In my 20 years of practicing personal injury law in Virginia, the ethical quandaries and challenges I've encountered are numerous. What should you do if a client in an injury case asks for a loan? How should you handle a driver and a passenger injured in the same accident each wanting to hire you to handle their case? Every client and every case is unique and poses its own ethical considerations but the information in this article will provide general guidelines and tips for handling such ethical dilemmas.
I. Know How to Walk the Ethical Line
A. Common Threats to the Attorney-Client Relationship
1. Plaintiff in Injury Case Needs Money and Asks for Loan
When someone has been hurt and has suffered lost wages, they are often under financial pressure unless they have a significant savings. Thus, the plaintiff-side injury attorney is sometimes asked by the client for some money during the pendency of the case.
The Rules of Professional Conduct applicable in Virginia expressly prohibit the lawyer from paying for the living expenses of the client. Rule 1.8(e).
Rule 1:8 Conflict of Interest: Prohibited Transactions
(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that
(1) A lawyer may advance court costs and expenses of litigation, provided the client remains ultimately liable for such costs and expenses; and
(2) A lawyer representing an indigent client may pay court costs and litigation expenses on behalf of the client.
When an injury client calls to ask me for pre-settlement money, I explain to them that the ethics rules do not allow a lawyer to give or loan the client money even if I wanted to do it. I explain that I understand their situation and will do everything I can to expedite the handling of their case. If the situation is really dire and the client has already exhausted all other possibilities, I will give them the number for one of the loan companies that will lend money non-recourse based on the assignment of personal injury proceeds. In doing so I explain to the client that they will end up paying much more back to these companies than whatever they borrowed. I explain that the client is much better off borrowing money from a family member or even running up their own credit cards as the interest rates will be more reasonable there than with these loan companies. Nonetheless it is sometimes necessary to advise the client about this possibility to create some financial breathing room for them.
These loan companies create a lot of practical problems in that the client will get far less in their pocket at the end of the case than they would have gotten if no loan was made, and the clients often forget that they actually got the benefit of the money when they were in dire straits to begin with. Accordingly, a case loan poses some complications in getting the case settled.
2. Ethically Handling an Attorney's Fee Lien
If the injury client fires the lawyer without cause, then the lawyer is entitled to enforce his attorney fee lien. See Rule 1.8(j).
Rule 1:8 Conflict of Interest: Prohibited Transactions.
(j) A lawyer shall not acquire proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer 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 contingency fee in a civil case unless prohibited by Rule 1.5.
Thus the lawyer who is terminated, not for cause, can assert an attorney's fee and cost lien pursuant to Virginia Code § 54.1-3932. Note however that the attorney's fee lien cannot seek fees on anything other than a quantum merit basis, meaning number of hours spent times a reasonable hourly rate. Heinzman v. Fine, 217 Va. 958, 234 S.E.2d 282 (1977). There is no right to ask for a percentage of the recovery in this situation ethically. Id.
3. Two Potential Clients, a Driver and a Passenger Injured in the Same Vehicle, Want to Hire You: What Do You Do?
It often happens that two people contact the plaintiff's injury lawyer both wanting to have the lawyer represent them for the same accident. Typically, they are relatives or at least friends. Let's use an example where a husband is the driver and his wife is the passenger. Both have been injured, but the wife/passenger's injuries are worse. The question is can you represent them both and as a practical matter how do you proceed. The rule to consult is Rule 1:7.
Rule 1:7 Conflict of Interest: General Rule.
(a) Except as provided in Paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
(1) Representation of one client will be directly adverse to another client; or
(2) There is significant risk that the representation of one or more clients will be materially limited by lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under Paragraph (a), a lawyer may represent a client if each affected client consents after consultation, and:
(1) A lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) Representation is not prohibited by law;
(3) 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; and
(4) The consent from the client is memorialized in writing.
Thus, in the husband and wife example, the issue is going to be whether representing both is violative of Rule 1:7(a) and if so whether there is a way to disclosure and waive the conflict by consent under Subsection (b). Another related section in this situation is the confidentiality rule because if the lawyer gets confidences from a client, the lawyer cannot reveal them if harmful to that person.
See Rule 1:6.
Rule 1:6 - Confidentiality of Information
(a) A lawyer shall not reveal information protected by the attorney-client privilege ... gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client unless the client consents after consultation....
So in figuring out the conflict of interest question with the couple, the lawyer has to be careful not to create a confidentiality of information problem with a person he does not want to represent because of a conflict. The best thing to do is to explain to the couple that you need to talk to them individually for reasons of lawyer ethics to protect both of them. Then you begin by talking to the wife alone. You start with the wife because she has the potentially better case both because she is a passenger who is incapable of contributory negligence in Virginia as well as the fact that her case may be more valuable because she is the more hurt person. The key question is what did her husband do wrong if anything behind the wheel. If there is no conceivable way that he could be at fault, or even be accused of being at fault, i.e., a rear end collision where he is fully stopped before the impact, then perhaps you can figure out a way to represent both of them.
