Playing By the Rules:

Violations of Ethics Rules as Evidence of Legal Malpractice

 

 

Gena L. Sluga

 

Douglas L. Christian

 

 

 

I.

Introduction[1]

 

For lawyers, the relationship between professional responsibility and professional liability is both unsettled and unsettling.  As lawyers receive increasingly critical public scrutiny, the lines between attorney disciplinary systems and the civil justice system have become blurred.  Clients expect and deserve accountability -- accountability not only for professional negligence but also for the way attorneys behave.

The two systems that regulate lawyer conduct, discipline and civil justice, actually encompass three distinct concepts of accountability:  aspirational standards, professional self-regulation, and a standard of care for providing legal services.  Aspirational goals historically have been codified alongside mandatory rules of professional conduct.  Consequently, what attorneys regard as a “lawyer code” is really an eclectic collection of pronouncements on everything from competence to civility.  None of these rules was intended to serve as a basis for imposing civil liability upon a lawyer for its violation.  Explicit contrary admonitions notwithstanding, these rules of conduct have been used by lawyers and courts as a springboard for establishing, or at least analyzing, the standard of care for lawyers in malpractice cases.  The rationale for the evidentiary admissibility of professional conduct rules and the circumstances under which they are admissible form the subject of this article.

 

A. Malpractice

Civil redress for legal malpractice has existed in the United States for over two hundred years.[2]  In recent years, malpractice claims have proliferated, perhaps due to changing client attitudes, complexity of practice, willingness of lawyers to sue other lawyers, and the existence of lawyer errors and omissions insurance.[3]  The total awards for compensatory and punitive damages in legal malpractice cases approaches 5.4 billion dollars each year.[4]

Lawyer malpractice actions most commonly arise from allegations that a lawyer negligently handled a client's legal matter.[5]  To establish a claim for legal malpractice, a client must establish: (1) a duty owed by the lawyer to the client; (2) breach of the duty; (3) damage to the client, and (4) causation between the breach and the damages.[6]  To establish that a duty was breached, a plaintiff must establish the relevant standard of care.  Since the promulgation of ethics rules, plaintiffs have offered those rules as evidence of the applicable standard of care.[7]  An important issue in many of these cases is whether the failure to comply with ethics rules should be admissible evidence against a lawyer.

 

B. The Ethics Rules

The American Bar Association has promulgated three successive sets of rules regulating professional conduct for lawyers.  In 1908, the ABA established the Canons of Professional Ethics.  The Canons were prescriptively general and served a largely symbolic function.  Recognizing the need for more effective discipline, the ABA adopted the Code of Professional Responsibility in 1969.  Most states quickly followed, adopting a version of the Code.  Finally, the ABA adopted the Model Rules of Professional Conduct in 1983.  The Model Rules articulated an expanded and more comprehensive set of rules.  Most states have adopted some version of the Model Rules of Professional Conduct, although some states maintain a version of the older Model Code of Professional Responsibility.[8]  For simplicity, this article will reference applicable state rules as "ethics rules,” and the Model Rules of Professional Conduct as the “Model Rules."

 

C. Relationship Between Malpractice and Ethics Rules

It is generally understood that ethics rules are adopted to guide lawyers in their professional conduct; they provide a benchmark for disciplining those lawyers who behave improperly.  By contrast, the language prefacing the Model Rules indicates that they are not to be used to impose civil liability.[9]

1. Arguments Against Use of Ethics Rules as Evidence of Malpractice

The Model Rules state:

 

Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. The Rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a Rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule.  Accordingly, nothing in the Rules should be deemed to augment any substantive legal duty of lawyers or the extra-disciplinary consequences of violating such a duty.[10]

 

Courts have offered several other arguments against the evidentiary receipt of ethics rules in malpractice cases.  For example, it has been suggested that the rules were designed for use in disciplinary proceedings, not in malpractice actions.[11]  This dichotomy makes some sense since the two different types of proceedings impose different evidentiary burdens.  In a disciplinary proceeding, for example, a lawyer can be sanctioned even if the ethics violation  caused no damage to the client and would not support a civil action.[12]  Because a rule violation is arguably demonstrated more easily in a disciplinary proceeding, it is inappropriate to use the ethics rules, or evidence of their breach in a civil proceeding.

There also is concern over increased litigation against lawyers resulting from the use of ethics rules to establish malpractice more easily.  Yet another argument against using the rules as evidence of malpractice suggests that disciplinary bodies may hesitate to enforce the rules if enforcement will also result in civil penalties.  Additionally, it may be unfair to exact civil penalties when the ethics rules were not enacted by a legislative body, but were adopted instead by state bar associations.[13]

Courts also have observed that clients have access to adequate remedies without resort to ethics rule violations.[14]  Some have held that the existing common law malpractice cause of action provides sufficient redress, and that an expanded use of the ethics rules is unnecessary.  Others suggest that companion remedies, including actions for malicious prosecution, adequately protect the public from unprofessional conduct.

 

a. Nature of the Rules

Judicial reluctance to cite ethics rules when determining the standard of care in malpractice actions arises from the concern that such a role is precluded by the nature and purpose of the rules themselves.  The prefatory language of both the Model Rules and the Model Code provide the substance for this argument: “Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached. . . . [The Rules] are not designed to be a basis for civil liability.”[15]  The Code makes no attempt to prescribe either disciplinary procedures or penalties for violation of a Disciplinary Rule, nor does it define standards for imposing civil liability upon lawyers.[16]  Many courts have cited this prefatory language in rejecting attempts to establish a cause of action based solely on a lawyer's violation of the ethics rules.[17]  Other courts have gone farther, noting that although the ethics rules are not irrelevant to the lawyer’s standard of care, this language precludes their admission into evidence.[18]

Courts also have refused to admit the ethics rules into evidence by reason of their underlying purpose.  Of particular note, the rules are not statutes or administrative regulations; they are court-adopted rules of lawyer discipline.[19]  As such, the rules arguably should not be elevated to the status of implicating civil liability.

