Michael Sean Quinn, Ph.D, J.D., Etc., Author
Law Office of Quinn and Quinn
1300 West Lynn #208
Austin, Texas 78703
(o) 512-296-2594
(c) 512-656-0503
Commandment One Published on December 31, 2014



This Preface is attached to each of the parts, oppressive though that may appear.This blog  is part (1/11th) of a collection called the ELEVEN COMMANDMENTS OF LEGAL ETHICS.  There are 11 separate mini-blogs; they need not be read in any particular order.  I have tried to keep them “together,” but cyber-success is not an inevitability when I am around. An early version* of it was published a decade or so ago.  Before that very short speech versions  were used as part of a day long CLE course ordered by the Supreme Court of Texas for new lawyers.  Later for several years it was used in other CE or CLE contexts.  All of this can be found on my Resume which is linked to (attached to) my website. www.michaelseanquinn.com. There are video versions somewhere in the cyber-sphere, and if not there in the cyber-world or in e-space and/or in the so-called “real world,” for sale.  As old as it is, the collection–whether in print, in the cyber-sky, on a something like a motion picture–is not really out of date, except there are not explicit references it to legal ethics and the cyber world.  At the same the obligations of the lawyers have not changed much, except now there is a new dimension to our confidentiality obligations and and out obligations to keep up to date. The “code numbers” are sometimes to the ABA Model Rules and sometimes to the Texas Rules of Professional Conduct. (*The term “version” means what it says: wordings change and ideas shift, tough the latter very little. Earlier version can be found entered on July 2, 2012 and on March 12, 2014.)

These disquisitions are revisions something I wrote at least several years ago. First editions of these essays were  begun some time ago.  Somehow their print got locked in, to some degree, so some parts of the essays were thrown out of kilter and can’t be made right today. This is particularly true along the left margins of some of the essays.


Given the purposes and context in which the early versions of the essays were written, many of the legal rules explicitly numbered are from The Texas Rules that were built upon the ABA Model Rules. 



This blog, like some of the others, will contain supplementary additions.  Like the others, it will also use some abbreviations from time to time: L for lawyer, LF for law firm, C for client.



COMMANDMENT TWO: NEVER, NEVER, NEVER LIE.

            No less an authority than James W. McElhaney has described mendacity as the worst sin of the trial bar.  He bemoans its basic injustice.  It prevents people from moving the best case they can, and he is worried that there is a “whole subculture centered around coming as close to the line of deceit as you can without factually crossing it.”  James W. McElhaney, The Legal Weasel Trap, 86 ABA J. 68 (January 2000).

A.        Legal Rules:

1.                     1.02(c):  Lawyers shall not help clients do dishonest and fraudulent things.7

C         1.02(d): Lawyers who know that clients are about to do dishonest and fraudulent things must try to dissuade them from doing so.

2.       1.02(e):  When a lawyer discovers that his client has done something dishonest or fraudulent, he must try to persuade him to take corrective action.

3.         1.03(f):  When the lawyer realizes that a client wants her to do something contrary to rules of professional conduct, the lawyer must explain the limitations upon her.

4.          3.03(a):  Lawyers shall not lie to tribunals about facts or law or fail to make necessary disclosures.

4.         3.03(a)(4):  Lawyers shall disclose controlling authority to tribunals which is known to the lawyer to be directly adverse to the position of the client, when that authority is not disclosed by opposing counsel.

5.         3.04(a):  Lawyers shall not destroy evidence in anticipation of litigation.

6.         3.04(b):  Lawyers shall not falsify evidence or assist witnesses in testifying falsely.

7.     4.01:  Lawyers shall not lie to third persons, or fail to make epistemicly necessary disclosures.  (Sometimes confidential information can be revealed to avoid problems here.  See 1.05(f).)

8.         4.03:    Lawyers will not imply that they are disinterested to those who don’t know any better.

9.         7.02:  Lawyer ads shall not be false or misleading.

B.         Lawyers are fiduciaries of their clients.  Frequently, therefore, if lawyers are being fully truthful is subject to higher standards.         Commentary:  Here are two important–never to be forgotten–guiding maxims:  No one loves lying lawyers and Everyone loathes the lying lawyer.8

Contemplate the following situation. L frames X of a crime and participates in apprehension. So we have here a case of felonious framing.Obviously there may be several sorts of forbidden lying going on. See blog with that title in part. 3/15/15.  

Here is a particularly outrageous case: A California couple (Cs) hired a lawyer (L) to recover from an insurance company of what appears to be a home owner’s claim.  That was in 2006. Recently Cs discovered that L had been disbarred for lying to another client by telling her that an appeal was pending and then providing her with forged court papers when she expressed doubts.  The Cs lost several thousand dollars in fees paid though one wonders if they lost anything in the insurance case, since it involved asbestos removal.  What is the lesson to be learned here? How’about this one:  Nothing takes forever, even in the law. See ABAJ [OnLine 2/9/15)

1.         Perjury and Obstruction.  Don’t help others lie either.  Don’t even suggest it.  Don’t let witnesses lie to courts when you have good reason to think they may be doing just that.  Xanadu Maritime Trust v. Meyer, 21 F.Supp.2d. 1104, 1106 (N.D. Cal. 1998)(expert witness caught lying). 

a.         Helping Witnesses Lie.  When a lawyer helps a witness lie, if there are privileges guarding communications between the lawyer and the client, they may be destroyed.  For example, the crime-fraud exception to the attorney-client privilege may be triggered.  There may be a similar exception to the work product privilege.9

2.         Lying to CourtsKeever v.  Finlan, 988 S.W.2d 300 (Tex.  App.–Dallas 1999, pet. filed).  In re Snyder, 623 N.W.2d 512 (Wis. 2001).  (Attorney made false statements to probate court.  He also lied to beneficiaries.)  In this case, a court found that a lawyer filed a false statement in an affidavit, and the court imposed a monetary sanction.  Id. at 309.  The subtext of the Dallas Court of Appeals’ opinion implies that the lawyer was too wily for his own good. It is a very bad idea for an attorney to make a misrepresentation to a court concerning any past disciplinary history when he is applying for pro hac vice status.  In re Howard, 721 N.E.2d 1126 (Ill. 1999). 



a.         For a particularly dramatic example of misrepresentations made to courts, see Florida Breckenridge v. Solvay Pharmaceuticals, 174 F.3d 1227 (11th Cir. 1999).  In this case, one of the litigants had engaged in a “head-snapping reversal of position[,]” which resulted from his realization that he had been caught misrepresenting the regulatory status of some entity and “wishe[d] to avoid a published opinion that would alert the world to its misdeeds.”  “In our supervisory capacity, however, we feel that we must review the attorneys’ conduct before this court and the district court and determine whether a disciplinary referral is appropriate.  Careful review of the record has uncovered a pattern of conduct by both parties’ attorneys designed to mislead and confuse the court with regard to the regulatory status of [certain entities.]  Unfortunately, we must remind these attorneys that they are officers of the court.  As such, they ‘owe duties of complete candor and primary loyalty to the court before which they practice.’  These duties are never subservient to a lawyer’s duty to advocate zealously for his or her client.  In this case, the attorneys for both parties have frustrated the system of justice, which depends on their candor and loyalty to the court, because they wanted to avoid an unpleasant truth about their client’s conduct.  ‘In short, they have sold out to the client.’”  Id. at 1231-32. 

b.         It should be obvious that lawyers may not submit false affidavits to courts.  Forging documents for use in court is lying and is treated in the same way.

c.         If a lawyer intentionally misrepresents to a judge that he is unable to attend a deposition because another judge had ordered him to a pre-trial conference, or anything of the sort, the lawyer will be subject to discipline.  Florida Bar v. Lathe, 774 So.2d 675 (Fla. 2000).

d.         Lying in pleadings, and such, can be as bad as any other form of lying to courts.  Skepnek v. Mynatt, 8 S.W.3d 377 (Tex. App.–El Paso 1999, pet. denied) (lawyers sanctioned for filing a false special appearance affidavit).  Sprauve v. Mastromonico, 86 F.Supp.2d 519 (D.V.I. 1999) (lawyer disbarred for consistent pattern of lying in pleadings to courts).  

