. 11-3748 (D. Minn. 8/3/2012). The case also provides yet another wake up call to lawyers about an internet collection law scam that has targeted lawyers for over five years.

A.   Facts. In 2011, the Rochester firm of O’Brien & Wolf (“O & W”) fell victim to a common internet scam. O&W was retained by a purported client, “Sato,” to collect a debt. The purported debtor paid by cashier’s check. O&W deposited the check into its Associated Bank trust account. Associated twice confirmed to O&W that the check had cleared. At Sato’s request, O&W wired $110,500 to Sato. Associated then informed O&W that the check was fabricated and Associated charged O&W’s trust account $110,500. O&W asked OLPR what to do. OLPR said to restore the funds. O&W did so and made a claim on its malpractice insurer, Liberty Mutual. Liberty denied the claim and O&W sued.

B.   Coverage Analysis Rooted in Ethics Rules. Liberty Mutual’s main argument against coverage was that there was no “claim” or “demand,” as the policy required, as a basis for payment. However, the Court concluded, “Rule of Professional Conduct 1.15 functions as a ‘demand’ for reimbursement of O’Brien & Wolf’s trust account, under a broad construction of that term.” Rule 1.15 required restoration of trust account funds. Additionally, the court reasoned that “Liberty should have expected to cover demands related to misappropriation of client trust account funds by insureds.” Finally, the court rejected Liberty’s position because “Liberty’s interpretation of ‘claim’ would have required O’Brien & Wolf to leave its client trust account short funds until a client complained. The Court refuses to interpret the policy to require O’Brien & Wolf to breach its ethical duties to its clients (and thereby subject itself to certain discipline) in order to ensure coverage under its malpractice insurance.” As the Court sharply and aptly put it, “'My insurance company told me to do it' is not a recognized excuse for violating the Rules of Professional Conduct.”

C.   Recent Scheme? Explaining its ruling, the Court suggested that in 2011 the scam was novel, “But at the time O’Brien & Wolf fell victim to the fraudulent scheme, there was nothing to indicate they should have been on notice or taken additional precautions.” This type of scam has, however, become increasingly well known since 2007. The author sent an e-mail alert about the first attempt by scammers against his firm in 2007. Since 2007, Minnesota Lawyer has repeatedly warned Minnesota lawyers.

D.   Minnesota Lawyer Articles. Several articles have called attention to the internet scam and explained how to deal with it. Julie E. Bennett, There May not be Any There, There, MINN. LAW., Aug. 1, 2011; Julie E. Bennett, Beware of Those Selling Bridges, MINN. LAW., June 7, 2010; Patrick R. Burns, Caution: Internet Scammers Targeting Lawyers, MINN. LAW., Feb. 2, 2009; Mark A. Cohen, Internet Scammers Targeting Attorneys, MINN. LAW., Oct. 22, 2007. Bennett's 2011 article provided advice that would have protected the O&W trust account:  “In order to ensure good fiscal policies, distributions should not be made until the deposit instrument has cleared the bank that holds the account on which the instrument is written. In other words, no distributions should be made until the payor bank has agreed to pay the instrument.”

E.   Disciplines. In CLE programs addressing the internet scam, OLPR has reported several disciplines, finding violations of the competence rule (1.1) and the trust account rule (1.15). OLPR’s view is that falling victim to the scam in its most obvious forms is – after all the notoriety the scam has generated – a failure of attention and competence. In a matter arising in 2009, OLPR closed its file with no discipline, because the scam was in a “highly sophisticated” form and because the firm restored the account immediately. The latter factor corroborates the Court’s concern in O’Brien, that a law firm that required clients to complain before restoring the trust account would likely face discipline. The author represented the respondent in the 2009 matter.

F.   Criminal Prosecution – “Operation Pacific Wire.” An August 9 article reported that a Nigerian fraudster was awaiting trial in Pennsylvania, for causing approximately half the $70 million in losses from the internet scam.

Discipline Procedures: Standard of Review, Missing Charge

In re McCormick, 2012 WL 3587990 (Minn. Aug. 22, 2012), raises two issues for lawyer discipline. First, given that the Supreme Court conducts de novo review of referee conclusions of law, is the determination whether under Rule 4.2 a person is represented by a lawyer “in the matter” one of fact or law? Second, who prevails when OLPR omits a Rule violation from the charges?

A.   Facts. McCormick represented R.S., a defendant in a homicide case. Another lawyer (L) represented a co-defendant, M.S., regarding the same homicide. M.S. reached a plea bargain, the M.S. case was severed and the M.S. sentencing was deferred until after M.S. testified in the R.S. trial. Thereafter (but before the R.S. trial), at McCormick’s direction and without L’s knowledge or permission, an investigator interviewed M.S. and took a statement from M.S. about the homicide.