 

b. Application Difficulties

 

Courts have expressed practical concerns about applying certain ethics rules to malpractice suits.  Ethics rules may offer such vague prescriptions that any standard of care derived from the rules would be too broad to provide the finder of fact with meaningful guidance.[20]  Some rules are simply too broad to guide the fact finder to a fact-specific determination. For example, Model Rule 2.1  states: “In representing a client, a lawyer shall exercise independent professional judgment and render candid advice.”[21]  Reference to these rules arguably could precipitate a finding of liability as to any violation of the rules, regardless of whether another standard of care would apply under the specific circumstances of the case.[22]

 

c. Fear of Adverse Consequences

 

Judicial reluctance to expand application of the ethics rules emanates in part from concern over the future viability of the rules and their impact on the legal system.  First of all, use of the ethics rules in malpractice actions could lead to a stratification of the rules based on their applicability to civil suits.  As discussed above, only some of the rules are specific enough to be useful in the malpractice context.  Other rules, however, remain important in guiding lawyer conduct.[23]  In addition, use of the ethics rules to impose civil liability could upset the balance among the courts, lawyers, and clients, as established by these same rules.  Specifically, lawyers may begin emphasizing lawyer-client rules over those that address a lawyer’s obligations to, and relations with, the court.[24]  Finally, there is fear that using the rules to define malpractice may cause the organized bar to dilute those ethical standards.[25]

Reluctance to expand the role of ethics rules in malpractice lawsuits also reflects the concern over possible adverse consequences to the court system.  One such consequence anticipates that use of the ethics rules in malpractice lawsuits would encourage litigation.[26]  There also exists a concern that recognizing an independent cause of action based upon violation of the ethics rules would detrimentally affect the relationship between the lawyer and the client, inhibiting lawyers from fully advocating their clients' interests.[27]

 

2. Arguments in Favor of Accepting the Ethics Rules as Evidence

Despite the many concerns regarding precipitous expansion of the role of ethics rules in lawyer malpractice suits, there remains articulated the belief that the rules prescribe a minimum standard of competence for lawyers.  Accordingly, the breach of an ethics rule should constitute evidence that a lawyer was negligent.

Most of the arguments that favor using the ethics rules as evidence are based largely on notions of fairness and public policy.  For instance, professional rules of conduct are relevant to establish the standard of care in negligence suits against other professionals.[28]  In addition, use of the rules as evidence of the standard of care, rather than as the basis for an independent cause of action, might serve as a deterrent to malpractice.  At least one judge has recognized: "the application of codified ethical standards in legal malpractice proceedings may be an additional deterrent against unethical conduct. . . . [A] monetary penalty in civil litigation may be a more meaningful sanction than a private admonition or reprimand in the disciplinary system."[29]  According to another court, "[h]olding a specific client unable to rely on the [ethical] standards in his professional relations with his own attorney would be patently unfair."[30]

 

II.

Evidence of Ethics Violations Is Frequently Admissible

Lawyers who still believe that the violation of an ethics rule may only be used against them in a disciplinary proceeding are sadly mistaken.  Among the courts that have addressed this issue, the overwhelming majority hold that evidence of an ethics violation is admissible in a malpractice action.[31]  The rationale that underlies admission of this evidence derives from the idea that the rules are designed to establish a minimum level of competence.  Consequently, when a lawyer’s conduct does not conform to the rules, the lawyer is negligent.  Assuming admissibility, the next logical inquiry concerns the weight of such evidence.

 

A. Majority Rule: Violation Admissible as Some Evidence of Breached Standard of Care

A majority of courts that considered this issue have held that ethics rules may be used to establish the standard of care for lawyers.  Thus, if a lawyer fails to meet the standard, it is evidence that the lawyer breached the applicable standard of care owed to the client.[32]  Typically, however, these cases also hold that the breach of a rule is not independently actionable; breach of the rule is relevant only to breach of the lawyer’s duty.

For example, in Allen v. Lefkorr, Duncan, Grimes & Dermer, P.C.,[33] a Georgia court reversed an earlier appellate court decision that disallowed evidence of the lawyer's breach of ethics standards.  The court first determined that a violation of ethics standards, by itself, does not support a malpractice action.  Such transgressions, however, are relevant evidence of a breach of the standard of care because it would be unreasonable to suggest that the rules do not play some role in shaping the care and skill ordinarily exercised by lawyers.

The Allen court further observed that laws intended to protect individuals may create norms of behavior, the violation of which may be actionable upon the theory that the violator has not acted with due care.  Although the court stated that failure to comply with the ethics rules will not ordinarily constitute negligence per se, the failure to comply can be considered along with other evidence to determine whether a lawyer acted properly.

Similarly, an Ohio court in Krishbaum v. Dillon[34] held that the ethics rules were relevant to the reasonableness of a lawyer’s behavior.  Faced with a malpractice action involving a lawyer who named himself as a beneficiary in his client's will, the court held that the rules, along with other facts and circumstances, could be considered to determine whether the lawyer breached his duty of care.

Consequently, most courts accept evidence of a lawyer's failure to comply with an ethics standard as "some evidence" of malpractice.  While this evidence does not establish a cause of action by itself, such evidence is valuable for two reasons.  First, it often allows a client to establish that the lawyer owed her a duty. Secondly, it tends to illustrate the standard of care required of all lawyers, and helps to prove that a lawyer did not act competently in situations where the lawyer’s conduct fell below that standard.

 

B. Violation Creates Presumption of Malpractice

Decisional authority exists that the breach of an ethics rule is presumptive legal malpractice.[35]  These decisions have analogized the violation of an ethics rule to the violation

of a statute or ordinance.  In Lipton v. Boesky,[36] a lawyer’s representation of a client in connection with construction of an office building gave rise to an action for legal malpractice.  The Michigan appellate court held that, as with statutes, the violation of an ethics rule creates a rebuttable presumption of malpractice.  The court analogized to other codified rules, including regulatory statutes, the violation of which occasions civil liability.  The court noted that the same wrongful act may harm a private individual as well as the public at large.  The Lipton case thus suggests that the ethics rules are standards of practice for lawyers that express norms of professional conduct for interacting with the public, the legal system, and the legal profession.  Furthermore, it would be unfair to preclude a client’s reliance on her lawyer’s responsibility to abide by those standards.

