Advanced Licensing Agreements 2017

Transcription

1 INTELLECTUAL PROPERTY Course Handbook Series Number G-1308 Advanced Licensing Agreements 2017 Volume Two Co-Chairs Marcelo Halpern Ira Jay Levy Joseph Yang To order this book, call (800) 260-4PLI or fax us at (800) Ask our Customer Service Department for PLI Order Number , Dept. BAV5. Practising Law Institute 1177 Avenue of the Americas New York, New York 10036

2 18 Basic Ethics for the Negotiating Lawyer David Rabinowitz Moses & Singer LLP Copyright 2016 David Rabinowitz If you find this article helpful, you can learn more about the subject by going to to view the on demand program or segment for which it was written

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4 David Rabinowitz Moses & Singer LLP Direct Dial: Fax: David Rabinowitz is co-head of the Litigation Department and a member of the Intellectual Property Department and Legal Ethics and Law Firm Practice Department at Moses & Singer, where he has been a partner since He handles civil commercial cases of all kinds and in particular both litigates and advises clients on financial industry and intellectual property matters. He is also a member of Moses & Singer s Legal Ethics and Law Firm Practice Department and a frequent speaker on ethical issues concerning negotiations, conflicts and fee agreement issues. Mr. Rabinowitz has appeared in state and federal courts and in arbitrations throughout the United States. Mr. Rabinowitz has lectured and participated on panels before the Bar Association of the City of New York, the American Bar Association, The Practicing Law Institute, the Copyright Society of the United States, the Licensing International annual convention and the Massachusetts Software Council. He has taught Copyright Law at Seton Hall Law School. He is a member and former trustee of the Copyright Society of the United States. Mr. Rabinowitz has published numerous articles which have appeared in Advertising Age, Entertainment Law Reporter, The Entertainment Publishing and the Arts Handbook, The Bulletin of the Copyright Society of the United States American Lawyer s Corporate Counsel Magazine and The Practical Lawyer. Education Columbia University School of Law, J.D., 1976, Harlan Fiske Stone Scholar, Massachusetts Institute of Technology, S.B., 1972 Articles New York Resolves In-House Counsel Bar Admission Problem Up Close and Professional with New York s Engagement Letter Rules Communications Decency Act Non-Traditional Fee Arrangements and Doing Business with Clients

5 Everything You Ever Wanted To Know About the Copyright Act Before 1909 Web Site Story 6-Breakaway Employees Beware Web Site Story 5-Emerging Limits to Out-of-State Jurisdiction over Web Sites Web Site Story 4-Nationwide Internet Jurisdiction is not Ended by Blue Note Web Site Story 3-The Emerging Tort of Domain Name Infringement Web Site Story 2-Finding Yourself Subject to Jurisdiction Far, Far Away Web Site Story-A Legal Primer for Web Site Owners and Designers Copyright Preemption: New York State s Erroneous Interpretation Copyright and Trademark Infringement: Current Techniques for Plaintiffs and Defendants Presentations (last 10 years - most recent year for series) 2016 Practicing Law Institute program, Ethics for the Negotiating Lawyer 2016 Practicing Law Institute program, Advanced Licensing Agreements 2015 Practicing Law Institute program, Understanding The Intellectual Property License 2015 Practicing Law Institute program, Outsourcing 2015: Sourcing Critical Services 2012, 2007 Copyright Society of the U.S.A., Basic Ethics for the Negotiating Lawyer, Non-Traditional Fee Arrangements and Doing Business with Clients 2008 Licensing International - Winning Ethics in Licensing 2007 Practicing Law Institute program, Internet Law Institute 2007 CMJ Music Marathon and Film Festival, Games Without Frontiers Adjunct Professor, Copyright Law, Seton Hall Law School

6 Table of Contents I. ETHICAL RULES... 7 A. BEFORE THE NEGOTIATION... 7 COMPETENCE... 7 OUT-OF-STATE PRACTICE (UNAUTHORIZED PRACTICE OF LAW)... 9 FEE ARRANGEMENTS MULTIPLE CLIENTS FORMER CLIENTS PROSPECTIVE CLIENTS B. IN THE NEGOTIATION CANDOR AND DECEIT COMMUNICATING WITH ADVERSE PARTY C. AFTER THE NEGOTIATION THE LAWYER AS WITNESS MALPRACTICE SEX II. EXAMPLES III. LEGAL ETHICS

