Year 1991 Ethics Opinions
THE ASSOCIATION OF
THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION 1991-2
COMMITTEE ON PROFESSIONAL AND JUDICIAL
ETHICS
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April 30, 1991
ACTION: Formal Opinion
OPINION:
Litigants burdened with the
economic and psychological costs of protracted litigation may
become frustrated with the process and conclude that if they were
able to circumvent the lawyers and speak directly with their
adversaries (who, they assume, are equally concerned by the
escalating legal costs), then the dispute could be more easily
and cheaply resolved. Such a client may simply communicate with
the adversary, without alerting counsel for either side. In other
cases, the client may inform his or her lawyer first and ask
whether such a direct client-to-client communication would be
permissible or advisable. The lawyer may, in fact, believe that
direct client communication would promote efforts efficiently to
settle or resolve the litigation.
In this Opinion, the Committee
addresses two ethical issues arising from these circumstances:
May a lawyer, without opposing
counsel's consent, advise a client to communicate with a
represented adverse party directly in order to explore
settlement?
What are the ethical obligations
of a lawyer who is informed by a client that the client either
intends to communicate with or has already communicated with a
represented party in order to engage in direct settlement
negotiations?
We conclude that (1) a lawyer may
not advise or encourage a client to communicate directly with an
adverse party known to be represented by counsel, without the
counsel's consent; (2) a lawyer is not ethically obligated to
discourage or interfere with client-initiated direct
communications with an adverse party; and (3) if a
client-initiated communication results in subsequent
negotiations, a lawyer may not ethically assist or advise the
client in the conduct of those negotiations, a lawyer may not
ethically assist or advise the client in the conduct of those
negotiations, without the knowledge and consent of opposing
counsel.
DR 7-104(A) of the Lawyer's Code
of Professional Responsibility states:
"During the course of the
representation of a client a lawyer shall not: (1) Communicate or
cause another to communicate on the subject of the representation
with a party the lawyer knows to be represented by a lawyer in
that matter unless the lawyer has the prior consent of the lawyer
representing such other party or is authorized by law to do
so."
Under this provision, a lawyer is
unambiguously prohibited from communicating with an adverse party
known to be represented by counsel without either consent of
counsel or some legal authorization. This rule "does not
admit of exceptions". N.Y. City 79-13; see also N.Y. State
463 (1977) ("[w]here a person is represented by counsel,
there is an absolute proscription which serves to bar any and all
communications relating to the matter for which that person has
retained counsel"). n1
n1 DR 7-104(A) is not limited to
where the lawyer is representing a client in litigation or other
adversarial proceedings, although the issues addressed in this
Opinion arise in that context.
In explaining the rationale for DR
7-104(A)(1), this Committee has previously said:
"Ours is an adversary system
of justice, and that system 'in its broadest sense functions best
when persons in need of legal advice or assistance are
represented by their own counsel.' DR 7-104(A)(1) is designed to
protect the adverse party's right to effective representation of
counsel." N.Y. City 81-29 (1981) (citing N.Y. City 80-46
(1980)).
The rule "preserves the
proper functioning of the attorney-client relationship" by
preventing interference with the adverse party's ability to
retain, and seek the advice of, his or her own counsel in all
phases of the case, including settlement. American Bar
Foundation, Annotated Code of Professional Responsibility 332
(1978) (hereafter "Annotated Code") ("the rule is
designed to prevent opposing counsel from impeding an attorney's
performance"); N.Y. County 405 (1952) ("the adverse
party is entitled to the advice of his attorney in negotiating a
settlement"). Thus, the rule is intended not only to
"prevent situations in which a represented party may be
taken advantage of by adverse counsel" (Frey v. Department
of Health and Human Services, 106 F.R.D. 32, 34 (E.D.N.Y. 1985),
quoting Wright v. Group Health Hosp., 103 Wash. 2d 192, 691 P.2d
564, 567 (1984); see also Annotated Code at 332-33), but also to
prohibit a lawyer's inadvertent or well-intentioned communication
with a represented adverse party. See, e.g., N.Y. City 81-29
(lawyer prohibited from communicating with opposing party
directly to discuss settlement, despite evidence that opposing
counsel "will obstruct efforts at a peaceful
resolution"); see also In re McCaffery, 549 P.2d 666, 668
(Or. 1976) (a lawyer's inadvertent or negligent direct
communication with adverse party violated DR 7-104(A)(1)).
In addition, DR 7-104(A)(1)
specifically prohibits a lawyer from "caus[ing]
another" to communicate with an adverse party where the
lawyer could not do so. At a minimum, this provision means that a
lawyer may not circumvent the prohibition of DR 7-104(A)(1) by
delegating the task to a nonlawyer, In re Burrows, 291 Or. 135,
629 P.2d 78 (1979), or by using another person to communicate in
a manner that would be impermissible if engaged in by a lawyer.