New Jersey courts consider that the violation of an ethics standard legally infers malpractice, shifting the burden of persuasion from the plaintiff/client to the defendant/lawyer.  In Albright v. Burns,[37] a malpractice action resulted from the lawyer’s management of a testator’s assets both before and after the testator’s death.  The court admitted applicable ethics rules into evidence and held that the defendant’s violation of those rules created a presumption of negligence.  The court noted that the failure to meet the minimum level of competency established by the profession should be admissible as evidence of malpractice.

 

C. Violation as Conclusive Evidence of Malpractice

Only a few courts have found that the violation of an ethics standard is conclusive evidence that a lawyer breached the standard of care to her client.[38]  In Ishmael v. Millington,[39] the plaintiff/client alleged that the defendant/lawyer had a conflict of interest.  The lawyer had represented both husband and wife in a divorce proceeding.  The California District Court of Appeal found the common law duty of care an inadequate measure of a lawyer's duty, and held that the standard of care for disclosing conflicts was that required by the ethics rules.  The Ishmael court effectively determined that failure to meet the standards imposed by the ethics rules was conclusive evidence of malpractice.  Subsequently, in Day v. Rosenthal,[40] the California Court of Appeal held that the state ethics rules conclusively established the lawyer's duty of care, and that any expert testimony to the contrary would be disregarded.

Most recently, in Mirabito v. Liccardo,[41] the California Court of Appeal admitted evidence that a lawyer had violated ethics standards by breaching a fiduciary duty to his client.  The lawyer had advised the client to invest substantial amounts of money in enterprises in which the lawyer held a personal interest.  The Mirabito court determined that the ethics rules defined a lawyer's duties to his client and, therefore, could properly be used by the jury to measure whether he had breached a fiduciary duty.[42]  The lawyer had argued that the rules could not be used to establish civil liability, and that the ethics breach therefore should be inadmissible in a civil case.  The court rejected his argument, however, explaining that, although California law recognized no independent cause of action for violation of an ethics rule, such a violation could be used as conclusive evidence of a breach of duty.  Beyond California, no state has expressly held that violation of an ethics rule is conclusive evidence of negligence.  A few other courts, however, appear interested in doing so.[43]

 

D. Violation Inadmissible in Malpractice Action

A minority of courts have held that the violation of an ethics rule is inadmissible in a lawyer malpractice action.[44]  In Orsini v. Larry Moyer Trucking, Inc.,[45] the Supreme Court of Arkansas upheld the trial court’s exclusion of the ethics rules without extensive discussion.  The court simply stated that the rules were designed for discipline and not civil liability.  The court in Hizey v. Carpenter,[46] however, provided a more detailed rationale. 

In Hizey, a lawyer was sued for negligence involving a real estate transaction.  The plaintiffs claimed that the lawyer represented both the buyers and sellers in the transaction.  At trial, the lawyer moved to exclude testimony of the plaintiffs' expert witness, arguing the impropriety of admitting evidence regarding the professional ethics standards that govern lawyers.  The trial court granted the lawyer's motion and, on appeal, the Washington Supreme Court unanimously upheld the trial court’s determination. It held that a plaintiff may not inform the jury of the existence of the ethics rules in a legal malpractice action, either directly through jury instruction or by expert testimony.

The court relied on public policy in its determination. The court observed that the plaintiffs had access to other common law remedies and could support a malpractice action without relying on the ethics rules as evidence.  The use of the rules as a basis for civil liability would defeat the purpose of the rules, whose aim was to aid the legal system as a whole by protecting the public and the integrity of the profession.  The court expressed concern that use of the ethics rules as a basis for civil liability would dilute the motivating force behind them.

The court also examined the analogy between ethical standards and statutes or administrative regulations.  In many jurisdictions the violation of a statute or administrative rule is admissible as evidence of negligence, and is sometimes admissible as negligence per se.  The court distinguished statutes as created through the legislative rather than the judicial process.  Consequently, since the ethics rules did not bear legislative imprimatur, they were too vague to establish the standard of care in a professionalism action.  The Hizey and Orsini decisions stand alone, however, as the only reported decisions that preclude this evidence.

E.         The Restatement View

The recently promulgated Restatement Third of the Law Governing Lawyers acknowledges that, “the legal effect of officially adopted lawyer codes is fundamental and diverse.”[47]  Restatement Section 48 establishes the elements of a claim for professional negligence and observes that the claim has characteristics of both a tort action for negligence and an action for breach of the client-lawyer contract.  Restatement Section 52 establishes the applicable standard of care and addresses the significance of a rule regulating lawyer conduct.  Section 52, comment f states:  “A rule or statute regulating the conduct of lawyers but not providing a damages remedy does not give rise to an implied cause of action for lack of care or fiduciary breach.”  Consequently, the Restatement does not regard the violation of a rule of professional conduct as separately actionable.  However, the Restatement does recognize the admissibility of ethics rules under appropriate circumstances:  “[T]he trier of fact may consider the content and construction of a relevant statute or rule, for example a statute or a rule of professional conduct (see §1, comment b) designed for the protection of persons in the position of the claimant. . . . The use of the rules in malpractice litigation can also protect lawyers, for example when showing that a lawyer was compelled by rule to act in the way challenged by the plaintiff. . . .”[48]

 

III.

Related Issues

 

A. Violation of Ethics Rule Not Actionable Independently

Most judicial discussion surrounding the admissibility of an ethics violation involves malpractice.   Occasionally, a lawyer may be sued, not for common law negligence, but for violating an ethics rule.  The question then becomes whether the violation of an ethics rule, by itself, can provide the basis for a lawsuit.

