ethical considerations insurance

8/11/2019 Ethical Considerations Insurance

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ETHICAL CONSIDERATIONS

By Gerry Schulze

Defense Lawyer Hypothetical1.

You are an insurance defense lawyer for Consolidated Federated. Consolidated

Federated is one of the stingiest insurers in the business, but eventually they pay your bills.

Getting them to spend an extra nickel on a defense, though, is like pulling hens teeth.

Another Consolidated Federated fender-bender comes across your desk. One Andrew

Volstead was rear-ended by Jos Cuervo. Your insured is Guillermo Cuervo, Joss brother, the

owner of the car.

Jos got a ticket for following too close and driving while intoxicated, his third.

Volsteads lawyer demanded the limits. The policy excludes punitive damages, and Volstead

wasnt seriously injured. He went to a chiropractor who treated him for two weeks and released

him. The total medical involvement was $625. Volsteads attorney has, of course, sued both

Jos and Guillermo, alleging negligent entrustment. Theres a note from the adjustor. This

guy wasnt hurt. Weve allocated $2,000.00 to the defense of this case. Spend it wisely.

Jos and Guillermo come to see you. Guillermo tells you that the car isnt really even

his. Its just in his name because Jos couldnt get insurance because of his driving record.

1 I didnt make all of this hypothetical up. There is a Nevada Ethics opinion about the fact

situation in which a brother permanently lends his brother his car because his record forgetting DWIs makes him uninsurable. State Bar of Nevada Standing Committee On Ethics And

Professional Responsibility Formal Opinion No. 9 (originally issued on 4/21/88, conclusionamended 9/24/07). The brothers confess to their lawyer that the arrangement essentially isfraudulent as to the insurer. The State Bar of Nevada Standing Committee on Ethics and

Professional Responsibility determined that the lawyer could not disclose the fraud to theinsurance company, was not obliged to withdraw on the ground that the fraud was complete, notcontinuing, and that he was not required to, but probably should counsel Guillermo about theadverse consequences of this fraudulent activity to the extent any further warning might benecessary. I made up a few extra details. The names have been changedwell, you are free toguess why I changed the names.


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Thats why the insurance agent recommended that Guillermo buy his car and take ou t the

insurance in his own name.

Besides, Jos says,thi s time I wasnt really drunk. I was acquitted at trial. Jos

hands you an order showing that a judge had actually entered a judgment acquitting him.

It cost $10,000 for the expert witness, but he showed the judge that the police officer

had not correctly used the breathalyzer. Jos had just gotten off work, we had his former co-

worker flown in from Ohio! He couldnt have had anything to drink for at least twelve hours.

1. Do you have an ethical problem regarding the fraud that Guillermo and Jos have

just disclosed to you?

a. Can you tell the insurer about it?

b. Must you tell the insurer about it?

c. Must you remain silent about it?

2. Do you have an ethical problem with the budget that the adjustor has set for you?

3. Would it make any difference if the insurer might be able to avoid paying punitive

damages, but you know that the clever plaintiffs lawyer can always drop the

punitive claim at the end of the trial and let the jury award a de factopunitive claim

in the form of high compensatory damages for mental anguish and pain and

suffering?

4. What if youre not sure if the above strategy is legal or not, but theres no way you

can afford to research it on the stingy budget your adjustor has given you?

Plaintiffs Lawyer Hypothetical

O. Julius Bananaberry, Elspeth Bluenose, and Mr. and Mrs. Worthington Farnsworth IV,

all close neighbors and longtime friends, were returning home from a long night at the opera.Mr. Bananaberry was driving. Ms. Bluenose was a passenger in the front seat. Mr. and Mrs.

Farnsworth IV were asleep in the back seat.

The vehicle they were driving was suddenly struck by a turnip truck driven by Hiram

Tweedle. The versions of the accident vary. Mr. Bananaberry insists that he was proceeding

along at the posted speed limit in his lane of traffic when his car was struck head on by a turnip


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truck. He did not see the truck until just before the accident. Mr. Tweedle insists that the

Bananaberrys Rolls Royce was weaving all over the road at a high rate of speed and the he was

just trying to dodge the car just before they collided, in his own lane. Ms. Bluenose says that the

accident happened in Mr. Bananaberrys lane, and that Mr. Bananaberry had not been weaving,

but that he was going somewhat faster than she was comfortable with. She was about to suggest

that he slow down when the accident occurred. The Farnsworths say they do not remember

anything about how the accident occurred.

All four plaintiffs were taken from the scene by ambulance. They got a minimal amount

of treatment at the emergency room, so their bills there were only about $10,000 each.

Insurance would have paid $117.50. The hospital refuses to submit the claims to the plaintiffs

health insurance companies.

Investigating Officer Seeley Booth found debris in both lanes, making it impossible to

determine the point of impact.

Mr. Bananaberry, Mr. Bluenose, and the Farnsworths are all injured in the accident.

Mr. Tweedle had minimum limits of $25,000 per person, $50,000 per accident on his turnip

truck.

Can you represent all of the plaintiffs? Under what circumstances?

If you meet them all at the same time, can you represent any of them?

If you already represent one of them on another matter, can you represent any of them in

regard to this accident?

Would it make any difference if Mr. Bananaberry failed to pay his automobile insurance

premium and his policy lapsed?

Assume Mr. Bananaberrys chiropractor consults you about the case. He is willing to

send Mr. Bananaberry your way if youll agree to make sure his lien is protected.

Assume Ms. Bluenose comes to you about the case. Before litigation is filed, can you

call Mr. Tweedle and get a recorded statement from him?

Assume twenty years ago you represented Mr. Tweedle on a DWI. He was guilty as hell,

but you got him off somehow. In the course of the representation, he admitted to you that he had

been driving drunk a lot, but hes going to go on the wagon and start attending AA. In fact, he

attended the same AA you attendedfor about three months.