Is it lying to a could for a lawyer that helped a person appearing pro se to ghostwrite a pleadings, brief, or something like it. Some courts have specific rules against this sort of thing without the lawyer identifying him/her self. Given rules of procedure it was dealing with, i.e., nothing precedential, the 2d Cir. said OK. In re Fengling Liu, 664 F.3d 367, 09-9006-am (November 22, 2011.) The lawyer was disciplined for other reasons, however, and was publicly reprimanded.  Other circuits have gone the other way, according to the decision in Liu. 

I am inclined to reason differently. The  lawyer has the person for whom she is ghostwriting as a client. That person is representing to the court that he is appearing pro se. This is a lie. He is having a lawyer do work on this case for him and filing it before the court. Thus L is assisting C is the telling a lie to a court and therefore probably a crime.  Also, the idea of some courts that ghostwriting is permissible if a rule says its OK so long as the lawyer is identified is self contradictory. Ghostwriting presupposes that the identity of the lawyer is not know.  It’s a necessary condition of being a ghost is that it cannot be seen, the old TV show Topper to the contrary, to the extent that it is, not withstanding.

e.         Under Federal Rules of Bankruptcy Procedure, counsel for a debtor may not accept fees prior to the payment in full of the filing fees.  A lawyer who misrepresents to a court that he or she has not been paid attorneys’ fees, when the lawyer has been paid, is subject to being sanctioned.  In re Lain, 760 So.2d 1152 (La. 2000).

f.          Commissions should be thought of as courts for these purposes.  PUCs are like courts when they do contested cases, as is the Texas Railroad Commission, as is the FCC.

g.         Obviously, lawyers involved in probate matters absolutely must now lie to courts, even on trivial matters if there are any such things.  The cases are uniformly draconian.

h.         Lawyering for the Disabled.  If a client becomes competent, the lawyer must be extraordinarily scrupulous with the truth.  Certainly no lawyer should make any misrepresentations with regard to the nature, character, or timing of a client’s incompetence.  Absolutely under no circumstances should a lawyer ever claim that a client is incompetent when the client is not.  Moreover, the lawyer should take extraordinary steps to make sure that she has this right. It is unclear who lied to whom, but somebody had to have. Newman v. Rick Harrington, Warden, #12-3725 (7th Cir. August 9, 2013)

i. Lawyering for the Unable. L represented a severely uneducated 16 year old boy who read at the first grade level and had a cognitive level at a 5th grade level. The was evidence that he was cognitively disabled. The boy was sentenced to 47 years in prison in Illinois, and defense counsel made no effort to prevent a trial. The federal district issued a writ of habeas corpus, and the 7th Circuit affirmed.

3.         Lying to Administrative Agencies.  Lying to government agencies cannot be as bad as lying in courts or lying to clients, but one can’t say that in public, and attorneys are subject to discipline for lying to government agencies, for example, about the price a client has paid for something.  Dayton Bar Ass’n v. Kinney, 728 N.E.2d 1052 (Ohio 2000). 

4.         Lying to Clients.  Communication is a fundamental component of the lawyer client relationship.  That which corrupts communication corrupts the relationship.  Silence not golden.  Lying is forbidden: “an attorney’s consideration of his or her client’s interests and communication with the client at reasonable times in response to the client’s inquiries [or not] are a vital and necessary part of the attorney-client relationship.”  Florida Bar v. Roberts, 770 So.2d 1207 (Fla. 2000).  If silence passively injures the relationship, lying affirmatively hurts it.10 Making misrepresentations to clients about what a lawyer is doing in a case can lead to serious discipline.11  If a lawyer tells a client that something can be done, when it cannot, it may constitute a lie to a client.  In re Wood, 543 S.E.2d 731 (Ga. 2001),  In re Walker, 766 So.2d 536 (La. 2000).  At the very least, it will constitute a culpably negligent misrepresentation.  Florida Bar v. Elster, 770 So.2d 1184 (Fla. 2000) (L assured C and family that a deportation could be stopped when he either knew or should have known that it could not be).

a.         If a lawyer states to a client that he has filed a motion, say, a motion challenging personal jurisdiction, and he has not, the lawyer will be subject to discipline.

b.         Lawyers lying to clients about the status on any lawsuit may lead to disciplinary action.  Klapheke v. Kentucky Bar Ass’n, 31 S.W.3d 895 (Ky. 2000) (attorney had five pending disciplinary actions, advised plaintiffs misleadingly as to the status of their cases, and failed to file pleadings).

 c.         Estate Lawyering.  Lawyers must never lie to their clients on matters pertaining to transmission of property at the end of life, persons under disability, or anything of the sort.

5.         Lawyer Lying to Client:  Significant DTPA Case.  If a lawyer lies to a client about whether he has filed a case, he may be guilty of unconscionable conduct under the DTPA.  Latham v. Castillo, 972 S.W.2d 66 (Tex. 1998) (a 5-4 opinion).  Although Latham was decided prior to the 1995 amendment pertaining to lawyers, it is difficult to see how this amendment would affect liability in this case.  Not everyone who stands in the client-attorney relationship with a lawyer is a consumer.  For example, where lawyers represent the executors of an estate, and also the beneficiaries of the estate, the executors may be consumers but the beneficiaries are not.  Vinson & Elkins v. Moran, 946 S.W.2d 381, 408 (Tex. App.–Houston [14th Dist.] 1997, writ ref’d).  (Of course, only consumers have standing to bring lawsuits under the DTPA.)

6.         Business Cards.  If a business card is misleading, it may constitute a kind of lie and lead to suspension.  In one case, a lawyer who did not have substantial knowledge of immigration matters put the phrase “Immigration Verification Associates” on his business card.  When a client relied upon his business card and received incompetent help–really no help at all–the lawyer was suspended for three years.  Florida Bar v. Elster, 770 So.2d 1184 (Fla. 2000) (other violations as well). 

            7.         Advertising.  Watch your ads.  Be vigilant about monitoring marketing efforts in general.12  Falsity in ads is actionable and grieveable.  Some direct mail solicitations are forbidden.  Florida Bar v. Went For It, Inc.,  515 U.S. 618 (1995) (targeted direct-mail solicitation of accident victims and their families in the “immediate aftermath of accidents” is subject to state regulation).  However, targeted direct-mail solicitation of criminal and traffic defendants within 30 days of arrest is not subject to prohibitory state regulation.  Ficker v. Curran, 119 F.3d 1150, 1154-55 (4th Cir. 1997).  Such solicitation is subject to regulation for truthfulness, however.  Internet ads and websites are a whole new problem, of course.  Are hyper linking’s a form of advertisings?

            8.         Fee Statements.  Bills are assertions.  Falsified, inflated bills are lies.  So are falsified expense sheets. 

a.         Falsified fee statements can lead to criminal charges.  It is worth taking note of the fact that the fees in bankruptcy cases are regulated in minute detail.  In re Clipper Int’l Corp., 154 F.3d 565 (6th Cir. 1998).  Falsity here is very dangerous, indeed.  See also In re Glesner, 606 N.W.2d 173 (Wis. 2000).

b.         If a lawyer lies to a client about who does the work on a case, and then charges the client at a higher rate, the lawyer has not only stolen from the client but lied to him as well.  In re Dann, 960 P.2d 416 (Wash.  1998).

c.         If L1 shares a fee with a non-lawyer, and produces a “sham invoice and lies about the represented arrangement, the lawyer may be suspended from practice, or subject to even more serious discipline.”