Schantz v. Eyman, 418 F.2d 11, 13-14 (9th Cir. 1969), cert.
denied, 397 U.S. 1021 (1971). See ABA/BNA Lawyer's Manual on
Professional Conduct, 71:302 (1988).
We conclude that the lawyer's
client is "another" for purposes of this prohibition.
This view is consistent with several other opinions on the
subject, including one by this Committee. N.Y. City 302 (1934)
(lawyer may not direct client's settlement negotiations with
represented adversary); see also In re Marietta, 569 P.2d 921
(Kan. 1977) (lawyer sanctioned for preparing release and advising
client to pass it on to represented adverse party); Va. St. Bar
771 (1986) (lawyer who is party represented by counsel may not
discuss settlement directly with represented adverse party where
the discussion is "merely a device by which counsel to the
party litigant attorney accomplishes by his client that which he
might not do directly"); and S.F. Bar Informal Opinion
1985-1 (1985) ("it would be inappropriate . . . for [a]
lawyer to use the client as an indirect means of communicating
with the adverse party" in settlement negotiations).
Thus, under DR 7-104(A), absent
consent of opposing counsel or authorization by law, a lawyer may
not "cause" his or her client to communicate directly
with a represented adverse party. Before discussing further the
question of what constitutes "causing" the client to
communicate, we turn first to the issue of whether a lawyer has
any obligation to attempt to dissuade a client who has decided on
his or her own to engage in such communication.
II.
The ABA Committee on Ethics and
Professional Responsibility first addressed the issue of
client-initiated communications with a represented adverse party
in Formal Opinion 75 (1932). There, counsel for both parties had
entered into a stipulation which permitted the plaintiff to move
the Court for entry of judgment upon notice. After plaintiff gave
the notice, defense counsel asked whether he could "advise
or sanction an effort by his client to procure a compromise
adjustment of the suit, through a personal interview with the
plaintiff, without the knowledge of plaintiff's counsel".
The ABA Committee, engaging in an analysis similar to ours,
answered this question in two parts. The Committee first
concluded that the lawyer could not advise his or her client to
communicate with the represented adverse party because doing so
would violate the then existing Canon 9, a predecessor to DR
7-104(A)(1). n2 The Committee then went further, ruling that the
lawyer had an affirmative obligation to dissuade the client from
communicating with the other side, even when the communication
was proposed by the client:
"Even should the client
suggest a personal interview for the purpose of compromise
without the consent of the adversary's attorney, it would be the
duty of his attorney to endeavor to dissuade him from so doing,
as Canon 16 provides, 'A lawyer should use his best efforts to
restrain and prevent his client from doing those things which the
lawyer himself ought not to do.'" Formal Opinion 75 (1932).
n2 Canon 9 stated: "A lawyer
should not in any way communicate upon the subject of controversy
with a party represented by counsel, much less should he
undertake to negotiate or compromise the matter with him, but
should deal only with his counsel."
Subsequent opinions of other bar
associations followed the holding of Formal Opinion 75, including
the "duty to dissuade" language, even though the Code
of Professional Conduct had replaced the original Canons. See,
e.g., N.Y. County 618 (1973) (lawyer must inform opposing counsel
of client's intention to meet with represented third party); S.F.
Informal Opinion 1973-25 (under DR 7-104(A)(1), lawyer obligated
to inform opposing counsel of client-initiated communications
without notice to opposing counsel, lawyer "should either
advise against any similar future conduct and/or seek to restrain
his client from doing so"); ABA Informal Opinion 524 (1962)
withdrawn in Formal Opinion 84-350 (1984) ("a lawyer should
use his best efforts to restrain and prevent his client from
communicating with the other party without the consent of the
other party's attorney").
The ABA Model Rules, adopted in
1983, have led to a different approach. The comment to Model Rule
4.2 -- a rule substantially identical to DR 7-104(A)(1) -- states
that "parties to a matter may communicate directly with each
other". In Formal Opinion 84-350 (1984), the ABA Committee
withdrew Formal Opinion 75 and Informal Opinion 524, both of
which required lawyers to discourage direct client-to-client
communications. The Committee gave little explanation for its
decision, stating only that the withdrawn opinions were
inconsistent with the Model Rules and the Model Code. n3 Other
bar associations, apparently following the ABA Committee's lead,
have recently held that lawyers are not obligated to discourage
direct communications between represented parties. See Va. St.