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8 I. ETHICAL RULES SELECTED PROVISIONS OF THE NEW YORK RULES OF PROFESSIONAL CONDUCT and the ABA MODEL RULES The following is a selection from the New York and ABA rules of professional conduct and comments that appear to have the greatest relevance to the lawyer negotiating business transactions, including licenses of intellectual property, particularly in New York. They are organized by topic, and the topics are in the order in which they would likely arise in the course of a legal representation, from retention, through performance of the work, to the end of the representation. Commentary is the author s unless attributed. A. BEFORE THE NEGOTIATION COMPETENCE This issue generates decisions mostly on the neglect of matters once undertaken, rather than on the competence or expertise of counsel to undertake a matter in the first place. However, in a specialized area, like intellectual property law, claims are possible that a generalist should not act without expert co-counsel. There is developing law on a lawyer s obligation, justified partly by the obligation to render competent service, to preserve documents relating to a representation. This obligation, of indefinite scope in terms of the documents to be preserved, has resulted in at least one decision potentially sanctioning a lawyer in the course of a malpractice case against that lawyer. The obligation may precede any indication of litigation relating to the subject of the representation. NEW YORK RULES OF PROFESSIONAL CONDUCT RULE 1.1: Competence (a) A lawyer should provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. (b) A lawyer shall not handle a legal matter that the lawyer knows or should know that the lawyer is not competent to handle, without associating with a lawyer who is competent to handle it

9 RULE 1.3 Diligence (a) A lawyer shall act with reasonable diligence and promptness in representing a client. RULE 1.4 Communication (a) A lawyer shall: (1) promptly inform the client of: (i) any decision or circumstance with respect to which the client s informed consent, as defined in Rule 1.0(j), is required by these Rules; (ii) any information required by court rule or other law to be communicated to a client; and (iii) material developments in the matter including settlement or plea offers. (2) reasonably consult with the client about the means by which the client s objectives are to be accomplished; (3) keep the client reasonably informed about the status of the matter; (4) promptly comply with a client s reasonable requests for information; and (5) consult with the client about any relevant limitation on the lawyer s conduct when the lawyer knows that the client expects assistance not permitted by these Rules or other law. (b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. ABA MODEL RULES COMMENT to RULE 1.1 A lawyer need not necessarily have special training or prior experience to handle legal problems of a type with which the lawyer is unfamiliar... Competent representation can also be provided through the association of a lawyer of established competence in the field in question. A lawyer may accept representation where the requisite level of competence can be achieved by reasonable preparation

10 References: Practising Law Institute NYS Bar Association Op (1975) (consistent failure of a lawyer to respond to telephone calls and correspondence from fellow attorneys violates duty of diligence) Duty to Preserve Documents FDIC v. Malik, 09-CV-4805 (E.D.N.Y.) NYLJ , at *1 (March 26, 2012) New York City Bar Association Ethics Opinion A Lawyer s Ethical Obligations to Retain and to Provide a Client with Electronic Documents Relating to a Representation New York City Bar Association Ethics Opinion ABA Inf. Op (1977) (lawyer should not discard matter that (i) probably belongs to the client, (ii) that the lawyer knows or should know may be necessary or useful in the assertion or defense of a client s position, before expiration of the statute of limitations, (iii) not given to the client that the client may reasonably expect the lawyer to preserve; also, lawyer should probably keep a record of discarded files) OUT-OF-STATE PRACTICE (UNAUTHORIZED PRACTICE OF LAW) This issue caused a stir in 1998, when the California Supreme Court refused a fee to a New York law firm that had represented a California client in California in a California arbitration of a dispute arising under California law, on the ground that the work was illegal as unauthorized practice of law. Birbrower, Montalbano, Condon & Frank, P.C. v. Superior Court, 17 Cal.4 th 119, 949 P.2d 1, 70 Cal. Rptr. 2d 304 (1998). The Court made it clear that the prohibition extended beyond appearing in California courts or arbitrations, to any activity defined as the practice of law, including counseling and negotiation. The ethical rules are relatively uninformative about lawyers acting in jurisdictions where they are not admitted or about advising clients about out-of-state law. Some of the more important cases are noted below. The rules appear to vary from state to state, so that the ethical rules admonition that (Model Code DR 3-101(B)) A lawyer shall not practice law in a jurisdiction where to do so would be in violation of regulations of the profession in that

