Ethics Marathon
with Stephen Gillers
April 1, 2014
1
TIMED AGENDA
Introduction (5 minutes)
Truth and confidences in negotiation and litigation (35
minutes)
When must a lawyer correct an opponent’s errors? (25
minutes)
The no-contact rule including in entity representation,
when the opponent is the government, and in the use of
testers. (25 minutes)
Playbook conflicts (15 minutes)
Q&A (15 minutes)
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2
TRUTH AND CONFIDENCES
In Negotiation and Litigation
3
The Problem
In a negotiation, what do you do if your client makes a
false statement of fact (whether or not knowingly), or you
do (innocently), and you then come to know of the falsity
as a result of a confidential communication?
In a litigation, what if your client or your witness makes a
false statement (whether or not knowingly), or you do
(innocently), and you then come to know of its falsity as a
result of a confidential communication?
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4
Negotiation and Confidentiality
5
NY Rule 1.2*
(d) A lawyer shall not counsel a client to engage, or assist
a client, in conduct that the lawyer knows is illegal or
fraudulent, except that the lawyer may discuss the legal
consequences of any proposed course of conduct with a
client.
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*The ABA rule is substantially the same.
6
New York Rule 8.4
A lawyer [or law firm] shall not:…
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7
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(c) engage in conduct involving dishonesty, fraud, deceit or
misrepresentation…
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The ABA rule is the same except the ABA lacks the bracketed
words.
NY Rule 1.6
(a) A lawyer shall not knowingly reveal confidential
information, as defined in this Rule, or use such
information to the disadvantage of a client or for the
advantage of the lawyer or a third person.
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8
NY Rule 1.6
“Confidential information” consists of information gained
during or relating to the representation of a client, whatever
its source, that is
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(a) protected by the attorney-client privilege,
(b) likely to be embarrassing or detrimental to the client if disclosed, or
(c) information that the client has requested be kept confidential.
“Confidential information” does not ordinarily include (i) a
lawyer’s legal knowledge or legal research or (ii) information
that is generally known in the local community or in the trade,
field or profession to which the information relates.
So non-privileged information is confidential only if it is within
(b) or (c).
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9
(the OPM “noisy withdrawal”
exception)
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“A lawyer may reveal or use confidential information
to the extent that the lawyer reasonably believes
necessary:...
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(3) to withdraw a written or oral opinion or representation
previously given by the lawyer and reasonably believed by
the lawyer still to be relied upon by a third person, where
the lawyer has discovered that the opinion or
representation was based on materially inaccurate
information or is being used to further a crime or fraud.”
But what if you have not given a witten or oral
opinion but unwittingly aided the fraud or crime?
10
ABA Rule 4.1
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In the course of representing a client a lawyer shall not
knowingly:
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11
(a) make a false statement of material fact or law to a third
person; or
(b) fail to disclose a material fact to a third person when
disclosure is necessary to avoid assisting a criminal or
fraudulent act by a client, unless disclosure is prohibited by
Rule 1.6.
[Paragraph (b) is not in the NY rule.]
ABA Rule 1.6
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(a) A lawyer shall not reveal information relating to the
representation of a client unless the client gives informed
consent, the disclosure is impliedly authorized in order to
carry out the representation or the disclosure is
permitted by paragraph (b).
12
ABA Rule 1.6(b)
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(b) A lawyer may reveal information relating to the
representation of a client to the extent the lawyer
reasonably believes necessary:
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13
(2) to prevent the client from committing a crime or fraud that
is reasonably certain to result in substantial injury to the
financial interests or property of another and in furtherance of
which the client has used or is using the lawyer's services;
(3) to prevent, mitigate or rectify substantial injury to the
financial interests or property of another that is reasonably
certain to result or has resulted from the client's commission
of a crime or fraud in furtherance of which the client has used
the lawyer's services;
Litigation and Confidentiality
14
NY Rule 1.0(w)
ABA Rule 1.0(m)
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“Tribunal” denotes a court, an arbitrator in an [ABA:
a binding] arbitration proceeding or a legislative body,
administrative agency or other body acting in an
adjudicative capacity.A legislative body, administrative
agency or other body acts in an adjudicative capacity
when a neutral official, after the presentation of