However, the more common scenario is there is some potential for allegation by the defendant of fault by the husband/driver. The exploration of potential future conflict under rule 1:7(a)(2) requires imagination and experience in such cases to draw from. For example, let's say that the husband is pulling out of a shopping center onto the main highway and the question may become who had the right of way between the husband and the other driver. Then, you should get permission to have the wife hire you and get another lawyer friend from a different firm to represent the husband. This will avoid any current or future potential conflict under Rule 1:7(a).
Be prepared by having a friend at another firm who can help out in this situation. The trick is to make it as convenient for the couple as you can perhaps by inviting your friend to meet the husband at your office at the same time that you are meeting with the wife. You can explain to both why it is that this is in their best interests to have separate counsel. You want to do so without getting any confidences from the husband which could be problematic under Rule 1:6.
A different outcome may obtain if the wife, based on facts known to her directly, states unequivocally there is no possible negligence on the husband. Then it may be possible to represent them both although perhaps not the wisest course. In a red light/green light case it may be that the wife's testimony would be that her husband had the green light. If that is her rock solid testimony, then she may be unable to make a claim against her husband under the Massey v. Firmstone, 134 Va. 450, 462, 114 S.E. 652, 656 (1922), doctrine that she is held to her own story and can't use other facts to contradict it.
Even if the lawyer feels there may be a conflict under Rule 1.7(a), the conflict is waivable under subsection (b) if the lawyer reasonably believes that he will be able to provide competent and diligent representation of each of the clients, and if the lawyer is not going to have to assert a claim by one client against the other. If the lawyer feels that Subsection (b) applies and the appropriate warnings given to the client and confirmed in writing, then he can proceed. "Memorialized in writing" in Rule 1:7(b)(4) means at least a confirming letter from the lawyer to the client, but the better practice is to get a signature on the disclosure and consent from the clients.
One problem in ethical conflicts analysis is that situations change. The lawyer has to really think through all of the implications of what may happen in the course of litigation before going the disclose and waive route. For example, in the rear-ender case, what if the defendant in litigation ends up saying that the husband driver jumped over into the defendant's lane just before the collision happened. This may make the husband/driver potentially negligent and at fault jointly and severally. Now the wife would potentially have to make a claim against the husband in case that defense theory held water with a jury. The lawyer has to hope that this defense theory does not first surface after the statute of limitations has run to add the husband as a defendant. If the facts do evolve this way, then the lawyer may have to get out of both cases at that time because he is no longer within the safe harbor of Subsection (b) because he may have to file a suit against his other client, the husband/driver.
Some of the biggest obstacles to doing the smart thing and sending the husband driver to another lawyer include the lawyer's desire to handle things most expediently, not to give up fee, and not to want to annoy the prospective clients with technicalities. None is a good reason to get into a potential ethical problem. It may be more trouble and it may require some explaining to the clients why it is necessary, but it almost always better to represent only one of the two persons in this scenario.
B. Dealing Fairly with Conflicts Involving Multiple Defendants
The question of conflicts between multiple defendants is really one best addressed by defense lawyers. With the warning that I am exclusively a plaintiff-side lawyer here goes. One of the common situations where there are two defendants in an automobile accident case is where the defendant is a truck driver operating a vehicle owned by his employer. Can the defense lawyer represent both the defendant driver and his employer who has also been sued under the theory of respondeat superior? The starting point is for the insurance defense lawyer to be clear about whom he represents:
Rule 1:13 - Organization as Client.
(a) A lawyer employed retained by an organization represents the organization acting through its duly authorized constituents.
(b) If a lawyer before an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a manner related to the representation that is a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization. In determining how to proceed, the lawyer shall give due consideration to the seriousness of the violation and its consequences. The scope and nature of the scope and nature of the lawyer's representation, the responsibility in the organization and the apparent motivation of the person involved, the policies of the organization concerning such matters and any other relevant considerations. Any measures taken shall be designed to minimize disruption of the organization and the risk of revealing information related to the representation to persons outside the organization. Such measures may include among others:
(1) Asking for reconsideration of the matter;
(2) Advising that a separate legal opinion on the matter be sought for presentation to an appropriate authority in the organization;
(3) Referring the matter to higher authority in the organization including if warranted by the seriousness of the matter, referral to the highest authority that can act in behalf of the organization as determined by applicable law.
(c) If, despite the lawyer's efforts in accordance with Paragraph (d), the highest authority that can act on behalf of organization insist upon action, or refusal to act, that is clearly a violation of law and is likely to result in substantial injury to the organization, the lawyer may resign or may decline to represent the client in that matter in accordance with Rule 1.16.
(d) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when it is apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.
(e) A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or the constituents subject to the provisions of Rule 1:7. If the organization's consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.
Thus, in simple negligence cases where the truck driver just rear ended someone and there is no other allegation of negligence, the defense lawyer can presumably serve as the defense lawyer for both the corporate employer as an organization as well as the individual driver. If there is a question of whether the driver was acting within the scope of his employment at the time of the crash, then a Rule 1:13(d) and 1:7 conflict analysis needs to be done. Typically, the insurance policy for the truck driver is going to cover both him and the corporate employer under respondeat superior liability, but if the company asserts that the driver was not driving at the time on company business, then defense counsel must be clear in disclosing the potential conflict to the driver and perhaps separate counsel is required. Likewise, if the driver has left the company, he may want his own attorney as well. The insurance defense attorney must look at Rule 1:7 closely under the facts of each case.