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Rules of Professional Conduct

Ethical questions always start with the Rules of Professional Conduct. What are the

Rules of Professional Conduct but another set of Rules? How are the Rules of Professional

Conduct different from the Rules of Evidence, the Rules of Civil Procedure, or the Rule against

Perpetuities?

We call our Rules of Professional Conduct rules of ethics. Im talking about these

rules today because we have a mandatory one-hour ethics requirement in our continuing legal

education obligation: Every member of the Bar of Arkansas, except as may be otherwise

provided by these rules and, excepting those attorneys granted voluntary inactive status by the

Arkansas Supreme Court Committee on Professional Conduct, shall complete 12 hours of

approved continuing legal education during each reporting period as defined by Rule 5(A)

below. Of those 12 hours, at least one hour shall be ethics, which may include professionalism as

defined by Regulation 3.02. Ark. R. Minimum Con't Legal Educ. Rule 3 (2009)

So what is this ethics hour supposed to be all about, anyway? Here it is:

Rule 3.02. Ethics

Ethics presentations shall be distinct segments no less than one hour in length, shall be

specifically designated separately on the program application and shall be accompanied by

appropriate documentation. Likewise, claims for ethics credit shall be designated separately

on certificates of attendance submitted to the Secretary.

Ethics shall be defined as follows: "Legal ethics includes, but is not necessarily limited

to, instruction on the Model Rules of Professional Conduct and the Code of Judicial

Conduct."

Ethics may include professionalism courses addressing the principles of competency,dedication to the service of clients, civility, improvement of justice, advancement of the rule

of law, and service to the community.

Professionalism courses may include a lawyer's responsibility as an officer of the Court;

responsibility to treat fellow lawyers, members of the bench, and clients with respect and


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dignity; responsibility to protect the image of the profession; responsibility generally to the

public service; the duty to be informed about methods of dispute resolution and to counsel

clients accordingly; and misuse and abuse of discovery and litigation.

Ark. Regulation Con't Legal Bd. Rule 3.02 (2009).

The ethics hour ought to also have something to do with the program.

The rule tells us that the Rules of Professional Conduct and a few relate issues are

entitled to an hour out of our twelve hour annual continuing legal education requirement. As

substantive law, these rules are not all that complex. They are, to be sure, vague, but Im not

sure that they are conspicuously vaguer than some of the other broad rules of general

applicability. They are difficult to apply, and frequently there is precious little authority to go

on. We could look to the cases in which people get in trouble, but for the most part, with a few

exceptions here and there, those seem to be fairly obvious cases. The only thing that bothers me

about them sometimes is that I think the committee is too willing to take action on cases that in

my opinion, if I were on the committee, I think Id leave to the legal malpractice bar. If someone

lets a statute of limitations run, sure, its probably a legitimate violation of the rules about

competence, but theres always circuit court for those cases. Thats just me. Im not likely to be

on the committee any time soon.

Back to the question: What is it about this relatively short set of rules that requires that it

dominate one twelfth of our annual continuing legal education requirement? It could be worse.

Im licensed in Texas. There I have to do fifteen hours of CLE a year, threeof which are in

ethics or professionalism.2

2I love lecturing and teaching CLE, and not only because its less boring than sitting here listening to

myself. If youve heard me enough, youll know its not. Im just as boring to myself as I am to you. The subject

matter, on the other hand, isnt boring at all. I really am personally devoted to the idea of CLE. Last year, the Bar

sent me notice that I had 66 hours of CLE.


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To understand this requirement, I believe we have to look beyond the letter of the law

and seek out its spirit. Unfortunately, that is often an invitation to impose our own values and

prejudices on a set of rules, reading things into them rather than taking guidance from them. We

cannot read the Rules of Professional Responsibility as a moral code. It is a body of substantive

law. We are obliged to comply with the strictures of that substantive law, even if our personal

moral code might counsel us to act differently than the rules require. In many areas a cogent,

strong, and principled ethical argument can be made for behavior that would violate the code.

But if we are to practice law, we must set our personal moral beliefs to one side and live up to

our oath to follow the Code of Professional Conduct. Still, I think the aspiration of the ethics

hour is more than that we engage in a dispassionate analysis of the substantive requirements of

the Model Rules of Professional Conduct, and that we spend this hour discussing our ethical

obligations above and beyond the mere obligations imposed by the Model Rules. Which brings

us to the question, are there any moral or ethical obligations above, beyond, or different from

those imposed by the rules?

The drafters of the Preamble to the Model Rules seemed to think so. The Rules do not .

. . exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile

human activity can be completely defined by legal rules. The Rules simply provide a framework

for the ethical practice of law. Preamble, Arkansas Model Rules of Professional Conduct.

Scope. But what is the content of the additional moral and ethical considerations that should

inform a lawyer? Reasonable minds can differ, and the minds of lawyers are seldom limited to

the ideas that inhabit the hypothetical reasonable mind.

The Model Rules are a starting point. The Model Rules are the ethical rules that are

actually enforcedthe violation of which will subject us to sanctions.

Most real ethical quandaries arise out of conflicting ethical obligations. The most

common situation in which this occurs is when a conflict of interest arises. We may oweconflicting duties of loyalty to our clients and the legal system. We may owe conflicting legal

duties to different people.


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A. Conflicts of Interest

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if therepresentation involves a concurrent conflict of interest. A concurrent conflict ofinterest exists if:

(1) the representation of one client will be directly adverse to another clients; or

(2) there is a significant risk that the representation of one or more clients will bematerially limited by the lawyer's responsibilities to another client, a former clientor a third person or by a personal interest of the lawyer,

(b) Notwithstanding the existence of a concurrent conflict of interest underparagraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide

competent and diligent representation to each affected client;

(2) the representation is not prohibited by law:

(3) the representation does not involve the assertion of a claim by one clientagainst another client represented by the lawyer in the same litigation or otherproceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing,

Ark. Rules of Professional Conduct, Rule 1.7 Conflict Of Interest: Current Clients.