Although the language prefacing the Model Rules states that their purpose is not to impose civil liability, courts overwhelmingly allow their admission in malpractice suits.  When admitted, however, violations are restricted to demonstrating substandard care.  No court has found an ethics violation itself to support an independent cause of action.[49]

While relevant case law is limited, the court in Baxt v. Lilioa[50] squarely addressed whether violation of an ethics rule was actionable outside a malpractice action.  In Baxt, the plaintiffs were unable to bring a malpractice action since the lawyers who violated the rules were representing their adversary in the underlying lawsuit.  Instead, they sued opposing counsel for willfully obstructing discovery and acting dishonestly.  The plaintiffs asked the court to recognize a cause of action premised upon a breach of the ethics rules.  They claimed, among other things, that the lawyers were liable for breaching the duty of candor to the tribunal, the duty to act fairly toward other parties, and the duty to make truthful statements to others.

The New Jersey Supreme Court rejected the plaintiffs’ claims and held that a violation of the rules could not form the basis for a cause of action.  In its holding, the court acknowledged that the ethics rules could be used to show that a lawyer breached a duty, but declined to adopt a new cause of action based solely on the violation itself.  The court also noted that the ethics rules were designed to be aspirational and to discipline lawyers, not to impose liability. 

The court highlighted the differences between violating ethics rules and committing a civil wrong, citing a hypothetical situation where a lawyer breached the duty to treat a third party with courtesy and consideration.  While agreeing that the lawyer’s conduct would be reprehensible, the court stated that this violation would be an inappropriate civil cause of action.

 

B. Compliance with Ethics Rules as a Defense

Moving beyond whether violations of the ethics rules are actionable as malpractice is the question whether lawyers may use compliance with ethics rules as a defense to malpractice.  In Kirsch v. Duryea,[51] the California Supreme Court stated:

 

An attorney has an obligation not only to protect his client’s interests but also to respect the legitimate interests of fellow members of the bar, the judiciary, and the administration of justice. . . .

            . . . .

When apparent conflict exists between the attorney’s duty to his client on the one hand and his public obligation on the other, it is not sufficient to show that some or many prudent attorneys would not have made the mistake.  The attorney’s choice to honor the public obligation must be shown to have been so manifestly erroneous that no prudent attorney would have done so.[52]

 

In some cases, courts have confirmed this principle and allowed the ethics rules to be used as a defense to malpractice claims.  The case of Nix. v. Whiteside[53] involved a lawyer who complied with the ethics rules and refused to allow his client to offer false testimony.  The client was subsequently convicted of perjury and appealed based on ineffective assistance of counsel.  The Supreme Court discussed the lawyer's duty to a client and held that the duty is "limited by an equally solemn duty to comply with the law and standards of professional conduct."[54]

Nix did not involve a civil malpractice action; it involved a criminal appeal for ineffective assistance of counsel.  While not directly on point, the inference to be drawn from Nix is that a lawyer is justified in following the ethics rules, even if his or her client seeks a different end.

The decision in Flatt v. Superior Court [55] is more directly on point.  In Flatt, the California Supreme Court considered the scope of an attorney’s duty to provide advice when severing a relationship with a new or prospective client after learning that such representation would conflict with the attorney’s duties to an existing client. After learning of a conflict, the defendant lawyer in Flatt informed his prospective client that he could not represent the client in filing a lawsuit.  When doing so, the lawyer neglected to inform the prospective client of the statute of limitation applicable to the lawsuit or the advisability of seeking alternate counsel.  Nevertheless, the Flatt court held that the ethical duty of undivided loyalty to the original client, articulated in the California Rules of Professional Conduct, negated any duty to provide legal advice to the prospective client.[56]  Observing ethical obligations to the original client provided a critical defense to lawyer conduct that otherwise might have been malpractice.

 

IV.

Use of Ethics Rules in Cases Filed by Non-Clients

 

A developing area of malpractice law has emerged from lawsuits filed by persons other than a lawyer’s client.  Traditionally, only a lawyer’s client could bring a legal malpractice claim against the attorney, but a trend has developed that allows certain other classes of persons to sue an attorney for negligence.  California first developed the multi-criteria balancing test used by many courts in determining whether a non-client can sue an attorney for negligence. [57] Those criteria are: (1) the extent to which the lawyer’s work was intended to benefit the plaintiffs; (2) the foreseeability of harm to plaintiffs; (3) the degree of certainty that plaintiffs suffered injury; (4) the closeness of the connection between the attorney’s conduct and the injury; (5) the policy of preventing future harm; and (6) the burden on the profession of recognizing liability under the circumstances. Although the preamble to the ABA Model Rules specifically cautions against the use of the ethics rules by non-clients, [58]courts have cited these rules in certain cases.

When applying the foregoing six-part test, at least one court has also considered the implications of Model Rule 2.3 and its comments.  In Bank IV Wichita v. Arn, Mullins, Unruh, Kuhn & Wilson,[59] the Kansas Supreme Court upheld the award of summary judgment in favor of the defendant law firm, holding that the firm owed no duties to the non-client bank.  The bank had been a creditor of the firm’s client to whom the firm had given an “opinion of counsel” letter as part of the client’s request for credit.  After applying the six-part balancing test, the court cited to Model Rule 2.3, which expressly authorizes a lawyer to evaluate a matter affecting the client for use by someone other than the client.[60]  Recognizing that the comment to Rule 2.3 suggests that such an evaluation need not necessarily create a duty owing to the third-party, the court declined to impose such a duty.

