Facebook, Rule 1.16, Rule 3.3, and the Crime-Fraud Exception

Here's a New York Times story that could make for a good classroom discussion. 

In a nutshell, several high profile lawyers have withdrawn from representing a man who claimed that, in 2003, he entered into a written agreement with Mark Zuckerberg in which Zuckerberg promised the plaintiff a substantial ownership stake in Facebook.  The U.S. Attorney's Office has now initiated criminal fraud proceedings against the plaintiff, alleging that he fabricated the alleged agreement.

The story implicates several issues covered in the typical PR class.  For example, students should be able to speculate as to why the lawyers for the plaintiff withdrew by analyzing Rules 1.16 and 3.3.  Students could also explore whether the prosecutors will be able to compel the testimony of the withdrawing lawyers through the use of the crime fraud exception to the attorney-client privilege.  There may also be some issues for those lawyers regarding Rule 3.1 (i.e., at what point did they know the claim was frivolous?).  Any other issues?

Comments

[Monroe Freedman]

Yes. Why MR4.1 is irrelevant, including the meaning of "prohibit" in 4.1(b). See also MR.1.2(d).

[Andrew Perlman]

That's a good one, Monroe. The interaction between Rules 4.1, 3.3, and 1.6 is extremely confusing.

Here's a question for you. Imagine that the lawyers for the plaintiff had filed a verified complaint and attached a copy of the agreement to the complaint. If the lawyers subsequently learned about the fraud (hence the withdrawal), would the lawyers also have had a duty under Rule 3.3(a) to disclose the fraud to the court?

[Andrew Perlman]

P.S. Regarding my hypothetical above, it's not farfetched. Consider paragraph 6(b) in the criminal complaint against the plaintiff here: http://www.justice.gov/usao/nys/pressreleases/October12/CegliaPaulCharges/Ceglia,%20Paul%20Complaint.pdf

Apparently, the plaintiff submitted a declaration, under penalty of perjury, affirming to the veracity of what was in the amended complaint. In that case, if the lawyers subsequently came to "know" (as that word is defined in Rule 1.0(f)) that the declaration was false, would they have had an obligation to do more than withdraw from the case? Rule 3.3(a) suggests that the answer is yes. My hunch is that the lawyers would say that, although they "reasonably believed" that a fraud was afoot (hence the withdrawal), they did not "know" it and thus had no obligation to disclose their beliefs under Rule 3.3. Pure speculation on my part, but it seems consistent with what we know.

[Trotsky]

I think that this is actually a soft spot in the MR - if counsel has (1.0) 'actual knowledge' - which in most cases would be to a substantial certainty - and yet the client still has a actual, subjective good-faith belief in the validity of the claim, there's a good argument for still giving the client his or her day in court / right to summary dismissal.

The short of it is - there's possibly a gap between counsel's substantial certainty and a client's subjective good-faith belief not foreclosed by objective impossibility. What most would consider actual knowledge of a fact is not precisely the same as actual knowledge of the objective impossibility of any other possible explanation.

Similar, perhaps, to allowing a deft to give a shaky alibi and then not referring to it in closing or vouching for it. Essentially, the claim should be allowed, but the chicanery barred.

As to the verified pleading, I would think that the question would be whether a verified pleading falls under 3.3(a)1 or 3.3(a)3. The former would seem to require a disavowal or correction at some point short of 1.0 'knowledge.'

None of that was legal advice. Don't rely on any of it except that last bit about it not being legal advice.

[Monroe Freedman]

Andy,

I don’t feel comfortable with the question, because there are too many variables that I know nothing about.

Coincidentally, about three weeks ago, I posted the following question for my ethics students. I had shown an episode of the practice in which the client-defendant had testified that she had not been having an affair with the victim (a material fact). Subsequently, just before closing arguments, the lawyers viewed a neighbor’s videotape which showed that the client had been lying about the affair. In class, we discussed the lawyers’ obligations at that point.

The reference to Appendix B is to New York statutory rules of construction, including plain-meaning readings; readings to harmonize all parts of a statute; and readings to avoid rendering any provision, phrase, or word meaningless or redundant. Also, U.S. S.Ct. authority that a word can have variable meanings, even within a single provision.

MR 4.1(b) says that a lawyer “shall not knowingly ... fail to disclose a material fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6.

Q1: Give at least three reasons, including arguments in support of your reasons, that this rule does not apply to defense counsel in the videotape involving perjury by the defendant, Vicki, who falsely testified that she had not been having an affair with the victim.

Q2: Explain why this rule does not apply when a client commits a fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services.

Note: In order to answer this question, it is necessary to explain first how MR 4.1(b) could be read to require a lawyer to reveal a client’s fraud in the circumstance stated in the previous paragraph.

Note also: In answering this question, it will be helpful to study Appendix B at pages 99-102 of the Supplement.