January 01, 2015

Staying Active in ADR Proceedings after Retirement Raises Unique Issues

Thomas E. Spahn

Some lawyers fantasize about, or take steps to undertake, what some call “recareering” after their retirement. One alternative would be for retired lawyers to represent parties in mediations or arbitrations, or even act as mediators or arbitrators themselves. These alternative dispute resolution (ADR) roles hold out the hope for a part-time professional life in a fairly friendly setting—with all the familiar lingo. However, any lawyer thinking of these post-retirement possibilities should use his or her lawyerly skills to check on a number of issues.

First, some states do not permit nonlawyers to represent parties in an ADR process. Retiring lawyers should know this before giving up their licenses. For instance, in 2013, the Illinois Bar issued a legal ethics opinion (LEO) that nonlawyers cannot represent parties in Financial Industry Regulatory Authority (FINRA) arbitrations. Illinois LEO 13-03 (1/2013). More recently, the Alabama Bar held that absent some statutory authority, nonlawyers cannot represent parties in court-ordered Alabama arbitrations. Alabama LEO R0 2014-01 (2014). The Alabama Bar took this matter so seriously that it also held that lawyers must report such unauthorized practice of law to the arbitrator or to a court.

Second, retired lawyers hoping to participate in ADR proceedings in warmer climates must check on whether out-of-state lawyers may do so. Until recently, the Florida rule did not permit that. The current Florida rule is more liberal but still requires that (1) the lawyer’s client “reside[] in or ha[ve] an office in the lawyer’s home state” or otherwise have some connection to the home state; (2) the lawyer be admitted pro hac vice if court rules or law requires that; and (3) the lawyer fill out various forms. And like most other states’ multijurisdictional practice rules, Florida does not permit out-of-state lawyers to represent parties in Florida ADR or any other setting on a regular—rather than a temporary—basis (the Florida rule generally permits three such ADR proceedings in a year). Rules Regulating Fla. Bar R. 1-3.11.

Third, lawyers acting as arbitrators or mediators must fully disclose any possible conflicts of interest. Earlier this year, a Texas court vacated a $125,000,000 arbitration award because the arbitrator had not fully disclosed his connections to one of the parties’ law firms. Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518, 520 (Tex. 2014). Lawyers in the process of disengaging from a law firm would have to carefully check for such conflicts.

Fourth, lawyers should remember that general anti-deception ethics principles usually apply even to mediators or arbitrators hoping to finalize a settlement with some “little white lies” to both sides. ABA LEO 06-439 (4/12/2006) explains that the general anti-deception ABA Model Rule 8.4 “may well” apply to mediators even though they are not actually representing a client (and are thus out of the reach of ethics rules starting with the phrase “[i]n representing a client”).

Fifth, lawyers representing parties in the ADR process should remember that, despite the legal system’s encouragement of settlements, they may waive their clients’ attorney-client privilege protection by disclosing privileged communications to an ADR adversary or even to the mediator or arbitrator. Eagle Compressors, Inc. v. HEC Liquidating Corp., 206 F.R.D. 474 (N.D. Ill. 2002). Courts disagree about the waiver impact of sharing work product in that setting, but some courts find a waiver even of that more robust protection. Ken’s Foods, Inc. v. Ken’s Steak House, Inc., 213 F.R.D. 89, 96–97 (D. Mass. 2002).

Sixth, lawyers acting as mediators might be tempted to write up a settlement agreement that they have successfully arranged. Although other states disagree, some states find that such a role violates the conflicts rules in litigation mediations—because the lawyer/mediator is representing antagonistic litigants. Ohio LEO 2009-4 (6/12/2009).

Seventh, anyone involved in a mediation or arbitration process should become familiar with the surprisingly strong (and often statutory) confidentiality duties. For instance, in 2011 the California Supreme Court held that a California statute rendered inadmissible any statements made in a mediation—even in a client’s case against her lawyer for malpractice during the mediation. Cassel v. Superior Court, 244 P.3d 1080 (Cal. 2011). Other states have taken the same counterintuitive approach. See Fehr v. Kennedy, No. 08-1102-KI, 2009 U.S. Dist. LEXIS 63748 (D. Or. July 24, 2009).

Eighth, states have adopted varying rules on what conduct mediators may or may not engage in. For instance, a Virginia statute (and a parallel ethics rule) explicitly prohibits mediators from disclosing “observations regarding the conduct and demeanor of the parties and their counsel” during the mediation process, absent consent. Va. Code Ann. § 8.01-581.24; Va. Rules of Prof’l Conduct R. 8.3 cmt. [3a].

Ninth, courts disagree about whether a lawyer/mediator must report sufficiently egregious ethics violations by one of the parties’ lawyers. Some states require that. Illinois LEO 11-01 (1/2011). Other states explicitly relieve lawyer/mediators of such a heavy responsibility. Va. Rules of Prof’l Conduct R. 8.3 cmt. [3a].

Tenth, lawyer/mediators or mediation parties’ lawyers might have to analyze their possible duty to report child abuse that comes to light during the mediation. This agonizing issue also varies from state to state. A 2004 article indicated that Missouri lawyer/mediators had no such duty but that a social worker acting as a mediator (or assisting a lawyer) might face such a disclosure duty. Lisa Hansen, Attorneys’ Duty to Report Child Abuse, 19 J. Am. Acad. Matrim. L. 59 (2004). The article then reported that “[i]f the same set of circumstances occurs across the state line in Kansas, the rules change.” Id. at 74. In that state, mediators had a disclosure duty regardless of their education or background.

All in all, lawyers thinking of easing into a post-retirement role as mediators or arbitrators (or as representatives of parties in such a setting) should prepare a checklist of these and other issues.

Thomas E. Spahn

Thomas E. Spahn is a commercial litigation partner in the Tysons Corner, Virginia, office of McGuireWoods LLP. He recently served on the ABA Standing Committee on Ethics and Professional Responsibility.