C. The Ethics of Disclosing Information Which Defeats Coverage
Again I give the caveat that I am a plaintiff's lawyer attempting to comment on the practical, ethical implications of the defense lawyer's relationship with their client. In automobile cases the insurance defense lawyer, whether an in-house captive law firm working exclusively for an insurer, or a separate, independent law firm hired by the insurance carrier on a case-by-case basis or under a contract, the tripartite relationship is the same. Under the insurance contract of the liability carrier, the insurer promises to provide an attorney and a defense to their customer as part of what the customer is getting in their insurance contract. This creates the potentially awkward, three-way relationship where the insurance company is paying for the defense lawyer, but the actual client is the individual defendant accused of negligence in the case. The basic relationship is allowed by Rule 1:8(f).
Rule 1.8 Conflict of Interest: Prohibited transactions.
(f) The lawyer shall not accept compensation for representing the client from one other than the client unless:
(1) The client consents after consultation.
(2) There is no interference with the lawyer's independence, professional judgment or with the client-lawyer relationship; and
(3) Information related to the representation of a client is protected as required by Rule 1.6.
What happens if the defendant tells his lawyer some facts which might void or jeopardize the insurance coverage? What are the lawyer's obligations in that situation?
The starting point is to realize that the named defendant is the client, not the insurance company. See Norman v. Insurance of North America, 218 Va. 718, 239 S.E.2d 902, 907 (1978). The duty of loyalty is to the client, the individual driver.
One example of the dilemma of the disclosure of policy voiding information could be a twenty-two year old driver who causes a wreck in his friend's uninsured car. The at-fault driver claims coverage under his parent's auto policy. The young man used to live at home, but tells his defense lawyer that he was living on his own at the time of the wreck. The client and his parents had failed to advise the insurance company that he no longer lived with his folks. The young man therefore is no longer a resident relative entitled to coverage under the parent's policy. This fact told to the defense attorney, if revealed to the insurer, would be detrimental to the client as the insurer would likely refuse to defend the case and pay any award. The defense attorney cannot run to tell the carrier because of Rule 1:6(a).
Rule 1.6 - Confidentiality of Information.
(a) a lawyer shall not reveal information protected by the attorney/client privilege... gained in the professional relationship... the disclosure of which would be... likely to be detrimental to the client... except as stated in paragraph (b)...
The general rule is that the lawyer would not be free to advise the insurance company about some reason to decline coverage for the client.
Under Rule 1.6(b), some exceptions appear, so "to the extent a lawyer reasonably believes necessary, the lawyer may reveal:
... (3) Such information which clearly establishes that the client has, in the course of representation, perpetrated upon a third party a fraud related to the subject matter of the representation."
In asking the Virginia State Bar ethics counsel about this scenario, they took the position that no disclosure of the facts of residency should be made without the client's consent after consultation, in that the lawyer likely cannot reasonably believe it is "necessary." The ethics counsel noted that each case needs to be evaluated under its own exact circumstances. If the attorney could not get the client to permit the disclosure after explaining the consequences, then withdrawal without disclosure is likely the only course as Rule 4:1 prevents the attorney participating in a fraud on a third party.
Rule 4:1 - Truthfulness In Statements To Others
In the course of representing a client a lawyer shall not knowingly:
(a) make a false statement of fact or law; or
(b) fail to disclose a fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.
The rule requiring confidentiality is one of the bedrocks of the attorney/client relationship. Clients must feel free to openly discuss their situation with the attorney. Accordingly, every lawyer should be extremely cautious and read the limited exceptions to confidentiality in such a way to be protective of the client, especially in the tricky tripartite relationship in an insurance defense case. Experienced defense counsel have also advised that to solve this dilemma, the lawyer may also recommend to the carrier to get separate counsel for themselves and the insured.
D. How Issues of Legal Liability and Ethics Intersect
The lawyer as an advocate has to weigh the zealous representation of the client against his obligations as a professional and officer of the court under the ethics rules. Rule 3.1 is one of the rules which addresses this:
Rule 3.1 - Meritorious Claims and Contentions
A lawyer shall not bring or defend a proceeding, or serve or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law.
The lawyer has an obligation to make good faith inquiry into both the law and the facts before filing any pleading. A lawyer who fails to do so may be found in violation of this ethics rule and the sanction rule found in Virginia Code § 8.01-271.1 which gives the court the power to take action against an attorney for signing a pleading which is frivolous. I have seen some attorneys who appear willing to file a lawsuit where the possibility of reversing existing law seems remote at best. For example, Virginia has strict rules that say there is no dram shop liability in Virginia. You cannot sue a bar for having served an intoxicated patron and let them go drive. However, some plaintiffs' lawyers will nonetheless file suits making this allegation. To the extent that the lawyer does not intend to take the matter all the way to the Virginia Supreme Court seeking reversal of a statute, which is unlikely to happen, they seem to be mainly trying to get their names in the paper.