New York Advertising Rules Held Unconstitutional

Today the Second Circuit announced it is upholding the N.D.N.Y. ruling that New York’s lawyer advertising rules are unconstitutional (with two exceptions — fictitious law firms and the thirty day moratorium on lawyers contacting accident victims).  Circuit Judge Guido Calabresi (possibly my new favorite judge’s name) wrote the opinion. The Buffalo lawyer was represented by Public Citizen.
 
The opinion is available from the New York Law Journal – http://www.law.com/jsp/nylj/PubArticleFriendlyNY.jsp?id=1202446174823 and at http://www.law.com/jsp/nylj/PubArticleNY.jsp?id=1202446174823. The Complaint, Memoranda filed by the parties and amici, the District Court opinion and appellate briefs are available from Public Citizen – http://www.citizen.org/litigation/forms/cases/getlinkforcase.cfm?cID=358

Quoting from the opinion:

“New York’s Appellate Division adopted new rules prohibiting certain types of attorney advertising and solicitation, which were to take effect February 1, 2007. The new rules barred, inter alia, testimonials from clients relating to pending matters, portrayals of judges or fictitious law firms, attention-getting techniques unrelated to attorney competence, and trade names or nicknames that imply an ability to get results. The amendments also established a thirty-day moratorium for targeted solicitation following a specific incident, including targeted ads on television or in other media. Plaintiffs, a New York attorney, along with his law firm and a not-for-profit public interest organization, challenged these provisions as violating the First Amendment. The District Court agreed in part—it declared most of the content-based rules unconstitutional, while upholding the thirty-day moratorium. Both Plaintiffs and Defendants timely appealed from portions of the District Court’s decision adverse to them. For the reasons that follow, we conclude that the District Court properly granted summary judgment to Plaintiffs with respect to the content-based advertising restrictions, with the exception of the prohibition on portrayals of fictitious law firms. We likewise conclude that the District Court properly granted summary judgment to Defendants with respect to the thirty-day moratorium.”

So let’s recap: William Shatner in a judge’s robe? Allowed. Fifty foot lawyers terrorizing Midtown Manhattan? Allowed.

Jim “The Hammer” Shapiro apologizing that he cannot “rip out the hearts of those of have hurt you”? Ok that last one was a trick — already allowed: http://www.youtube.com/watch?v=Q5hn8bhEpMY – but good idea? Maybe that is the better question.

Are You Promising Too Much in Your Advertising?

South Carolina Attorney Ad Tests Bounds of Advertising Rule

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

In re Anonymous, 385 S.C. 263, 684 S.E.2d 560 (2009)

Brief Summary
A lawyer advertisement that promised the lawyer would “work to protect” clients’ interests and “we’ll get you the benefits you deserve” did not improperly guarantee results and was not misleading.

Complete Summary
The South Carolina Office of Disciplinary Counsel (ODC) brought charges against an unnamed lawyer (“Respondent”) alleging his television advertisement was actually or inherently misleading and that it created an unjustified expectation regarding results, in violation of Rule of Professional Conduct (RPC) 7.1. The advertisement stated:

It’s not your fault you were hurt on the job, but I know you’re afraid to file a job injury claim. You’re afraid your boss won’t believe you’re really hurt-or worse, that you’ll be fired. We’ll protect you against these threats-these accusations-and work to protect your job. I’m not an actor, I’m a lawyer. I’m [Anonymous]. Call me and we’ll get you the benefits you deserve. The [Law] Firm.

Id. at 265. The ODC argued that this advertisement improperly gave the impression that Respondent could guarantee job protection. A hearing panel found for the lawyer, and the ODC appealed.

The South Carolina Supreme Court dismissed the charges against Respondent. The court held that neither the plain text of the advertisement, nor the evidence submitted to the Hearing Panel warranted finding the advertisement misleading. The parties below had agreed that expert testimony would not be proper with respect to the question of law as to whether the ad was misleading. The ODC relied instead on a “market study” focus group testing five different ads for layperson reactions.  