(b) A lawyer shall not use information relating to representation of a client to thedisadvantage of the client unless the client gives informed consent, in a writingsigned by the client, except as permitted or required by these Rules.

(e) A lawyer shall not provide financial assistance to a client in connection withpending or contemplated litigation, except that:

(1) a lawyer may advance court costs and expenses of litigation, the repayment ofwhich may be contingent on the outcome of the matter; and

(2) a lawyer representing an indigent client may pay court costs and expenses oflitigation on behalf of the client.

(f) A lawyer shall not accept compensation for representing a client from oneother than the client unless:

(1) the client gives informed consent;


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(2) there is no interference with the lawyer's independence of professionaljudgment or with the client-lawyer relationship; and

(3) information relating to representation of a client is protected as required byRule 1.6.

(g) A lawyer who represents two or more clients shall not participate in making anaggregate settlement of the claims of or against the clients, or in a criminal casean aggregated agreement as to guilty or nolo contendere pleas, unless each clientgives informed consent, in a writing signed by the client. The lawyer's disclosureshall include the existence and nature of all the claims or pleas involved and ofthe participation of each person in the settlement.

(h) A lawyer shall not:

(1) make an agreement prospectively limiting the lawyer's liability to a client for

malpractice unless the client is represented by independent legal counsel , or

(2) settle a claim or potential claim for such liability with an unrepresented clientor former client unless that person is advised in writing of the desirability ofseeking and is given a reasonable opportunity to seek the advice of independentlegal counsel in connection therewith.

(i) A lawyer shall not acquire a proprietary interest in the cause of action orsubject matter of litigation the lawyer is conducting for a client, except that thelawyer may:

(1) acquire a lien granted by law to secure the lawyer's fee or expenses; and

(2) contract with a client for a reasonable contingent fee in a civil case.

(k) While lawyers are associated in a firm, a prohibition in the foregoingparagraphs (a) through (i) that applies to any one of them shall apply to all ofthem,

Rule 1.8 Conflict Of Interest: Current Clients: Specific Rule

(a) A lawyer who has formerly represented a client in a matter shall not thereafterrepresent another person in the same or a substantially related matter in which thatperson's interests are materially adverse to the interests of the former client unlessthe former client gives informed consent, confirmed in writing.(b) A lawyer shall not knowingly represent a person in the same or a substantiallyrelated matter in which a firm with which the lawyer formerly was associated hadpreviously represented a client:


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(1) whose interests are materially adverse to that person; and(2) about whom the lawyer had acquired information protected by Rules 1.6 and1.9(c) that is material to the matter; unless the former client gives informedconsent confirmed in writing,(c) A lawyer who has formerly represented a client in a matter or whose present

or former firm has formerly represented a client in a matter shall not thereafter:(1) use information relating to the representation to the disadvantage of the formerclient except as these Rules would permit or require with respect to a client, orwhen the information has become generally known; or(2) reveal information relating to the representation except as these Rules wouldpermit or require with respect to a client.

Rule 1.9. Duties To Former Clients

1. Representing Adverse Interests

Rule 1.7 prohibits concurrent conflicts of interest. If the representation of one client

will be directly adverse to another client, or theres a significant risk that the representation of

one or more clients will be materially limited by a lawyers responsibilities to another client, a

former client, or a third person by a personal interest of the lawyer, you ordinarily cannot

represent either client. There is an exception under subsection (b), but one of the requirements is

that the representation does not involve the assertion of a claim by one client against another

client represented by the lawyer in the same litigation or other proceeding before a tribunal.

[14] Ordinarily, clients may consent to representation notwithstanding aconflict. However, as indicated in paragraph (b), some conflicts arenonconsentable3, meaning that the lawyer involved cannot properly ask for suchagreement or provide representation on the basis of the client's consent. When thelawyer is representing more than one client, the question of consentability4mustbe resolved as to each client.

AR R RPC Rule 1.7 Comment

An interesting case on disqualification based on prior representation was Samontry v.

State, 2012 Ark. 105, 387 S.W.3d 178. This was a criminal case. As the Court explains:

3For some reason, Microsoft Words spell check doesnt think nonconsentable is a word.4Its never heard of consentability either.


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The facts leading up to this interlocutory appeal began on May 12, 2010,when Samontry and Phouangmany were arrested for prostitution and promotingprostitution. Jerry Richard, Samontry's ex-husband, was also arrested and chargedwith promoting prostitution. Samontry and Phouangmany, who were representedby Dan Hancock, and Richard, who was represented by Reggie Koch, were tried

by the Cabot District Court in Lonoke County. On October 4, 2010, Samontrywas found guilty of prostitution and second-degree promoting prostitution by thedistrict court, and Phouangmany was found guilty of prostitution. Richard,however, was acquitted of all charges. Samontry and Phouangmany then retainedKoch as their attorney and appealed their convictions to the Lonoke CountyCircuit Court.

Samontry v. State, 2012 Ark. 105, 2-3, 387 S.W.3d 178, 180 (2012).

The state moved to disqualify Koch on the ground that he had a conflict of interest arising

out of his previous representation of Richard. The defendants disagreed, saying that any conflict

had been waived. The Circuit Court granted the motion for disqualification. The defendants

appealed. The Arkansas Supreme Court reversed the Circuit Courts disqualification order.