11 jurisdiction does in fact require consideration of the rules in each out-of-state jurisdiction involved. While the courts say that no one factor determines whether unauthorized practice is occurring, the key issues appear to be the location of the client and the place where the services are actually performed. The law governing the transaction, oddly, appears to be a distant, although recognized, third factor. Birbrower relied on all three to find unauthorized practice. A later California decision distinguished Birbrower on the ground that the client was out-ofstate, holding that California has no interest in disciplining an out-of-state attorney practicing law on behalf of a client residing in the lawyer s home state. Condon v. McHenry, 65 Cal. App. 4 th 1138, 76 Cal. Rptr. 2d 922 (1 st Dist. 1998). The Condon Court did not insist on reserving California law to California lawyers: Surely the citizens of states outside of California should not have to retain California lawyers to advise them on California law. If this proves to be the prevailing rule, much of the concern caused by Birbrower should disappear. See also, Cal. Code Civ. P (new section enacted in 1999 allows non-resident lawyers to participate in California arbitrations, creating limited exception to Birbrower). Special Rule For In-House Counsel The ABA has adopted a new rule that would do away with the duty of in-house counsel to obtain admission in the state in which they practice. Model Rule 5.5(d)(1) exempts in-house counsel who confine their practice as follows: (d) A lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services in this jurisdiction that: (1) are provided to the lawyer s employer or its organizational affiliates and are not services for which the forum requires pro hac vice admission Several states have adopted this new model rule. New York has adopted a different rule, allowing non-admitted in-house counsel to register, instead of seeking admission to the bar. 22 NYCRR Part 522. See also New Jersey Rule 1:27-2 ( Limited License: In- House Counsel ). NEW YORK RULES OF PROFESSIONAL CONDUCT RULE 5.5 Unauthorized Practice Of Law (a) A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction

12 (b) A lawyer shall not aid a non-lawyer in the unauthorized practice of law. NEW YORK RULES OF THE COURT OF APPEALS FOR THE REGISTRATION OF IN-HOUSE COUNSEL 22 NYCRR Registration of In-House Counsel (a) In-house counsel defined. An in-house counsel is an attorney who is employed full time in this State by a non-governmental corporation, partnership, association, or other legal entity, including its subsidiaries and organizational affiliates, that is not itself engaged in the practice of law or the rendering of legal services outside such organization. (b) In its discretion, the Appellate Division may register as inhouse counsel an applicant who: (1) (i) has been admitted to practice in the highest law court in any other state or territory of the United States or in the District of Columbia; or (ii) is a member in good standing of a recognized legal profession in a foreign non-united States jurisdiction, the members of which are admitted to practice as lawyers or counselors at law or the equivalent and subject to effective regulation by a duly constituted professional body or public authority; (2) is currently admitted to the bar as an active member in good standing in at least one other jurisdiction, within or outside the United States, which would similarly permit an attorney admitted to practice in this State to register as inhouse counsel; and (3) possesses the good moral character and general fitness requisite for a member of the bar of this State Scope of legal services An attorney registered as in-house counsel under this Part shall: (a) provide legal services in this State only to the single employer entity or its organizational affiliates, including entities that

13 control, are controlled by, or are under common control with the employer entity, and to employees, officers and directors of such entities, but only on matters directly related to the attorney s work for the employer entity, and to the extent consistent with the New York Rules of Professional Conduct; (b) not make appearances in this State before a tribunal, as that term is defined in the New York Rules of Professional Conduct (22 NYCRR Rule 1.0[w]) or engage in any activity for which pro hac vice admission would be required if engaged in by an attorney who is not admitted to the practice of law in this State; (c) not provide personal or individual legal services to any customers, shareholders, owners, partners, officers, employees or agents of the identified employer; and (d) not hold oneself out as an attorney admitted to practice in this State except on the employer s letterhead with a limiting designation. 22 NYCRR Scope of temporary practice (a) A lawyer who is not admitted to practice in this State may provide legal services on a temporary basis in this State provided the following requirements are met. (1) The lawyer is admitted or authorized to practice law in a state or territory of the United States or in the District of Columbia, or is a member of a recognized legal profession in a non-united States jurisdiction, the members of which are admitted or authorized to practice as attorneys or counselors at law or the equivalent and are subject to effective regulation and discipline by a duly constituted professional body or a public authority; and (2) the lawyer is in good standing in every jurisdiction where admitted or authorized to practice; and (3) the temporary legal services provided by the lawyer could be provided in a jurisdiction where the lawyer is admitted or authorized to practice and may generally be provided by a lawyer admitted to practice in this State, and such temporary legal services:

