V. Common Professional Responsibility Concerns

• Library: Professional Responsibility in Litigation (ABA) (2016 Ed.)

V. Common Professional Responsibility Concerns

So far, our discussion of co-counsel's duties has primarily focused on professional liability. It is now time to examine some key ethical aspects of co-counsel relationships. These include (a) the duty to inform a client of another lawyer's malpractice or fiduciary breach; (b) the duty to report co-counsel's misconduct to professional authorities; (c) lawyers' supervisory duties under Model Rule of Professional Conduct 5.1; (d) the responsibilities of subordinate lawyers under Model Rule 5.2; and (e) the division of legal fees between lawyers in different firms, or "fee-splitting."

A. The Duty to Inform the Client of Co-counsel's Misconduct

Lawyers' duty to communicate with their clients is essential to the attorney-client relationship, regardless of the specific nature of the representation. This duty is primarily enforced through Model Rule 1.4, which provides:

(a) A lawyer shall:

(1) promptly inform the client of any decision or circumstance with respect to which the client's informed consent . . . is required by these Rules;
(2) reasonably consult with the client about the means by which the client's objectives are to be accomplished;
(3) keep the client reasonably informed about the status of the matter;
(4) promptly comply with reasonable requests for information;
(5) consult with the client about any relevant limitation on the lawyer's conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.²⁶⁴

Of course, lawyers would have a duty to communicate with their clients even in the absence of Rule 1.4. The attorney-client relationship is a fiduciary relationship that requires the lawyer to communicate to the client information that the client needs to know.²⁶⁵ The attorney-client relationship is also an agency relationship, and agents generally must provide their principals with information related to the subject of the agency.

Lawyers' duties under Rule 1.4 are mandatory, not aspirational.²⁶⁶ Moreover, the duty to communicate is an affirmative obligation in the sense that lawyers must initiate communications when necessary;²⁶⁷ they generally cannot rely on clients to do so. At the same time, the obligation to keep a client informed is tempered by reason.²⁶⁸ Lawyers need not apprise clients of all details of their representations. A lawyer has no duty to tell the client something the client already knows. A lawyer is not required to communicate with a client as often as the client desires, as long as the lawyer's conduct is "reasonable under the circumstances."²⁶⁹ This rule of reason applies both to the lawyer's duty to initiate communications or volunteer information and to the duty to respond to a client's inquiries.

It is generally accepted that a lawyer's ethical duty to communicate includes a duty to inform the client of the lawyer's conduct giving rise to a potential malpractice claim.²⁷⁰ Lawyers' fiduciary duties to clients also require them to disclose acts of malpractice.²⁷¹ These duties exist in co-counsel representations just as in all others. The errant lawyer's duty to inform the client exists regardless of another lawyer's involvement in the representation. The more interesting issue is whether a lawyer filling a co-counsel role has an ethical duty to inform the client of the other lawyer's potential malpractice or substantial misconduct. Such a duty would seem clear in light of the decision in Estate of Spencer v. Gavin.²⁷²

In Estate of Spencer, Kathryn Spencer retained Daniel Gavin to prepare her will. The will named Gavin as executor and directed that he be retained to represent her estate and those of her mother and sister who had predeceased her. When she died, Gavin became the administrator of all three estates as planned. At about the same time, Gavin was looking to reduce his workload. To accomplish this, he asked other attorneys in the building where he kept his office to handle discrete tasks, in addition to transferring files to them. Dean Averna was one of the lawyers to whom Gavin often turned for assistance. Indeed, Averna was slowly assuming charge of Gavin's practice. With respect to the Spencer estates, Averna (1) formed a related entity, the Spencer Foundation, at Gavin's request, and (2) drafted a contract between the Spencer Foundation and a builder. Gavin paid Averna for his work by checks drawn on the account of one of the estates.²⁷³ Averna had no formal engagement agreement with Gavin or the estates for either project.²⁷⁴

Unfortunately, Gavin pillaged the Spencer estates. Averna was allegedly aware of Gavin's thefts. Gavin died of cancer and a substitute administrator, Erik Shanni, was appointed. Shanni discovered the massive thefts and, after obtaining partial reimbursement from the New Jersey Client Protection Fund, sued a number of defendants on behalf of the estates, including Averna. The trial court granted summary judgment for Averna, reasoning that he did not share an attorney-client relationship with the estates and had no duty to police Gavin's conduct. The plaintiffs appealed.