Bar 771 (1986) ("it is not ethically improper for a party
litigant to contact an adverse party litigant directly",
unless the communication is a device by counsel to bypass
opposing counsel); S.F. Informal Opinion 85-1 (1985) (lawyer not
obligated to discourage clients from attempting to negotiate a
settlement between themselves); but see Mich. St. Bar CI 1206
(1988) (lawyer representing himself in lawsuit may not
communicate with represented adversary directly without
permission of opposing counsel).
n3 Formal Opinion 84-350 (1984)
leaves it unclear whether both parts of Formal Opinion 75 are
withdrawn, or just the part regarding client-initiated
communications with represented adversaries. We believe the ABA
Committee intended to withdraw only the latter part of the
opinion. Formal Opinion 84-350 describes the withdrawn opinion as
"sanctioning attempt by client to reach compromise
settlement by direct communication with adverse party".
(Emphasis added.) Thus, the new opinion focused only on the part
of Formal Opinion 75 which concerned client-initiated
communications with adversaries, not the part which concerned
whether a lawyer could "advise" direct client
communications.
In any event, to the extent Formal
Opinion 84-350 withdrew the prohibition against lawyers advising
their clients to communicate with represented adverse parties, we
decline to follow it. For the reasons stated in Part I of this
opinion, such advice, in our opinion, would violate DR
7-104(A)(1).
We conclude that DR 7-104(A)(1)
does not require a lawyer to attempt to dissuade or prevent his
or her client from engaging in client-initiated communications
with a represented adverse party. Similarly, the rule does not
require a lawyer to advise opposing counsel, whether the lawyer
learns about such communication in advance or only after the
fact.
This conclusion is supported by
the language of the rule. DR 7-104(A)(1) prohibits a lawyer from
"communicat[ing] or caus[ing] another to communicate",
with another party absent counsel's consent. (Emphasis added.)
When the client independently initiates communications with the
other side, i.e., acts on his or her own, the lawyer cannot
fairly be said to have "cause[d]" the client's acts. In
addition, we find nothing in the Code that requires lawyers
actively to discourage their clients from doing what the lawyers
themselves cannot do, except, of course, criminal or fraudulent
conduct. See, e.g., DR 7-102. In this aspect, the Code is clearly
different from the original Canons, on which Formal Opinion 75
(1932) was based. Former Canon 16 required lawyers to use
"best efforts to restrain and prevent [their] clients from
doing those things which the lawyer[s] [themselves] ought not to
do".
Finally, our conclusion comports
with "the interest of the public in the proper
administration of justice: an interest which requires that the
judicial machinery be kept free of unnecessarily protracted
litigation". N.Y. State 478 (1978). At common law, the
parties to a lawsuit have "an absolute right to settle a
case without the consent of [their] attorney[s]". Raabe v.
Universe Tankships, 263 F. Supp. 786, 787 (S.D.N.Y. 1966);
accord, Lewis v. S.S. Baune, 534 F.2d 1115, 1122 (5th Cir. 1976);
Cook v. Moran Atlantic Towing Corp., 76 F.R.D. 481, 484 (S.D.N.Y.
1977). Requiring a lawyer who learns of direct client-to-client
settlement negotiations to discourage or disrupt those
negotiations would interfere with that right and could possibly
cause the parties to continue to participate in litigation
unnecessarily.
III.
We have concluded that a lawyer
may not ethically "cause" his or her client to
communicate directly with a represented adverse party but has no
obligation to discourage the client from doing so. We now turn to
the issue of what actions would constitute "causing"
the client so to communicate.
We conclude that "caus[ing]
another to communicate with a party" in this context
includes not just using the client as an agent for or in place of
the lawyer for making the communication (i.e., where the lawyer
directs, supervises or plans the substance of the communication),
but also the act of suggesting or recommending to the client that
he or she engage in such communication, even though the lawyer
has no further involvement in or knowledge of the substance of
the communication that subsequently takes place, or the
endorsement or encouragement of such a course of action, even
when it is first raised or proposed by the client. The implicit
objective in any such suggestion or recommendation is the
exclusion of opposing counsel from the settlement negotiation,
which would deprive the adverse party of his or her lawyer's
assistance. EC 7-18; N.Y. City 81-29. Even where the lawyer does
not suggest to or discuss with the client the substance of a
potential communication with the other party, the lawyer can
still in fact "cause" the client to communicate by
observing or advising that it might be desirable for the client
to by-pass opposing counsel and speak directly to the adverse
party, if the lawyer's action is a material factor in the
client's final decision to engage in such a communication.
