Legal Ethics Forum

Will the ABA adopt anti-bias rule in text of 8.4?

As many of our readers know, Model Rule 8.4 has a comment paragraph suggesting that certain discriminatory conduct might be grounds for discipline because it is prejudicial to the administration of justice. An ABA ethics committee is now floating a proposal to put an anti-bias provision in the rule itself.

Download Language_choice_narrative_with_appendices_final.authcheckdam

Transactional lawyers as business advisors? (New 7th Circuit opinion)

There's an interesting new case out of the Seventh Circuit, reinstating a legal malpractice case against a transactional firm for an alleged failure to warn the client that it might be dealing with a Ponzi scheme. Worth reading in its entirety, but here are excerpts:

The Trustee's complaint contends that Katten violated its duty to its clients by not telling Bell that the actual arrangement (no checks with Costco, no money directly from Cost-co) posed a risk that Petters was not running a real business. Katten had been engaged to structure [*2] transactions, the Trustee asserts, and part of that duty entails telling the client what contractual devices are appropriate to the situation. The complaint focuses on two periods: first, a time during 2003 when principal contracts were being negotiated and signed; second, a time during 2007 when Petters fell behind in payments to the lockbox (he asserted that Costco was late paying him) and the Funds consulted Katten about what to do. According to the complaint, in 2003 Katten did not advise the Funds to ask for additional protections—the Trustee believes that Katten's lawyers did not recognize the risk from the combination of no contacts and no direct payments, plus the potential that the paperwork purporting transactions with Costco had been forged. The complaint also alleges that in 2007 Katten advised the Funds to defer the due dates on the payments, and that no other change was necessary, even though the delay coupled with the other indicators should have alerted any competent transactions lawyer to the possibility of fraud, and the lawyer should have counseled the client to obtain better security.

The district court dismissed the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief may be granted. Instead of taking the complaint on its own terms, the district court's opinion narrates the events from the law firm's perspective. Katten maintains, and the opinion states, that Bell knowingly bypassed verification with Costco in order to obtain a higher interest rate from Petters. Thus the Funds knowingly took a risk and cannot blame a law firm for failing to give business advice.

There are three problems with this decision. First, it rests on a factual view extrinsic to the complaint and therefore is not an appropriate use of Rule 12(b)(6) . The complaint alleges that Bell attributed the Funds' high return at least in part to the lack of direct verification with Costco and that he told some would-be investors about this tradeoff, but it does not allege that Bell was indifferent to legal advice concerning how to curtail risks given the no-contact constraint.

Second, the decision does not engage the complaint's main contention—not that Katten was supposed to do something about Petters's no-direct-contact edict, but that Katten had to alert its client to the risk of allowing repayments to be routed through Petters, drafting and negotiating any additional contracts necessary to contain that risk. As the complaint depicts matters, Bell did not appreciate the difference between funds from Costco and funds from Petters. A competent transactions lawyer should have appreciated that the former arrangement offers much better security than the latter and alerted its client. If a client rejects that advice, the lawyer does not need to badger the client; but the complaint alleges that the advice was not offered, leaving the client in the dark about the degree of the risk it was taking.

The third problem is that the decision does not identify any principle of Illinois law that sharply distinguishes [*3] between business advice and legal advice. It is hard to see how any such bright line could exist, since one function of a transactions lawyer is to counsel the client how different legal structures carry different levels of risk, and then to draft and negotiate contracts that protect the client's interests. A client can make a business decision about how much risk to take; the lawyer must accept and implement that decision. But it is in the realm of legal advice to tell a client that the best security in a transaction such as this one is direct verification with Costco plus direct deposits to a lockbox; the second-best is direct deposits to a lockbox; and worst is relying wholly on papers over which Petters had complete control, for they may be shams with forged signatures by Costco managers who have never heard of Petters. Knowing degrees of risk presented by different legal structures, a client then can make a business decision; but it takes a competent lawyer, who understands how the law of secured transactions works (and who also knows what's normal in the world of commercial factoring that Petters claimed to practice), to ensure that the client knows which legal devices are available and how they affect risks.

Download Peterson 

China's Crackdown on Lawyers: What Should US Law Schools and Law Firms Do?

Chinese officials are arresting, detaining, and convicting civil rights and defense lawyers in the country. The Times has an editorial today (July 30) - "the crackdown is undoubtedly intended to crush the 'rights defense' movement, which aims to defend the rights of individuals in a legal system rife with corruption and abuse," says the Times, which has reported on the issue throughout the month.

Yet China is a popular spot for western law schools to offer semester abroad classes and a necessary venue for intentional firms to open offices. 

NYU is among those schools. New York students can spend a term studying with Chinese faculty at an NYU facility near Shanghai. 

I'm not arguing for a boycott. But the only alternative is not silence. What is the correct response? One worry is that the Chinese faculty who teach US-based students may not have the same intellectual freedom in those classrooms as we have here. And what about the US lawyers and firms based in China? Do they have a responsibility? 

I realize that China is not the only nation about which these questions can be asked.

Does SCOTUS Need a Code of Conduct

(Cross posted on The Faculty Lounge)

Writing in The New Yorker, Lincoln Caplan argues in favor of a Code of Conduct for the U.S. Supreme Court, focusing primarily on issues of recusal.  The National Review’s Ed Whelan disagrees, pointing out that SCOTUS recusal is already subject to 28 U.S.C. 455, which is applicable to all federal justices, judges, and magistrates. 

Whelan definitely has the better of this particular argument.  Although the language is somewhat different, it is hard to imagine a case where the outcome would be different under the Code of Conduct for United States Judges – adopted by the Judicial Conference for the lower courts – and the federal statute.

