B-law B-law B-law: Ethics for Business Lawyers - the No Contact Rule

• Jurisdiction: California,United States
• Author: Neil J Wertlieb
• Citation: Vol. 2021 No. 3
• Publication year: 2021

B-Law B-Law B-Law: Ethics for Business Lawyers - The No Contact Rule1

Neil J Wertlieb

Neil J Wertlieb, the author of this article, is a Founding Member and Co-Chair of the California Lawyers Association Ethics Committee, and a former Chair of the Business Law Section and its Corporations and Business Litigation committees. Mr. Wertlieb is a transactional lawyer, educator, and ethicist, who provides expert witness services in disputes involving business transactions and corporate governance and in cases involving attorney malpractice and attorney ethics. For additional information, please visit www.WertliebLaw.com. The views expressed herein are his own.

This edition of B-Law B-Law B-Law addresses the application of the so-called "No Contact Rule" to business lawyers. Continue to watch this column for guidance on ethical issues of particular interest to business lawyers in the State of California.

In our last column, we briefly discussed the No Contact Rule and its application to deal negotiations and documentation. In this edition, we take a deeper dive into exploring the application of the No Contact Rule to business lawyers more generally.

The Basic Rule

The No Contact Rule is contained in rule 4.2 (Communication with a Represented Person) of the California Rules of Professional Conduct. The basic rule, expressed in paragraph (a), provides: "In representing a client, a lawyer shall not communicate directly or indirectly about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer."

In litigation, application of the No Contact Rule is clear, compelling, and obvious: a litigator simply cannot communicate with the opposing adverse party—the enemy of the litigator's client is simply off-limits, fully shielded by opposing counsel. In a business transaction, the application of the rule may not be so clear, compelling, or obvious. In fact, the adversity apparent in every litigation matter simply does not exist in most transactional matters. Your client may have a friendly relationship with their counterparty, working collaboratively to achieve their mutual goals.

For example, it is not unusual for the client in a business transaction to call their lawyer seeking input on some aspect of the deal (such as how to secure regulatory approval for the transaction). Because opposing parties in the transaction may be working together to get the deal done, the client might have their counterparty on the phone as well. Despite the lawyer's desire to be helpful and responsive to the client, the No Contract Rule prohibits such communication, at least without the consent of the counterparty's lawyer. The proper response from the lawyer, upon receiving such a joint call, would be to exit the call as soon as possible, without responding to the inquiry, and to seek the consent of the counterparty's lawyer before engaging in any further contact with the counterparty.

Application of the No Contact Rule to such friendly communications may appear to be counterintuitive and counterproductive. However, the rule prohibiting such communication does indeed apply to transactional attorneys working on consensual business deals, and violations of the rule can carry consequences, including discipline by the State Bar.²

The No Contact Rule aims to preserve the attorney-client relationship between a represented person and his or her legal counsel and to protect a represented person from possible overreaching by an attorney who may take advantage of the opportunity to gain a better deal for theirr client.³ In the above example, however, many transactional attorneys would not hear alarm bells, and even for those who do, they may feel that...