Ethics & Malpractice Update

Charles Herring, Jr.Herring & Irwin, L.L.P.

Austin, Texas

Barratry fall-out2011 passage – SB 1716Remedies:

1. Client suits to void contracts obtained by barratrous conduct, plus attorney’s fees

2. Nonclients solicited by barratrous conduct--$10,000 plus atty’s fees.

“Barratry bonus” suitsMay a corporation sue? R 7.03

distinction – particular event v. general business

What is barratry?Criminal prohibitions – principally Penal Code § 38.12

Civil case law – “exciting and stirring up … suits”; “adjudicative cheerleading”

Ancient origins

Barratry -- § 38.12Case runnersSuing without authorization“solicit[ing]employment, either in

person or by telephone, for himself or for another” inconsistently with Disciplinary Rules;

 knowingly solicits employment from someone represented by other counsel

Barratry -- § 38.12Communicates using “coercion,

duress, fraud, overreaching, harassment, intimidation, or undue influence” or

A communication that “contains a false, fraudulent, misleading, deceptive, or unfair statement or claim.”

Pelton v. McClaren Rubber, Co., 120 S.W.2d 516 (Tex. Civ. App. – Waco 1938, no pet.)

“Pelton secured his contract of employment to collect the claim in question by personal solicitation in violation of this law. His purported contract was therefore void and unenforceable.”

Defensive Uses

Motion to disqualify Plaintiffs’ counselMotion to require P’s attys to instruct

clients concerning rights – Willis; PJC 104.2; Disciplinary Rule 1.03

Invalidating contracts based on barratrous solicitation

Attacking attorney’s fees when barratry occurs

Attorneys’ FeesDLA Piper v. Adam VictorSuit for $675,000 unpaid feesDLA internal docs:

“Now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode”

Prof. William G. Ross: “churning . . . is an insidious problem in the legal profession”

Attorneys’ FeesFrailick v. Plumbers & Pipefitters Natl. Pension Fund, 2011 WL 487754 (N.D. Tex. 2011) Disallowing fees in ERISA case for

various billing practices, including:“lack of billing judgment” (noting the

lack of documentation of hours written off as unproductive, excessive, or redundant)

Attorneys’ FeesFrailick (cont.):

“block billing” (reporting all tasks performed on a given day as a single entry, rather than specifying the time spent per task)

vagueness (e.g., entries reading “telephone conference,” “phone conference with co-counsel,” “legal research”);

billing for “clerical work” by lawyers (e.g., organizing files, serving and filing proofs of service)

Attorneys’ FeesBurrow v. Arce – fee forfeiture for breach

of fiduciary dutyPJC 104.2

Transaction “fair and reasonable”Acting in “utmost good faith”“Scrupulous honesty”Putting client’s interests above own

Motions To DisqualifyFormer client conflicts

ProliferationR 1.09:

Adverse to former clientSame or substantially related matterReasonable probability of R 1.05

(confidentiality) violationChallenging work product

Tactical considerations

Motions To DisqualifyIs an in-house counsel who is also

corporate officer judged by lawyer or non-lawyer standard?

In re SAExploration, Inc., 2012 WL 6017717 (Tex. App. –Houston [14th Dist.] 2012, no pet.)

Held: Non-lawyer standard appliedScreening permissible – not done, so

counsel disqualified and screened

Motions To DisqualifyIn re SAExploration, Inc. (cont.)

What should the company have done?“caution [him] not to disclose any

confidences”“instruct [him] not to work on any

matter that he previously worked on for the other side”

“take reasonable steps to ensure that the employee will not work in connection with such matters”

Anti-fracturing doctrine“Legal malpractice” v. other claimsProfessional negligence v. breach of

fiduciary duty, fraud, DTPA, breach of contract

Significance:Statute of limitationsRemediesAttorney’s fees

Attorney-client Relationship?Express agreementAgreement implied by conductAttorney by estoppelDuty to warn cases – Perez v. Kirk & CarriganMirandizing corporate “constituents”

Attorney Immunity DefenseSuits by opposing partiesEaston v. Phelan, 2012 WL 1650024 (Tex. App.–

Houston [1st Dist.] 2012, no pet.)

Alleged that defendant lawyers conspired to deprive the plaintiffs of annuity funds by “generating, filing, and prosecuting a ‘pretend’ lawsuit, committing fraud, and tampering with governmental records

Attorney Immunity DefenseEaston v. Phelan, (cont.)

“[t]he filing of pleadings and motions – even if they are unmeritorious or frivolous – and the rendition of legal advice cannot form the factual basis of a fraud claim against an attorney when the acts are performed within the context of discharging duties to a client”

Attorney Immunity DefenseEaston v. Phelan, (cont.)

however, immunity “to non-clients is not absolute …. [A]n attorney may be held liable for conspiracy to defraud by knowingly assisting a client in evading a judgment through a fraudulent transfer, or . . . knowingly assisting a client in extorting a payment to which the client had no legal right”

Professional Ethics CommitteeAppointed by Tx S CtCreated by statute:

Tex. Gov’t Code §§ 81.091-.95Effect of opinions?

§ 81.092(c): opinions not binding on Tx S CtStonewall Fin. Servs. Corp. v. Corona, 2012

WL 4087642 (Tex. App.—Texarkana 2012, no pet.)Opinions “advisory”Practicalities: disciplinary enforcement

PEC Op. 614 (2012)

Under Rule 3.04(b): A lawyer must not condition a suit settlement on the other party providing testimony acceptable in form and substance

But may require an affidavit to address truthfully a “specified subject or incident,” without specifying content

PEC Op. 617 (2012)Addressing Rule 7.01 trade-name-

restriction & Rule 8.05 choice-of-law issues

Lawyer licensed in both Texas and North Carolina, but who practiced law in North Carolina, proposed to use a trade name in his North Carolina law firm

(Compare Johnnie Cochran “mirror page” settlement)

PEC Op. 621 (2012)

Addressing Rule 3.04(b) witness-payment issues

A lawyer handling a divorce case proposed to allow client to pay the client’s former lawyer to serve as both fact witness and expert witness

Held: permissible if fees reasonable and not contingent on outcome