Beyond Ethics A discussion of Legal Ethics and Professionalism Georgette C. Poindexter Hypothetical No. 2 THE MISSING BLACKLINING Lori Lawyer was trying to close the biggest real estate deal of her career. The documents required for this transaction were voluminous and constituted well over 400 singlespaced pages. After months of drafts and comments and redrafts and more comments, it looked like the end was in sight. Only a few changes to three of the documents and it was ready to close. She indicated where these changes should be made and instructed a new first-year associate, Allan, to make sure the changes were included, mark the changes and send all the documents to the opposing counsel. Lori then went home to reacquaint herself with her husband and children. Allen went to his office, redrafted the necessary provisions, and then took the documents to the night secretary for word processing. He forgot to tell her to have their word processing software mark the changes. Later that evening he got the documents back, but discovered there were no changes marked. He is now all alone in the office and has no idea how to use the program to insert the markings. Therefore, he takes out his pen and marks the changes by hand. As luck would have it though, he neglects to mark the change in the mortgage which gives the lender the right to call the loan if the sun rises in the east. Previous drafts only allowed the lender to call the loan if the sun rises in the west. He puts a complete set of documents in an envelope and leaves them to be delivered to opposing counsel first thing in the morning. He includes in the package a cover letter under Lori s signature indicating that all changes have been marked. The next morning Olivia (the opposing counsel) receives the package and reviews only the marked changes. She does not read the changed call provision. She calls her client, Barry Borrower, and tells him everything is set to close. The deal closes that afternoon. Barry is casually reviewing the documents at the closing table and comes across the call provision. He goes ballistic, stating that he only agreed that the loan could be called if the sun rose in the east and the sun stopped spinning on its axis. Olivia turns to Lori and demands to know why this change wasn t marked. Barry, addressing her as Ollie Baby, wants to know why Olivia only read the marked provisions before she let Barry sign. Lori screams for Allen, who is busy updating his resume. 1
The Model Rules of Professional Conduct provide a useful starting point for analyzing the situation presented in Hypothetical number 2. For your convenience, the relevant Rules are set forth at the end. However, while these Rules are a beginning; they are not the end of the discussion. For beyond the Rules lie issues of professionalism, collegiality and just plain good manners. "Virtually all difficult ethical problems arise from the conflict between a lawyer's responsibilities to clients, to the legal system and to the lawyer's own interest in remaining an upright person while earning a satisfactory living." 1 Application of the Rules is not a cut and dry process. As one commentator noted, [b]usiness law is one area where the guidelines for application of key rules of professional conduct can seem too murky for comfort. 2 A construct of Professionalism clarifies these murky waters and should help guide our path. I will address the following duties presented by the scenario a) Duty between Lawyers b) Duty of Partners for acts of Associates c) Duty owed to clients Duty between Lori and Olivia Model Rule 4.1 requires a lawyer to be truthful and fair when dealing with others. A lawyer cannot make a false statement of material facts. Furthermore, a failure to act may constitute a misrepresentation. 3 When the letter went out indicating that all changes 1 Preamble to the Model Rules of Professional Conduct 2 Margaret Graham Tebo, A Treacherous Path, 86 Feb. A.B. A. J. 54 (2000) 3 Camilla E. Watson, Tax Lawyers, Ethical Obligations and the Duty to the System, 47 U. Kan. L. Rev. 847, 873 (1999). 2
had been marked this was a false statement. Due to the gravity of the change it clearly was a material fact. In assessing Lori s culpability under the Model Rules, Lori s lack of intent to misrepresent the facts is crucial. This assertion is bolstered by the comments to Rule 4.1 which place no affirmative duty on a lawyer to inform the opposing party of relevant facts. 