2. Loyalty to a Client vs. Conflicts of Interest That Arise After EngagementAgreement's Signed

If a conflict arises after representation has been undertaken, the lawyer must

withdraw from the representation, unless the lawyer has obtained the informedconsent of the client under the conditions of paragraph (b). See Rule 1.16. Wheremore than one client is involved, whether the lawyer may continue to representany of the clients is determined both by the lawyer's ability to comply with dutiesowed to the former client and by the lawyer's ability to represent adequately theremaining client or clients, given the lawyer's duties to the former client. See Rule1.9. Comments [5] and [29].[5] Unforeseeable developments, such as changes incorporate and other organizational affiliations or the addition or realignment ofparties in litigation, might create conflicts in the midst of a representation, aswhen a company sued by the lawyer on behalf of one client is bought by anotherclient represented by the lawyer in an unrelated matter. Depending on thecircumstances, the lawyer may have the option to withdraw from one of therepresentations in order to avoid the conflict. The lawyer must seek courtapproval where necessary and take steps to minimize harm to the clients. See Rule1.16. The lawyer must continue to protect the confidences of the client fromwhose representation the lawyer has withdrawn. See Rule 1.9(c).


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AR R RPC Rule 1.7 Comment.

Can you protect yourself with an advance waiver. Whats that? Well:

Advance waivers are a kind of conflict of interest waiver. In a conflict of interest

waiver, clients give their consent for their lawyer or law firm to undertake certain(or any) kinds of representations that are adverse to them. Consent allows lawyersto undertake a class of representations, defined by the ethics rules of theappropriate jurisdiction, that the lawyers could not undertake otherwise. In thecase of the Model Rules, this class of representations includes those directly

adverse to a client, and those giving rise to a significant risk that the

representation of one or more clients will be materially limited because of thelawyer's other professional or personal obligations.

Michael J. DiLernia, Advance Waivers of Conflicts of Interest in Large Law Firm Practice, 22Geo. J. Legal Ethics 97, 98 (2009) [footnotes omitted]

Consent to Future Conflict.[22] Whether a lawyer may properly request a client towaive conflicts that might arise in the future is subject to the test of paragraph (b).The effectiveness of such waivers is generally determined by the extent to whichthe client reasonably understands the material risks that the waiver entails. Themore comprehensive the explanation of the types of future representations thatmight arise and the actual and reasonably foreseeable adverse consequences ofthose representations, the greater the likelihood that the client will have therequisite understanding. Thus, if the client agrees to consent to a particular type ofconflict with which the client is already familiar, then the consent ordinarily willbe effective with regard to that type of conflict. If the consent is general and open-

ended, then the consent ordinarily will be ineffective, because it is not reasonablylikely that the client will have understood the material risks involved. On the otherhand, if the client is an experienced user of the legal services involved and isreasonably informed regarding the risk that a conflict may arise, such consent ismore likely to be effective, particularly if, e.g., the client is independentlyrepresented by other counsel in giving consent and the consent is limited to futureconflicts unrelated to the subject of the representation. In any case, advanceconsent cannot be effective if the circumstances that materialize in the future aresuch as would make the conflict nonconsentable under paragraph (b).

AR R RPC Rule 1.7 Comment 22.

3. Consultation and Consent

Informed Consent.[18] Informed consent requires that each affected client be aware ofthe relevant circumstances and of the material and reasonably foreseeable ways that theconflict could have adverse effects on the interests of that client. See Rule 1.0(e)


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(informed consent). The information required depends on the nature of the conflict andthe nature of the risks involved. When representation of multiple clients in a single matteris undertaken, the information must include the implications of the commonrepresentation, including possible effects on loyalty, confidentiality and the attorney-client privilege and the advantages and risks involved. See Comments [30] and [31]

(effect of common representation on confidentiality).[19] Under some circumstances itmay be impossible to make the disclosure necessary to obtain consent. For example,when the lawyer represents different clients in related matters and one of the clientsrefuses to consent to the disclosure necessary to permit the other client to make aninformed decision, the lawyer cannot properly ask the latter to consent. In some cases thealternative to common representation can be that each party may have to obtain separaterepresentation with the possibility of incurring additional costs. These costs, along withthe benefits of securing separate representation, are factors that may be considered by theaffected client in determining whether common representation is in the client'sinterests.Consent Confirmed in Writing.[20] Paragraph (b) requires the lawyer to obtainthe informed consent of the client, confirmed in writing. Such a writing may consist of a

document executed by the client or one that the lawyer promptly records and transmits tothe client following an oral consent. See Rule 1.0(b). See also Rule 1.0(n) (writingincludes electronic transmission). If it is not feasible to obtain or transmit the writing atthe time the client gives informed consent, then the lawyer must obtain or transmit itwithin a reasonable time thereafter. See Rule 1.0(b). The requirement of a writing doesnot supplant the need in most cases for the lawyer to talk with the client, to explain therisks and advantages, if any, of representation burdened with a conflict of interest, as wellas reasonably available alternatives, and to afford the client a reasonable opportunity toconsider the risks and alternatives and to raise questions and concerns. Rather, the writingis required in order to impress upon clients the seriousness of the decision the client isbeing asked to make and to avoid disputes or ambiguities that might later occur in theabsence of a writing.

AR R RPC Rule 1.7 Comments

4. Ethical Traps in Representing the Insured at the Insurer's Expense

Cuervo hypothetical.

5. Conflicts of Interest With Former ClientsDefining Substantially Related

Matters

[2] The scope of a matter for purposes of this Rule depends on the facts of a

particular situation or transaction. The lawyer's involvement in a matter can alsobe a question of degree. When a lawyer has been directly involved in a specifictransaction, subsequent representation of other clients with materially adverseinterests in that transaction clearly is prohibited. On the other hand, a lawyer whorecurrently handled a type of problem for a former client is not precluded fromlater representing another client in a factually distinct problem of that type even