14 (iv) are not within subparagraph (ii) or (iii) of this paragraph and arise out of or are reasonably related to the lawyer s practice in a jurisdiction in which the lawyer is admitted or authorized to practice. ABA MODEL RULES See RULE Unauthorized Practice Of Law; Multi- Jurisdictional Practice Of Law References: New York: In re Antoine, 74 A.D.2d 67, 899 N.Y.S.2d 41 (1 st Dep t 2010) (foreign legal consultant stripped of license for holding self out as New York lawyer) El Gamayel v. Seaman, 72 N.Y.2d 701, 536 N.Y.S.2d 406 (1988) (Lebanese lawyer who assisted New York client with legal matters in Lebanon governed by Lebanese law, who acted principally in Lebanon, permitted to collect fee in New York court) Spivak v. Sachs, 16 N.Y.2d 163, 263 N.Y.S.2d 953 (1965) (California lawyer could not collect fee for work performed in New York assisting New York client with her New York divorce) Matter of New York County Lawyers Ass n (Roel), 3 N.Y.2d 224, 165 N.Y.S.2d 31 (1957), app. dis., 355 U.S. 604 (1958) (practice of Mexican law by Mexican lawyer at office in New York State was unauthorized practice of law) NYS Bar Association Ethics Opinion 709 (1998). Lawyers may practice on the Internet, but must consult rules of states where clients are located to assess whether advising them will constitute unauthorized practice of law. Other States: In re Charge of Unprofessional Conduct in Panel File No , 2016 Bloomberg Law , No. A (Minn. 8/31/16) (out-of-state lawyer admonished for trying to negotiate settlement on behalf of in-laws) Matter of Kingsley, 950 A.2d 659 (Del. 2008) (Pennsylvania-New Jersey lawyer who regularly drafted instruments for Delaware clients disbarred and prohibited from advising Delaware clients on matters of Delaware law. Fogarty v. Parker, Poe, Adams and Bernstein, No (Ala. Sup. Ct. 8/18/06) (private cause of action for unauthorized practice of law in Alabama sustained against North Carolina firm that misled nonclient

15 South Carolina adversaries about right of inspection of books of Alabama companies) Maryland Attorney Grievance Commission v. Johnson, 363 Md. 598, 770 A.2d 130 (2001) (out-of-state lawyer disbarred for practicing without a license [sic]). Office of Disciplinary Counsel v. Pavlik, 89 Ohio St. 458, 732 N.E.2d 985 (2000) (public reprimand for lawyer who permitted out of state lawyer employed by his office to consult with clients and sign documents without disclosing lack of admission in Ohio) Chandris v. Yanakakis, 668 So.2d 180 (Fla. 1995) (contingent fee agreement made in Florida by Massachusetts lawyer with Greek client to represent client in action arising under federal law unenforceable) Kennedy v. Bar Association, 316 Md. 646, 561 A.2d 200 (1989) (D.C. lawyer not permitted to maintain office in Maryland advising on federal and D.C. law) Lozoff v. Shore Heights, Ltd., 66 Ill. 2d 398, 362 N.E.2d 1047 (1977) (lawyer licensed in Wisconsin rendering services in connection with Illinois real estate could not recover fee) Appell v. Reiner, 43 N.J. 313, 204 A.2d 146 (1964) (New York lawyer allowed to collect fee for assisting New Jersey residents in workout of their debts where creditors located both in New York and New Jersey) Philadelphia Ethics Opinion Lawyer requested to perform services by someone outside of state should research the unauthorized practice laws of that other state. Matter of Hughes, 833 N.E.2d 459 (2005) (lawyer reprimanded for sending out of state lawyer employed by him to handle court proceedings) Illinois Ethics Opinion (2003). Lawyer may negotiate from his home state a claim for medical matters in another state, at least when no lawsuit has been filed. Similarly, Pennsylvania Ethics Opinion Ohio Ethics Opinion Internet legal advice service permitted, with provisos, including assuring that law of distant clients states allows giving legal advice to clients. Pennsylvania Bar Association Formal Opinion Permissible for D.C. firm to prepare real estate loan documentation for Pennsylvania property and opine on Pennsylvania law so long as it does not represent that it is licensed to practice in Pennsylvania

16 Restatement (3rd) of Law Governing Lawyers, 3 Comment e (permissible to advise a client in lawyer s home state about the law of another state) FEE ARRANGEMENTS Non-hourly fee arrangements receive close scrutiny. There are some textual differences between New York Rule 1.8 and ABA Model Rule 1.8, which both require terms of agreements with clients to be fair and reasonable, and which raise the possibility that clients must be warned to seek independent counsel on deals where the lawyer accepts, as a fee, an interest in the client s business or property, but their practical construction is similar. In addition, Rule 1.8 forbids the lawyer to even negotiate with the client or the lawyer s own potential assigns or transferees concerning literary or media rights relating to the subject of the representation until the representation is over. NEW YORK RULES OF PROFESSIONAL CONDUCT RULE 1.5 Fees And Division Of Fees (a) A lawyer shall not make an agreement for, charge, or collect an excessive or illegal fee or expense. A fee is excessive when, after a review of the facts, a reasonable lawyer would be left with a definite and firm conviction that the fee is excessive. The factors to be considered in determining whether a fee is excessive may include the following: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent or made known to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by circumstances; (6) the nature and length of the professional relationship with the client;