evidence or legal argument by a party or parties, will
render a [ABA: binding] legal judgment directly
affecting a party’s interests in a particular matter.
15
NY and ABA Rule 3.3(a)
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A lawyer shall not knowingly:
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16
(1) make a false statement of fact or law to a tribunal or fail to
correct a false statement of material fact or law previously
made to the tribunal by the lawyer
NY and ABA Rule 3.3(a)
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A lawyer shall not knowingly:
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17
(3) offer evidence that the lawyer knows to be false. If a lawyer,
the lawyer’s client, or a witness called by the lawyer, has offered
material evidence and the lawyer comes to know of its falsity,
the lawyer shall take reasonable remedial measures, including, if
necessary, disclosure to the tribunal. ....
NY and ABA Rule 3.3(b)
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A lawyer who represents a client before a tribunal and
who knows that a person intends to engage, is engaging
or has engaged in criminal or fraudulent conduct related
to the proceeding shall take reasonable remedial
measures, including, if necessary, disclosure to the
tribunal.
18
ABA Rule 3.3 cmt. [12]
(NY Rule 3.3 cmt. [12] is similar)
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Lawyers have a special obligation to protect a tribunal
against criminal or fraudulent conduct that
undermines the integrity of the adjudicative process,
such as bribing, intimidating or otherwise unlawfully
communicating with a witness, juror, court official or
other participant in the proceeding, unlawfully
destroying or concealing documents or other
evidence or failing to disclose information to the
tribunal when required by law to do so.
19
ABA and NY Rule 3.3
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(b) A lawyer who represents a client [in an adjudicative
proceeding] [before a tribunal] and who knows that a person
intends to engage, is engaging or has engaged in criminal or
fraudulent conduct related to the proceeding shall take
reasonable remedial measures, including, if necessary,
disclosure to the tribunal.
(c) The duties stated in paragraphs (a) and (b) continue to the
conclusion of the proceeding, and apply even if compliance
requires disclosure of information otherwise protected by
Rule 1.6.
[Red in ABA rule only. Green in NY only.]
20
When is a statement “false?”
21
The “False” Statement Riddle
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Lawyers are forbidden to make a “false statement of fact
or law to a tribunal” and have certain remedial obligations
in matters before a tribunal. NY and ABA Rule 3.3(a)
In negotiation, lawyers are forbidden to make a “false
statement of material fact or law to a third person.” NY
and ABA Rule 4.1(a). (The NY version of Rule 4.1(a)
omits “material.”)
22
But We’re In Lawyer Land..
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So what is false? When is exaggeration or posturing
allowed? When is a literally true if overly precise
statement disallowed?
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23
NB: A statement can be false even if the speaker does not
mean to lie at the time the statement is made. The word “false”
refers to the statement, not the speaker’s state of mind.
So a statement may be “false” though not “fraudulent” or
perjury (even if under oath).
What Can You Say in Negotiation:
ABA Opinion 06-439
 “My
client won’t take less than $200.”
 Client has authorized $150
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“We have an eyewitness that will [identify] [exonerate]
the accused.”
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24
None exists.
What Can You Say in Negotiation:
ABA Opinion 06-439
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In labor negotiation, “That benefit will cost the company
$200.”
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In fact, it would cost $20.
“Immunity is off the table. We’ll be researching possible
charges.”
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25
Prosecutor has no intention of indicting the
defendant
What Can You Say in Negotiation:
ABA Opinion 06-439
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“We have documentary proof of the claim.”
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None exists.
 “If
you don’t lower your price, my client
will buy elsewhere.”
 Client has said there is no other source
26
What is False?
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A good rule of thumb is that an incorrect statement of
historical fact will be “false” within the meaning of the
rule, as contrasted with a prediction or perhaps an
opinion.
27
When Is There A Duty to Correct
An Opponent’s Drafting Error?
28
Questions to Ask
(to begin with)
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Is it an error of law or fact?
If it’s an error of fact, is it mechanical (arithmetical) or
based on superior investigation?
The death of a client
29
Death of a Party
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If it’s the death of a party in a matter in court, you will
likely have to reveal that under court rules for
substitution or the jurisdiction’s ethics rules.
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30
Virzi v. Grand Truck Warehouse (E.D.Mich. 1983); Matter of Forrest,
(N.J. 1999
Arithmetical Error

