Ethics Question of the Month - July 2019
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Partner Y sued Partner X for breaching their partnership agreement when kicked Y out of the partnership. X concedes kicking Y out of the partnership, but contends he was justified because Y was stealing company monies and acting contrary to the partnership’s best interest. Lawyer A represents Partner X, and Lawyer B represents Partner Y in the breach of partnership suit.
Partner X has counterclaimed against Y for fraud and conversion of partnership monies. The litigation has continued for months, and settlement discussions have gone nowhere. In a conversation before trial, Lawyer A tells Lawyer B, “Look, let’s get real about what is going to happen next. Your client faces significant liability at trial and has no real defenses to his misappropriation. Plus, your client could end up in jail for stealing partnership money. What am I missing here?”
Lawyer B responds by claiming that Lawyer A has violated a disciplinary rule by saying anything about the possibility of Partner Y going to jail during settlement discussions. Lawyer B files a grievance against Lawyer A and hopes that the grievance will be enough to get Lawyer A to recommend that that his client come back to the negotiating table with a reasonable offer. Lawyer A receives the State Bar notice of Lawyer B’s grievance by mail two days before a mediation between the parties.
Which of the following is most accurate?
A. Only Lawyer A has violated a disciplinary rule by threatening criminal prosecution in a civil matter; Lawyer B cannot violate a disciplinary rule because complainants have absolute and unqualified immunity in filing grievances
B. Only Lawyer B has violated a disciplinary rule by filing a grievance against Lawyer A; Lawyer A’s conduct does not rise to the level of an actual threat
C. Lawyers A and B have both violated disciplinary rules.
D. Neither A nor B has violated disciplinary rules.
Rule 4.04 of the Texas Disciplinary Rules of Professional Conduct prohibits a lawyer from threatening or bringing criminal or disciplinary charges solely to gain an advantage in a civil matter.
The first question is whether Lawyer A threatened to bring criminal charges. The alleged “threat” has some ambiguities in the language:
“Look, let’s get real about what is going to happen next. Your client faces significant liability at trial and has no real defenses to his misappropriation. Plus, your client could very well end up in jail for stealing partnership money. What am I missing here?”
Lawyer A certainly mentions the possibility of Y going to jail for stealing partnership money and does so in the context of settlement negotiations. However, there is not an overt quid pro quo; Lawyer A did not directly communicate to Lawyer B something along the lines of “Either your client settles with my client by noon tomorrow for $xxxx or my client will be filing criminal charges against your client.”
So how close can a lawyer get to the line of mentioning possible criminal consequences to opposing counsel without straying over the line? The Rule doesn’t say more than that lawyers cannot threaten or bring criminal charges solely to gain an advantage in a civil matter. And what about that other condition: “solely to gain an advantage in a civil matter”? What does “solely” mean in this context?
The cleanest violation scenario is certainly an express exchange: if you don’t “settle” (or, in another context, “dismiss your case”), criminal charges will be filed. We could argue that a “settle or else” threat is implied by this communication occurring in the context of settlement negotiations. This is not a random conversation outside the scope of settlement talks between counsel, although the Rule says nothing about a violation only occurring in settlement negotiations.
On the other hand, Lawyer A’s statement (“Plus your client could very well end up in jail for stealing partnership money”) is arguably an indisputable factual statement. There is a difference between stating a fact and expressly linking that fact to a criminal consequence. And what about that qualifier “solely”? If Lawyer A had a legitimate motive and an illegitimate motive in making that statement to Lawyer B, would the legitimate motive absolve the illegitimate motive?
Conclusion: Lawyer A’s statement seems to skirt, but not cross, the Rule 4.04 line. The statement does not contain an express quid pro quo. It states a likely fact. If Lawyer A says no more than this and does not make a more explicit demand or threat, then Lawyer A has not clearly violated Rule 4.04—yet. But Lawyer A would have been on safer ground by not mentioning any criminal consequences. And he probably did not need to do so because the threat of criminal prosecution may be implied if the case doesn’t settle.
As for Lawyer B filing a grievance against Lawyer A for making this statement, Lawyer B has civil immunity from suit for filing his grievance under Rule 17.09 of the Texas Rules of Disciplinary Procedure. Lawyer B does not have immunity, however, from disciplinary charges for violating Rule 4.04.
But the real issue is whether Lawyer B violated Rule 4.04 by filing a grievance against Lawyer A. Lawyer B’s intent is mixed: Lawyer B may genuinely believe that Lawyer A violated Rule 4.04 by making his statement about Partner Y potentially going to jail while talking about settlement. Based on these facts, Lawyer B also appears to be hopeful that the grievance against Lawyer A just before mediation might be helpful in pressuring Lawyer A to convince his client to settle with Lawyer B’s client now. This latter aspect—gaining an advantage in a civil matter--is illegitimate, but the former aspect—whether Lawyer A violated Rule 4.04--is not completely clear of doubt, and Lawyer B has a plausible argument that Rule 4.04 is implicated by Lawyer A’s statement.
The combination of a legitimate, apparently good faith belief that a disciplinary rule violation occurred with an illegitimate hope that a grievance against opposing counsel will result in settlement should be enough not to trigger the “solely” condition necessary to violate Rule 4.04. Further, Lawyer B has not expressly offered to dismiss the grievance against Lawyer A if Lawyer A’s client settles.
Therefore, the smoking gun in either scenario has yet to smoke, but both lawyers are on exceptionally thin ice ethically.
The best answer is D. But the absence of a clear violation does not mean that these practices should be encouraged. The line between non-punishable and punishable ethical conduct is often murky. The better approach here is not to mention criminal charges or disciplinary charges in the context of civil litigation.
Posted: 6/27/2019 10:54:52 AM by
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