First, this is not being titled as a “Friday Follow Up” post because, like the rest of you, I have no idea what day of the week it is at this point.
Second, there is way much more important events afoot in the world and if you want to know my thoughts about those you can go find me on Twitter. Given the complete lack of even a fig leaf to connect to legal ethics on that front, I’m sticking to sports here.
Third, two ethics opinions from two different states came out late last year addressing two different variations on ways that the ethics rules makes lawyers “special” when it comes to the right to contract. Because states like mine have been engaged in the issuance of ethics opinions really pushing the boundaries of this concept (at least as to the scope of RPC 5.6), it seems worth mentioning these two opinions albeit each for slightly different reasons.
The first of the two is almost entirely straightforward in addressing something that I certainly think is undoubtedly clear from the Comment to the ABA Model Rule — whether the scope of RPC 5.6 is somehow different for in-house counsel. Nevada, in Formal Op. 56, has made plain that the scope is not different, explaining that an in-house counsel cannot accept a stock award agreement that is made contingent upon agreeing to a one-year covenant not to compete. It somewhat helps to understand why Nevada would have to issue an ethics opinion on this question to know that Nevada has no Comments adopted along with its rules. Instead, Nevada’s Supreme Court has offered that both the preamble and the comments to the ABA Model Rules are something that “may be consulted for guidance in interpreting and applying the Nevada Rules of Professional Conduct.”
Here in Tennessee, we actually have our own Comment identical to the ABA Model Rule version so an ethics opinion wouldn’t really be necessary to cover the fact that the Comment specifically says it applies to organizational employers as well as private firms. One nuance that the opinion introduces but does not explore in any real depth is that an in-house counsel could agree to a non-compete that would only apply to the performance of business functions, rather than legal services, at a competitor. Thus, an in-house lawyer serving as both General Counsel and Executive Vice President at one corporate employer could be required to agree as part of a stock bonus not to take any similar employment with a competing company in the future by focusing only on the executive portion of the existing job.
The Nevada opinion also delves a bit into a way that a confidentiality agreement as part of such a stock award could also run afoul of RPC 5.6 by extending beyond the requirements of RPC 1.6 and RPC 1.9 under the ethics rules.
The other opinion I wanted to touch on comes from Los Angeles. LA County Bar Op. 532 tackles a question that does not require application of RPC 5.6 to resolve but that is not entirely unrelated to that rule — whether a lawyer can agree to indemnify the adverse party as a condition of a settlement. The LA County opinion correctly reaches the conclusion that the lawyer cannot do so because of the conflict that creates between the personal interests of the attorney and the client’s interests. It is an uncontroversial conclusion as the opinion admits because there are some 20+ other jurisdictions, including here in Tennessee, that have likewise made such a settlement provision improper.
Two other aspects of the opinion are much more interesting, however. One is that the primary ground on which the opinion nixes the possibility is that doing so would be the lawyer improperly paying the client’s business or personal expenses in violation of California’s RPC 1.8(b)(5). The other is that the opinion also involves RPC 8.4(a) to create the same dynamic that is in play when RPC 5.6 is triggered – it is unethical for a lawyer to propose such an agreement to the plaintiff’s lawyer because it would be unethical for the plaintiff’s lawyer to agree to it. While RPC 5.6 states plainly that it is an unethical for a lawyer to “participate in offering or making” the kind of agreement addressed by Nevada as discussed above, the potential reach of RPC 8.4(a) when it comes to negotiating contracts is often overlooked. California’s rule, like the ABA Model, makes it a disciplinary violation for a lawyer to “knowingly … induce another” lawyer to violate the ethics rules.
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