9.         Fee Applications.  A lawyer needs to be careful about applying to a court for fees.  If a lawyer represents C1 but bills C2, then–at least under some statutes–C1 has not  incurred court costs or fees.  If the lawyer claims that C1 has incurred the fees, when, in fact, it is C2 that incurred the fees, and C2 is not a party to the litigation, the lawyer may be guilty of a sanctionable false affidavit.  Keever v.  Finlan, 988 S.W.2d 300 (Tex.  App.–Dallas 1999, pet. filed).  Fee applications can be especially problematic in bankruptcy court, where the temptation to prevaricate seems to be especially strong.  In re Lain, 760 So.2d 1152 (La. 2000) (lawyer disciplined).

Deliberately falsified fee applications to administrative agencies are treated as lies and are grounds for disciplinary action.  Iowa Supreme Court Board of Professional Ethics and Conduct v. Gallner, 621 N.W.2d 183 (Iowa 2001).

Keep in mind that if a contingency fee is to be shiftless to an opponent, under Texas law, it must now be supported by appropriate time records.  Arthur Anderson & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (Tex. 1997).

10.       Broad Construction.  Don’t try to construe the anti-falsity rules narrowly.  For due process purposes, lawyer discipline cases are compared to criminal cases.  In re Tocco, 984 P.2d 539 (Ariz.  1999).  See In re Ruffalo, 390 U.S. 544 (1968).  This does not mean, however, that the rule of lenity applies.  Laws governing lawyers are not strictly construed.

11.       Silence by Fiduciaries.  “A lawyer’s failure to correct a false impression created by a nondisclosure of a material fact constitutes ‘misrepresentation[.]’” In re Benett, 14 P.3d 66, 70 (Ore. 2000).  For fiduciaries, a failure to speak is a lie.  Shapiro, Lifschitz and Schram, P.C. v. Hazard, 24 F.Supp.2d. 66 (D.C. App. 1998)(“attorneys unquestionably stand in a fiduciary relationship to their clients for matters related to their legal representation of their clients.”  Id. at 75 n.10 (citation omitted).)  Those who are fiduciaries must give full disclosure to those for whom they are fiduciaries.  If a lawyer fails to notify a client that he is not doing work he should be doing, this constitutes willful silence by a fiduciary and amounts to a lie.  Bamberger v. Kentucky Bar Association, 36 S.W.3d 758 (Ky. 2001).  See Attorney Grievance Comm’n of Maryland v. Cassidy, 766 A.2d 632 (Md. 2001).  (In this case, the attorney also failed to explain to clients that he had been suspended from the practice of law.)  In re Grapsas, 622 N.W.2d 750 (Mich. 2001) (similar an outline to Cassidy but involving an immigration case).  Even a lawyer who is ill has a duty to communicate with clients.  Courts do not quite treat this as equivalent of fiduciary-lying, but they are relatively unforgiving because of the lack of diligence.  In re Starks, 542 S.E.2d 726 (S.C. 2001).

                        a.         Organizations:  1.12(b): Rat on people.  When lawyers represent organizations, its people are not the lawyers’ clients.

b.         Non-client:  1.12(e):  Explain to those who work for organizations.

c.         Maximum disclosure to clients as to what is going on avoids malpractice.  If clients understand the context, meaning, and implications of their decisions, the lawyers are not responsible for those decisions.  Sierra Fria Corp. v. Evans, 978 F. Supp. 28 (D. Mass. 1996), aff’d 127 F.3d 175 (1997).

Even when disclosure alone is not enough to avoid problems, it is nonetheless mandatory.  For instance, misrepresentations designed to hide attorney neglect and lack of diligence are a very bad idea.  See Iowa Supreme Court Bd. of Prof’l Ethics and Conduct v. Stein, 603 N.W.2d 574 (Iowa 1999) (such acts warranted indefinite suspension).  See also In re Watts, 744 So.2d 1278 (La. 1999).

d.         Overselling a case, claiming that there would be “absolutely no problem in getting custody, [that] the case would be a ‘slam dunk’ and just a formality” is not the kind of representation a lawyer should make.  Kahlig v. Boyd, 980 S.W.2d 685, 687 (Tex. App.–San Antonio 1998, pet. denied).

e.         Failure to Disclose Experience Level.  Given the fact that a lawyer does not explain in advance that he has never tried a jury case does not automatically  constitute fraud or the breach of its fiduciary duty.  Pal v. Sinclair, 9 F.Supp.2d 383 (S.D.N.Y. 2000).  (Of course, it was important that representation was before an administrative agency and not before a jury.)

f.          Securities Law.  Often, securities law contexts are complicated, and purchasers of securities try to claim that the lawyers for the issuer had a duty to make disclosures to them.  This gambit seldom succeeds, because non-disclosure constitutes an affirmative lie only in the fiduciary context.  See immediately below.

            12.       Silence.  Not only must lawyers refrain from lying to courts, they must refrain from misleading courts and from remaining silent when silence is misleading.  Obviously, this rule can create difficult situations.  Here is an interesting problem from criminal practice:  A lawyer should not knowingly place a witness on the stand when he knows that the witness will assert the Fifth Amendment upon cross-examination in such a way that his testimony upon direct cannot be tested for credibility.  United States v. Colon-Miranda, 992 F. Supp. 86 (D.P.R. 1998).

Lawyers ought not lie-by-silence to their law firms either.  In Clary v. Schmolke, 977 S.W.2d 883 (Tex. App.–Beaumont 1998, pet denied), an associate in a law firm agreed to split commissions 50-50 with his firm for every case he generated.  The associate generated a case, failed to mention it to his firm, and left the firm.  He was not permitted to keep the fee.  This case could also be classified as a version of stealing.  See C1.  Question:  From whom will this fellow get referrals?  Sometimes morality, law, and long-range self-interest coincide.

13.       Citation to Non-Controlling Authority.  Some courts believe that lawyers have an obligation to disclose directly contrary authority from non-controlling jurisdictions when they know of it and when there is little authority to go on.  Rural Water System #1 v. City of Sioux Center, 967 F. Supp. 1483, 1498 n.2 (N.D. Iowa 1997).  Failure to cite authority from controlling jurisdiction is a clear violation of disciplinary rules.  See, e.g., Tex. Rule 3.03(a)(4); United States v. Crumpton, 23 F.Supp.2d 1218 (D. Colo. 1998).  In this case, the attorney failed to cite a contrary, controlling decision of a judge in the same District who had considered the very same statute at issue.  The judge in the case stated, (“. . .I find that it was inappropriate for Crumpton’s counsel to file her motion and not mention contrary legal authority that was decided by a Judge of this Court when the existence of authority was readily available to counsel.  Counsel in legal proceedings before this Court are officers of the court and must always be honest, forthright and candid in all of their dealings with the Court.  To do otherwise, demeans the court as an institution and undermines the unrelenting goal of this Court to administer justice.”  Id. at 1218-19.)

14.       Ghostwriting.  Lawyers are not permitted to ghostwrite pleadings for ostensibly pro se parties.  Laremont-Lopez v. Southeastern Tidewater Opportunity Center, 968 F. Supp. 1075 (E.D. Va. 1997).

a.         A lawyer may not pose as an ordinary pro se litigant, and must state in discovery that she is a lawyer.  Wesley v. Don Stein Buick, Inc., 987 F. Supp. 884 (D. Kan. 1997). 

b.         There are limits, of course, on who can appear pro se.  Corporations may not.  Pridgen v. Andresen, 113 F.3d 391 (2nd Cir. 1997).  Hence, a lawyer who is ghostwriting must be especially careful about ghostwriting for a corporation.

c.         Question:  What about appellate briefs?