 

A. The Tripartite Relationship Between Insurer, Insured and Defense Counsel

The most common situation in which a non-traditional client sues a lawyer for negligence occurs in the context of the tripartite relationship between an insurer, its insured, and the defense counsel retained by the insurer.  In the seminal case, Atlanta International Insurance Co. v. Bell,[61] the Michigan Supreme Court held that the insurer can sue the insured’s defense counsel for malpractice, absent a conflict of interest, even though the insurer retained counsel for the insured.  However, the court specifically noted that the insurer was not the defendant attorney’s client; the suit could only be brought under the doctrine of equitable subrogation.[62]  

Notwithstanding the Bell determination, other courts recently have held that in the context of the tripartite relationship, absent a conflict of interest, the attorney has two clients and owes duties to both the insurer and the insured.[63]  An analysis of the ethics rules factored in at least two judicial decisions to allow an insurance company to sue retained counsel for malpractice.  In Home Indemnity Co. v. Lane, Powell, Moss & Miller,[64] the Ninth Circuit applied Alaska law and held that the comments to Ethical Rule 1.7(b) expressly contemplate the representation of more than one client in potential conflict situations.  The comments state that “[a] possible conflict does not itself preclude the representation,” and “common representation of persons having similar interests is proper if the risk of adverse effect is minimal.”[65]  The court cited this language to support its ruling that, in the absence of a conflict of interest, the defense attorney represents both the insured and the insurer and can be sued for malpractice by either.

Likewise, in Paradigm Insurance Co. v. Langerman Law Offices,[66] the Arizona Supreme Court held that an attorney retained to defend an insured may be sued for malpractice by the insurer, whether the insurer is a client or not.  Citing Ethical Rule 1.7(b), the defendant lawyer in Paradigm argued that an attorney may not undertake dual representation absent the informed consent of both clients.  The lawyer further argued that because she had not obtained the express consent of both clients, she did not represent both the insurer and the insured. If the insurer thus did not hold client status, it could not sue her for negligence. 

            The Paradigm decision is among the first to predicate its determination upon the revised language of Restatement Third of the Law Governing Lawyers.  Although the actionable conduct of the defendant-lawyer did not implicate an ethics rule nor require proof of its violation, Paradigm is noteworthy for the court’s use of both the Restatement and the Rules of Professional Conduct to shape retained counsel’s duty to the insurer.  However, the court declined to establish a bright line rule for determining when an insurer held client status. It de-emphasized the importance of such a determination, focusing instead upon a lawyer’s duty to a non-client.  Citing to Restatement Section 51(3) for authority regarding a lawyer’s duty to a non-client, the Arizona Supreme Court held that:

. . . when an insurer assigns an attorney to represent an insured, the lawyer has a duty to the insurer arising from the understanding that the lawyer’s services are ordinarily intended to benefit both the insurer and the insured when their interests coincide.  This duty exists even if the insurer is a non-client.[67]

 

Just as the defendant attorney in Paradigm attempted to deny the existence of an attorney-client relationship with the insurer, citing her failure to obtain an express client consent to dual-representation, the defendant lawyers in Gulf Insurance Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone[68] attempted a similar denial to defend against their malpractice suit. They claimed that a previously undisclosed conflict of interest between the insurer and the insured precluded an attorney-client relationship between the firm and the plaintiff carrier.  In response to this defense, the court observed that attorneys are obligated under the ethics rules to both avoid and disclose conflicts between clients.  The court stated that if a conflict of interest did exist between the insurer and the insured, Berger Kahn was obliged ethically to disclose the conflict to both the insurer and the insured, and either to obtain written waivers of the conflict or withdraw.  Because the defendant law firm never disclosed the conflict to either of its clients, the court refused to allow the firm to escape malpractice liability by failing to fulfill its other ethical responsibilities.[69]

 

B. Relationship Between Estate's Counsel and Estate Beneficiaries

The ethics rules also played a critical role in the recent Arizona Court of Appeals decision in In re Estate of Fogleman.[70]  Fogleman involved a suit against the attorney for a personal representative of an estate, brought by beneficiaries of the estate.  The personal representative for the Fogleman estate and his attorney were partners in the defendant law firm.  A potential conflict existed because the firm also represented certain creditors of the estate.

The primary question presented on appeal in Fogleman was whether the beneficiaries of the estate had standing to sue the individual attorneys, and therefore the law firm. Under Ethics Rule 1.10(a), no member of the firm could represent the estate creditors if it would have been a conflict of interest for the personal representative or his attorney do to so in an individual capacity.[71]  The beneficiaries argued that the firm had breached Ethical Rules 1.7 (conflict of interest) and 2.2 (service as intermediary between clients).  The appellate court disagreed, however, noting that while the personal representative of the estate was a client of the firm, the beneficiaries were not.  Instead, the court recognized that attorneys for an estate representative owe a duty of undivided loyalty to their client (the representative), but owe only a lesser duty of “fairness and impartiality” to estate beneficiaries.[72]  Because the beneficiaries were not clients, the appellate court reversed the trial court’s ruling that the defendant lawyers had violated Ethics Rules 1.7 and 2.2.  It is important to note, however, that while the court did not confer “client” status upon the estate beneficiaries in that case, it did allow them to sue for breach of the “lesser” duties that were owed to them.[73]  The court’s determination regarding the breach of fiduciary duty claim was based largely upon the language of Ethics Rule 1.7(b), which states: "A lawyer shall not represent a client if the representation of that client may be materially limited by the attorney’s responsibility to another client or to a third person, or by the lawyer’s own interests. . . . "[74]  Because the firm owed certain duties to the non-client estate beneficiaries, the simultaneous representation of estate creditors violated this rule and provided the basis for a breach of fiduciary duty lawsuit by the beneficiaries.

 

V.

General Pitfalls and Warnings

A. Expert Testimony

While discussing what evidence may be offered in a legal malpractice case, it also makes sense to discuss what evidence must be offered.  As a general rule, expert testimony is required to establish a prima facie case of lawyer malpractice.[75]  In fact, it may be malpractice to try such a case without expert testimony.[76]  An exception occurs when the alleged act of malpractice is clear and obvious, exceptionally egregious, or so easily understandable that laypersons can determine for themselves whether the lawyer breached the relevant standard of care.[77]

Expert testimony may be critical, especially in the context of allegations that a lawyer has violated an ethics rule.  In Kubik v. Burk, [78] the court held that the allegation that a lawyer violated the Code of Professional Responsibility required expert testimony to demonstrate a deviation from the standard of care. Similarly, in Carlson v. Morton,[79] the court held that in cases where specialized knowledge was required, expert testimony must establish the violation of any ethics rule that resulted in the alleged negligence.  Though they may not require expert testimony, other courts permit and consider such testimony regarding alleged violations of the ethics rules.[80]  At least one court, however, has determined that expert testimony concerning an ethics violation was not appropriate, any more than expert testimony concerning violation of a municipal building code, because jurors required no expert testimony on legal ethics to assess whether a disciplinary rule was violated. [81]  The court noted instead that an expert properly may base his opinion regarding malpractice on a lawyer’s failure to conform to a disciplinary rule.