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though the subsequent representation involves a position adverse to the priorclient. Similar considerations can apply to the reassignment of military lawyersbetween defense and prosecution functions within the same military jurisdictions.The underlying question is whether the lawyer was so involved in the matter thatthe subsequent representation can be justly regarded as a changing of sides in the

matter in question.[3] Matters are substantially related for purposes of this Ruleif they involve the same transaction or legal dispute or if there otherwise is asubstantial risk that confidential factual information as would normally have beenobtained in the prior representation would materially advance the client's positionin the subsequent matter. For example, a lawyer who has represented abusinessperson and learned extensive private financial information about thatperson may not then represent that person's spouse in seeking a divorce.Similarly, a lawyer who has previously represented a client in securingenvironmental permits to build a shopping center would be precluded fromrepresenting neighbors seeking to oppose rezoning of the property on the basis ofenvironmental considerations; however, the lawyer would not be precluded, on

the grounds of substantial relationship, from defending a tenant of the completedshopping center in resisting eviction for nonpayment of rent. Information that hasbeen disclosed to the public or to other parties adverse to the former clientordinarily will not be disqualifying. Information acquired in a prior representationmay have been rendered obsolete by the passage of time, a circumstance that maybe relevant in determining whether two representations are substantially related.In the case of an organizational client, general knowledge of the client's policiesand practices ordinarily will not preclude a subsequent representation; on theother hand, knowledge of specific facts gained in a prior representation that arerelevant to the matter in question ordinarily will preclude such a representation. Aformer client is not required to reveal the confidential information learned by thelawyer in order to establish a substantial risk that the lawyer has confidentialinformation to use in the subsequent matter. A conclusion about the possession ofsuch information may be based on the nature of the services the lawyer providedthe former client and information that would in ordinary practice be learned by alawyer providing such services.

AR R RPC Rule 1.9

6. Principles of Imputed Disqualification

In First American Carriers, Inc. v. Kroger Co., 302 Ark. 86, 787 S.W.2d 669 (1990)

there was an eleven vehicle accident involving, among other vehicles, some tractor trailers. An

insurer for one tractor trailer, First American Carriers, called an attorney in a large law firm. He

did extensive work on the case. An insurer for another tractor trailer, owned by Kroger, called


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another attorney in the same firm and asked him a question. He did a minimal amount of work

on the case, unaware that his partner was heavily involved in the case. The second lawyer both

worked the case for about a day until they found out they were both working the same case, at

which point the one who had done the minimal amount of work withdrew. He had never actually

talked to a client, but had dealt exclusively with the adjustor. No confidential information had

yet been conveyed. Nonetheless, new counsel for Kroger moved to disqualify the firm as First

Americans lawyer due to conflict of interest. The trial court granted the motion. The Supreme

Court affirmed.

An attorney hired by an insurance company to represent an insured is, of course, the

attorney for the insured, not the insurer, even if the attorney never so much as talks to the

insured. The case is a good illustration of just how seriously the Arkansas Supreme Court takes

this rule.

7. Conflicts Arising From Witness Contacts

See the discussion ofBulsara v. Watkins, in the discovery section.

8. Resolving Conflicts of Interest

The easiest way to resolve conflicts of interest would be to simply withdraw. That

creates its own problems sometimes,but often its the only way to avoid going forward with an

impermissible conflict of interest.

As discussed above, sometimes you can resolve conflicts of interest by getting your

clients to sign a waiver. This requires disclosure, which can often be a challenge.


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B. Confidentiality

Rule 1.6. Confidentiality of information

(a) A lawyer shall not reveal information relating to 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).

(b) A lawyer may reveal such information to the extent the lawyer reasonably

believes necessary:

(1) to prevent the commission of a criminal act;

(2) to prevent the client from committing a fraud that is reasonably certain

to result in 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 injury to the financial interest 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;

(4) to secure legal advice about the lawyer's compliance with these Rules;

(5) to establish a claim or defense on behalf of the lawyer in a controversy

between the lawyer and the client, to establish a defense to a criminal charge or

civil claim against the lawyer based upon conduct in which the client was

involved, or to respond to allegations in any proceeding concerning the lawyer'srepresentation of the client or,

(6) to comply with other law or a court order.

(c) Neither this Rule nor Rule 1.8(b) nor Rule 1.16(d) prevents the lawyer from

giving notice of the fact of withdrawal, and the lawyer may also withdraw or

disaffirm any opinion, document, affirmation or the like.

C. Ethical Traps When Lawyers Change Firms

D. When a Lawyer May Testify (The Dangers of Combining the Roles of Advocate andWitness)

RULE 3.7. LAWYER AS WITNESS


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(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to bea necessary witness unless:(1) the testimony relates to an uncontested issue;(2) the testimony relates to the nature and value of legal services rendered in thecase; or

(3) disqualification of the lawyer would work substantial hardship on the client.

AR R RPC Rule 3.7

E. Communicating With Unrepresented Interested Parties

RULE 4.3. DEALING WITH UNREPRESENTED PERSON

In dealing on behalf of a client with a person who is not represented by counsel, alawyer shall not state or imply that the lawyer is disinterested. When the lawyerknows or reasonably should know that the unrepresented person misunderstandsthe lawyer's role in the matter, the lawyer shall make reasonable efforts to correctthe misunderstanding. The lawyer shall not give legal advice to an unrepresentedperson, other than the advice to secure counsel, if the lawyer knows or reasonablyshould know that the interests of such a person are or have a reasonablepossibility of being in conflict with the interests of the client.

F. Attorneys' Fees

The Arkansas Supreme Court Committee on Professional Conduct rarely gets involved inattorneys fee disputes.5 Occasionally there will be an issue that touches on attorneys fees. For

instance, in theory the committee would get involved in a case involving an excessive or

unreasonable fee.

Gone are the days in which a lawyer could be disciplined for charging too low a fee.

There was a time, however, when minimum fee schedules were in effect, and it was actually an

ethical violation to charge less than the minimum fee set by the bar association for particular

services. See Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).

5Telephone conversation with Stark Ligon, Executive Director, Arkansas Supreme Court Committee onProfessional Conduct. This conversation occurred three or four years ago. I must state that Judge Ligon was notgiving advice or opinion, just sharing information. The Committee is not allowed to give any form of advisoryopinion.