15.       Filing as Lying.  Sometimes, courts understand the concept of lying broadly.  Sometimes, they consider filing frivolous and fraudulent lawsuits to be a form of lying.  In Wallace v. Investment Advisors, Inc., 960 S.W.2d 885 (Tex. App.–Texarkana 1997, no writ), a lawyer filed a lawsuit for the sole purpose of taking the deposition of a non-party.  It was a securities dispute, subject to arbitration elsewhere.  The lawsuit was collusive.  Both sides wanted to take someone’s deposition, so one party filed a lawsuit; the other side answered, and a subpoena was issued.  The collusive use of a scripted lawsuit which was to be dismissed after obtaining the desired deposition constituted a fraud on the court, according to the majority.

16.       Officer of the Court.  Because a lawyer is an officer of the court, he may very well have a duty to disclose the fact that significant orders have been erroneously entered due to manifest mechanical administrative error.  He may have the duty to notify the court and opposing counsel.  In Grun v. Pneumo Abex Corp., P.A., 163 F.3d 411, 422 n.9 (7th Cir. 1998), an attorney was chastised for remaining silent when he knew that the opposing party was unaware of a dismissal notice.

17.       IRS.  There is considerable controversy over how much a tax lawyer must disclose to the IRS.  The ABA takes the position that since the IRS is not a tribunal, lawyers have no duty to cite adverse controlling authority.  See Formal Opinion 314 (1965) and Formal Opinion 85-352 (1985).  The IRS has a very different view, which is expressed in Circular 230, as well as the several penal provisions of the Code.13

18.       Lying to Governmental Bureaucracies.  Knowingly supplying incomplete and inaccurate information to the Internal Revenue Service while assisting a client constitutes not only criminal conduct under 26 U.S.C. § 7203 and 18 U.S.C. § 2, but also conduct which can lead to discipline.  Similarly, filing false federal income tax returns for a corporation justifies disbarment.  In re Bock, 750 A.2d 87 (N.J. 2000) (L also convicted of income tax evasion).  See In re John H. Haley, 60 F.Supp.2d 926 (E.D.Ark. 1999) (more from the Independent Counsel).  See also Office of Disciplinary Council v.  Price, 732 A.2d 599 (Pa.  1999) (also involved making false assertions about judges).

19.       Securities Lawyers:  Special Problems:  Securities lawyers have special problems with misrepresentations.  Obviously, lawyers dealing with those near the end of their lives, those who have access to trust funds, and the like, may have a need for securities expertise may find themselves involved in securities matters.

20.       Lying to the Bar:  CLE.  Falsified CLE reports can lead to discipline.  In re Diggs, 552 S.E.2d 298 (S.C. 2001).  This case involved lying about how many different CLEs a lawyer had taken.  Thought Question:  don’t lawyers lie all the time about whether they attend sessions they sign up for?

22.       Fraud.  Lawyers may have liability when they fraudulently claim to know that certain legal propositions are true, and then people–even non-clients–take action based upon the lawyer’s observations.  Waterloov Gutter Protection Systems Co. v. Absolute Gutter Protection, 64 F. Supp.2d 398 (E.N.J. 1999).  (In this case, a lawyer for A (and maybe for B), advised B that a certain type of gutter could be protected for international patents.  The lawyer’s observation may have constituted a fraudulent statement, upon which B relied in investing in a start-up business.)  Lying to creditors is impermissible.  People v. Reed, 942 P.2d 1204 (Colo. 1997) (suspension from the bar for one year and one day).

23.       Lawyer Lying in Investigative Interrogations.  Lawyers should not tell prospective witnesses that they represent people that they don’t represent.  Nor should they deny that they represent people whom they do represent.

a.         When conducting internal corporate investigations inquiring into whatever, a lawyer should not either affirmatively mislead employees, or permit them to believe that the lawyer represents them.14

b.         If someone states in court that the lawyer represents them, and the lawyer does not, the lawyer needs to see to it that the court’s misunderstanding is immediately dispelled.  E. F. Hutton & Co. v. Brown, 305 F.Supp. 371 (S.D. Tex. 1969).  In this case, a lawyer who failed to speak under these circumstances was disqualified. 

            24.       Lying About Credentials.  False claims concerning one’s credentials are grounds for disciplinary action.  In re Lemmons, 522 S.E.2d 650 (Ga. 1999) (misrepresentations by attorney that he was a CPA resulted in two-year suspension).

C.        Case:  Diaz v. Commission for Lawyer Discipline, 953 S.W.2d 435 (Tex. App.–Austin 1997, no writ).  A lawyer filed a false affidavit in support of a summary judgment where he was the party, and not the lawyer.  He was still sanctioned after mounting a number of technical defenses, each of which failed miserably.

D.        Another Thought Question:  Why is it not okay to fight fire with fire?  After all, lawyers are permitted to do so in evidentiary battles and in argumentative battles.  Why is lying different, if it is?15  This can be just as large a problem in negotiational, advisory, and investigational law practice as in litigation.  The problem surrounds and afflicts in-house counsel as much as it does out-house counsel.  Consider the fact that the consulting firm KPMG reported not long ago in its 2000 Organizational Survey that 76% of all employees in all industries admitted to observing violations of the law or company policy during 1999.  Almost 50% of those employees who stated that they believed that if the misconduct were made public the companies would lose a significant amount of public trust.16  Some studies suggest that a majority of all oral verbal communication contains some form of deceit.  This includes, “lies, exaggerations, half-truths, secrecy, or diversionary tactics[.]”17

E.         Securities Exposures.  A fair fraction of actionable securities violations are fraud or akin to fraud.  Obviously, they are therefore lying or akin to lying.  Lawyers involved in securities cases have substantial exposure to both primary and secondary liability.18

1.         Recent Decisions:  Private Actions.

a.         Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 (1994).  Probable implication:  If a lawyer speaks directly to a third-party, for example, in negotiations, or prepares an opinion letter, or prepares any other comparable document for the benefit of third-party investors, there is a possibility  of primary liability.  This may arise under Rule 10b–5 or under state law.  Contours of primary liability are far from clear.19  In general, law firms are not sellers of securities, and they simply act as counsel to underwriters or issuers.  They are therefore immune from liability under § 12 of the Securities Act of 1933.  Wilson v.  Saintine Exploration & Drilling Corp., 872 F.2d 1124 (2nd Cir. 1989).

b.         Primary Liability/Aiding and Abetting.  The scope of aiding and abetting cases has been sharply limited under § 10(b) of the Securities Exchange Act of 1934 and Rule 10b–5.  Dinsmore v.  Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin, 135 F.3d 837 (2nd Cir.  1998) (in Central Bank, the Supreme Court of the United States barred not only aiding and abetting claims but conspiracy claims for those who are only secondarily liable.  “[W]here the requirements for primary liability are not independently met, they may not be satisfied based solely upon one’s participation in a conspiracy in which the other parties have committed a primary violation.”  Id. at 843. Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1225 (10th Cir. 1996)(The “critical element separating primary from aiding and abetting violations is the existence of a representation, either by statement or omission, made by the defendant, that is relied upon by the plaintiff.”  A similar standard has been applied to accountants.  In re Software Toolworks Inc. Securities Litigation, 50 F.3d 615 (9th Cir. 1994).  (Plaintiffs alleged that accountants violated § 10(b) by participating in the drafting of two letters sent by their client to the SEC.  The first letter referred expressly to the involvement of the accountants.  The second letter did not.  Nevertheless, the Ninth Circuit concluded that the second letter, as well as the first, reported § 10(b) liability.  Those who “played a significant role in drafting and editing” the second letter might be primarily liable under § 10(b).  Id. at 628 n. 3.  It is still possible to state § 10(b) and Rule 10b–5 actions against lawyers.  Wenneman v.  Brown, 49 F.  Supp.2d 1283, 1287-90 (D. Utah, 1999).

