by Diane L. Karpman
(County Bar Update, October 2001, Vol. 21, No. 9)
By Diane L. Karpman, immediate past chair, LACBA Professional Responsibility & Ethics Committee. Karpman of Karpman & Associates in Los Angeles represents attorneys in disciplinary matters and is an expert consultant and witness on legal ethics issues. The opinions expressed are her own.
When lawyers review various sections of our Rules of Professional Conduct, they often maintain that "those particular rules" don’t apply to their special practice area. Nothing could be further from the truth. All lawyers are bound by those obligations. The Rules represent the minimum level of expected conduct. Hawk v. Sup.Ct. (People) (1974) 42 Cal. App. 3d 108. Failure to fulfill the requirements can result in discipline and a plethora of other unpleasant results.
Some lawyers have enhanced duties because of their particular areas of practice, such as bankruptcy and patent/trademark. Tax lawyers are governed by various Federal regulations.
Class action lawyers sometimes have greater obligations. Many believe that the traditional rules are unworkable in multi-party litigation/class actions/mass tort representation. There are duties to pre-certification or putative class members, different obligations in terms of the anti-contact Rule (2-100). Often rules are relaxed out of necessity. Some members of the American Law Institute suggested that class actions be segregated from the "Restatement of the Law of Lawyers", but that idea was rejected by the membership. California’s generic conflicts rule exempts application of the aggregate settlement section (Rule 3-310 (D)) in class actions. Some maintain that since that particular section specifically exempts application in class action, that implies that the other sections are applicable.
The American Bar Association Model Rules differentiate lawyers acting as litigators from those acting in a counseling mode. This historic difference is graphically apparent in England, with the distinction between barristers (those with wigs) and solicitors (those with computers). That distinction exists in our day-to-day activities. Most of us are engaged in transactional activities.
Trial lawyers are a totally different species, with different problems and, therefore, different authority regarding clients. Trial lawyers take the facts as they find them, often dramatically reenacting past events in the court room, but with "spin" that is advantageous to their client. They sometimes need to make quick discretionary decisions without the luxury of client consultation. You can’t huddle under the counsel table to reach consensus on an objection. Therefore, since they lack the time to meditate and ponder, they do not incur the same liability to third-party non-clients that transactional lawyers do.
Lawyers working in transactional capacities are hired to attempt to influence the future by their work. Clients want them to anticipate how events will unfold and, therefore, effectuate the clients’ choices as to coming events. These are the dealmakers, shaping inheritances, business entities, movies and corporations, things that require sustained deliberation and care. Transactional lawyers give opinions that are designed to impact the future. Sometimes third parties, non-clients or putative clients detrimentally rely on their pronouncements. Third party liability (non-client) is justified where the lawyer’s statements were substantially misleading, or where it was reasonably foreseeable that another would rely, and that reliance does not conflict with a duty owed to a true client, as opposed to a "faux" client.
Now, quell your beating heart — I realize that this is scary. It involves the outrageous notion that you could have liability to unknown, unidentified, remote people you never even met! But think about the theory. Those people could be classified as the intended beneficiaries of your work product, such as beneficiaries of an elaborate estate plan or recipients of an opinion letter designed to reassure and comfort potential investors.
The duty of care to a third party intended beneficiary has existed in California for decades. It merely requires that what is communicated be true, accurate, and not misleading or confusing. This is similar to the duty that your stationery or advertisements or anything with your firm’s name on it be consistent with the obligations articulated in Rule 1-400 (Advertising and Solicitation).
Additional protection against random third party claims can be achieved by the use of disclaimers, which help eliminate allegations of reasonable reliance. Boldly stating that a given letter is intended for Corporation X — and Corporation X only — helps, and limitations on the scope of your engagement can be effective. In entity representation (Rule 3-600), it is prudent to "Mirandize" those who are not being represented, such as limited partners.
Real clients or faux clients can make claims against you, but when you have it in writing, with limitations and announcements regarding intended client identity or scope of representation, coupled with clear disclaimers, they will have difficulty maintaining that additional duties were owed to their interests when the deal "goes south."
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