 

B. Releases and Disclaimers

In trying to avoid or settle a malpractice claim, lawyers occasionally have considered the use of a release or disclaimer.  The Model Rules of Professional Conduct place strict limits on the use of these contractual tools:

 

A lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement, or settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith.[82]

 

Consequently, a lawyer may not include a malpractice disclaimer in a retainer agreement.  Failure to obey this rule itself may occasion disciplinary penalties.[83]  Courts also have strictly limited a lawyer’s use of releases to preclude malpractice actions.  Releases may, however, be used in certain situations to settle existing malpractice claims.  To be effective, the release must be supported by consideration and the lawyer must advise the client in writing that independent representation should be sought before settling the claim and signing the release.[84]  Additionally, the lawyer is responsible to prove the validity of the release by showing that it was fair and reasonable.[85]

 

V.

Conclusion

Self-regulation is a cornerstone of the legal profession.  Ethics rules not only guide the lawyer’s behavior, they also shape the role of lawyers in society to some extent.  Since ethics rules have contributed to the public’s perception of proper lawyer conduct, it stands to reason that these rules also may be perceived as the standard by which legal services are measured.

Although ethics rules were promulgated for regulatory purposes, they increasingly are admitted by courts as evidence of the standard of care in lawyer malpractice cases.  Cumbersome and intentionally imprecise, these rules do not lend themselves readily to the kind of analysis that can discern a breach of duty.  Regardless, their acceptance for that purpose grows and, for better or worse, lawyers should expect that their clients will ask them to play by the rules they themselves have created.


ENDNOTES

 



[1]           Earlier versions of this article have been published by the American Bar Association.  See Douglas L. Christian & Michael Christian, Twice Bitten: Violations of Ethical Rules as Evidence of Legal Malpractice, The Brief, Spring 1999, at 62; Douglas L. Christian & Michael Christian, Twice Bitten: Violations of Ethical Rules as Evidence of Legal Malpractice, GP Solo, March 2000, at 28. The authors are indebted to their colleague Michael Christian of Pillsbury, Madison & Sutro in San Francisco for his valuable research and writing on the previous drafts.

[2]           Ann Peters, Note, The Model Rules as a Guide for Legal Malpractice, 6 Geo. J. Legal Ethics 609 (1993).

[3]           Laura Callaway Hart et al., From Offense to Defense:  Defending Legal Malpractice Claims, 45 S.C.L. Rev. 771, 772 (1994).

[4]           Joseph Wharton et al., Figuratively Speaking, 81 A.B.A.J. 12 (October 1995).

[5]           Peters, supra note 2, at 612. See also Hart et al., supra note 3, at 778.

[6]           Peters, supra note 2, at 612.

[7]           Criton A. Constantinides, Note, Professional Ethics Codes in Court:  Redefining the Social Contract Between the Public and the Professions, 25 Ga. L. Rev. 1327 (1991).

[8]           Kathleen J. McKee, Annotation, Admissibility and Effect of Evidence of Professional Ethics Rules in Legal Malpractice Action, 50 A.L.R. 5th 301 (1997).

[9]           Model Rules of Prof’l Conduct Scope (1992); Model Code Of Prof’l Responsibility Preliminary Statement (1983).

[10]          Model Rules of Prof’l Conduct Scope (1995).

[11]          Peters, supra note 2, at 611.

[12]          Id. at 611-12.

[13]          Id. at 623.

[14]          See Hizey v. Carpenter, 830 P.2d 646, 653 (Wash. 1992) (en banc).

[15]          Model Rules of Prof’l Conduct Scope (1983).

[16]          Model Code of Prof’l Responsibility Preliminary Statement (1970).

[17]          See, e.g., Terry Cove North, Inc. v. Marr & Friedlander, P.C., 521 So. 2d 22, 23 (Ala. 1988) ("The Code . . . is designed not to create a private cause of action for infractions of disciplinary rules, but to establish a remedy solely disciplinary in nature."); Mozzochi v. Beck, 529 A.2d 171, 176 (Conn. 1987); Helmbrecht v. St. Paul Ins. Co., 362 N.W.2d 118, 128 (Wis. 1985).

[18]          See, e.g., Lazy Seven Coal Sales, Inc. v. Stone & Hinds, P.C., 813 S.W.2d 400, 403 (Tenn. 1991) ("The initial inquiry, whether the Code is the standard of care in an action based on negligence, is answered by the Code itself."). See also id. at 405 (“The standards stated in the Code are not irrelevant in determining the standard of care in certain actions for malpractice.”).

[19]          Hizey, 830 P.2d at 652.

[20]          Id.

[21]          Model Rules of Prof’l Conduct Rule 2.1 (1983).

[22]          See, e.g., Lazy Seven Coal Sales, 813 S.W.2d at 405-07.

[23]          Troubled by his court's ruling, one judge concurred:

The majority has begun the descent of the slippery slope of legislating civility and courtesy. In the future, this Court no doubt will have to classify some professionalism standards as more important than others, some transgressions as more unprofessional than others, and some standards as appropriate weapons in the litigation arena and others only as guides for regulating conduct through our attorney disciplinary agencies.

Allen v. Lefkoff, Duncan, Grimes & Dermer, P.C., 453 S.E.2d 719, 723 (Ga. 1995) (Benham, P.J., concurring) (quoting Green v. Green, 437 S.E.2d 457, 462 (Ga. 1993) (Sears-Collins, J., concurring)) (alteration in original).