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The State Bar of Texas addressed the question whether a lawyer retained by an insurance

company to defend its insured, ethically comply with litigation/billing guidelines which place

certain restrictions on how the lawyer should conduct the

defense of the insured. In Opinion 533, the answer was no.

The opinion listed examples of limitations imposed on lawyers:

1. Whether to hire an expert in the defense of the insured;

2. What. if any, legal research may be conducted by the lawyer in defense of the

insured;

3. What, if any, depositions may be taken in the defense of the insured;

4. Whether the defense counsel may investigate the claims made against the

insured;

5. Whether particular depositions may be videotaped;

6. Whether any motions, including, motion to dismiss or for summary judgment,

may be filed; and

7. Whether the lawyer or a paralegal should engage in the preparation of variousdocuments.

Texas, like most American jurisdictions, considers that an attorney hired by an insurance

company to defend an insured is the attorney for the insured and owes the duty to the insured

the clientto exercise independent professional judgment to that client.

Texas has similar rules to Rule 1.8 (f). those above which permit another person to pay

for the lawyers services so long as there is no interference with the lawyer's independence

of professional judgment or with the client-lawyer relationship. This would require that the

insurance companys decision-making involvement be limited:

When a lawyer has been retained by an insurer to represent an insured, the

representation may be limited to matters related to insurance coverage. (Rule

1.02, Comment 4). However, when restrictions in litigation/billing guidelines

direct and control legal services rendered by the lawyer to a client and how those


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services are to be delivered, imposing such restrictions upon the lawyer would

result in a violation of the Rules by the lawyer. Although, the lawyer is free to

enter into an agreement with the insurer regarding his fee and services to be

rendered for the insured/client, such an agreement cannot override the ethical

responsibilities of the lawyer under the Texas Disciplinary Rules. In other words,

regardless

of such an agreement with the insurer, the lawyer must at all times be free to

exercise his or her independent professional judgment in rendering legal services

to the client.

Although there may be some reasonable requirements related to third-

party payment for legal representation, such as when to submit statements for

legal services rendered or similar routine matters

not affecting the actual representation of the client, no restriction or requirement

by the third-party insurer can direct or regulate the lawyer's professional judgment

in rendering such legal services or affect the lawyer's responsibility to the

insured/client. As stated in Rule 5.04, Comment 5:

Because a lawyer must always be free to exercise professional

judgment without regard to the interests or motives of a third

person, the lawyer who is employed or paid by one to representanother should guard constantly against erosion of the lawyer's

professional judgment. The lawyer should recognize that a person

or organization that pays or furnishes lawyers to represent others

possesses potential power to exert strong pressures against the

independent judgment of the lawyer. The lawyer should be

watchful that such persons or organizations are not seeking to

further their own economic, political, or social goals without

regard to the lawyer's responsibility to the client.

The Committee expresses no opinion as to the relationship between the

insured and the insurer regarding contractual obligations the insurance company

has to pay for legal services rendered. Those matters involve legal issues this

Committee has no authority to address. The Committee understands that an


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insured can enter into different types of contractual relationships with an

insurance company; however, such agreements between the insured and the

insurer cannot affect or diminish a lawyer's ethical responsibilities to the insured

under the Texas Disciplinary Rules once the insured becomes the client of the

lawyer.

Based on this rationale, the Texas opinion concluded that agreements under which the

attorney agrees to limitations that interfere with the lawyers exercise of professional judgment

were impermissible under the Texas Rules of Professional Conduct.

Supplemental Hypothetical:

You're at a cocktail party, or at church, or maybe at a cocktail party at church, andsomeone comes up to you:

SOMEONE:You're a lawyer, aren't you?

YOU:Yes.

SOMEONE:Can I ask you a question?

YOU:Sure, but the answer won't be any good unless you pay.

SOMEONE:Fair enough. There was this guy who got hit in the head by a box ofpapers that someone threw out a window. Is that covered by insurance?

YOU:Have him come see me, we'll find out.

That someone sent Hiram Tweedle to you. Hiram is a sanitation engineer for GarbageUs, the new private waste disposal company that has a contract with Saxon Heights,Arkansas for garbage disposal. He was at the home of O. Julius Bananaberry, the notoriousmood ring baron, to pick up the garbage, when suddenly a box of papers fell on his head.

Hiram's medical bills were paid for by workers' compensation. He was off work for a

month. He had a ruptured disk. The orthopedic surgeon selected by his employers workerscompensation carrier repaired the disk by surgery. He had physical therapy intermittently forseveral months. He was hurt, but he got well. He returned to his job with Garbage Us.However, now he's on a less dangerous route in nearby Gotham City.

It occurs to you that a third party claim against Bananaberry might be appropriate. Youinvestigate and you learn that Bananaberry told the workers compensation adjustor that helooked out the window of his study, and dropped the box of papers to the ground. He denies


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having seen Hiram, either before or after the accident. He first realized something was amisswhen he went down to throw the box into the garbage container and saw that the box wasalready missing.

Woford Ubiquitous, the driver of the trash truck, witnessed the accident. Hiram was

going to pick up Bananaberry's trash when a box flew out the second story window.Ubiquitous helped Hiram to safety, then retrieved the box and kept it. He turned it over to anagent of Consolidated Federated Mutual Insurance Company of Sweet Haven, NewHampshire.

Consolidated was not the workers compensation carrier. It must be Bananaberry'scarrier.

So you call Consolidated's local office, only to be told by adjustor Snidely Whiplashthat Consolidated denies coverage. "Why?" You ask. "I can't tell you that," answers theadjustor.

Even if Bananaberry doesn't have coverage, he's a good defendant. He cornered themarket on phlogiston, the substance that makes mood rings function. With his control ofmost of the phlogiston mining industry in the nation, it doesn't matter much whether he'sinsured. So you sue him. You take care to furnish a copy of the complaint to the insurancecompany.