17 (7) the experience, reputation and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent. (b) A lawyer shall communicate to a client the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible. This information shall be communicated to the client before or within a reasonable time after commencement of the representation and shall be in writing where required by statute or court rule. This provision shall not apply when the lawyer will charge a regularly represented client on the same basis or rate and perform services that are of the same general kind as previously rendered to and paid for by the client. Any changes in the scope of the representation or the basis or rate of the fee or expenses shall also be communicated to the client. (c) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. Promptly after a lawyer has been employed in a contingent fee matter, the lawyer shall provide the client with a writing stating the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or, if not prohibited by statute or court rule, after the contingent fee is calculated. The writing must clearly notify the client of any expenses for which the client will be liable regardless of whether the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a writing stating the outcome of the matter and, if there is a recovery, showing the remittance to the client and the method of its determination. (d) A lawyer shall not enter into an arrangement for, charge or collect: (4) a nonrefundable retainer fee. A lawyer may enter into a retainer agreement with a client containing a reasonable minimum fee clause, if it defines in plain language and

18 sets forth the circumstances under which such fee may be incurred and how it will be calculated; RULE 1.8 Current Clients: Specific Conflict Of Interest Rules (a) A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise professional judgment therein for the protection of the client, unless: (1) the transaction is fair and reasonable to the client and the terms of the transaction are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client; (2) the client is advised in writing of the desirability of seeking, and is given a reasonable opportunity to seek, the advice of independent legal counsel on the transaction; and (3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer s role in the transaction, including whether the lawyer is representing the client in the transaction. (d) Prior to conclusion of all aspects of the matter giving rise to the representation or proposed representation of the client or prospective client, a lawyer shall not negotiate or enter into any arrangement or understanding with: (1) a client or a prospective client by which the lawyer acquires an interest in literary or media rights with respect to the subject matter of the representation or proposed representation; or (2) any person by which the lawyer transfers or assigns any interest in literary or media rights with respect to the subject matter of the representation of a client or prospective client. (i) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may: (1) acquire a lien authorized by law to secure the lawyer s fee or expenses; and (2) contract with a client for a reasonable contingent fee in a civil matter subject to Rule 1.5(d) or other law or court rule

19 References: Practising Law Institute Bloom v. Lugli, 2011 NY Slip Op (N.Y. App. Div. 2011) (lawyer who received 45% of real estate venture in exchange for all required legal services sold his share to co-partners; sale agreement not enforceable by New York procedure allowing summary judgment in lieu of complaint because lawyer s continuing services were condition, and agreement therefore not one for payment of money only) Reznor v. J. Artist Management, Inc., 365 F. Supp. 2d 565 (S.D.N.Y. 2005) (summary judgment denied on claim of fiduciary breach in agreements between client and lawyer acting as manager) In re Cimino, 2000 Colo. LEXIS 630 (Sup. Ct. May 1, 2000) (lawyer sanctioned for representing company and self in loan to company) Rhodes v. Buechel, NYLJ March 18, 1998 (Sup. Ct. N.Y. Co.), aff d, 258 A.D.2d 274, 685 N.Y.S.2d 65 (1 st Dep t 1999), app. den., 93 N.Y.2d 806, 689 N.Y.S.2d 708 (1999) Matter of Cooperman, 83 N.Y.2d 465 (1994) (non-refundable fees forbidden) NYS Bar Association Opinion 913 (2012) Acceptance of Securities as a Legal Fee (must advise client to consult other counsel regarding stock as fee agreement) Missouri Sup. Ct. Advisory Comm. Formal Op. 128 (5/18/10) (nonrefundable fees forbidden) NYC Bar Association Formal Opinion , The Acceptance of Securities in a Client Company in Exchange for Legal Services To Be Performed (prudent, but not always necessary to advise client to obtain other counsel to negotiate deal) NYC Bar Association Formal Opinion , prohibiting non-refundable fees. See also Weinstein on Evidence [3][c] suggesting that the possible loss of attorney-client privilege due to lawyer s association with the enterprise as investor or officer as danger that must be raised with client (no case authority cited). See also Chang v. Chang, 190 A.D.2d 311, 597 N.Y.S.2d 692 (1 st Dep t 1993) (lawyer who participated in corporation s affairs and who was a co-defendant with corporate officers could not represent corporate officers and himself due to potential conflict of interest)

20 MULTIPLE CLIENTS A lawyer may not represent more than one client in a transaction unless all clients consent after a full explanation of the implications of using one lawyer. Even if they consent, the lawyer may violate ethical rules and even commit malpractice if the interests of the parties are in fact in conflict or if the lawyer s representation of one client may be adversely affected by the joint representation. The easiest case is when more than one party is on the same side of a deal. The most dangerous case is representing parties on both sides of a deal; even if the lawyer is not later accused of any wrongdoing by a disgruntled former client, the lawyer will be unable to continue representing the party that brought the lawyer into the deal when a dispute arises. NEW YORK RULES OF PROFESSIONAL CONDUCT RULE 1.7 Conflict Of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if a reasonable lawyer would conclude that either: (1) the representation will involve the lawyer in representing differing interests; or (2) there is a significant risk that the lawyer s professional judgment on behalf of a client will be adversely affected by the lawyer s own financial, business, property or other personal interests. (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed consent, confirmed in writing