Recognizing the constitutional protections for lawyer advertising and commercial speech more generally, the court noted that an advertisement is misleading and can be prohibited when it contains a material misrepresentation or creates an unjustified expectation. The court held that the phrase “work to protect” did not imply that Respondent could guarantee results and was therefore not actually or inherently misleading.

The court noted that there was no credible evidence that anyone in the public actually was misled by the ad, and that the Bar complaint was filed by an anonymous member of the South Carolina Bar. The court also held that the results of the market survey conducted on behalf of the ODC did not contain clear and convincing evidence that the advertisement was misleading. The participants in the survey had indicated that, out of five advertisements shown, Respondent’s advertisement most strongly conveyed that clients would be protected from getting threatened or fired. Without commenting on whether such a finding could support a conclusion that the ad was misleading, the court found that the survey itself was not reliable because, inter alia, the sample group was too small (30 people), the margin of error was too large (20 percent), the Respondent’s advertisement was the only one that referenced clients’ jobs, and the questions were worded in a way that would elicit the ODC’s desired response.

Significance of Opinion
Courts nationwide arguably have been trending toward less restrictive interpretations of lawyer advertising rules, and this case is no exception. The opinion provides some clear guidance and solid reasoning respecting the statements at issue here, which may well translate to similar statements and in other jurisdictions. This opinion also is notable for the court’s detailed critique of the market survey evidence submitted by the ODC

Lateral Moves and Insurance Coverage (LMRM 2)

When a lawyer changes law firms, the lawyer may want to ensure that the lawyer has insurance to cover claims arising from legal services provided while at the former firm.

Sometimes the former firm’s insurance policy may provide coverage for such claims. Often this turns on whether the definition of “insured” includes former lawyers. Of course, it may be difficult for the lawyer to review the former firm’s policy when or after making a move. Also, if the former firm dissolves, payment on the former firm’s insurance is also likely to end.

Generally the new firm’s insurance policy will not provide coverage for services provided while at a former firm. Sometimes, however, the new firm can purchase coverage for the lateral attorney’s work at the former firm under a special policy, often called a “prior acts” policy. The LMRM panel “The Insurance Marketplace and Considerations” warned, however, that the new firm may find that it is damaging its insurability or expended its insurance limits by covering work for which the new firm received no payments, and over which the new firm had no control.

Some insurers are also providing individual tail policies for lawyers who make a lateral move. According to the LMRM panel, most insurers are still struggling with how to assess risk for such policies, particularly where the insurer does not provide insurance for (and thus does not know the risk profile of) the former firm.

Notice of potential claims and changing LPL insurers — update from LMRM

Yesterday was the first day of the Legal Malpractice/Risk Management conference in Chicago. Client matters have kept me from blogging much until now, but  I thought I would share an interesting discussion from the panel, “Insurance Coverage Update” about reporting claims.

As the panelists noted, lawyers who work in the area of lawyer risk management or legal malpractice defense are often asked whether a particular set of circumstances should be reported to an insurer.

Answering such questions is often quite tricky. The questioned lawyer must review the notice requirements in the relevant lawyers professional liability (LPL) policy. The questioned lawyer must also gain an understanding of the circumstances related to the possible claim, to see whether the insurer should be notified. While making a claim is often a good idea, it is difficult to give general advice regarding providing notice to an insurer in a vacuum.

That said, firms are often strongly encouraged to provide notice to the firm’s insurer when the firm knows of an incident that may require notice, and the firm is seeking to renew or obtain new insurance. Such reporting is usually a good choice because failure to provide notice may result in a decision that the incident is not covered because, although the firm may have had prior knowledge of the potential claim, the incident was not disclosed at the appropriate time under the old policy or on the (renewal) application.

A tricky situation may arise, however, when the firm decides to provide notice of a potential claim around the renewal period, and the insurer responds that notice is not yet appropriate.

If the lawyer is considering changing insurers, should the lawyer report the same circumstances to the new potential insurer? There are good reasons that a lawyer may want to avoid disclosure. Disclosure may complicate obtaining insurance from the new insurer or an increase in premiums. Further, the old insurer has already said the incident did not yet require reporting, and this may tempt a lawyer to believe the incident does not need to be disclosed on the application to the new insurer.

