CHAPTER 2 PROFESSIONAL RESPONSIBILITY FOR LAWYERS IN THE POOLING AND UNITIZATION CONTEXT

• Jurisdiction: United States

Onshore Pooling and Unitization
(Jan 1997)
CHAPTER 2
PROFESSIONAL RESPONSIBILITY FOR LAWYERS IN THE POOLING AND UNITIZATION CONTEXT
John S. Dzienkowski
University of Texas School of Law
Austin, Texas

Condensed Outline

I. An Introduction to the Regulation of Lawyers

A. Codes of Ethics

B. Three Forums for Discipline

C. New Trends in Professional Responsibility in Advocacy

D. New Trends in Professional Responsibility in Non-litigation

E. Sources of Analysis in Professional Responsibility

F. Researching Professional Responsibility Issues

II. The Partner and Supervisory Lawyer's Responsibilities

A. Hypothetical One

B. Model Rule 5.1

C. The Importance of Bringing Professional Responsibility Issues to the Attention of Supervisory of Partner Attorneys

D. Application of the Rule in the In-House Context

III. The Supervised Lawyer's Responsibilities

A. Hypothetical Two

B. Model Rule 5.2

IV. Communication with Represented and Unrepresented Parties

A. Hypothetical Three

B. Model Rule 4.3 (Dealing with Unrepresented Parties)

C. Hypothetical Four

D. Model Rule 4.2 (Communicating with Persons Represented by Counsel)

PART ONE:

ETHICAL ISSUES IN LITIGATION

V. Conflicts of Interest in Litigation

A. Hypothetical Five — Present Client Conflicts (Suing a Present Client)

B. Model Rule 1.7

C. Hypothetical Six — Present Client Conflicts (Representing Business Competitors in Separate Actions)

D. Model Rule 1.7

E. Hypothetical Seven — Representing Multiple Clients in Litigation

F. Model Rule 1.7(b)

G. Hypothetical Eight — Former Client Conflicts

[Page 2-ii]

H. Model Rule 1.9

I. Hypotheticals Nine & Ten — Lawyers Switching Sides

J. Model Rule 1.9

VI. Lawyer as Witness Problem

A. Hypothetical Eleven — Advocate Witness Rule

B. Model Rule 3.7

VII. Confidentiality Problems in Litigation

A. Hypothetical Twelve — Client Lying in Depositions

B. Model Rule 3.3

C. Hypothetical Thirteen — Revealing Adverse Legal Authority in the Controlling Jurisdiction

D. Ibarra v. State

E. Hypothetical Fourteen — Confidentiality among Multiple Clients to Litigation

F. Model Rule 1.6

PART TWO:

ETHICAL ISSUES IN NONLITIGATION PRACTICE

VIII. Duty of Confidentiality

A. Hypothetical Fifteen — Duty to Reveal Confidential Information

B. Model Rule 1.6

C. Hypothetical Sixteen — Confidentiality in Negotiations

D. Current Guidance on Ethics in Negotiation

E. Model Rule 3.3(a)(2) — Candor to the Tribunal

IX. Lawyer as Intermediary

A. Hypothetical Seventeen

B. Model Rule 1.07

C. Open Questions for the Lawyer Who Acts as an Intermediary

D. In-House Lawyer Representing a Subsidiary

E. Multiple Client Representation in Pooling and Unitization Agreements — Hypothetical Eighteen

F. An Actual District of Columbia Decision

X. Lawyer as Evaluator

A. Hypothetical Nineteen

B. Model Rule 2.02

C. Open Questions

XI. Who is the Client

[Page 2-iii]

A. Hypothetical Twenty

B. The Model Rules and Representing an Entity

XII. Termination of the Attorney-Client Relationship

A. Hypothetical Twenty-One

B. Who is (are) the Client(s)?

C. Representing Multiple Clients

[Page 2-1]

Professional Responsibility Issues

in the Corporate Law Context

Outline and Problems

I. An Introduction to the Regulation of Lawyers

[A] Codes of Ethics

[1] 1908 Canons

[2] 1969 Model Code of Professional Conduct

[3] 1983 Model Rules of Professional Responsibility

[B] Three Forums for Discipline

[1] State Disciplinary Process

[2] Malpractice Case

[3] Judicial Regulation Before a Tribunal

[C] New Trends in Professional Responsibility in Advocacy: Judge as Manager of Lawyers' Ethics

[1] Use of Conflicts of Interest as a Basis for Disqualifying Opposing Counsel

[2] Use of Procedural Sanctions for Discovery Abuse and Filing of Frivolous Motions under Rule 11

[3] Creeds of Professionalism and Code of Practice

[a] Code of Practice in Dondi Properties (N.D. Tex.) 121 F.R.D. 284 (1988).

[b] Texas Creed of Professionalism (Tex. S. Ct.)