c.         Aiding and Abetting.  See Klein v. Boyd, 135 F.3d 837 (3rd Cir. 1997).  Lawyers who draft documents can be primarily liable.20

d.         Private Securities Litigation Reform Act of 1995 (PSLRA).  15 U.S.C. § 77z-2(c)(1).  It protects false or misleading forward-looking statements if they are accompanied by “meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement, [15 U.S.C. §§77z-2(c)(1)(A)(i), or if the plaintiff fails to prove that the statement “was made with actual knowledge by that person that the statement was false or misleading.”  15 U.S.C. § 77z-2(c)(1)(B)(i).  Kennsington Capital Management v.  Oakley, 1999 WL 816964 (C.D. Cal.  1999).  PSLRA provides a mechanism for deciding controversies regarding who will represent plaintiff’s class.  For an unseemly controversy that involved one group of lawyers paying brokers and dealers for assistance, see Frank W.  Knisley v.  Network Associates, Inc., 77 F. Supp.2d 1111 (N.D. Cal.  1999).  (The paying lawyers were not found to be incapable of adequately representing the class and were not replaced.)

e.         Conspiracy.   Dinsmore v. Squardron, Ellenoff, Plesent, Sheinfeld & Sorkin, 135 F.3d 837 (2d Cir. 1998) (allegations of conspiracy amount to allegations of aiding and abetting).  Probably, some conspiracies involve scienter.  If so, then they are more serious than some forms of aiding and abetting.  Under some circumstances, conspiracy should provide a foundation for primary liability.

f.          Scope of Representation.  When a lawyer is retained to write an opinion as to the validity of the loan and its documents, the lawyer and his law firm may be held liable for securities fraud for failure to make securities disclosures.  Rubin v. Schottenstein, Zox & Dunn, 143 F.3d 263 (6th Cir. 1998) (en banc).  (In this case, the lawyer was not involved in any securities deals.)  Usually, lawyers for issuers of securities or underwriters do not have an attorney-client relationship with the purchasers of the security.  Marshall v.  Quinn-L Equities, Inc., 704 F.Supp.  1384, 1395 (N.D. Tex.  1988) (also remarking that investors had no business misrepresentation claim against such lawyers).  Normally, attorneys for issuers of securities do not have an affirmative duty to disclose misrepresentations made by those issuers.  Abell v.  Potomac Ins.  Co., 858 F.2d 1104 (5th Cir.  1988), vacated on other grounds 492 U.S. 914 (1989).  See Schatz v.  Rosenburg, 943 F.2d 485, 490-91 (4th Cir. 1991) (distinguishing between silence and affirmative misstatement:  even if an attorney knows of a misstatement, he does not owe a duty to speak to the purchaser).21  Knowingly assisting in making misrepresentations, of course, is an entirely different matter.  See also Bernstein v. Portlands S&L  Ass’n, 850 S.W.2d 694, 702 (Tex.  App.–Corpus Christi 1993, pet. dism’d) (simple failure to disclose by a lawyer does not constitute fraud or conspiracy). 

g.         Negligent Misrepresentation.  Attorneys who prepare opinion letters knowing they will be distributed to investors can be liable for negligent misrepresentation.  Molecular Technology Corp.  v.  Valentine, 925 F.2d 910, 916-17 (6th Cir.  1991).  If a lawyer permits an issuer to release a tax opinion letter, the lawyer may be guilty of negligent misrepresentation.  The lawyer’s consent to the release of his opinion letter can be inferred from circumstantial evidence, including evidence internal to the letter.  Ackerman v.  Schwartz, 947 F.2d 841, 847-48 (7th Cir.  1991) (scathing opinion by Judge Easterbrook).  When an attorney organizes a tax sheltered deal, the attorney can be liable for negligent misrepresentation to the purchasers of the deal.  Eisenberg v.  Gagnon, 766 F.2d  770 (3rd Cir.  1985).  Eisenberg has been an influential case.  See Klein v.  First Western Government Securities, Inc., 24 F.3d 480 (3rd Cir.  1994).  In this case, the court held that “attorneys may be liable for both misrepresentations and omissions where the result of either is to render an opinion letter [in this case a tax opinion letter] materially inaccurate or incomplete.”  Id.  at 485-86.  “We are dealing here with a situation in which [the lawyer] by authoring [his] opinion letters, has elected to speak regarding the transactions at issue.  Plaintiffs allege that this speech was misleading because [the lawyer] failed to include in [his] opinion letters information that, if included, would have undermined the conclusion reached in those letters.  In contrast, the cases cited by the district court [below] , as well as those cited by [the lawyer] for the proposition that attorneys may not be held liable for omissions absent the duty to disclose concern the question of whether a law firm or similar entity has a duty to ‘blow the whistle’ on its client.  That is, those cases concern situations where the alleged omissions were unrelated to the validity of a law firm’s opinion letter or similar communication. . . . .[T]his case, in contrast, presents the question of whether, once a law firm has chosen to speak, it may omit facts material to its non-confidential opinions.  Here. . . , the allegedly omitted facts bear directly on the accuracy of the tax opinion.”  Id.  at 490-91.  See also Trust Company of La. v. N.N.P. Inc., 104 F.3d 1478, 1488 (5th Cir. 1997) (negligent misrepresentation by a lawyer for the issuer is actionable under Louisiana law).22
h.         Bespeaks Caution Doctrine.  “[T]he inclusion of sufficient cautionary statements in a prospectus renders misrepresentations and omissions contained therein non-actionable. . . .As we see it, ‘bespeaks caution’ is essentially shorthand for the well-established principle that a statement or omission must be considered in context, so that accompanying statements may render it immaterial as a matter of law. . . .The prospectus here took considerable care to convey to potential investors the extreme risks inherent in the venture while simultaneously  carefully alerting investers to a variety of obstacles the Taj Mahal [gambling palace in Atlantic City] would face, all of which were relevant to a potential investor’s decision concerning purchase of the bonds.  We conclude that, given these warning signals in the text of the prospectus itself, the plaintiff-investors could not establish actionable misrepresentation by a careless stray sentence taken in isolation.  In re Donald J.  Trump Casino Securities Litigation–Taj Mahal Litigation, 7 F.3d 357, 365 (3rd Cir.  1993).  Although this litigation was not against a lawyer, it seems to suggest how lawyers could involve being genuinely exposed in such litigation:  insist on plentious cautionary language.  See Kensington Mgmt v. Oakley, 1999 WL 816964 (C.D. Cal. 1999).23

i.          Causation.  In order to recover against securities lawyers for misrepresentation, plaintiffs must prove that they relied upon either  misrepresentations or omissions.  In general, law firms or underwriters do not acquire any sort of duty to make full disclosure on their own to potential securities purchasers.  Abell v.  Potomac Ins.  Co., 858 F.2d 1104, 1123-1126 (5th Cir.  1988).

