Professional Responsibility for Civil Litigators
Fall 2013 – Silver
I. Introduction
Basics of the Attorney-Client Relationship
A. Formation
· The agreement determines who the attorney represents, absent a court appointment.
· Someone acting with the client’s authority, such as an agent or insurer, can retain counsel for the client.
B. Scope of Representation
· The scope of representation is also determined by agreement.
· Tex. 1.02, ABA 1.2
· Duties to the client exist only when handling matters within the scope of the agreement.
· Scope is usually not an issue but may need to be clarified when related legal needs are not going to be addressed.
· A duty to warn a client of unmet legal needs arguably exists along boundary of scope – when legal needs relate closely to a matter being handled and would likely be recognized as important by an ordinary attorney.
C. Hallmarks of Agency
· Fiduciary Duty – requires an attorney to use discretion solely to advance the client’s interests.
Tex. 1.06 cmt. 1, ABA 1.07 cmt. 1
A lawyer must use professional judgment solely for a client’s benefit; a lawyer cannot act to a client’s detriment without the client’s informed consent; however, duty of loyalty does not make the lawyer a guarantor, they should not be liable for innocent mistake.
· Duty of Obedience/Right of Control – This duty prohibits a lawyer from ignoring instructions from the client, including instructions that are prohibited or unauthorized. A lawyer has two options: comply or withdraw.
Texas Rule 1.02.
ABA Model Rule 1.2.
o A lawyer may not ignore a lawful instruction from a client. Note: this duty does not require you to obey, just says you may not “ignore.” So when client gives you an instruction, you can do what the client asks or withdraw. Cannot do anything other than those two things.
o Duty of obedience runs only to a client (principal), so important to determine whether the ins. co. and policy holder are co-clients. Silver says yes, most of the time.
o Rogers case – Dr. told lawyers I don’t want you to settle, insurance said settle. Doctor sued insurance comany and lawyers. Lawyers breached duty to obey in terms of Dr. Rogers. But control was with insurance company, because they hired you! But the duty to obey is unwaivable! It applies even when you’re given an unauthorized instruction!
o Rare exceptions: for our purposes there are none!
o Does the duty to obey run outside the scope of the representation?
§ Closely related matters – this is where the duties would run outside the scope of representation.
D. Duty of Loyalty
· This duty requires a lawyer to refrain from representing conflicting interests without a client’s informed consent.
· When acting on the client’s behalf, the attorney must exercise his or her discretion solely for the benefit of the client.
E. Duty of Care, Competence, and Diligence
· This duty requires a lawyer to provide services at the level of quality normally adhered to by a reasonably prudent and competent practitioner.
Texas 1.01, ABA 1.1, 1.3
A lawyer must make appropriate recommendations.
F. Duty to Communicate
· This duty requires the lawyer to give a client all of the information the client reasonably needs to make informed decisions.
Tex 1.03, ABA 1.04
In co-client representation, duty to communicate trumps other duties (Rest. Of Law Governing Lawyers), including loyalty, confidentiality, but a lawyer may only communicate matters relevant to the joint representation, cannot communicate matters outside the scope of his employment.
· When a lawyer represents co-clients, this duty extends to all of them.
· However, because some clients have more decisions to make than others, as a practical matter the attorney may communicate more with some than with others.
· There is NO duty to communicate information unrelated to the scope of the representation, so a defense lawyer need not communicate info that is solely overage related. However, information that relates to both defense and coverage must be communicated.
· This duty has created a responsibility that goes outside scope of representation. Example – worker injured at worksite, against employer has worker’s comp claim against employer. Say non-employer also on worksite contributed. Goes to firm that only does worker’s comp work. SOL against nonemployer expires. Court says you have duty to tell client they had an unmet legal need.
· If you say duty to communicate only runs to defense based information, then question of whether driver was driving with permission or not you don’t have to communicate. Harder cases arise when info at issue is relevant to defense and relevant to coverage at case.
G. Duty of Confidentiality
· This duty requires a lawyer to keep confidential all information that relates to the representation regardless of the source.
Tex. 1.05, ABA 1.06
· However, there are many exceptions. For example, when a lawyer represents co-clients, there is no confidentiality between them with respect to material information.
· This duty is violated the most often.
· One exception: you can disclose confidential information with an ethics consultant.
H. Duty to Exercise Independent Professional Judgment
· Lawyers are required to give candid judgment. Clients are free to ignore this judgment.
· However, lawyers are not allowed to act on recommendations without a client’s consent.
· This duty is not violated if a client rejects an attorney’s recommendations, even if the client does so for reasons that attorney thinks are poor.