[24]          Jean E. Faure & R. Keith Strong, The Model Rules of Professional Conduct: No Standard for Malpractice, 47 Mont. L. Rev. 363, 375 (1986).

[25]          See Allen, 453 S.E.2d at 725 (Benham, P.J., concurring) ("Rather than advancing ethics and professionalism, the majority opinion may cause many professional codes to be allowed to stagnate; others will be repealed outright to avoid their use in malpractice actions.").

[26]          See Charles W. Wolfram, The Code of Professional Responsibility as a Measure of Attorney Liability in Civil Litigation, 30 S.C.L. Rev. 281, 295 (1979).

[27]          See, e.g, Garcia v. Rodey, Dickason, Sloan, Akin & Robb, P.A., 750 P.2d 118, 123 (N.M. 1988); Bob Godfrey Pontiac, Inc. v. Roloff, 630 P.2d 840, 848 (Or. 1981) ("To expose attorneys to actions for damages for breach of ethical duties imposed by such statutes and codes would be contrary to the obvious public interest in affording every citizen the utmost freedom of access to the courts.") (internal quotation marks omitted).

[28]          See, e.g., Saur v. Probes, 476 N.W.2d 496, 498 (Mich. Ct. App. 1991) (noting that a psychiatrist's violation of the profession's code of responsibility created a rebuttable presumption of malpractice); Pittman v. Upjohn Co., 890 S.W.2d 425, 435 (Tenn. 1994) (“Although the rules and standards of practice promulgated by the Board of Pharmacy do not necessarily establish the duty of care owed by the pharmacy in this case, they are relevant to the issue and may provide guidance in determining if there is a duty of care under the circumstances."). See also Waldman v. Levine, 544 A.2d 683, 691 (D.C. 1988) (holding that use of the Code in determining the legal malpractice standard of care is "not unlike the use of practice codes in other negligence contexts"); 1 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice, § 1.1 at 2-3 (5th ed. 2000) ("[T]here is no precise formula which can determine when an attorney has committed malpractice.  There is agreement that attorneys, however, should not be treated differently than other professionals, such as doctors or dentists, who are similarly subject to a suit for malpractice." (footnotes omitted)).

[29]          Brooks v. Zebre, 792 P.2d 196, 214 (Wyo. 1990) (Urbigkit, J., dissenting) (quoting Michael J. Hoover, The Model Rules of Professional Conduct and Lawyer Malpractice Actions: The Gap Between Code and Common Law Narrows, 22 New Eng. L. Rev. 595, 616 (1988)) (alteration in original) (internal quotation marks omitted).

[30]          Lipton v. Boesky, 313 N.W.2d 163, 166-67 (Mich. Ct. App. 1981).

[31]          Of all reported opinions, it appears that only two states have deemed such evidence inadmissible.  See Hizey v. Carpenter, 830 P.2d 646 (Wash. 1992) and Orsini v. Larry Moyer Trucking, Inc., 833 S.W.2d 366, 369 (Ark.), reh’g denied, 839 S.W.2d 180 (Ark. 1992).

[32]          For an excellent state-by-state survey of the existing law in this area, see McKee, supra note 8.

[33]          453 S.E.2d 719 (Ga. 1995).

[34]          567 N.E.2d 1291 (Ohio 1991).

[35]          See, e.g., Hart v. Comercia Bank, 957 F. Supp. 958 (E.D. Mich 1997); Albright v. Burns, 503 A.2d 386 (N.J. Super. App. Div. 1986); Beattie v. Firnschild, 394 N.W.2d 107 (Mich. Ct. App. 1986); Lipton v. Boesky, 313 N.W.2d 163 (Mich. App. Ct. 1981).

[36]          313 N.W.2d 163 (Mich. Ct. App. 1981).

[37]          503 A.2d 386 (N.J. Super App. Div.1986).

[38]          Day v. Rosenthal, 217 Cal. Rptr. 89 (Ct. App. 1985), cert. denied, 475 U.S. 1048 (1986); Ishmael v. Millington, 50 Cal. Rptr. 592 (Ct. App. 1966).

[39]          50 Cal.Rptr. 592 (Ct. App. 1966).

[40]          217 Cal. Rptr. 89 (Ct. App. 1985), cert. denied, 475 U.S. 1048 (1986).

[41]          5 Cal. Rptr. 2d 571 (Ct. App. 1992).

[42]          Id. at 573.

[43]          See, e.g., Hatcher v. Roberts, 478 So. 2d 1083, 1087 (Fla. Dist. Ct. App. 1985) (holding that state ethical standards defined the standard of care but dismissing the action for want of proximate cause), review denied, 488 So. 2d 68 (Fla. 1986); Carlson v. Morton, 745 P.2d 1133, 1137 (Mont. 1987) (violation of some ethics rules may conclusively establish negligence, but not the rules alleged in the case at hand); O’Toole v. Franklin, 569 P.2d 561, 566-67 (Or. 1977) (an intentional deliberate violation of an ethical rule may alone create a cause of action, but no independent cause of action exists for negligent violations).

[44]          Hizey v. Carpenter, 830 P.2d 646 (Wash. 1992); Orsini v. Larry Moyer Trucking, Inc., 833 S.W.2d 366, 369 (Ark.), reh’g denied, 839 S.W.2d 180 (Ark. 1992).

[45]          Orsini, 833 S.W.2d at 369.

[46]          830 P.2d 646 (Wash. 1992).

[47]            Restatement (Third) Law of Lawyering § 1 cmt. b (2000).

[48]          Id. § 52 cmt. f.