Therefore, we would deem the suggestion or recommendation by the
lawyer that the client communicate directly with the adverse
party to be intended to cause the client to so act and, as such,
to be in violation of DR 7-104(A)(1). n4
n4 There will be close questions
as to whether a particular communication is in fact
client-initiated or "cause[d]" by the lawyer. We would
focus not on the client's actual subjective decision-making
process but instead on whether the lawyer's words and actions
would reasonably be understood to suggest or encourage that the
client engage in the communication. Even that distinction might
be seen to invite circumvention through carefully worded
discussions between the lawyer and client. Obviously, such
circumvention would be less likely if, for example, the lawyer
had an affirmative obligation to dissuade or try to prevent such
direct communication, if made known to him or her, or even if a
lawyer were prohibited from discussing the subject altogether.
However, we do not want to articulate a rule that would
unnecessarily curtail the assistance of counsel available to a
client. In any event, we believe that the distinction between
client-initiated and lawyer-caused communication is consistent
with the Code and is meaningful and workable.
In sum, we conclude that a lawyer
violates DR 7-104(A)(1) by proposing or suggesting to a client
that the client communicate directly with a represented adverse
party or by encouraging or recommending such action where the
client raises the matter. Therefore, if a client asks the lawyer
whether he or she should approach the adverse party directly, the
lawyer may not ethically recommend or endorse such action. The
lawyer may inform the client that such communication is not
prohibited and that the client has the right to engage in it if
he or she independently decides to do so. As a matter of
prudence, however, we believe that the lawyer should also advise
the client promptly that the lawyer cannot assist, direct or
otherwise participate in such communication, absent the consent
of opposing counsel. Similarly, although we conclude that lawyers
need not discourage or interfere with client-initiated settlement
negotiations between represented adverse parties, a lawyer who
learns that a client has initiated settlement negotiations with
the adverse party may not, thereafter, advise the client as to
how to proceed with those negotiations or otherwise assist in
them in any other manner that would constitute using the client
as a vehicle for communicating with the represented adverse
party, absent notice to and consent from opposing counsel.
IV.
As a caution, we note that,
despite the restrictions articulated above, there can be
situations where a lawyer may not be able prudently or ethically
simply to stand by while the clients engage in settlement
negotiations, even though those negotiations are party-initiated
and conducted.
For example, the lawyer may not,
consistent with his or her professional obligations to the
client, fail to take action if the lawyer is aware that the
client is engaged in or contemplating conduct that would be
detrimental to the client's interest in the context of the
representation. DR 7-101(A)(3) prohibits the lawyer from
"intentionally . . . prejudic[ing] or damag[ing] the client
during the course of the professional relationship . . .,"
and EC 7-8 states:
"A lawyer should exert best
efforts to insure that decisions of the client are made only
after the client has been informed of relevant considerations. A
lawyer ought to initiate this decision-making process if the
client does not do so."
Thus, if the lawyer learns that
the client, as a result of direct discussions with the adverse
party, is about to enter into an unfavorable settlement or commit
some other act prejudicial to the client's position, the lawyer
may be obligated to take some action to attempt to protect the
client's interests.
At the same time, a lawyer may not
stand idly by if he or she becomes aware that the client is in
the process of the settlement negotiations engaged in defrauding
the adverse party. The Code provides that a lawyer may not
"assist the client in conduct that the lawyer knows to be
illegal or fraudulent". DR 7-102(A)(7). If the lawyer learns
that the client has perpetrated a fraud on the adversary in the
course of direct communications, then the lawyer "shall
promptly call upon the client to rectify the same" and, if
the client refuses to do so, "shall reveal the fraud to the
affected person or tribunal, except when the information is
protected as a confidence or secret". DR 7-102(B)(1).
We believe that in either of these
circumstances, the lawyer should ask the client for permission to
disclose to and seek consent from the opposing lawyer to
participate or assist in the negotiations, consistent with DR
7-101(A)(1). If the client refuses to give this permission, the
lawyer may decide to withdraw from the representation under DR
2-110(C)(1)(c) (where the client "insists that the lawyer
pursue a course of conduct which is . . . prohibited under the
Disciplinary Rules") or DR 2-110(C)(1)(d) (where client
"renders it unreasonably difficult for the lawyer to carry
out employment effectively"), if withdrawal can be
accomplished consistent with DR 2-110(A).
Finally, we note that difficult
questions can easily arise in this area, and we would advise that
care and prudence will often dictate that the lawyer urge his or
her client to agree to the notification of opposing counsel of
the fact of the discussions, particularly if and when the lawyer
learns that the client-initiated communications are likely to
develop into a significant dialogue. The parties then can conduct
negotiations directly without lawyers present, if they so choose,
but still receive separately counsel and advice about the
negotiations from their individual lawyers, without presenting
their lawyers with difficult ethical issues. The lawyer will best
be able to satisfy both the lawyer's ethical obligations under
Canon 7 and his or her responsibilities to the client where the
lawyers for all parties are at least informed that settlement
negotiations between the parties are occurring.