[4] Consequences of the New Trend

[Page 2-2]

[a] Use of Ethics as Strategic Weapon

[b] Diversion of Case from the Merits

[c] Altering the Role and Impartiality of the Judge

[d] Diverging Interests Between the Attorney and Client

[e] Struggle over Control over the Strategy: Client or Lawyer

[f] Choice of Professional Responsibility Rules

[D] New Trends in Professional Responsibility in Nonlitigation

[1] Different Roles of the Lawyer are Recognized by the Model Rules

[a] Advisor

[b] Intermediary

[c] Evaluator

[d] Negotiation

[e] Lobbyist

[2] Use of Lawyers in Alternative Dispute Resolution

[a] Mediators

[b] Arbitrators

[c] Mock Presentation of the Case

[3] These roles present new responsibilities and exposure to liability.

[a] In some cases, the lawyer must be adversarial for the client and in other cases the lawyer cannot be adversarial.

[b] Increased Duties of Disclosure

[c] Increased risk of malpractice exposure with many of these roles.

[Page 2-3]

[d] Partnerships with non-lawyers as a trend in law practice.

[E] Sources of Analysis in Professional Responsibility

[1] Compare State Rule with Prior State Code Provision

[2] Compare State Rule with ABA Model Rule

[F] Researching Professional Responsibility Issues

[1] C. Wolfram, Modern Legal Ethics (West 1986)

[2] G. Hazard & W. Hodes, Model Rules Handbook (2d. ed. Prentice Hall Law & Bus. 1995)

[3] BNA/ABA Lawyers' Manual on Professional Conduct (BNA)

[4] Annotation in State Statutory Volume.

[5] ABA Database on Lexis and Westlaw

[6] Lexis and Westlaw Searches Using Model Code and Model Rules as Key Words

[7] Shepard's Professional and Judicial Conduct Citations

II. The Partner and Supervisory Lawyer's Responsibilities

[A] Hypothetical One

The general counsel of a corporation discovers that one attorney in the legal department has failed to comply with discovery requests in litigation. What should the general counsel do? Would the general counsel act differently if the misconduct was committed by a lawyer in an outside law firm?

[B] Model Rule 5.1 (Responsibilities of a Partner or Supervisory Lawyer)

[1] Partner or Supervisory Lawyers are responsible in a disciplinary proceeding if they "order, encourage, or knowingly permit the [improper] conduct involved." Rule 5.1(a).

[Page 2-4]

[2] Partner, Government Agency General Counsel, and Supervisory Lawyers are responsible in a disciplinary proceeding if they "with knowledge of the other lawyer's violation of these rules knowingly fail to take reasonable remedial action to avoid or mitigate the consequences of the other lawyer's violation." Rule 5.1(b).

[3] A similar provision imposes the same standards on partners and supervisory lawyers for conduct of nonlawyer assistants. Rule 5.3.

[4] Note the ABA Model Rule provision requires that "A partner in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the rules of professional conduct." Supervisory lawyers have a similar obligation on matters supervised by them. This expressly encourages the formation of an ethics committee. The Texas Rules omitted this provision in an attempt to eliminate the possibility of arguments in a malpractice action that the partners or supervisory lawyers should have known about the violation of the rules.

[5] How would these provisions interact with the duty to report misconduct to the disciplinary authorities in Model Rule 8.3? This provision requires disclosure of a violation of another lawyer "that raises a substantial question as to that lawyer's honesty, trustworthiness, or fitness as a lawyer in other respects." Note, however, this provision does not require disclosure of information otherwise protected by the confidentiality rules.

[C] The Importance of Bringing Professional Responsibility Issues to the Attention of Supervisory or Partner Lawyers

[1] The old view of the firm involves groups of lawyers practicing on their own but associated for the purpose of serving the various needs of clients.

[2] New view of the firm involves the perspective of the law firm as a training ground for new lawyers and as a monitor of lawyer's ethics. Under this view, lawsuits and disciplinary actions will be targeted to the firm as well as the individual.

[3] In malpractice actions and disciplinary proceedings, I contend that a firm is better off with procedures and a process to consider difficult

[Page 2-5]

ethical problems than allowing such problems to "take care of themselves."

[D] Application of the Rule in the In-House Context

[1] "Reasonable remedial measures" provides flexibility for resolving the violation on a case-by-case basis.

[2] Does the in-house relationship make the duty to disclose the violation to the client — the agents of the corporation — stronger or weaker? Does the answer depend upon the authority of the general counsel and his reporting obligations under firm policy?

[3] The law of employment discrimination may also modify the content of "reasonable remedial measures." For example, if the general counsel intends to reprimand or fire the lawyer who has committed the violation, the measures taken may be affected.

III. The Supervised Lawyer's Responsibilities

[A] Hypothetical Two

An associate identifies a very difficult disclosure issue in complying with an environmental regulation. The lawyers in the office agree that they would normally disclose the information but the non-lawyer agents of the corporation client argue that the information should not be disclosed. If the issue is debatable, should the in-house lawyer's defer to the client more than in the outside counsel context? Who should ultimately make the decision for the lawyers? What should the associate do?

[B] Model Rule 5.2 (Responsibilities of a Supervised Lawyer)

[1] "[A] supervised lawyer does not violate these rules if that lawyer acts...