B.   Charges, Findings Conclusions. OLPR charged McCormick with violating Rules 4.2 (communicating with a represented party about the subject of representation) and 8.4(d) (conduct prejudicial to the administration of justice). After trial, the Supreme Court’s referee concluded McCormick violated Rules 4.2 and 8.4(d). McCormick disputed these conclusions.

C.   Was the R.S. “Matter” Within the “Subject of Representation” of M.S.? Rule 4.2 prohibits communications with a represented person only as to the matter which is “the subject of the representation.” McCormick’s main argument was that the R.S. matter was not the same matter as the M.S. matter, even though they arose from the same homicide. The Court’s referee rejected McCormick’s argument. Was this determination one of fact (if so, the standard of review is “clearly erroneous”) or one of law (to which de novo review applies). The Court regarded it as a factual dispute.

D.   Why is the Standard of Review Important? The standard of review is important, because if individual referees can determine what key terms in the Rules, like “matter,” mean, subject only to a “clearly erroneous” standard, various interpretations will be acceptable. Minnesota lawyers will then be subject to somewhat variable and unpredictable standards. On the other hand, if the Court definitively interprets key legal terms in the Rules de novo, standards for lawyers will be more uniform and predictable.

E.   Standard of Review. In the author’s view, the determination of the same “matter” issue is one of law. In criminal cases, the Court has definitively interpreted key terms of Rule 4.2. In State v. Willis, 559 N.W.2d 693, 698 (Minn. 1997), the Court held that a different criminal case was not the same “matter” under Rule 4.2. See also State v. Miller, 600 N.W.2d 457, 467 (Minn. 1999) (interpreting Rule 4.2’s “authorized by law” term and holding that a general manager of a represented organization is covered by Rule 4.2). On de novo review, the Court could have concluded that the R.S. and M.S. cases, arising out of one homicide, were the same matter for Rule 4.2 purposes. See In re Wilson, 746 N.W.2d 643 (Minn. 2008).

F.   Missing Charge. McCormick was charged with violating Rule 4.2, which forbids communications with represented persons on the subject of representation. However, McCormick never personally communicated with M.S. McCormick’s investigator, at McCormick’s direction, communicated with M.S. However, McCormick was not charged with violating Rule 5.3(c) or 8.4(a), the Rules covering a lawyer’s acting through an agent. In many reported admonitions and public cases, OLPR has properly charged lawyers with their agents’ misconduct, under Rules 5.3(c) and 8.4(a). OLPR apparently forgot these Rules in this case.

G.   When a Charge is Missing, Who Prevails? In a footnote, the Court noted that McCormick’s investigator’s conduct was covered by Rule 5.3(c), but no violation of that Rule was alleged. Nonetheless, the Court sustained the referee’s conclusion that McCormick violated Rule 4.2, “While the disciplinary petition did not allege a violation of Rule 5.3(c)(1), McCormick does not contend that he cannot be disciplined for his investigator’s conduct.” Needless to say, McCormick was pro se in the discipline proceeding. In any event, the charging defect here could be overcome by several factors. (1) McCormick had clear notice of the allegedly offending conduct. (2) Causing another to communicate as one’s agent is arguably a kind of communicating. (3) McCormick failed to object. (4) In criminal cases the Court had cited Rule 4.2 in relation to police conduct where the connection of prosecuting attorneys was much more remote than McCormick’s connection. Without these factors, the defective charge might well not have been sustained.

ABA Model Rules Amendments

A.   Ethics 20/20 Commission. In 2009, the ABA appointed a Commission on Ethics 20/20, to study the impact of technology and globalization on the legal profession. The Commission recommended changes to the Model Rules of Professional Conduct. Six changes were adopted at the August 2012 ABA meeting. More changes will be considered at the February 2013 mid-year meeting.

B.   Small Potatoes. The adopted changes are not very important, especially in Minnesota. For example, amended Model Rule 1.6(b)(7) allows disclosure of confidential information for lateral-hire conflict-checking purposes. This type of disclosure has always been allowed in Minnesota and outside of Minnesota it has been common practice.

C.   Multi-Jurisdictional Practice Rules. Two Ethics 20/20 Model Rule changes are based on lawyers' increasing mobility from state to state. One change would make it easier to gain admission in a new state without taking the bar exam. Another change would give an incoming lawyer a year’s grace period before licensure is required. In Minnesota, changes in these rules would be the province of the Board of Law Examiners and the Minnesota Supreme Court.

D.   Technological Savvy. An amendment to Model Rule 1.1 cmt. 6, states that a lawyer “should keep abreast of... the benefits and risks associated with relevant technology. . ..” This is the most recent of several opinions and authorities stating that a lawyer should have at least basic familiarity with the technology used by a lawyer.

E.   Minnesota Consideration. The MSBA Standing Committee on Ethics and Professional Responsibility will consider the Model Rule changes for possible adoption in Minnesota. Of course, the changes do not affect the law in Minnesota unless and until the Minnesota Supreme Court amends the Minnesota Rules.