21 RULE 1.8 Practising Law Institute Current Clients: Specific Conflict Of Interest Rules (g) A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, absent court approval, unless each client gives informed consent in a writing signed by the client. The lawyer s disclosure shall include the existence and nature of all the claims involved and of the participation of each person in the settlement. RULE 1.10 Imputation Of Conflicts Of Interest (a) 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 Rule 1.7, 1.8 or 1.9, except as otherwise provided therein. (d) A disqualification prescribed by this Rule may be waived by the affected client or former client under the conditions stated in Rule 1.7. (e) A law firm shall make a written record of its engagements, at or near the time of each new engagement, and shall implement and maintain a system by which proposed engagements are checked against current and previous engagements when: (1) the firm agrees to represent a new client; (2) the firm agrees to represent an existing client in a new matter; (3) the firm hires or associates with another lawyer; or (4) an additional party is named or appears in a pending matter. RULE 1.13 Organization As Client (a) When a lawyer employed or retained by an organization is dealing with the organization s directors, officers, employees, members, shareholders or other constituents, and it appears that the organization s interests may differ from those of the constituents with whom the lawyer is dealing, the lawyer shall explain that the lawyer is the lawyer for the organization and not for any of the constituents. (b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action or intends to act or refuses to act in a matter related to

22 the representation that (i) is a violation of a legal obligation to the organization or a violation of law that reasonably might be imputed to the organization, and (ii) is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization. In determining how to proceed, the lawyer shall give due consideration to the seriousness of the violation and its consequences, the scope and nature of the lawyer s representation, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters and any other relevant considerations. Any measures taken shall be designed to minimize disruption of the organization and the risk of revealing information relating to the representation to persons outside the organization. Such measures may include, among others: (1) Asking reconsideration of the matter; (2) Advising that a separate legal opinion on the matter be sought for presentation to an appropriate authority in the organization; and (3) Referring the matter to higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest authority that can act in behalf of the organization as determined by applicable law. (c) If, despite the lawyer s efforts in accordance with paragraph (b), the highest authority that can act on behalf of the organization insists upon action, or a refusal to act, that is clearly in violation of law and is likely to result in a substantial injury to the organization, the lawyer may reveal confidential information only if permitted by Rule 1.6, and may resign in accordance with Rule (d) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization s consent to the concurrent representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders

23 References: Practising Law Institute e2interactive Inc. v. Interactive Comm. Int l, Inc., 09-CV-629 (W.D. Wash. 2010) (law firm representing client could oppose client s subsidiary in unrelated litigation) Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hills, Inc., 10 A.D.3d 267, 780 N.Y.S.2d 593 (1 st Dep t 2004) (motion to dismiss malpractice claim denied; law firm retained by parent corporation while suing subsidiary) In re: Holsberger, 223 A.D.2d 920, 637 N.Y.S.2d 322 (3d Dep t 1996) (improper to represent borrower while representing lenders in other financial transactions) Fischer v. Deitsch, 198 A.D.2d 327, 605 N.Y.S.2d 703 (2d Dep t 1993) ( substantial identity of interest among multiple clients) NYC Bar Ass n Formal Opinion , Multiple Representations; Informed Consent; Waiver of Conflicts NYC Bar Ass n Formal Opinion , Unforeseeable Concurrent Client Conflicts NYC Bar Ass n Formal Opinion , Conflicts of Interest; Waivers; Imputation of Conflicts (when conflicts are waivable, either where lawyer represents adverse party in unrelated matter, or where lawyer represents multiple parties with differing interests) NYC Bar Ass n Formal Opinion , prohibiting disclosure of sensitive and confidential personal information concerning one former client to another where they had been jointly represented FORMER CLIENTS Ethical obligations to former clients may preclude the lawyer from representing other clients adverse to the former client. If the lawyer represented more than one party in an earlier transaction, the lawyer will be prohibited from representing any of them against another in a dispute arising out of the transaction. In other circumstances, the lawyer s right to represent a party adverse to a former client turns on whether the lawyer has confidential information from the former client that would come into play in the new transaction. In all events, the lawyer may not disclose the former client s confidential information

24 NEW YORK RULES OF PROFESSIONAL CONDUCT RULE 1.9 Duties To Former Clients (a) A lawyer who has formerly represented a client in a matter shall not 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 the former client gives informed consent, confirmed in writing. (b) Unless the former client gives informed consent, confirmed in writing, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client: (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired information protected by Rules 1.6 and paragraph (c) that is material to the matter. (c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter: (1) use confidential information of the former client protected by Rule 1.6 to the disadvantage of the former client, except as these Rules would permit or require with respect to a current client or when the information has become generally known; or (2) reveal confidential information of the former client protected by Rule 1.6 except as these Rules would permit or require with respect to a current client. RULE 1.10 Imputation Of Conflicts Of Interest (a) 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 Rule 1.7, 1.8 or 1.9, except as otherwise provided therein. (b) When a lawyer has terminated an association with a firm, the firm is prohibited from thereafter representing a person with interests that the firm knows or reasonably should know are materially adverse to those of a client represented by the formerly associated lawyer and not currently represented by