If it’s an arithmetical or transmittal error, the issue becomes
harder but the courts seem to require correction.
 Sumerel v. Goodyear Tire & Rubber Co. (Colo. App. 2009)
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31
“When plaintiffs' counsel reviewed Brooks's charts, they immediately
recognized the cause of the parties' six-figure discrepancy. At this
point, the proper course was obvious to us: plaintiffs' counsel should
have called Brooks, identified the discrepancy, and concluded the
matter without further delay.”
Drafting Error
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An error in drafting a provision to which the parties have
orally agreed will likely have to be corrected.
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32
California Op. 2013-189
An Opponent’s Errors:
Additional Authorities
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State v. Addison (Neb. 1987)(discipline for failure to
correct opponent’s misunderstanding of insurance policy
amounts)
Brown v. County of Genesee (6th Cir. 1989)(because of
misunderstanding, plaintiff’s lawyer in discrimination case
bargained for reinstatement at a lower pay grade than
plaintiff was entitled)
Whitaker v. Assoc. Credit Services, Inc. (6th Cir.
1991)(typographical error in offer to settle)
ABA Op 86-1518 (error in draft memorializing an
agreement)
California Op. 2013-189 (a detailed analysis with many
authorities cited and two helpful hypothetical problems)
33
Lawyer Liability for Negligent
Misrepresentation
(or other theory)
34
Slotkin v. Citizens Casualty Co (2nd Cir. 1979).
In re McGrath (1st Dep’t 1983)
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Lawyer stated that “to the best of his knowledge”
defendant had only $200,000 in insurance. Plaintiff settled
for $185,000.
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35
In fact, defendant had an additional $1 million policy which the
lawyer had in his file.
Slotkin, cont’d
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We believe that the jury could properly find that
Christopher McGrath's conduct rendered him liable
under New York law as charged…. McGrath stipulated
that “to the best of his knowledge” there was only
$200,000 worth of coverage in spite of the information in
the documents in his possession. McGrath's insistence
that the policy limit was $200,000 renders him liable
under the New York definition of scienter as “a reckless
indifference to error,” “a pretense of exact knowledge,”
or “(an) assertion of a false material fact ‘susceptible of
accurate knowledge’ but stated to be true on the
personal knowledge of the representer.”
36
From Slotkin…
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Lawyer’s “insistence that the policy limit was
$200,000…renders him liable under the New York
definition of scienter as reckless indifference to error, a
pretense of exact knowledge, or (an) assertion of a false
material fact susceptible of accurate knowledge but stated
to be true on the personal knowledge of the
representer.” (internal quotes omitted)
37
Today, in N.Y. …
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The claim would likely assert negligent misrepresentation
rather than a variety of fraud (why is that?).
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38
Prudential Ins. Co. of America v. Dewey Ballantine (NY
1992)(recognizing negligent misrepresentation claims against
lawyers)
Three other cases that may
discomfort lawyers
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1. Lawyers Title Ins. Co. v. Baik (Wash. 2007)
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Estate’s lawyer responds to title insurer in connection with sale of
estate land:
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39
“By this letter I am informing you that, based on our tax preparation, no
estate taxes are due and owing to the state or federal government.
Likewise, to my knowledge, no other taxes are outstanding against the
estate.”
Insurer does not exclude tax liability from policy and IRS then levies
against property for unpaid inheritance taxes.
Insurer sues lawyer.
Three other cases that may…
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2. Hoyt Properties, Inc. v. Production Resource Group,
L.L.C. (Minn. 2007)
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40
In settling a suit against a subsidiary with a release to the
parent, “Steve Hoyt asked, ‘I don't know of any reason how
we could pierce the veil, do you?’ Hoyt alleges that PRG's
attorney responded, ‘There isn't anything. PRG and Entolo
are totally separate.’”
Effort to open settlement and assert new claims.
Allegation of fraudulent misrepresentation but same
allegations could support negligence.
Three other cases that may…
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3. Petrillo v. Bachenberg (N.J. 1995)
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41
How many passed perc tests out of how many tried? 2/7 or
2/30?
Did lawyer’s act contribute to buyer’s reasonable false
inference?
How to protect yourself…
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Do not make statements of fact or implied fact to an
opposing counsel or party, at least not without a
disclaimer or preceded by “My client tells me….”
Don’t endorse (including by repetition) a statement
of fact or fact/law you’re not prepared to stand
behind.
If you client makes a material false statement in a
negotiation, either correct it (with permission if
necessary) or withdraw, possibly a noisy withdrawal.
42
The No-Contact Rule
(see also attached material)
43
ABA Model Rules 4.2*
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[1] In representing a client, a lawyer shall not [2]
communicate about [3] the subject of the
representation with a person the lawyer [4] knows to
be represented by another lawyer in the matter,
unless the lawyer [5] has the consent of the other
lawyer or [6] is authorized to do so by law or a court
order.
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44
NY Rule 4.2(a) is substantially the same. Numbers in brackets added.
New York Rule 4.2(b)
(not in the ABA Rule)
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(b) Notwithstanding the prohibitions of paragraph (a),
and unless otherwise prohibited by law, a lawyer may
cause a client to communicate with a represented
person unless the represented person is not legally
competent, and may counsel the client with respect
to those communications, provided the lawyer gives
reasonable advance notice to the represented
person’s counsel that such communications will be
taking place.
45
NY Rule 4.2