But recall that the notice requirements for the two policies may be different. Failure to provide notice on the application to the new insurer may result in the new insurer’s refusing to provide coverage.

What’s a lawyer to do? The panel suggests that, if the incident is serious enough, the lawyer may benefit from staying with the same old carrier instead of moving to a new carrier. This solves the problem of what to do with an incident that the old insurer has already determined does not require notice.

Research on the Go

While at my son’s soccer practice this weekend, another father and I spoke quite a bit about the transition from paper media to electronic media. Odd, I know — but he’s a librarian and I am seriously considering a Kindle. When discussing the future of books and research, he told me that he believed lawyers to be one of the professions (the other being doctors) on the forefront of electronic media and online research.

It’s true, of course, and we can all be thankful for the complete and immediate research capabilities provided online by Westlaw or Nexis or whatever major provider one uses (especially when compared to the research methods most of us learned in law school). But what happens when a lawyer is not near a computer to do research? Have you ever wished you get a case or cite on the go (whether in a deposition, hearing, meeting, etc.)? I recently came across a few tools which may help:

• If you have an iPhone, you may want to consider downloading Fastcase legal research. It is a free app and provides lawyers research capabilities on the go. Fastcase is not new (the Oregon State Bar is one of 17 which subscribe to its service for their members), but the app is new and it allows one to create an account to do research on their iPhone. The interface is a bit clumsy but you can search jurisdiction-specific caselaw or statutes and save  documents for later review. This app has come in very handy when I have needed a quick cite on the go. And,
• Google has dipped their toe in the world of research with Google Scholar — a beta program which allows a free search across many disciplines and sources, including articles and court opinions. Going to the advanced search options allows a more focused search with state specific options. I have tried a few sample searches and have found it included most of what I was looking for, although the results appear to produce way more than I need (and quite a bit of irrelevant material). I’ve heard a few concerns that the Google library is not complete and so a lawyer should not rely on it for research. That may be true (I don’t know one way or the other), but if a lawyer needs a cite or case and can’t access their computer (or even Fastcase), then Google Scholar may suffice as a quick fix.

If I happen to have missed a program you are using on the go, please let me know.

Bankruptcy Provision Trumps Local Limitations in Fifth Circuit

Statutes of Repose Do Not Shorten Bankruptcy Trustee’s Period to Pursue Legal Malpractice

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Stanley v. Trinchard, 579 F.3d 515, 51 Bankr. Ct. Dec. 278 (5th Cir. 2009)

Brief Summary
Bankruptcy trustees who wish to pursue causes of action on behalf of debtors’ estates are not governed by a state’s shorter statute of repose, but rather by the federal bankruptcy law’s two-year period.

Complete Summary
Bankruptcy trustee Stanley (“Trustee”) brought a legal malpractice claim on behalf of a bankruptcy debtor’s estate against law firm Trinchard & Trinchard LLC 13 months after the debtor knew or should have known of his legal injury. The district court granted Trinchard & Trinchard’s summary judgment because the Trustee’s claim was barred by Louisiana’s one-year peremptive period, which is the civil law equivalent of a statute of repose in a common law jurisdiction. 

Bankruptcy Code § 108(a) allows a trustee to commence an action on behalf of a debtor’s estate within the period allowed by state law for such an action, or within two years after the order for relief, whichever is later. Louisiana law allows a party to bring an action for legal malpractice under two statutes, a statute of limitations and a period of peremption. The former is a period in which an action may be commenced, while the latter represents the lifespan of a substantive right. On the Trustee’s appeal, the question before the Court was whether Louisiana’s one-year peremptive statute was exempt from Bankruptcy Code § 108 because of its status as a statute of repose.  

Trustee argued that the time period established under Bankruptcy Code § 108(a) preempted all time period limitations under state law, not just statutes of limitation. Trinchard & Trinchard, however, argued that Bankruptcy Code § 108(a) was limited to statutes of limitations; otherwise, the Bankruptcy Code would impermissibly resurrect substantive rights otherwise extinguished by state law.