· For duty to exercise independent judgment, see Model Rule 2.1 and Texas 2.01.
o Model Rule 2.1: In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation.
o Texas 2.01: In advising or otherwise representing a client, a lawyer shall exercise independent professional judgment and render candid advice.
I. Allocation of Authority to Make Decisions
· This is generally subject to an agreement between a lawyer and a client.
· Absent an agreement, the default rule is that the client makes decisions regarding the objectives of representation and fundamental matters, while the lawyer makes decisions regarding the means of representation.
· However, a client is free to micro-manage if the client wants to.
II. Insurance Defense Ethics
Basics of Insurance Defense
A. Defining the Relationship
· This relationship always involves more than two players:
o Insurance company
o Attorney
o Policy holder
· This triangular relationship breaks apart the attorney/client relationship and puts the bonding rules (loyalty, obedience, confidentiality) in tension and stresses the duties
· It’s a very common set up of suits in the United States.
Carrier bears all defense costs and (usually) the entire judgment-related risk as well.
Carrier funds the defense and controls it, using co-client status to obtain advantages available under agency law.
Policyholder must give prompt notice, assist the defense, and (sometimes) pay a deductible.
Ordinary agency rules apply to defense lawyer, who must follow orders from carrier while refraining from acting to the detriment of the policyholder without informed consent.
Ideally, all participants would always be incentivized to act for the common good of all.
In fact, each participant can sometimes gain individually by sacrificing the common good.
Insurer may benefit by rejecting reasonable at-limits settlement demands.
Policyholder may focus on reputation or other secondary effects of litigation.
Defense lawyer may enhance compensation by recommending excessive amounts of legal services.
Liability insurers bankroll the civil justice system.
o In many contexts, they provide most or all of the money that compensates victims.
o They also pay defense lawyers (directly) and plaintiffs’ attorneys (indirectly).
Liability insurance was once controversial.
· First tort liability policies were sold in the USA in the late 1880s.
• After “companies began o
because they bargained for the right to control.
· This does not mean that the attorney can act contrary to the wishes of the insured, however. They still owe the insured the duty of obedience.
F. Scope of the Representation
· The scope of representation is limited to defending the liability suit. The default rule of agency is that an agent for co-principals has authority to act only on matters in which they are jointly interested.
o Example = DWI. Insurance company retains lawyer to defend civil action, but has no responsibility for criminal case.
o But the finding in criminal case might be preclusive….so you might want to have criminal defense counsel, but you would have to get the policy holder’s consent.
· The scope of representation is only the activity in which the interests of the insurer and the policyholder align, not the policyholder’s affirmative claims.
· May or may not include settling.
The carrier hires the lawyer to minimize exposure on the liability claim.
The attorney ONLY needs to know about tort law and the facts, NOT the coverage, policyholder’s affirmative claims, etc.
But the lawyer cannot trample interests of either client that conflict with this.
G. Conflicts of Interest between Insurer and the Insured (Coverage Conflicts/Excess Exposure)
1. Excess Exposure
Pryor and Silver Article: Defense Lawyers' Responsibilities in Excess Exposure Cases
There are lots of situations that could create conflict:
If a carrier wants to concede liability and contest damages: policyholder wants to contest liability
Carrier wants to defend aggressively; policyholder wants P to recover
Carrier wants to settle; policyholder doesn’t (maybe due to reputational interest)
Policyholder wants to settle; carrier doesn’t (maybe policyholder doesn’t face excess exposure)
o Normally, a lawyer’s duties to a client exist only with respect to matters inside the scope of representation. Example: duty of loyalty. When acting on the client’s behalf, Attorney must exercise his or her discretion solely for the benefit of the client. In insurance defense context, this duty has provoked a debate – policyholder wants to litigate to death, insurance company wants to settle. What should the lawyer do?
§ Two schools of thoughts: PCR v. NSR
· No subordination rule – has always been the rule for handling intra conflict clients.
· Primary client rule is a modern gloss – defense lawyer must do what’s good for the policy holder, because they are the primary client.
o Consequences are very dramatic.
o This is the only context where the primary client rule has been advocated, so only applies to defense. This should make us suspicious!
How to resolve
Don’t do anything that harms one client without informed consent. If you can’t reach an agreement, you need to WITHDRAW.
Full coverage vs. excess exposure:
When coverage is full, only carriers’ money is at stake. This makes conflicts unlikely. The usual problem is getting the policyholder to care and assist.
When excess exposure exists, the policyholder cares. They may want more vigorous defense than the carrier because the first dollars saved are the insured’s. They may also want settlement more urgently.
o Policyholders rarely contribute to settlements so excess exposure is more of a theoretical problem than a real problem.