25 the firm if the firm or any lawyer remaining in the firm has information protected by Rule 1.6 or Rule 1.9(c) that is material to the matter. (c) When a lawyer becomes associated with a firm, the firm may not knowingly represent a client in a matter that is the same as or substantially related to a matter in which the newly associated lawyer, or a firm with which that lawyer was associated, formerly represented a client whose interests are materially adverse to the prospective or current client unless the newly associated lawyer did not acquire any information protected by Rule 1.6 or Rule 1.9(c) that is material to the current matter. (d) A disqualification prescribed by this Rule may be waived by the affected client or former client under the conditions stated in Rule 1.7. References: Poma v. Ipek, NYLJ 3/15/10, p. 18 (one lawyer in two-person firm was former partner of lawyer who had represented defendants in negotiating contract at issue; two-person firm disqualified as plaintiff s counsel in the litigation due to likely access to confidential information concerning transaction) PROSPECTIVE CLIENTS This section of the New York rules is an innovation. It regulates obligations to persons who communicate with the lawyer but do not retain the lawyer. It protects the communication as if it were an attorney-client communication and also gives the prospective client protection similar to that of a former client when it comes to conflicts issues. RULE 1.18 Duties To Prospective Clients (a) A person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client. (b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client

26 (c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d). (d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if: (1) both the affected client and the prospective client have given informed consent, confirmed in writing; or (2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and (i) the firm acts promptly and reasonably to notify, as appropriate, lawyers and nonlawyer personnel within the firm that the personally disqualified lawyer is prohibited from participating in the representation of the current client; (ii) the firm implements effective screening procedures to prevent the flow of information about the matter between the disqualified lawyer and the others in the firm; (iii) the disqualified lawyer is apportioned no part of the fee therefrom; and (iv) written notice is promptly given to the prospective client; and (3) a reasonable lawyer would conclude that the law firm will be able to provide competent and diligent representation in the matter. (e) A person who: (1) communicates information unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to

27 discuss the possibility of forming a client- lawyer relationship; or (2) communicates with a lawyer for the purpose of disqualifying the lawyer from handling a materially adverse representation on the same or a substantially related matter, is not a prospective client with the meaning of paragraph (a). RULE 1.10 Imputation Of Conflicts Of Interest (e) A law firm shall make a written record of its engagements, at or near the time of each new engagement, and shall implement and maintain a system by which proposed engagements are checked against current and previous engagements when: (1) the firm agrees to represent a new client; (2) the firm agrees to represent an existing client in a new matter; (3) the firm hires or associates with another lawyer; or (4) an additional party is named or appears in a pending matter. B. IN THE NEGOTIATION CANDOR AND DECEIT The lawyer is constrained not only by ethical rules, but also by considerations of civil and criminal liability from deceptive or illegal conduct. Yet, it is certain that negotiations proceed without a full and unreserved exchange of information and opinions between the adverse counsel; indeed, counsel has a duty to preserve client confidences, which is a countervailing obligation. Reconciling these obligations is probably the trickiest ethical issue for transactional lawyers. The Comments to the ABA rules (below), confining the lawyer s duty to matters of fact, and then defining fact, are key to a proper understanding of this area. NEW YORK RULES OF PROFESSIONAL CONDUCT RULE 1.2 Scope Of Representation And Allocation Of Authority Between Client And Lawyer (d) A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent, except that the lawyer may discuss the legal consequences of any proposed course of conduct with a client

28 (f) A lawyer may refuse to aid or participate in conduct that the lawyer believes to be unlawful, even though there is some support for an argument that the conduct is legal. RULE 1.6 Confidentiality Of Information (a) A lawyer shall not knowingly reveal confidential information, as defined in this Rule, or use such information to the disadvantage of a client or for the advantage of the lawyer or a third person, unless: (1) the client gives informed consent, as defined in Rule 1.0(j); (2) the disclosure is impliedly authorized to advance the best interests of the client and is either reasonable under the circumstances or customary in the professional community; or (3) the disclosure is permitted by paragraph (b). Confidential information consists of information gained during or relating to the representation of a client, whatever its source, that is (a) protected by the attorney-client privilege, (b) likely to be embarrassing or detrimental to the client if disclosed, or (c) information that the client has requested be kept confidential. Confidential information does not ordinarily include (i) a lawyer s legal knowledge or legal research or (ii) information that is generally known in the local community or in the trade, field or profession to which the information relates. (b) A lawyer may reveal or use confidential information to the extent that the lawyer reasonably believes necessary: (1) to prevent reasonably certain death or substantial bodily harm; (2) to prevent the client from committing a crime; (3) to withdraw a written or oral opinion or representation previously given by the lawyer and reasonably believed by the lawyer still to be relied upon by a third person, where the lawyer has discovered that the opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud; (4) to secure legal advice about compliance with these Rules or other law by the lawyer, another lawyer associated with the lawyer s firm or the law firm;