The Fifth Circuit agreed with Trustee and reversed. The Court noted the purpose of the Code is to afford trustees extra time to assess and pursue the estate’s assets. Furthermore, Congress drew no distinction between the state periods of limitation and repose governing time limits for filing suit. Thus, the Fifth Circuit held that Bankruptcy Code § 108(a) extends Louisiana’s legal malpractice peremption period.  

Significance of Opinion
This opinion addresses a matter of first impression on appeal, and lawyers and insurers in matters with statutes of repose that would expire during the two-year bankruptcy limitations period should take note of the holding. Although statutes of repose, such as Louisiana’s peremptory period, are generally not subject to extension, this opinion creates a substantial exception to that rule.

Attorney-Client Privilege for Communications . . . With Nonlawyers?

On February 6, 2010, the U.S. District Court for the Northern District of California reached the perhaps surprising conclusion that the attorney-client privilege protects communications with a nonlawyer.

In Black v. Potter, 2010 WL 532408 (N.D. Cal. Feb. 6, 2010), plaintiff sought a protective order that would prevent the defendant from deposing the plaintiff’s (nonlawyer) union representative on grounds those communications were protected by the attorney-client privilege.

Applying federal common law on privilege, the district court agreed. Admitting that prior courts had reached differing conclusions, the district court focused on EEOC regulations that allowed a claimant to have a lay representative. 29 CFR 1614.605(a). The court concluded that “protecting the confidentiality of communications between an aggrieved employee and the union representative who is acting as the employee’s advocate in EEOC proceedings furthers the traditional rationales underlying the attorney-client privilege.” Thus, the privilege could apply to specific conversations.

Having reached that determination, the court concluded the question the defendant apparently wanted answered did not seek privileged information. Rather, only communications “that were made in confidence, intended to be kept confidential, and otherwise meeting the strictures of the attorney-client privilege”  would be protected.

Isn’t it a bit odd that protecting communications between a pseudo-client and a non-attorney is seen as advancing the “traditional rationales underlying the attorney-client privilege”?

New Case on Duties of Class Counsel in California

California Class Action Lawyers Must Help Class Members Enforce Judgment

Another in Our Series of Hinshaw Lawyers for the Profession® Alerts

Barboza v. West Coast Digital GSM, Inc., 179 Cal.App.4th 540, 102 Cal.Rptr.3d 295 (2009)

Brief Summary
In a class action, given absent class members’ lack of power or incentive to enforce a judgment, the court ordered class counsel to assume post-judgment enforcement duties on behalf of the class.

Complete Summary
Plaintiffs were employees who brought a class action against their employer West Coast Digital, Inc. (WCD). WCD then sold its assets and ceased operations. The parties stipulated to a default against WCD. The court entered an aggregate judgment of more than $4 million. Plaintiffs’ counsel submitted for the court’s approval a notice to class members of the judgment. The proposed notice stated that class counsel had fulfilled their obligations to the class and had no obligation to seek to enforce the judgment. The trial court did not approve the notice and noted that class counsel’s duty of care extends to enforcement of the judgment. Class counsel appealed from the order denying approval of the notice.

The California Court of Appeal, Second District, affirmed based on a number of considerations unique to class actions. Most importantly, a class related issue was still unresolved. Namely, there was an open question as to the appropriate distribution among class members of any assets recovered. This issue was exacerbated by the fact that any recovery from the insolvent defendant would likely be too small to cover plaintiffs’ aggregate claims. Further, because the judgment was an aggregate judgment, no individual class member could seek to enforce it, and even if individual enforcement was possible it would likely be too expensive for individuals to seek enforcement. The court also noted that class members often cannot feasibly agree with class counsel on the scope of representation. Accordingly, the court held that class counsel must represent “all of the absent class members’ interests throughout the litigation to the extent there are class issues” and that it was the duty of the trial court to ensure that counsel is protecting those interests. Id. at 300-01.