4 Let s face it if a change of this magnitude is made this late in the negotiation process, Olivia should confirm the change, notwithstanding the lack of blacklining. However, beyond her ethical requirements Lori owed Olivia a professional duty. Olivia has the right to depend that a letter under Lori s signature is truthful. Otherwise, we trust no one and everyone s actions are suspect. Before allowing the letter to leave her office Lori should have checked for accuracy. Duty between Lori and Allen As a partner, Lori has the responsibility for Allen s breach of ethics. Rule 5.1 requires Lori, as Allen s supervisor, to make reasonable efforts that Allen conforms to the Rules of Professional Conduct. This includes the duty of truthfulness and fairness to other parties found in Rule 4.1. This difficulty is determining whether Lori breached this duty when she left Allen with the responsibility of making the changes and forwarding the documents to Olivia. While Lori and Allen are, once again, shielded from ethical breach because of lack on intent to misrepresent, Lori still has to face the question of whether she provided adequate supervision to Allen. Should a first year associate have been trusted with this task? Did Lori explain the changes and stress the materiality of the call provision? The 4 See, Patricia Wilson, A Guide to Ethics for the Real Estate Lawyer, 445 PLI/Real 305, 320 (September 1999). 3
issue becomes even more complex if we consider that Olivia was more likely to believe a letter from Lori asserting all changes were marked than she would be a letter under Allen s signature. Duty between Olivia and Barry Once the change was made and sent to Olivia she had a duty under Rule 1.3 to act with reasonable diligence and promptness in representing Barry. She also had a duty of communication under Rule 1.4 to explain a matter to allow the client to make an informed decision. Did Olivia breach this duty by failing to point out the change in the call provision to Barry before he signed the documents? Olivia relied, to her detriment, on Lori s representation that all changes were marked. Would Barry pay the hourly rate for Olivia to reread the entire document? Even if Barry wouldn t pay, is Olivia obligated to read at least the material changes regardless of whether they were marked? Olivia s response to her client s sexist remarks must walk a razor thin line. While she owes the duty of being a good lawyer she does not owe the duty of being a doormat. Issues of Professionalism The ABA will release a final report of its Ethics 2000 Commission later this year. This committee is formally known as the Commission on Evaluation of the Rules of Professional Conduct. 5 However, these rules won t be binding on lawyers unless adopted by the states. Even if adopted these rules only punish breaches of ethics, not breaches of professionalism. 5 For a description of the work of the committee see, Mark Hansen, Countdown to Controversy, ABA Journal, p. 90 (August 2000). 4
Individual state bars have begun to address the issue of professionalism. For example, the President of the Utah Bar Association called for a return dignity and civility to our profession 6 New Mexico has gone farther than most states. It adopted "A Lawyer's Creed of Professionalism of the State Bar of New Mexico (the "New Mexico Creed")." 7 Although a violation of the New Mexico Creed does not generally rise to the level of an ethical violation, pursuant to rules in the Federal District Court in New Mexico, a federal judge has the ability to sanction a lawyer who violates the New Mexico Creed. 8 In his essay prepared for this panel Professor Salsich makes a salient point. Professionalism is more than treat others as you want to be treated. It pushes us to treat others in the manner they want to be treated. Lori, Allen and Olivia are professionals deserving of respect and courtesy. 6 Charles Brown, Civility and Professionalism, 13-May Utah B.J. 6 (May 2000). 7 Id. 8 Id. 5
Rule 1.3 Diligence A lawyer shall act with reasonable diligence and promptness in representing a client Rule 1.4 Communication a) A lawyer shall keep a client reasonable informed about the status of a matter and promptly comply with reasonable requests for information. b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. Rule 4.1 Truthfulness in Statements to Others In the course of representing a client a lawyer shall not knowingly: a) make a false statement of material fact or law to a third person; or b) fail to disclose a material fact tot third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by rule 1.6 Rule 5.1 Responsibilities of a Partner or Supervisory Lawyer a) A partner in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the rules of professional conduct. b) A lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the rules of professional conduct. c) A lawyer shall be responsible for another lawyer s violation of the rules of professional conduct if: i. The lawyer orders or, with knowledge of the specific conduct ratifies the conduct involved; or ii. The lawyer is a partner in the law firm in which the other lawyer practices or has direct supervisory authority over the other lawyers and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action. 6