[49]          See, e.g., Terry Cove, 521 So. 2d 22 (Ala. 1988) (violation of state’s legal ethics rules alone does not create cause of action against attorney); Orsini, 833 S.W.2d 366 (Ark. 1992) (same); Allen, 453 S.E.2d 719 (Ga. 1995) (same); L&H Airco, Inc. v. Rapistan Corp., 446 N.W.2d 372 (Minn. 1989) (same); Garcia, 750 P.2d 118 (N.M. 1988) (same); Lazy Seven Coal Sales, 813 S.W.2d 400 (Tenn. 1991) (same); Archuleta v. Hughes, 969 P.2d 409 (Utah 1998) (same).

[50]          714 A.2d 271 (N.J. 1998).

[51]          578 P.2d 935 (Cal. 1978).

[52]          Id. at 939.

[53]          475 U.S. 157 (1986).

[54]          Id. at 168 (emphasis added).

[55]          Flatt v. Superior Court, 885 P.2d 950 (Cal. 1994).

[56]          California Rules of Professional Conduct 3-310.

[57]          Lucas v. Hamm, 364 P.2d 685 (Cal. 1961); Biakanja v. Irving, 320 P.2d 16 (Cal. 1958); Goldberg v. Frye, 266 Cal. Rptr. 483, 489 (Ct. App. 1990).  See also Trask v. Butler, 872 P.2d 1080 (Wash. 1994); Pizel v. Zuspann, 795 P.2d 42 (Kan. 1990); Fickett v. Superior Court, 558 P.2d 988 (Ariz. Ct. App. 1976).

[58]          The ABA Model Rules of Prof’l Conduct, Scope (1995), states:

 

Furthermore, the purpose of the Rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a Rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule.

[59]          Bank IV Wichita v. Arn, Mullins, Unruh, Kuhn & Wilson, 827 P.2d 758 (Kan. 1992).

[60]          Kansas Supreme Court Rule 226, MRPC 2.3 (1991) states:

“(a) A lawyer may undertake an evaluation of a matter affecting a client for the use of someone other than the client if:

(1) the lawyer reasonably believes that making the evaluation is compatible with other aspects of the lawyer’s relationship with the client; and

(2) the client consents after consultation.

“(b) Except as disclosure is required in connection with the report of an evaluation, information relating to the evaluation is otherwise protected by Rule 1.6.

“The comment to MRPC 2.3 states:

“Duty to Third Person

“When the evaluation is intended for the information or use of a third person, a legal duty to that person may or may not arise.  That legal question is beyond the scope of this Rule.  However, since such an evaluation involves a departure from the normal client-lawyer relationship, careful analysis of the situation is required.  The lawyer must be satisfied as a matter of professional judgment that making the evaluation is compatible with other functions undertaken in behalf of the client.”  See id. at 768.

[61]          475 N.W.2d 294 (Mich. 1991).

[62]          Id. at 297.

[63]          Unigard Ins. Group v. O’Flaherty & Belgium, 45 Cal. Rptr. 2d 565 (Ct. App. 1995); Paradigm Ins. Co. v. Langerman Law Offices, 2 P.3d 663 (Ariz. Ct. App. 1999), review pending.

[64]          43 F.3d 1322 (9th Cir. 1995).

[65]          Id. at 1330.

[66]          24 P.3d 593, 249 Ariz. Adv. Rep. 11 (Ariz. 2001).

[67]          Id. at 602.

[68]          93 Cal. Rptr. 2d 534 (Ct. App. 2000).

[69]          Id. at 546-47.

[70]          3 P.3d 1172 (Ariz. Ct. App. 2000).

[71]          Ethical Rule 1.10(a) states:  "While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by ER 1.7, 1.8(c), 1.9 or 2.2."

[72]          In re Estate of Fogleman, 3 P.3d at 1177.

[73]          Id. at 1179.

[74]          Id. at 1179-80.

75                Wilburn Brewer, Jr., Expert Witness Testimony in Legal Malpractice Cases, 45 S.C.L. Rev. 727, 733 (Summer 1994).

 

[76]          Id.

[77]          Id.

[78]          540 N.W.2d 60 (Iowa Ct. App. 1995).

[79]          745 P.2d 1133 (Mont. 1987).

[80]          Miami Int'l Realty Co. v Paynter, 841 F.2d 348, 352-62 (10th Cir. 1988) (permitting expert testimony based on the Code of Professional Responsibility, so long as the expert did not testify that the ethical standards had the force and effect of a law and that a violation of them constituted negligence per se); Roberts v. Langdale, 363 S.E.2d 591 (Ga. Ct. App. 1987) (expert testimony that the defendant attorney violated one or more provisions of the Code of Professional Responsibility was admissible but insufficient to support finding that attorney was negligent when legal presumption that attorney performed in an ordinarily skillful manner was reinforced by affidavits of three other attorneys who affirmed that  attorney represented  client with requisite degree of skill, prudence, and diligence); Smith v. Haynsworth, 472 S.E.2d 612 (S.C. 1996) (expert was permitted to testify concerning Rules of Professional Conduct, violations of which plaintiffs contended constituted legal malpractice).

[81]          Fishman v. Brooks, 487 N.E.2d 1377 (Mass. 1986).

[82]          Model Rules of Prof’l Conduct Rule 1.8(h) (1995).

[83]          Hart et al., supra note 3, at 788.

[84]          Id. at 789.

[85]          Id.

 

(Authors' Bios)

            Gena L. Sluga is an associate in the Arizona law firm of Christian & Mariano P.L.C. Her practice emphasizes insurance coverage and bad faith litigation. Ms. Sluga is a summa cum laude, Phi Beta Kappa graduate of Arizona State University. She received her J.D. from Boalt Hall School of Law at the University of California-Berkeley.

 

            Douglas L. Christian is the founding partner of Christian & Mariano P.L.C. where his practice emphasizes coverage, bad faith and professional liability litigation. He is past president of the Arizona Association of Defense Counsel and a member of the American Board of Trial Advocates. Mr. Christian is active in the Federation of Insurance & Corporate Counsel and chairs its Ethics Section. He is a former member of the Council of the Tort and Insurance Practice Section of the American Bar Association where he also chaired the Professionalism Committee. Mr. Christian maintains an active practice in Arizona and Nevada.