j.          Duty of Lawyers to Investigate.  Lawyers have some duty to investigate what their clients are telling them.  Mere negligence does not appear to be enough to generate liability.  Recklessness quite clearly is.  There is a significant “stem case” that indicated that if a lawyer consistently fails to investigate even obvious factual assertions made to him by his clients, the attorney may have liability, even if he does not actually know that he is being lied to or that his clients are acting recklessly.  Escott v.  Barchris Construction Corp., 283 F.  Supp.  643, 689-92 (S.D.N.Y. 1968).  It is unclear how much precedential force the doctrines in this case have.  It is an enormously prestigious case, however, so its language is important.  It is also important to remember that this is not a case brought against a lawyer for being a lawyer.  It is a case brought against the lawyer for being a director.  However, a lawyer designed the disclosure statement.  Here is the key language of the case:  “The defendant lawyer claims ‘that a lawyer is entitled to rely on the statements of his client and that to require him to verify their accuracy would set an unreasonably high standard.’  This is too broad a generalization.  It is all a matter of degree.  To require an audit would obviously be unreasonable.  On the other hand, to require a check of matters easily verifiable is not unreasonable.  Even honest clients can make mistakes.  The statute imposes liability for untrue statements regarding whether they are intentionally untrue.  The way to prevent mistakes is to test oral information by examining the original written record.”  Id.  at 690.24

k.         Odd Ball Case.  A lawyer can be sued under 10b–5 for taking stock as a legal fee, when there is less than full disclosure about the nature of the legal fees or of the legal services.  When sued in this manner, the lawyer may be both remiss in fiduciary duties and guilty of a securities law violation.  Popovice v.  Milides, 11 F.  Supp.2d 638 (E.D. Pa.  1998).

l.          Practical Wisdom.  “[T]he closer the lawyer comes to the selling process the more exposure he has to personal liability.”  Lewis D.  Lowenfels, Attorneys’ Liability for Failure to Disclose or for Misrepresentation to Third-Party Non-clients in Private Civil Actions Under the Federal Securities Law, 14 PLI/NY 707, 730 (February 1998) [PLI Order No. F0-000L].

2.         SEC actions.  The SEC has a variety of ways to deal with violations of the securities laws.  Many of these are informal.  Among the formal ones are court actions and administrative proceedings.

a.         Suits.  The SEC can sue on a variety of grounds.25

(1)        Securities Fraud.  Sometimes, lawyers are directly involved in securities fraud.  One case involved a lawyer dealing with nontransferable securities.  His violations cost him his job at Skadden Arps.  He was suspended from the practice of law for eighteen months and received an order to pay double his profits plus pre-judgment interest.  SEC v.  Jaqubowski, 150 F.3d 675 (7th Cir.  1998).

(2)        Registration.  The SEC can enjoin the sale of unregistered securities.  SEC v.  Cavanaugh, 155 F.3d 129 (2nd Cir.  1998) (lawyers unlawfully selling securities enjoined from doing so and assets frozen). 

(3)        Aiding and Abetting.  This is probably the hot button for securities litigation where lawyers are involved.

(a)        The SEC does not regard itself as bound by Central Bank.  See, SEC Press Release, April 19, 1994 (1994 WL 136934).  This means that classic aiding-and-abetting cases brought against lawyers by the SEC are still good law.  See SEC v. Coven, 581 F.2d 1020 (2d Cir. 1978) (involving the improper closure of an escrow account for an “all-or-none” portion of an offering) and SEC v. Spectrum, Ltd., 489 F.2d 535 (1973) (sloppy opinion letter).  This is not a matter of any significant controversy, although some lawyers disagree.  The Courts have gone with the SEC.

(b)        Stem Case.  Clearly, the SEC may enjoin attorneys from violating securities laws where the conduct is repeated, intentional, knowing, outrageous, or some combination of a majority of these factors.  SEC v.  Nat’l Student Marketing Corp., 457 F.  Supp.  682 (S.D.N.Y. 1978).

(c)        SEC v. Fehn, 97 F.3d 1276 (9th Cir. 1996). (The SEC may bring injunctive actions against those who aid and abet violations of the Securities Exchange Act.  This is authorized by the Private Securities Litigation Reform Act of 1995).  When a lawyer recklessly assists in a scheme which turns out to be fraudulent, he may be enjoined by the Securities Exchange Commission from further such conduct, even if he did not subjectively realize what he was doing.  SEC v.  Electronics Warehouse, Inc., 689 F.  Supp.  53 (D.  Conn.  1988), aff’d sub.  nom. SEC v. Calvo, 891 F.2d 457 (2nd Cir.  1989).

(d)       The SEC can seek all sorts of injunctive relief in courts, including judicial orders barring others from serving as either directors or officers.  Hazen, § 9.5 (p. 433).
(3)        Insider Trading.  Of course, the SEC can investigate insider trading, enjoin misconduct, and mandate disgorgement of ill-gotten gains.  Chiarella v. United States, 445 U.S. 222 (1980).  Lawyers can be insiders for the purpose of insider trading regulation.  Dirks v. SEC, 463 U.S. 646 (1983) “Under certain circumstances, such as where corporate information is revealed legitimately to an underwriter, accountant, lawyer or consultant working for the corporation, these outsiders may become fiduciaries of the shareholders.  The basis for recognizing this fiduciary duty is not simply that such persons acquired nonpublic corporate information, but rather that they have entered into a special confidential relationship in the conduct of the business of the enterprise and are given access to information solely for corporate purposes.  When such a person breaches his fiduciary relationship, he may be treated more properly as a tipper than a tippee.  For such a relationship to be imposed, however, the corporation must expect the outsider to keep the disclosed nonpublic information confidential, and the relationship must at least imply such a duty.”  Id. at 655 n.14.  For a general account of insider trading, see Donald C. Langevoort, Insider Trading Handbook (1986). See also, Alan Strudler and Eric W. Orts, Moral Principle in the Law of Insider Trading, 78 Tex. L. Rev.  375 (December 1999).

(4)        Misappropriation Theory and Insider Trading.  Plaintiffs can use a “misappropriation theory” to demonstrate a violation of § 10(b) of the Securities and Exchange Act of 1934 and Rule 10b–5.  United States v.  O’Hagan, 521 U.S. 642 (1997).  “The ‘misappropriation theory’ holds that a person commits a fraud ‘in connection with’ a securities transaction, and thereby violates § 10(b) and Rule 10b–5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information [in O’Hagan’s case, this was a law firm that briefly represented one of the parties to a tender offer transaction.]  Under this theory, a fiduciary’s undisclosed self-serving use of a principal’s information to purchase or sell securities in breach of a duty of loyalty and confidentiality defrauds the principal of the exclusive use of that information.  In lieu of premising liability on a fiduciary relationship between company insider and purchaser or seller of the company’s stock, the misappropriation theory premises liability on the fiduciary–turned-A trader’s deception of those who entrusted him with access to confidential information.”  Id. at 652.  Often, nondisclosure does not constitute a deception, but it does when the nondisclosing deceiver is a fiduciary of a relevant party.  In this case, O’Hagan was disbarred, convicted of state court violations, and convicted of federal crimes.  (Before he violated federal securities law, O’Hagan embezzled large sums from his well-known law firm.)  There are limits.  What is left of Chiarella and Dirks after O’Hagan?26

b.         Administrative Actions.  The SEC can bring administrative actions against lawyers.  See generally Simon M. Lorne and W. Hardy Callcott, Administrative Actions Against Lawyers Before the SEC, 50 Bus. Law 1293 (1995).  The SEC has the power to issue cease and desist orders.  It may hold administrative hearings in the course of exercising supervisory authority over a variety of players in the securities market.  Indeed, under the 1990 Remedies Act, the SEC acquired a number of enforcement powers.

c.         Rule of Practice 2(e).  The SEC may suspend, limit, or bar “any person” from practicing before it “in any way.”  17 C.F.R. § 201.2(e)(3).  This power has been used against lawyers on a number of occasions.  See Hazen, at § 9.5, pp. 446-447 n.182.  There has been some question about the use of sanctions under Rule 2(e), since there is no express statutory authority for the promulgation of a rule.  However, the Second Circuit has upheld the rule.  Touche Ross & Co. v. SEC, 609 F.2d 570, 579 (2d Cir. 1979).  See Chechosky v. SEC, 23 F.3d 452 (D.C. Cir. 1994).  See also Davy v. SEC, 792 F.2d 1418, 1421-22 (9th Cir. 1986).

d.         Foreign Corrupt Practices Act.  One recent trendy activity of the SEC is to enforce the FCPA, 15 U.S.C. §§ 78dd-1, 78dd-2 and 78m (1999), against lawyers.  Matthew Shabat, SEC Regulation of Attorneys Under the Foreign Corrupt Practices Act: Decisions and Efficiency in Their Role in International Anti-bribery Efforts, 20 U. Pa. J. Int’l Econ. L. 987 (1999).  Obviously, this is a problem both for firm lawyers and for in-house lawyers.

e.         Sarbanes-Oxley Act of 2002.  This is a securities act responding to the Enron scandal.  It almost certainly contains implications for lawyers who do securities work.

