General Practice, Solo & Small Firm DivisionMagazine

 

Legal Ethics: Customs, Cases, and Confusion/Martin Paskind

© American Bar Association. All rights reserved. Martin Paskind is a lawyer in Albuquerque, New Mexico. His practice focuses on the representation of small businesses and their owners.

 
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Rule 11

Trusting souls do not make up the legal profession. We worry continually about trustworthiness of opposing counsel and parties, and of assorted officials and bureaucrats. Before trials, we lay awake worrying about trustworthiness of our side’s witnesses, and the other side’s witnesses as well.

The attorney-client privilege encourages truthfulness between lawyer and client. Clients can tell lawyers anything without fear of disclosure. Lawyers assume the truthfulness of information from our clients. If we don’t trust clients, it affects the trust and confidence that should be the basis of any lawyer-client relationship. Now, however, it may be time to start shopping around for a lie detector.

That may have been perfectly fine ten or 20 years ago. Perhaps it’s time to reconsider whether and how much to trust your clients. Take, for example, William M. Simmons, a Massachusetts lawyer, and Perkins, Smith and Cohen, where Simmons was "of counsel."

For some time, Simmons represented a company named Schiebel Elektronische Geraete, GMBH. Because of his experience, Simmons believed that Schiebel managers were always reliable in their dealings with him.

"Your Case Stinks"

Ultimately, Schiebel hired Simmons to handle a dispute with Polestar Technologies, Inc., and Geo-Centers, Inc. Early in the proceedings, either just before or just after Simmons sued, opposing counsel contacted him. His opponents told Simmons in a good deal of detail just why his client, Schiebel, did not have a case.

Lawyers often contact each other, early in a dispute or later, to try the case over the telephone or at lunch. Sometimes, cases settle. Most of the time, the telephone call or lunch doesn’t amount to more than a little informal discovery.

In Simmons’ case, however, the court’s opinion is short—it’s only three pages. We don’t know just how much effort defense counsel spent on attempting to ward off suit by Schiebel. Still, given what happened later, the defense’s effort to avoid litigation must have been a good-sized project.

Seeking Sanctions

The dispute between Schiebel and the Polestar and Geo-Centers codefendants went on to judgment. Schiebel as plaintiff got zapped; it won no recovery at all. Geo-Centers didn’t file a counterclaim. Polestar won $171,025 on its counterclaim against Schiebel.

At that point, Geo-Centers moved for Rule 11 sanctions of $81,550 against Simmons and his law firm. That was the amount of attorney fees awarded to Polestar in the overall judgment.

Rule 11 is a federal rule of civil procedure, although many if not all states adopted similar provisions. Essentially, the rule says that a lawyer’s or party’s signature certifies that the signer read the motion or pleading, which good grounds support.

Lawyers for Polestar didn’t ask for direct sanctions against Simmons and the firm with which he had an of-counsel relationship. Polestar asked the trial court for judgment against Simmons and the firm, to become effective only if Schiebel failed to pay the portion of the award stemming from attorney fees awarded to Polestar. The award was to be contingent on Schiebel’s failure to pay.

Oddities

This case, perhaps, is not as odd as it sounds. The same lawyers defended Polestar and Geo-Centers under an agreement for joint representation.

In his opinion, the trial judge said, "I find no precedent precisely on point with respect to this unusual motion under Rule 11. I conclude, in the absence of precedent on point, that this motion is an appropriate motion under Rule 11."

(Assertions like this one from the bench often signal the trial judge’s hope that the plaintiff and his lawyer will appeal her ruling. Then, an appellate court may provide a basis for deciding similar issues in the future.)

Once he decided to rule without support in precedent, the trial judge looked for support in the facts. His opinion would be far more useful to the rest of us had he elaborated a little.

The judge made several key findings. "I find that misleading representations and nondisclosures, in the face of a duty arising from incomplete and misleading representations emanating from Schiebel’s headquarters, were the primary source of allegations in Schiebel’s pleadings," said the judge. These "incomplete and misleading representations" infected documents such as motions that Schiebel filed as the case went on.

Client Lies, Lawyer Pays

"Schiebel thus misled its own attorney of record in this case, and the law firm in which he has been and is associated," said the court.

But (and this is a big but), "The fact that high-level executives of Schiebel provided false and misleading information to Schiebel’s own attorney of record, however, does not take this case out of Rule 11 with respect to joint responsibility of the attorney of record and the law firm with which he is and was associated throughout the pendency of this case in this court."

Moreover, said the judge, "Here, the very nature of the assurances he was receiving, in the face of evidence to the contrary made available to him by defendants and their counsel, created a compelling need for him to press for more supporting information from his own client rather than taking the position that he could continue to rely until defense counsel produced compelling evidence."

Files and Minds

Unfortunately, we don’t know what information defense counsel provided to Simmons. One of the court’s last comments, however, offers a clue.

"In the circumstances of this case," said the judge, "the most compelling evidence of falsity of the representations was likely to be, and at trial was proved in fact to be, in the files of Schiebel and in the minds of Schiebel’s officials." If this trend grows, law schools will teach mind reading.

Trial resulted in an award of $171,029 to Polestar, including attorney fees, and of $81,550 to Geo-Centers, consisting only of attorney fees and contingent on the failure of Schiebel, the plaintiff and counterdefendant, to pay.

Now, we all know that judicial opinions are not little textbooks from which we lawyers can learn how to practice. Opinions, at least when we can understand them, are what we offer in support of arguments. This opinion no doubt will turn up in Rule 11 litigation stemming from client misdeeds. Still, it is so broad and general, with so little reasoning, that it probably will cause unpredictable trouble wherever it appears.

The End of Simple Belief

What do you do, for example, when a matter comes in? You interview to develop facts. Opposing counsel then contradicts important parts of what you’re told. Necessarily, there’ll be a lot of information in the client’s head and in the files.

Under the Massachusetts ruling, you’re taking risks if you simply believe your client. That means you must, in some fashion, investigate. So you sit down with the client and review your opponent’s assertions, point by point. By the time you’re finished, it should not surprise anyone that the client wonders just whom you represent.

If you push this far enough, you may look much more like an investigator than a lawyer. And if that’s so, then your investigation may, at least conceivably, be subject to discovery. So you’re now a witness on a contested matter. The ethical rules don’t allow you to continue representation.

Stuck Either Way

Suppose your investigation, complete with reviews of documents and interviews with top managers, reveals that your client lied and the case is hopeless. It may be time to quit.

Nevertheless, there’s damage done either way. If you went beyond a lawyer’s role in investigating, you may wind up on the witness stand. If the Massachusetts ruling stands up, and you go ahead, you and your firm may wind up paying your opponent’s attorney fees. It really does look like it’s time to invest in that lie detector.

The case was Schiebel Elektronische Geraete, GMBH, v. Polestar Technologies, Inc., and Geo-Centers, Inc., No. 97-10231-REK on the docket of the U.S. District Court for the District of Massachusetts. Lawyers Weekly USA summarizes the case at 98 LWUSA 78, p. 4 (September 7, 1998). CL

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