Cmt. [11]: Persons represented in a matter may
communicate directly with each other. A lawyer may
properly advise a client to communicate directly with a
represented person, and may counsel the client with
respect to those communications, provided the lawyer
complies with paragraph (b)…. A lawyer may also counsel
a client with respect to communications with a
represented person, including by drafting papers for the
client to present to the represented person.
46
ABA Rule 4.2
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Cmt. [4]: “Parties to a matter may communicate
directly with each other, and a lawyer is not
prohibited from advising a client concerning a
communication that the client is legally entitled to
make.”
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47
The scope of this language is addressed in ABA Opinion 11461.
Niesig v. Team I (NY 1990)
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“The test that best balances the competing interests...
is one that defines "party" to include [1] corporate
employees whose acts or omissions in the matter
under inquiry are binding on the corporation (in
effect, the corporation's "alter egos") or [2] imputed
to the corporation for purposes of its liability, or [3]
employees implementing the advice of counsel. All
other employees may be interviewed informally.”
[Bracketed numbers added]
48
Niesig v. Team I (NY 1990).

Niesig excludes former agents and employees from
the operation of the rule.
49
But Be Careful Because
Niesig Concludes:
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“Defendants' assertions that ex parte interviews
should not be permitted because of the dangers of
overreaching, moreover, impel us to add the
cautionary note that, while we have not been called
upon to consider questions relating to the actual
conduct of such interviews, it is of course assumed
that attorneys would make their identity and interest
known to interviewees and comport themselves
ethically.”
Do not seek to elicit privileged or strategic
information.
50
ABA Rule 4.2

Cmt. [7]: “In the case of a represented organization, this Rule
prohibits communications with a constituent of the
organization who [1] supervises, directs or regularly consults
with the organization’s lawyer concerning the matter or [2]
has authority to obligate the organization with respect to the
matter or [3] whose act or omission in connection with the
matter may be imputed to the organization for purposes of
civil or criminal liability. Consent of the organization’s lawyer is
not required for communication with a [4] former
constituent.”
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51
[Bracketed numbers added. Accord Restatement of Law Governing
Lawyers §100. NY Rule 4.2 cmt. [7] is substantially the same.]
What About Testers?
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Can a lawyer supervise a tester consistent with the no-contact
rule? What is a tester?
Gidatex, S.r.L v. Campaniello Imports, Ltd. (S.D.N.Y. 1999):
“These ethical rules should not govern situations where a
party is legitimately investigating potential unfair business
practices by use of an undercover posing as a member of the
general public engaging in ordinary business transactions with
the target. To prevent this use of investigators might permit
targets to freely engage in unfair business practices which are
harmful to both trademark owners and consumers in general.”
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52
See also Hill v. Shell Oil Co. (N.D. Ill. 2002).
ABA Opinion 95-396
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[A] lawyer representing the organization cannot insulate
all employees from contacts with opposing lawyers by
asserting a blanket representation of the organization.
53
ABA Model Rule 3.4
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A lawyer shall not…(f) request a person other than a
client to refrain from voluntarily giving relevant
information to another party unless:
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54
(1) the person is a relative or an employee or other agent of a
client; and
(2) the lawyer reasonably believes that the person's interests
will not be adversely affected by refraining from giving such
information.
When the Government is the
Adversary

ABA Opinion 97-408 reads Rule 4.2 to permit contact
with government officials “who have authority to take or
to recommend action in the matter, provided that the
sole purpose of the lawyer’s communication is to address
a policy issue, including settling the controversy.”
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55
See also NYS Opinion 812.
When the Government is the
Adversary
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Contact is forbidden where the official lacks the authority
to do these things or where the purpose is to “develop
evidence” or learn relevant information.
Also notice of intended contact must first be given to
government counsel “to afford an opportunity for
consultation…on the advisability of…entertaining the
communication.”
56
Ethics Opinions

ABA Opinion 06-443 and NYC Opinion 2007-1 (contact
with organization’s in house lawyer).
57
“Playbook” Conflicts
58
NY and ABA Rule 1.9(a)

(a) A lawyer who has formerly represented a client in a
matter shall not thereafter represent another person in
the same or a substantially related matter in which that
person's interests are materially adverse to the interests
of the former client unless the former client gives
informed consent, confirmed in writing.
59
What Does Rule 1.9(a) Protect?
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Confidential information –
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But how?
The risk of false positives and false negatives
An ongoing duty of loyalty
60
“Playbook” Conflicts
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Lawyers may not switch sides on the same or a
substantially related matter.
“Same” is easy.
“Substantially related” can be hard, requiring
judgment, knowledge of the caselaw, and prediction.
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61
Essentially, the question is this: Could the lawyer have
acquired information in the former representation that can
now be used against the former client in the new adverse
matter.
“Playbook” Conflicts

“Substantially related” is a proxy or surrogate for an
actual investigation of the confidential information,
which courts don’t want to do because:
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It takes too much time
It forces disclosure of the very information the former
client’s DQ motion seeks to avoid
The inevitability of false positives and false negatives
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62
One possible antidote for false negatives
“Playbook” Conflicts

The “playbook” question:
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63
Is DQ appropriate if the former client’s information allegedly
at risk is not matter specific information but at a higher level
of generality?
And how high can you go without preventing the former
firm from ever opposing the former client?
“You Don’t Know Anything”
Some authorities in the attached material