The court conceded that the default rule — outside of the class action context — is that attorneys’ duties end upon entry of judgment, but the court noted that this common law rule has generally included an exception for special circumstances. The court held that class representation can present such a special circumstance. The court also conceded that its holding could impose a hardship on class counsel who lack expertise in enforcing judgments. But the court held this consideration was outweighed by the need to protect class members’ interests, and noted that class counsel could always associate with counsel who did have expertise in enforcement.

Significance of Opinion
This opinion demonstrates one of the many ways the lawyer-client relationship and its attendant duties may be considered differently in the class representation context. Although the court takes a fact-specific approach to this case, it also seemingly articulates a broader rule calling for lawyers to represent “all of the absent class members’ interests throughout the litigation [including post-judgment] to the extent there are class issues.”

Discharged Firm May Still Collect Contingency Fee

Another in our series of Hinshaw Lawyers for the Profession® Alerts.

DeLapaz v. Selectbuild Construction, Inc., 917 N.E.2d 93, 334 Ill.Dec. 496 (Ill. App. 1st Dist. 2009)

Brief Summary
A lawyer did much of the work on a contingency fee matter prior to his employment being terminated by his law firm, and the lawyer took the client’s matter with him and settled it shortly thereafter. It is within the trial court’s discretion to award the original law firm the contingency fee, less the amount of a quantum meruit payment to the lawyer for the value of the work after the discharge.

Complete Summary
Plaintiff Rafael DeLapaz hired law firm Touhy & Touhy, Ltd. (“Touhy”) on a contingency fee basis to bring a negligence action. DeLapaz was referred to Touhy lawyer James Zouras. Zouras performed essentially all of the attorney work on the DeLapaz matter. Touhy then terminated Zouras’ employment.

Zouras started a new firm and took the DeLapaz matter with him. Shortly thereafter, the matter settled and Touhy and Zouras both sought the right to be paid the contingency fee.

The trial court awarded Touhy its contingency fee and allocated a small portion of the fee to Zouras’ new firm on a quantum meruit basis. Zouras appealed, arguing that the trial court’s award was an abuse of its discretion.

The Illinois Appellate Court, First District, affirmed, noting that the trial court’s award was supported by Illinois case law and thus was not an abuse of discretion. The appellate court first cited the general rule that a discharged attorney (i.e., Touhy) normally is not entitled to the original contract contingency fee, which terminates upon discharge, but is entitled to be paid on a quantum meruit basis for services rendered prior to the discharge. The appellate court, however, relied on an established exception recognized by the Illinois appellate courts, which holds that a discharged firm is entitled to its contract fee and the successor counsel merely entitled to a fee based on quantum meruit in cases generally like this one in which the case settled before most of the work normally required was done, and the overwhelming majority of that work was done at the original firm.

Also significant to the court was the fact that Zouras’ new firm did not have a written fee agreement with DeLapaz.

Significance of Opinion
This opinion reflects the broad discretion Illinois courts have in allocating fees between former and successor counsel, and recognizes that the relative contributions of the original and successor attorneys does matter. The opinion suggests that it would be best practice for the successor attorney to have a new written fee agreement with the client. Not only would such an agreement presumably strengthen the successor attorney’s position vis-a-vis prior counsel, but it also ideally should include client consent to a shared fee as required under the ethics rules in many jurisdictions.

March is the Month for LMRM

Hinshaw’s 9th Annual Legal Malpractice & Risk Management Conference will take place March 2 to March 5 in Chicago. The Legal Malpractice & Risk Management Conference is focused on current and important developments in the law and litigation of malpractice claims, legal malpractice insurance and risk management strategies.

The 2010 Legal Malpractice & Risk Management Conference offers interactive panels comprised of leaders in their respective fields, from professional liability practitioners and law firm general counsel to insurance professionals. Each panel will provide a comprehensive examination of current developments with an emphasis on recent legal decisions.

Only a few spaces are left but there is still time to be a part of the conference. We hope to see you there!

If you have any questions about the conference, feel free to contact one of us or conference coordinator Katie McCormack at 312-704-3000.

Check out www.lmrm.com for a brochure and more information.