29 (5) (i) to defend the lawyer or the lawyer s employees and associates against an accusation of wrongful conduct; or (ii) to establish or collect a fee; or (6) when permitted or required under these Rules or to comply with other law or court order. RULE 1.16 Declining Or Terminating Representation (b) Except as stated in paragraph (d), a lawyer shall withdraw from the representation of a client when: (1) the lawyer knows or reasonably should know that the representation will result in a violation of these Rules or of law; (2) the lawyer s physical or mental condition materially impairs the lawyer s ability to represent the client; (3) the lawyer is discharged; or (4) the lawyer knows or reasonably should know that the client is bringing the legal action, conducting the defense, or asserting a position in the matter, or is otherwise having steps taken, merely for the purpose of harassing or maliciously injuring any person. (c) Except as stated in paragraph (d), a lawyer may withdraw from representing a client when: (1) withdrawal can be accomplished without material adverse effect on the interests of the client; (2) the client persists in a course of action involving the lawyer s services that the lawyer reasonably believes is criminal or fraudulent; (3) the client has used the lawyer s services to perpetrate a crime or fraud; (4) the client insists upon taking action with which the lawyer has a fundamental disagreement; (5) the client deliberately disregards an agreement or obligation to the lawyer as to expenses or fees; (6) the client insists upon presenting a claim or defense that is not warranted under existing law and cannot be supported

30 by good faith argument for an extension, modification, or reversal of existing law; (7) the client fails to cooperate in the representation or otherwise renders the representation unreasonably difficult for the lawyer to carry out employment effectively; (8) the lawyer s inability to work with co-counsel indicates that the best interest of the client likely will be served by withdrawal; (9) the lawyer s mental or physical condition renders it difficult for the lawyer to carry out the representation effectively; (10) the client knowingly and freely assents to termination of the employment; (11) withdrawal is permitted under Rule 1.13(c) or other law; (12) the lawyer believes in good faith, in a matter pending before a tribunal, that the tribunal will find the existence of other good cause for withdrawal; or (13) the client insists that the lawyer pursue a course of conduct which is illegal or prohibited under these Rules. (e) Even when withdrawal is otherwise permitted or required, upon termination of representation, a lawyer shall take steps, to the extent reasonably practicable, to avoid foreseeable prejudice to the rights of the client, including giving reasonable notice to the client, allowing time for employment of other counsel, delivering to the client all papers and property to which the client is entitled, promptly refunding any part of a fee paid in advance that has not been earned and complying with applicable laws and rules. RULE 4.1 Truthfulness In Statements To Others In the course of representing a client, a lawyer shall not knowingly make a false statement of fact or law to a third person. RULE 8.4 Misconduct A lawyer or law firm shall not: (a) violate or attempt to violate the Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another;

31 (b) engage in illegal conduct that adversely reflects on the lawyer s honesty, trustworthiness or fitness as a lawyer; (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; (d) engage in conduct that is prejudicial to the administration of justice; ABA COMMENT 5 TO RULE 1.0 Fraud [5] When used in these Rules, the terms fraud or fraudulent refer to conduct that is characterized as such under the substantive or procedural law of the applicable jurisdiction and has a purpose to deceive. This does not include merely negligent misrepresentation or negligent failure to apprise another of relevant information. For purposes of these Rules, it is not necessary that anyone has suffered damages or relied on the misrepresentation or failure to inform. ABA COMMENT 10 TO RULE 1.2 Criminal, Fraudulent and Prohibited Transactions A lawyer may not continue assisting a client in conduct that the lawyer originally supposes is legally proper but then discovers is criminal or fraudulent. Withdrawal from the representation, therefore, may be required. NEW YORK COMMENTS 9, 10 TO RULE 1.2 [9] Paragraph (d) prohibits a lawyer from counseling or assisting a client in conduct that the lawyer knows is illegal or fraudulent. This prohibition, however, does not preclude the lawyer from giving an honest opinion about the consequences that appear likely to result from a client s conduct. Nor does the fact that a client uses advice in a course of action that is illegal or fraudulent of itself make a lawyer a party to the course of action. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity. [10] When the client s course of action has already begun and is continuing, the lawyer s responsibility is especially delicate. The lawyer is required to avoid assisting the client, for example, by