Instead of one of the insurance defense lawyers you're used to, Bananaberry's personallawyer, Jacqueline Hyde, of Runne, Laquelle, and Hyde signs the answer.

You ask in discovery, does Bananberry have coverage? You learn that Bananaberry

asserts that he has coverage under not one but two policies issued by Consolidated, butConsolidated asserts some kind of policy defense. You request a copy of the policies. Onreviewing them, you can't figure out why in the world Consolidated isn't defending.

At every step of the litigation, you forward copies of the documentation toConsolidated. Periodically Consolidated drops you a line that they owe no coverage in thiscase, but usually they just ignore you.

You get a judgment of $85,000. It's not as much as you would have liked, but enough tomake pursuing the case worth it to you and your client.

You send the insurer a copy of the judgment by certified mail, return receipt requested.You are again ignored.

You now have to decide whether to execute on phlogiston mines, garnish Bananaberry'slavish income, or pursue his insurance coverage.


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Thirty one days after the certified letter you sent with the judgment was received, yousue Consolidated. Consolidated answers alleging it owed no duty to pay because of thecriminal acts exclusion in its policy.

Then Bananaberry intervenes, asserting not only that Consolidated owes the coverage

and owes him his defense costs back, but also alleging that the claim was denied in bad faith.

Throwing a box of documents out a second story window without looking may bestupid, but a quick survey of the statutes fails to turn up an offense of Defenestration ofDocuments.

In discovery, you learn that the documents in the box had to do with Bananaberry'scornering the market in phlogiston. Apparently some of the means he used to do that were inviolation of the antitrust laws. Fortunately for Bananaberry, the statute of limitations ran onthe last conceivable offense shortly before your trial.

Antitrust concerns must have been serious for Bananaberry. You learn in discovery thatBananaberry was upset when Whiplash told him that he would be well advised to drop theclaim for coverage. Whiplash suggested that he would hate to see those papers turn up in thehands of the Feds.

Consolidated takes the position that destruction of the evidence of his illegal businesspractices constituted obstruction of justice, a crime. The policy contains this exclusion:

We do not cover any bodily injury or property damage intended by, or which mayreasonably be expected to result from the intentional or criminal acts or omissions of, anyinsured person. This exclusion applies even if:

(a) such insured person lacks the mental capacity to govern his or

her conduct;

* * * * * *

(c) such bodily injury or property damage is sustained by a

different person than intended or reasonably expected; . . .

This exclusion applies regardless of whether or not such insured person is actuallycharged with, or convicted of a crime.

Bananaberry also has a homeowners' policy. That policy contains a business pursuitsexclusion under which the insurer denies coverage The "business pursuits" exclusion of thepolicy provides that the liability coverage does not apply "to bodily injury or propertydamage arising out of business pursuits except activities therein which are ordinarily incidentto non-business pursuits."


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tone of the aforesaid correspondence is intemperate, Plaintiffs counsel offers his apologies,

but frankly Plaintiffs counsel did not imagine that it would be necessary to bring these matters

to the attention of the Court at the time the letters were written.

6. Defendant has steadfastly refused to respond to the Interrogatory and has

stated his refusal in writing, thus requiring the intervention of the Court. Exhibit C and E.

7. The information sought is material to the issues to be litigated in this matter.

8. Plaintiff is entitled to discovery of the matter sought.

WHEREFORE, Plaintiff moves for an Order requiring Defendant to answer Plaintiffs

Request for Production, sign Plaintiffs authorization, and for all other just and proper relief.

Respectfully Submitted

________________________

O. Will Laquelle

Attorney for Plaintiff

RUNNE LAQUELLE & HYDE

8317 Ascension Rd.

Little Rock, AR 72204

Telephone: (501) 291-0369Facsimile (501) 246-8550

[email protected]

runnelaquellehyde.weebly.com

CERTIFICATE OF SERVICE

On this _____ day of ______, 2013, I served a copy of the above and foregoing Motion

upon counsel for defendant, Matt Murdock, by electronic mail ([email protected])and

facsimile (501-246-8570).

_________________________

O. Will Laquelle
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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EXHIBIT A

INTERROGATORY No. 17: Please state your Facebook password for your Facebook page

www.facebook.com/juliecmontague.

RESPONSE TO INTERROGATORY NO. 17: Objection. See Response to Request for Production No. 41 and

92. The same arguments are incorporated herein and adopted.

* * * *

REQUEST FOR PRODUCTION NO. 41: Please provide the Zip file of your Facebook page,

www.facebook.com/juliecmontague. Note: In order to do that, log onto your Facebook account by going to

Account>Account Settings>Download Your Information and download your content into a .zip file.

RESPONSE TO REQUEST FOR PRODUCTION NO. 41: Objection. This Request is burdensome andoppressive, seeks information that is not properly discoverable, seeks information protected by the attorney-clientprivilege, the work-product privilege, or any other privilege, protection, or immunity applicable under the governinglaw. Defendant further objects to this Requests for Production of Documents as it is overly broad, undulyburdensome, oppressive, and/or seeks information that is not relevant to the issues in this lawsuit or reasonablycalculated to lead to the discovery of admissible evidence. Further, much of the information is of a private natureand involves confidences of not only Defendant, but acquaintances of hers.

* * *

REQUEST FOR PRODUCTION NO. 92: Please sign the attached Authorization for release of OnlineData.