F.         Soliciting Business and Advertising.  False advertising is forbidden. 

1.         Frequently, bar associations want to review ads before they are placed.  This is true in Texas, for example.  Rule 7.07(a).  In addition, rules against misrepresentation are construed quite strongly and broadly. 

2.         Many states also require that attorney ads have a certain content.  For example, many states require that attorneys state that they are not board certified, if they are not.  Walker v. Board of Professional Responsibility of the Supreme Court of Tennessee, 38 S.W.3d 540 (Tenn. 2001).  Texas is like this.  Rule 7.04(b)(3).

G.        The Role of Lawyers in Questioned Business Transactions.  Lawyers do not provide mere legal advice.  Lawyers support the business transactions of their clients, including review of business plans, financial statements and agreements which document complicated transactions.  In difficult economic times transactions which have an adverse impact on the value of a company come under greater scrutiny and the question of what is the role of legal counsel takes on new significance.

The collapses of several public companies recently have generated allegations of improper activity by corporate executives and accountants.  The public is also looking at what the lawyers involved could and should have done.

In the Enron case, its attorneys, Vinson & Elkins, have come under scrutiny for its reivew of some of the transactions that led to the energy giant’s collapse.  The U.S. Securities and Exchange Commission (“SEC”) and two congressional committees have hit the law firm with subpoenas for documents.  Enron directors, conducting an internal investigation, have asked V&E to explain its role in what happened.  In addition, Arthur Levitt, former chairman of the SEC, has publicly called on the American Bar Association (“ABA”) to change its ethics code to make lawyers more responsible for reporting fraudulent activity.

While lawyers have an obligation to not participate in any illegal actions or practices, they do not have a mandatory obligation to publicly disclose unethical business or accounting practices.  Failing to squeal for actions resulting in economic loss falls well within the ethical guidelines for lawyers.

There is, however, growing support for creating such a duty to squeal.  In August 2001, the ABA tried to expand the circumstances set forth in its Model Rules of Professional Conduct in which a lawyer could reveal confidential information of its client to niclude: (i) to prevent the client from committing a crime or fraud that is reasonably certain to result in substantial 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; and (ii) to prevent, mitigate or rectify substantial injury to the financial interests 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.27

Support for the ABA’s proposal can be found in the eight jurisdictions (including Texas) that permit disclosure when clients threaten crimes or frauds likely to result in substantial injury to the financial or property interest of another and the 25 jurisdictions that permit a lawyer to reveal the intention of a client to commit any crime.  The Commission’s proposal is also in accord with Section 67 of the American Law Institute’s Restatement of the Law Governing Lawyers.

In Texas a lawyer may disclose confidential information of its client when the lawyer has reason to believe it is necessary to do so in order to prevent the cleint from committing a criminal or fraudulent act.  A “fraudulent act” denotes conduct having a purpose to deceive and not merely negligent misrepresentation or failure to apprise another of relevant information.  This is not, however, a mandatory duty to disclose such as the one imposed upon a lawyer in receipt of confidential information clearly establishing that a client is likely to commit a criminal or fraudulent act that is likely to result in death or substantial bodily harm to a person.28

At the ABA’s mid-year meeting in February, 2002, the Commission again rejected proposals to allow lawyers to breach confidentiality to protect assets rather than lives, but did introduce new commentary explaining the relationship between the lawyer’s duty to third parties under Rules 1.2(d) (Scope of Representation) and 4.1(b) (Truthfulness to Others), and the lawyer’s duty of confidentiality to the client under Rule 1.6.29

In particular, the new Commentary to Rule 4.1 notes that:  “Ordinarily a lawyer can avoid assisting a client’s crime or fraud by withdrawing from the representation.  Sometimes it may be necessary for the lawyer to give notice of the fact of withdrawal and to disaffirm an opinion, document, affirmation or the like.  In extreme cases, substantive law may require a lawyer to disclose certain information relating to the representation to avoid being deemed to have assisted the client’s crime or fraud.  If the lawyer can avoid assisting a client’s crime or fraud only by disclosing this information, then under paragraph (b) the lawyer is required to do so, unless the disclosure is prohibited by Rule 1.6.30

In short, lawyers are not accountants, nor are they regulators, corporate executives or directors.  The duty of confidentiality to the client is paramount, for now.  Client confidences are under some attack in some states.  Recently, the Ohio Supreme Court created an exception to the attorney-client privilege where a plaintiff has pleaded bad faith against an insurance company.  “A lack of good faith in determining coverage involves conduct that occurs when assessment of coverage is being considered.  Therefore, the only attorney-client and work-product documents would contain information relating to the bad faith claim, and, thus, be unworthy of protection, which would have been created prior to the denial of coverage.”  [Emphasis added.]  “[W]e hold that in an action alleging bad faith denial of insurance coverage, the insured is entitled to discover claims file material containing attorney-client communications relating to the issue of coverage that were created prior to the denial of coverage.”  Boone v. Vanliner Ins. Co., 744 N.E.2d 154 (Ohio 2001).






                7 We are taking all of the citations from the Texas Disciplinary Rules of Professional Conduct.  The numbering system in the Model Rules is slightly different, and the rules are sometimes somewhat different, but it’s fairly easy to get back and forth.

                8 There is a substantial literature on lawyer lying.  Joseph Boyle, The Absolute Prohibition of Lying and the Origins of the Casuistry of Mental Reservation: Augustinian Arguments and Tomistic Developments, 44 Am. J. Juris. 43 (1999).  Marcy Ressler Harris, Getting Wise About Résumé Lies, 25 Litigation 21 (1999) (lawyers attacking lies of others); Richard K. Burke, “Truth in Lawyering”:  An Essay Lying and Deceit and the Practice of Law, 38 Ark. L. Rev. 1 (1984) (“This is not, and is not intended to be, a research article on the law of lawyer lying and deceit.  It is a normative essay on ethics. . .that questions both the implicite assumptions and explicit assertions that duplicity, deception, and lying are either necessary or desirable concomitance of the professional practice of law.  Id. *.  Christopher J. Shine, Deception and Lawyers:  Away from the Dogmatic Principle and Toward a Moral Understanding of Deception, 64 Notre Dame L. Rev. 722 (1989); Lisa G. Lerman, Lying to Clients, 138 U.Pa. L. Rev. 659 (1990) (some empirical research).  Floyd Abrams, Why Lawyers Lie?, New York Times Magazine 54 (1994).  There is a considerable self-help literature which treats lying, as well.  See Brad Blanton, Radical Honesty:  How to Transform your Life by Telling the Truth (1996).

            Liisa Renée Salmi, Don’t Walk the Line:  Ethical Considerations in Preparing Witnesses for Deposition and Trial, 18 Rev. Litig. 136 (1999).

                10 If a client lies to a lawyer, a diciplinary committee need not hear testimony from an expert witness with respect to whether a lawyer violated some disciplinary rule.  In re Howe, 621 N.W.2d 361 (N.D. 2001).

