B-law B-law B-law: Ethics for Business Lawyers Negotiations and Documentation

• Jurisdiction: California,United States
• Citation: Vol. 2021 No. 2
• Publication year: 2021
• Author: Neil J Wertlieb
• topic: Business of Law,Contracts

B-Law B-Law B-Law: Ethics for Business Lawyers Negotiations and Documentation

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.

Contact With Opposing Side

Despite the fact that many business deals are friendly, or at least consensual, there are limitations on the ability of a deal lawyer to interact with the party on the other side of a transaction.

If your client's counterparty is represented by counsel in the transaction (or if such counterparty is an officer or representative of an entity represented in the transaction), your communication with such individual is subject to the "No Contact Rule," evidenced in rule 4.2 (Communication with a Represented Person) of the Rules of Professional Conduct. Rule 4.2 provides that, in connection with the representation of 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 and compelling: a litigator simply cannot communicate with the opposing, adverse party. In a business transaction, the application of the rule may not be so clear or compelling. Your client may have a friendly relationship with the counterparty, working collaboratively to achieve their mutual goals. In fact, it is not unusual for such a lawyer to receive a call from the client, with the counterparty on the phone as well, seeking input on some aspect of the deal (such as how to secure regulatory approval for the transaction). Despite the lawyer's desire to be helpful and responsive, rule 4.2 nevertheless 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.

Even if your client's counterparty is not represented by counsel in the transaction, there are still constraints on your communication with the counterparty. Absent such representation, the Rules of Professional Conduct do not prohibit such communication, but rule 4.3 (Communicating with an Unrepresented Person) limits what a lawyer may communicate to such an unrepresented counterparty. For example, the lawyer should make clear who is and who is not the lawyer's client, and because the interests of...