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Posts Tagged ‘Rule of Professional Conduct’

California Lawyers Should Not Lie

Posted on: December 20th, 2019

By: Greg Fayard

It seems obvious, but lawyers shouldn’t lie. A new Rule of Professional Conduct applicable to California lawyers says that while representing a client, a lawyer shall not knowingly make a false statement of material fact or law to a third person.

Rule 4.1 is aimed at lawyers communicating with opposing counsel or an opposing party. This duty to not misrepresent facts or law to others includes a lawyer “agreeing” with statements he or she knows are false. For example, if a lawyer hears a factually untrue statement said in a court hearing, and orally agrees with that statement, knowing it is false, that verbal affirmation runs afoul of the rule.

However, if the lawyer remained silent after hearing the false statement, such silence would likely not violate the rule—as silence is not an affirmation. Of course, the best practice for all lawyers, in California and elsewhere, is to tell the truth, don’t lie to others, and correct statements that the lawyer knows are untrue, even if it may not necessarily help the client’s case.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Is an Unethical Fee-Splitting Agreement Per Se Unenforceable? Perhaps Not

Posted on: January 4th, 2018

By: Mark C. Stephenson

Rule of Professional Conduct 5.4 limits the circumstances in which an attorney may share legal fees with a non-lawyer. A recent Pennsylvania Supreme Court decision considered what impact Rule 5.4 has on the claim that was made by a non-lawyer acting as a consultant to a law firm, who sought to enforce an alleged right to recover a five-percent share of the firm’s annual profit.  Rule 5.4 allows a lawyer or law firm to include nonlawyer employees in a firm compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement. In SCF Consulting v. Barrack, Rodos & Bacine, the non-lawyer/consultant was independent and not a firm employee, such that the fee-splitting arrangement at issue violated the rule. But did that violation bar his breach of contract claim?

SCF Consulting entered into a written agreement with the Barrack firm to work exclusively to develop the firm’s securities class action business in exchange for a fixed annual consulting fee plus a five-percent share of profit. The Barrack firm allegedly later refused to pay SCF Consulting the agreed upon bonus and SCF sued. The trial court granted summary judgment to the firm, finding that Rule 5.4 prohibited the arrangement and rendered the contract unenforceable. On appeal, the Pennsylvania Superior Court affirmed summary judgment, noting that there was no dispute that the non-lawyer consultant was not an employee of the firm which made Rule 5.4’s exception for employee profit-sharing plans inapplicable.

The Pennsylvania Supreme Court granted allocator on the question of whether public policy required the agreement be enforced as to the non-lawyer because an attorney must not be shielded from liability nor financially rewarded for violating the Rules of Professional Conduct. On December 19, 2017, Chief Justice Saylor wrote for a fractured majority to reverse summary judgment and remand for further proceedings, holding that an unethical fee-splitting agreement is not per se unenforceable as to the non-lawyer but may become so if the court determines that the non-lawyer bore some responsibility for the ethical violation. Justice Baer (joined by Justice Todd), concurring and dissenting, would have held that, “because a non-lawyer is not bound by the Rules of Professional Conduct, the non-lawyer committed no unethical or illegal act by entering into the agreement and, thus, can bear no measure of responsibility relative to the law firm’s material violations of the rules governing the profession.” Justice Wecht (joined by Justice Donahue) dissented, arguing that a such arrangements must be per se unenforceable and leaving the non-lawyer to seek relief in equity by showing, among other things, that they entered the agreement with clean hands.

As legal fee arrangements become increasingly creative, there is clear indication that the courts will not allow lawyers and law firms to use Rule 5.4 as a shield to avoid liability for otherwise required payments to non-lawyers. Practitioners should also take note that nothing in SCF Consulting relieves the law firm from its violation of Rule 5.4 and potential penalties that may apply. Arguably, a law firm’s attempts to manipulate Rule 5.4’s prohibition of legal fee sharing with non-lawyers only serves to underscore the severity of the firm’s original ethical violation by entering into the prohibited relationship in the first place.

If you have any questions or would like some more information, please contact Mark Stephenson at [email protected]