                11 In re Thigpen, 526 S.E.2d 839 (Ga. 2000) (misrepresentation to client regarding progress on cases sanctionable).  See Office of Disciplinary Council v. Wallace, 729 N.E.2d 343 (Ohio 2000) (L suspended for lying to client about progress on case), In re Williams, 527 S.E.2d 541 (Ga. 2000).  Cuyahogh Cnty Bar Ass’n v. Hunisger, 683 N.E.2d 1270 (Ohio 1997) (lawyer lied to client about having filed a dissolution action and provided his client with a false decree of divorce). 
                12 William E. Hornsby, Jr., Marketing and Legal Ethics:  The Boundaries of Promoting Legal Services (3d Ed. 2000) (a publication of the Law Practice Management Section of the American Bar Association).
                13 For a comprehensive review of these problems, and others, see Camilla E. Watson, Tax Lawyers, Ethical Obligations, and the Duty to the System, 47 U. Kan. L. Rev. 847 (May 1999).  Here’s the essence of Watson’s view:  “There is no discrete duty owed by the lawyer qua lawyer either to society or to the tax system.  Instead, as a private citizen and a member of society, the lawyer has the same duty that is imposed upon every person:  to obey and uphold the law.  As a professional, the lawyer has a duty to behave as a moral, upstanding person, adhering to the rules of professional responsibility while representing the client tot he best of her ability.  finally, as a member of the legal profession, the lawyer has a duty to act in the best interest of the profession as a whole.  If the lawyer adheres to these duties, there should be no separate duty owed either to the tax system or to the society.”  Id. at 851.  This position raises obvious problems.  “The duty of disclosure raises several thorny problems for tax practitioners.  chief among them is what happens if the lawyer determines that a position taken on a tax return lacks a realistic possibility of success, and thus should be disclosed in accordance with the government’s rules and regulations, but the client refuses to disclose.  [Whatare] the lawyer’s dut[ies] of disclosure when an IRS agent makes a mistake in the client’s favor[?]  Does the lawyer’s duty of candor under circular 230 and duty of fairness to opposing party under the Model Rules trump the duty of confidentiality to the client, or vice versa?”  Id. at 852.  Watson’s view that a “lawyer has a duty to behave as a moral, upstanding person” raises certain questions.  Isn’t the lawyer suppose to represent the client’s interests, so long as they are within the law?  How can Watson’s view be squared with Lord Brougham’s one-sided view of vigorous advocacy:  “The lawyer knows but one set of interests in all the world, and those are his client’s.”  See C6 § N below.

                14 Brad D. Bryan & Barry F. McNeil, Internal Corporate Investigations:  Conducting them/Protecting Them 30 (American Bar Association Section of Litigation 1992).


                15 At least one lawyer-scholar has criticized moralists who “over-condemn lying.”  He tries to develop a case for “morally appropriate lying, develops a critique of what he calls “quasi-categorical Moralism,” which he says “is a more dangerous forest than the impulse to moral self-assertion that it deprecates.  William H. Simon, Virtuous Lying:  A Critique of Quasi-Categorical Moralism, 12 Georgetown J. of Legal Ethics 433 (1999).  Simon, a law professor at Stanford, argues for a contextual approach to determining when lying is appropriate and possibly even obligatory.  Obviously, C2 qualifies as at least Quasi-categorical Moralism.”

                16 See Maria Mallory, Liar, Liar Workplace Ire, Austin American-Statesman K1 (September 3, 2000).

                17 Apparently, “nearly one-third [of these deceits] represented ‘individual endeavors to negotiate a positive validation of [the speaker’s] announced identity.’”  Loyal Rue, By the Grace of Gile:  The Role of Deception in Natural History and Human Affairs 154 (1994) (citing and discussing Ronny E. Turner, Charles Edgley, and Glen Olmstead, Information Controlling Conversations:  Honesty is Not Always the Best Policy, 11 Kan. J. of Sociology 69, 72 (1975).  Rue presents a comprehensive hypology of various kinds of deceptions.  Strangely, he argues that, at some very basic level, widespread deception about fundamental values is adapted and, therefore, in some sense good and valuable.  Can this position possibly be consistent?)

                18 For a general account of lawyer liability and how it fits into the general scheme of securities regulation, see Thomas Lee Hazen, The Law of Securities Regulation § 7.2 (pp. 336, 339, 340-42, 344-45, 349), § 7.10 (pp. 376-87), § 9.5 (pp. 433-48), § 13.15 (p. 895) (3d Ed. 1996). 

                19 Donald C. Langevoort, Words from on High About Rule 10b-5:  Chiarella’s History and Central Bank’s Future, 20 Del. J. Corp. L. 865, 886-97 (1995).  For a general overview of this entire area, see Ben D. Orlanski, Comment, Whose Representations Are These Anyway?  Attorney Prospectus Liability After Central Bank, 42 UCLA L. Rev. 885 (1995).

                20 For a recent survey of the general area, see Robert S. De Leon, The Fault Lines Between Primary Liability and Aiding and Abetting Claims Under Rule 10b–5, J. Ct. L. 723 (1997).  See also, The Primary Liability of Securities Lawyers, 50 SMU L. Rev. 383 (1996). For another interesting argument, see Robert A. Prentice, Locating that “Indistinct” and “Virtually Nonexistent” Line Between Primary and Secondary Liability under Section 10(b), 75 N.C.L. Rev. 691 (1997) (the title being descriptive of the essay.)  Aiding and abetting liability is a less serious matter in private lawsuits than it once was.  See Hazen § 7.8 at 370.

                21            “The court in Shatz v. Rosenburg went too far in protecting the attorneys in question while at the same time sacrificing appropriate limits on client misrepresentation.  The SEC has indicated that an attorney’s failure to blow the whistle and thereby prevent a securities fraud puts the attorney in breach of his or her professional responsibility and may also establish an aiding and abetting claim. . . .[A]n  attorney who prepares documents and then, with knowledge, sits by while a fraud is perpetrated cannot (and should not) reasonably expect to be free from being held accountable[according to Hazen].  Similarly, the presentation of legal opinions may form the basis of a primary Rule 10b–5 violation.  This is true even though the opinion is expressly stated to be based on the facts provided by the client.”  Hazen, § 7.10(p. 379).  Hazen goes on to discuss the Schatz case in some detail. 

                22 Marc Steinberg, Attorney Liability and Conflicts of Interest:  A Guide for the Corporate and Securities Lawyer, UT-LST Conference on Security Regulations and Business Law Problem (February 18, 19, 1999) (More than half of this document consists of chapters from the earlier book, Marc I.  Steinberg, Corporate and Securities Malpractice, B1-1 through 37 (PLI 1991).)  However, the first fourteen pages are a newly prepared outline, which demonstrates the continuity between past and present. 

                23 According to Hazen, “[t]he bespeaks caution doctrine, which applies both to material misstatements and omissions, should not be applied too quickly.  Cautionary language will not always be adequate to prevent an antifraud claim; it must be sufficient to negate any reasonable reliance on predictions that appear optimistic.”  Hazen at § 7.3 (p. 329).

                24 For an extensive discussion of Barchris, see Hazen, § 7.4 (pp. 741-45). 

                25 See Ann Maxey, SEC Enforcement Actions Against Securities Lawyers: New Remedies vs. Old Policies, 22 Del. J. Corp. L. 537 (1997).

                26 See Jack E. Karns, Edwin A. Doty, Steven S. Long, Accountant and Attorney Liability as “Sellers” of Securities Under Section 12(2) of the Securities Act of 1933, 74 Neb. L. Rev. 1 (1995).

                27 See proposed changes to Rule 1.6 at http://www.abanet.org/cpr/e2k-rule16.html.

                28 See (Tex. Disciplinary R. Prof. Conduct, (1989) reprinted in Tex. Gov’t Code Ann., tit. 2, subtit. G, App. (Vernon Supp. 1995) (State Bar Rules art. X § 9) – Rule 1.05.

                29 http://www.abanet.org/cpr/e2k-chair_report_202.html.