Nonetheless, Caplan is right to point out that SCOTUS is the only court in the United States that is not governed by a written code of ethics, and there are still good reasons – unrelated to recusal – for SCOTUS to adopt its own code.  Consider the following questions (which I first raised in a 2005 column in The American Lawyer, and later in a 2012 article in the Valparaiso Law Review):

Is it right or wrong for justices to speak anonymously to the press following a controversial decision?  Is it acceptable for justices to appear at political fundraisers or to address partisan legal organizations?  To vacation with litigants in the middle of pending proceedings?  To endorse, or appear to endorse, candidates for elective office? To solicit charitable contributions? To comment on legal issues or cases pending in other courts? To accept gifts from political activists?  To assign clerks or court staff to work on their memoirs or other books?  Some of these events have occurred and others have not (although they are all imaginable).  When questioned, individual justices have from time to time stated personal opinions on the virtuousness of their own activities – unsurprisingly, no justice has ever admitted doing anything wrong – but there is no definitive statement from the Court itself regarding self-imposed limits of propriety.

At the Supreme Court level, the function of a judicial code is not to compel compliance or punish violations – both of which would be impossible.  Rather, the purpose of a code would be to set identifiable standards for the justices’ conduct, so that the public may know what to expect of the nine most powerful judges in the nation.   Ultimately, it would matter very little what the Supreme Court’s Code of Judicial Conduct might say about the confidentiality of deliberations, or anything else, so long as it says something definitive.  It is fine and good for the justices to look to numerous outside sources for “guidance,” as Chief Justice Roberts put it in his 2011 Annual Report, but a well-articulated Code of Conduct would actually let the public know what to expect.

COA upholds law restricting physician speech about guns

It's not about lawyers, but it's a free speech opinion about a learned profession, so here's news that the 11th Circuit upheld Florida's law limiting the free speech of doctors in raising the issue of gun ownership with patients unless the doctor has a good faith belief that the issue is relevant to medical issues or safety. I found it interesting to read from the viewpoint of the law of lawyering. The majority starts the opinion by emphasizing the imbalance of power between the doctor and patient, which justifies some degree of state regulation.

Excerpt from the opinion:

"Thus, a physician may make inquiries as to the firearms-ownership status of any or all patients, so long as he or she does so with the good-faith belief --- based on the specifics of the patient's case --- that the inquiry is relevant to the patient's medical care or safety, or the safety of others,'' the majority opinion said. "If, for example, the physician seeks firearm information to suit a personal agenda unrelated to medical care or safety, he or she would not be making a 'good-faith' inquiry, and so the act plainly directs him to refrain from inquiring."

"Bill Kuebler, Pentagon-appointed lawyer who fought for Omar Khadr, has died at 44"

Story at the Ottawa Citizen. Bill was widely heralded for how he fought for his detainee-client, Omar Khadr. More at this article from GQ. I provided an opinion for Bill and his co-counsel regarding their ethical duties. The military commission ordered Bill to represent his client even though the client had chosen not to be represented by a military lawyer. 

More on competitors using state AG's to harm rivals

At TechDirt there's further discussion of how content providers used state attorney generals (attorneys general?) to attack Google. 

Two view on SCOTUS & judicial ethics

At The New Yorker and at National Review. 

Does Mike Huckabee want to be President or an American ayatollah?

Just about everyone has heard what Mike Huckabee has to say about the nuclear deal between major world powers, including the United States, and Iran.  

http://www.nbcnews.com/storyline/iran-nuclear-talks/mike-huckabee-iran-deal-will-lead-israelis-door-oven-n398816

One can agree or disagree with the terms of the agreement, but Huckabee’s words do nothing but stir up sectarian fear and prejudice in a region already plagued with both.  His words are almost as inflammatory as the rhetoric that Iranian leaders – including quite a few ayatollahs -- have spouted for several decades.  In part because of that rhetoric the nuclear agreement was very difficult to negotiate.   

Are there any lawyers or other advisers telling the candidates (particularly Trump and Huckabee) that stirring up ethnic and religious hatred has no place in a civilized election?  Nothing in the election laws prohibits this rhetoric, and the First Amendment protects it.  I am not sure that President Obama’s condemnation does anything other than strengthen these candidates’ appeal to voters on the far right fringe.  But if Republicans don’t do something about the tone of this primary, our credibility problems will be a lot worse than any of the problems created by Secretary Clinton’s mail, former President Clinton’s speaking fees and the donations to their Foundation.     

Personal email accounts are not for sending classified information . . . Duh . . .

Since the Clinton Administration the White House staff manual has said that no official government business should be done on personal email accounts.   This point should be even more obvious with respect to classified information.

I remember saying that once or twice in White House ethics lectures.  I wanted to stress even obvious points after the indictment and resignation of the Vice President’s Chief of Staff (Scooter Libby) in a scandal involving a leak of classified information.   But no classified information in personal email?  If the White House ethics lawyer has to tell people that, he might as well also warn people against stuffing classified information in their socks simply because President Clinton's former aide Sandy Berger did just that when illegally removing classified files from the National Archives.   I realized that I was telling people something they already knew – which trivializes ethics lectures – and I dropped the point.

Then again, the State Department – a place where there is perhaps even more classified information than in the White House – apparently needs to bring this seemingly obvious point back into its ethics training:  please don’t put classified information in personal email.

http://www.wsj.com/articles/investigation-sought-into-hillary-clintons-emails-1437714369

That – and perhaps also a reminder not to copy Vladimir Putin on any emails containing classified information . . .