RESPONSE TO REQUEST FOR PRODUCTION NO. 92: Objection. This Request is burdensome andoppressive, seeks information that is not properly discoverable, seeks information protected by the attorney-clientprivilege, the work-product privilege, or any other privilege, protection, or immunity applicable under the governinglaw. Defendant further objects to this Requests for Production of Documents as it is overly broad, undulyburdensome, oppressive, and/or seeks information that is not relevant to the issues in this lawsuit or reasonablycalculated to lead to the discovery of admissible evidence. Further, much of the information is of a private nature

and involves confidences of not only Defendant, but acquaintances of hers. Further, this is not a proper method ofdiscovery under the Arkansas Rules of Civil Procedure.
http://www.facebook.com/juliecmontaguehttp://www.facebook.com/juliecmontaguehttp://www.facebook.com/juliecmontague


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AUTHORIZATION & CONSENT FOR RELEASE OF INFORMATION

Customer or Clients Full Name Date of Birth

______________________________________________________________________________Customer or Clients Screen Name Customer or Clients email address

Social Security Number Drivers License Number

This Authorization and Consent for Release of Information is to comply with the Stored Communications Act, 18

U.S.C. 2701-2712, particularly 18 U.S.C. 2702(b)(3). Any Internet Service Provider, electronic mail provider,

online social network, online dating service, or other provider of electronic data services is hereby requested and

authorized to disclose any and all information about me to O. Will Laquelle, Attorney at Law, RUNNE LAQUELLE &

HYDE, 8317 Ascension Rd. Little Rock, AR 72204, Telephone: (501) 291-0369, Facsimile (501) 246-8550,

[email protected]. I authorize the release of the following:

All stored electronic mail in my account

All stored electronic messages in my account

All photographs or files that I have uploaded to my account or my page

All content of my page or space.

Any photographs tagged with my name, whether uploaded by me or by someone else

Any data about my online activities, including online gaming

My downloadable Facebook information zip file.

I understand that the purpose of the release of this information is for use in litigation in the case of Montague v.

Capulet, Pulaski Circuit Court No. 60 cv -549.

This understanding does not purport to limit the purposes for whichthe information may be used. It may be used for any purpose.

A COPY MAY BE ACCEPTED AS A SUBSTITUTE FOR AN ORIGINAL FORM

If not previously revoked, this consent expires on the 31stday of December, 2050.

Client/Customer Signature Date
mailto:[email protected]:[email protected]:[email protected]


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EXHIBIT B

RUNNE LAQUELLE & HYDE8317 Ascension Rd.

Little Rock, AR 72204Telephone: (501) 291-0369Facsimile (501) 246-8550


O. Will Laquelle

[email protected]

January 16, 2012

Matt Murdock

Marvel Law Firm

3772 Hotspur Avenue

Gotham City, AR 78787VIA FACSIMILE: (501) 246-8570

Re: Montague v. Capulet, Pulaski Cir. 6- cv-549

Dear Matt:

What the hell is the matter with my Interrogatory No. 19, Request for

Production number 41 and 92 and why the hell wont you make your client sign

my authorization? Why do you always have to make everything so God-damned

difficult?

You know this information is relevant. I am having to defend your

frivolous and retaliatory counterclaim. She complains that she cant work,but Im led to believe there are pictures of her juggling oranges and

jousting at the Renaissance Fair on her Facebook page.

She refused to friend either me or my secretary, so I cant get the

comments, IMs and pictures any other way.

With warmest personal regards,

O. Will Laquelle

OWL/gs


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EXHIBIT C

Marvel Law Firm

3772 Hotspur AvenueGotham City, AR 78787

(501) 413-7574

Fax: (501) 246-8570

Matt Murdoch

[email protected]

Extension: 109

January 17, 2012

O Will Laquelle

VIA FACSIMILE: (501) 246-8550

Re: Montague v. Capulet , Pulaski Cir.60-cv-549

Will:

Yes, Im serious. This is a complete abuse of the system. There are some things that should bekept confidential. People say all kinds of things on the Internet.

You know that download would encompass all of her private messages, including some fromfriends that have nothing to do with this car wreck. Also, although Ive tried to stop her, she keeps IMingme about this case and all the things she cant do any more. If you can find a judge stupid enough togrant a motion to compel on this one, go right ahead and try. I think if you file a motion the judge willsanction you under Rule 11 and probably hold you in contempt for insulting his intelligence.

Cordially,

Matt MurdockAttorney at Law

MM/ss


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EXHIBIT D

RUNNE LAQUELLE & HYDE8317 Ascension Rd.

Little Rock, AR 72204Telephone: (501) 291-0369Facsimile (501) 246-8550


O. Will Laquelle

[email protected]

January 18, 2012

Matt Murdock

Marvel Law Firm

3772 Hotspur AvenueGotham City, AR 78787

VIA FACSIMILE: (501) 246-8570

Re: Montague v. Montague, Pulaski Cir. DR-549

Dear Matt:

I hereby request that you reconsider your objection to my Request for

Production No. 41 and No. 92. Your objections are without merit. The

information on a persons social networking page is not protected by

privilege. Even if, as you state, your client has communicated with you on

Facebook, she has waived the privilege as Facebook is in no way a proper way

to communicate in confidence.

It would not be burdensome or oppressive for your client to comply. I

have given her instructions, and instructions are available on Facebooks

highly informative help pages as well. It would take about a minute to order

the file and probably five or so minutes to download it, depending on your

clients ISP.

Please forward the requested information so that we can avoid having to

bother Judge deSaisieve with this dispute.

With warmest personal regards,

O. Will Laquelle

OWL/gs


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EXHIBIT E

Marvel Law Firm3772 Hotspur Avenue

Gotham City, AR 78787

(501) 413-7574Fax: (501) 246-8570

January 21, 2012O Will LaquelleVIA FACSIMILE: (501) 246-8550

Re: Montague v. Capulet Montague, Pulaski Cir. DR-549

Will:

The answer remains not just no but hell no.

Theres not a single reported decision in Arkansas authorizing such a wide -ranging and irrelevantfishing expedition of a litigants Facebook account.

Cordially,

Matt MurdockAttorney at Law

MM/ss

P.S. Dont think youre going to get away with not providing your first letter, because if you dont, I will.