Paula Schaefer, "Harming Business Clients with Zealous Advocacy: Rethinking the Attorney Advisor's Touchstone.”

In the wake of the OPR report on John Yoo, we discussed whether the counselor/advisor rule (2.1) was too “thin” or if it might be read holistically.  Little did we know that Paula Schaefer had been nearing completion of this article, “Harming Business Clients with Zealous Advocacy: Rethinking the Attorney Advisor's Touchstone.”  Abstract:

Joseph Collins was a successful business lawyer, with a sophisticated practice at Mayer Brown LLP. In January 2010, Collins was sentenced to seven years in prison for his role in a massive fraud that cost investors millions and sent his client Refco, Inc. into bankruptcy. At sentencing, the judge reportedly stated, “I think this is a case of excessive loyalty to his client.” Collins’ own testimony reflects a lawyer who believed he was zealously representing his client's interests. But in reality, Collins’ conduct was not “loyal” to his client. He contributed to his client’s destruction.

With the Collins example and others, I argue that business lawyers act as zealous advocates to their own clients’ peril. I explain that professional conduct rules are central to the problem. The advisor’s duties are relegated to a single rule that provides scant direction about how to advise. In the absence of direction, lawyers fill in the gaps with zealous advocacy. After examining the problems of the zealous advocacy mantra, I suggest that “fiduciary duty” would be a preferable touchstone for attorney-advisors. While it is true lawyers are already fiduciaries, fiduciary duty is not the focus for most lawyers. I argue that it should be. Using fiduciary duty as a framework, I propose professional conduct rules that would provide direction to business lawyers that is more consistent with their clients’ interests. 

Comments

[Brad Wendel]

This isn't a knock on the article (which I haven't read yet), but "professional conduct rules are central to the problem" only if lawyers are ignorant enough to think that professional conduct rules are all they have to consider when advising clients. In the Refco case she cites, the partner's liability is established by mail fraud statutes, and the firm itself escaped civil liability for securities fraud only because of Stoneridge's narrowing of the reliance element of 10b-5. As I often say to my students, you could throw the rules of professional conduct out the window and, in many cases, the law of lawyering wouldn't change a bit. If lawyers are so seduced by their "zealous advocacy" mantra that they don't stop to consider whether their advice exposes them or their clients to civil or criminal liability, it's hard to see how the rules of professional conduct can be faulted. Similarly, as for direction to business lawyers that would be in their clients' interests, I'd just have business lawyers re-read FDIC v. O'Melveney & Myers. (But again, I haven't read the paper -- she may give reasons why it matters that this change be made to the rules.)

[John Steele]

Brad,

When you do read it, you may be shocked at one of Paula's cited sources: a tall PR prof with interesting views on rule 2.1.

[Paula Schaefer]

In response to Brad's post, I think 2.1 and 1.13 should be more reflective of a lawyer's legal duties to a client. A competent lawyer, who understands loyalty to the organizational client (as explained in FDIC v. O'Melveney & Myers - which I cite), doesn't need the rules to say more. But there are many examples of lawyers who default to zealousness. Instead of throwing out the rules, I argue there would be value in these rules containing more substance consistent with lawyers' legal duties to clients. It won't solve all of the problems discussed in the article, but I think there's value in the bar doing more to explain what's expected of a competent advisor. I think 1.13 is a good rule in this regard already, but it is so complex that the message is lost on many lawyers (who, as I note in the article, argued against the rule's amendment in 2003 as contrary to zealous advocacy).

If you're reading this blog, you are probably cited in the article (including Brad Wendel). If you have a chance to read the article, I would be interested in hearing your thoughts on it at paula.schaefer@tennessee.edu.