The critical issue on appeal was whether Averna had a duty to the Spencer estates to report Gavin's misappropriations. The court noted that a lawyer, as a fiduciary, has a duty to look out for a client's best interests and communicate information that the client needs to know.²⁷⁵ Even so, Averna argued, he did not have an attorney-client relationship with the Spencer estates and thus owed them no duty. The court rejected this "myopic contention" for three reasons.²⁷⁶ First, Averna prepared the documents forming the Spencer Foundation pursuant to a directive in Kathryn Spencer's will.²⁷⁷ Second, Gavin paid him for his work in Gavin's capacity as executor of Kathryn Spencer's estate by checks drawn on the estate's account.²⁷⁸ Third, Averna could not have represented the Spencer Foundation at the time of its formation because it did not then exist.²⁷⁹ Had Averna been unable to form the Spencer Foundation, he still had one or more clients to whom he was accountable in the undertaking, possibly including the plaintiffs.²⁸⁰ Indeed, the court was satisfied that Averna represented Kathryn Spencer's estate in forming the Spencer Foundation.²⁸¹ Regardless, all of the Spencer estates relied on Averna to represent their best interests, and he therefore owed them a duty of care even if they were not clients.²⁸²

Once the court determined that Averna owed the Spencer estates fiduciary duties as clients or non-client beneficiaries of his services, it easily concluded that he had a duty to report Gavin's misappropriations if he indeed knew about them. This conclusion was buttressed first by Gavin's and Averna's close and sustained working relationship, which "reinforce[d] imposing certain duties upon [Averna] as a consequence of that proximity."²⁸³ Second, the court found support in New Jersey Rule of Professional Conduct 8.3(a), which requires lawyers to report serious misconduct by other lawyers to appropriate professional authorities.²⁸⁴ While violations of New Jersey ethics rules are not themselves civilly actionable, Averna's alleged failure to honor his duty under Rule 8.3(a) strengthened the court's conclusion that his inaction should expose him to liability to the Spencer estates.²⁸⁵

The Estate of Spencer court reversed the summary judgment for Averna and remanded the case to the trial court for further proceedings. The critical issues on remand would be whether Averna knew of Gavin's dishonesty and, if so, when he learned of it.

Estate of Spencer supports the recognition of a duty to inform a client of co-counsel's negligence or other misconduct as an aspect of a lawyer's fiduciary duty of loyalty. In fact, this must be the case, because a lawyer's fiduciary duty of loyalty includes the obligation to "make known to the client all information that is significant and material to the matter that is the subject of [their] relationship,"²⁸⁶ and a lawyer's potential malpractice or fiduciary breach is plainly that. The same duty clearly exists under Rule 1.4, as well. Rule 1.4(a)(2) obligates a lawyer to consult with a client about the means by which the client's objectives are to be accomplished,²⁸⁷ and the lawyer's potential malpractice is a critical component of those means. Rule 1.4(b) compels a lawyer to explain a matter to the extent reasonably necessary to permit the client to make informed decisions about the representation,²⁸⁸ and the lawyer's potential malpractice will surely influence the client's decisions concerning the representation—such as whether to retain the lawyer.

Rule 8.3(a) is a much less certain basis for imposing a duty to inform a client of co-counsel's stumble or dishonesty. Model Rule 8.3(a) provides that a lawyer "who knows that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness, or fitness as a lawyer in other respects, shall inform the appropriate professional authority."²⁸⁹ The rule was arguably relevant in Estate of Spencer because Gavin's thefts clearly implicated his honesty, trustworthiness, and fitness as a lawyer. But many cases do not involve such glaring misconduct. For example, an isolated incident of negligence seldom evidences a lawyer's unfitness to practice and would not compel co-counsel to report the offending lawyer to professional authorities.²⁹⁰ Besides, Model Rule 8.3(a) mandates reporting to professional authorities; it says nothing about informing clients.²⁹¹ For these reasons, there are stronger bases for requiring lawyers to inform clients of co-counsel's negligence or misconduct.

B. The Duty to Report Co-counsel's Misconduct to Professional Authorities

The discussion of Rule...