The market for bad legal advice: Academic professional responsibility consulting as an example

Stanford Law Review

Volumn 60, Issue 6, 2008, Pages 1555-1603

  Simon, William H ^a  

^a Och Spine at New York Presbyterian Hospitals

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EID: 49249122822     PISSN: 00389765     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (170)

1. See Appendix C (Role of Enron's Attorneys) to Final Report of Neal Batson, Court-Appointed Examiner, at 26-90, In re Enron Corp., 370 B.R. 583 (Bankr. S.D.N.Y. 2007) (No. 01-16034) [hereinafter Batson Report].
2. Paul Braverman, Heiter Shelter, AM. LAW., Dec. 2003, at 65.
3. See generally José E. Alvarez, Torturing the Law, 37 CASE W. RES. J. INT'L L. 175 (2006).
4. See Howard M. Erichson, Beyond the Class Action: Lawyer Loyalty and Client Autonomy in Non-Class Collective Representation, 2003 U. CHI. LEGAL F. 519 (2003);
5. David Luban, Settlements and the Erosion of the Public Realm, 83 GEO. L.J. 2619, 2647-59 (1995).
6. E.g., Greycas v. Proud, 826 F.2d 1560 (7th Cir. 1980). But see Jonathan M. Barnett, Certification Drag: The Opinion Puzzle and Other Transactional Curiosities, 33 J. CORP. L. 95, 112-18 (2007) (pointing out that courts seem more reluctant to enforce the duty in the third-party than in the first-party context).
7. JACK GOLDSMITH, THE TERROR PRESIDENCY 97 (2007);
8. see also Randolph D. Moss, Executive Branch Legal Interpretation: A Perspective from the Office of Legal Counsel, 52 ADMIN. L. REV. 1303, 1318-20 (2000) (discussing views on the binding effect of OLC opinions). The exculpatory effect of advice from private counsel is more limited, but a substantial effect is recognized with respect to both civil and criminal claims requiring proof of willfulness or bad faith. See, e.g., Mahurker v. C.R. Bard, 79 F.3d 1572, 1579 (Fed. Cir. 1996) (stating that advice of counsel may provide a defense to a claim of willfulness in patent infringement case); United States v. Baldwin, 307 F.2d 577, 579 (7th Cir. 1962) (noting that advice of counsel may show lack of intent in tax fraud case).
9. Cent. Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 (1994).
10. Even liability for perjury cannot be enforced privately. Briscoe v. LaHue, 460 U.S. 325, 330-34 (1983) (reaffirming the traditional common law immunity of witnesses from damage claims). For a survey and critique of the doctrine as applied to experts, see Jeffrey L. Harrison, Reconceptualizing the Expert Witness: Social Costs, Current Controls, and Proposed Responses, 18 YALE J. ON REG. 253 (2001).
11. Courts commonly admit academic opinions on whether challenged lawyer conduct is consistent with professional responsibility norms despite the objection that admission violates the traditional rule against testimony on matters of law. See Carl M. Selinger, The Problematical Role of the Legal Ethics Expert Witness, 13 GEO. J. LEGAL ETHICS 405, 408-18 (2000).
12. Some cases hold that rules like Federal Rule of Civil Procedure 26(b) impliedly prohibit lawyers from ex parte contact with opposing experts. See 6 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE ¶ 26.80[4] (3d ed. 1997). Others have disqualified experts from testifying adversely to former clients in matters related to the former engagement (although in at least some of these cases the expert appears to have acted in the former engagement as a consulting expert, whose work may have been privileged, rather than as a testifying expert). See Great Lakes Dredge & Dock Co. v. Harnischferger, 734 F. Supp. 334, 336-39 (N.D. Ill. 1990) (discussing cases). These cases might be taken to imply that the testifying expert has a duty of confidentiality even in the absence of agreement, but it is debatable whether such a duty is entailed by or even compatible with the expert's role. See Samuel R. Gross, Expert Evidence, 1991 WIS. L. REV. 1113, 1148-52.
13. Gross, supra note 10, at 1178.
14. See THOMAS LEE HAZEN, THE LAW OF SECURITIES REGULATION § 7.4 (4th ed. 2002). Strictly speaking, "due diligence" is a defense to a fraud claim. However, the securities laws developed a particularly demanding version of fraud liability which sometimes treats failure to disclose as misrepresentation and failure to learn as tantamount to knowledge. The net effect is that of an enhanced duty.
15. 26 U.S.C.A. § 6664(c)(1) (2006).
16. See, e.g., MODEL RULES OF PROF'L CONDUCT R. 1.6 cmt. (2002).
17. N.Y. STATE BAR ASS'N TAX SECTION, REPORT ON CORPORATE TAX SHELTERS OF NEW YORK STATE BAR ASSOCIATION TAX SECTION (1999), reprinted in NYSBA Tax Section Applauds Some Anti-Corporate Tax Shelter Proposals, Rejects Others, 1999 TAX NOTES 82-29, ¶ 101 (Apr. 29, 1999).
18. Tanina Rostain was the first to draw attention to the general importance of the work of the New York and ABA tax sections, see Tanina Rostain, Sheltering Lawyers: The Organized Tax Bar and the Tax Shelter Industry, 23 YALE J. ON REG. 77 (2006). I am grateful to Dennis Ventry for helpful discussion of the regulation of tax practice.
19. 26 U.S.C.A. §§ 6662, 6664(d)(2)(A) (2006). A weaker but still important safeguard is the evidence doctrine that once a client asserts "advice of counsel" as an excuse, she waives privilege with respect to all advice on the relevant subject matter. In re Echostar Commc'ns Corp., 448 F.3d 1294, 1299 (Fed. Cir. 2006). Thus, a client cannot produce a favorable opinion while asserting privilege with respect to unfavorable ones.
20. 26 U.S.C.A. § 6664(d)(3)(B) (2006).
21. 26 U.S.C.A. § 6112(a)(1) (2006).
22. 26 U.S.C.A. § 6111(a)-(b) (2006).
23. 31 C.F.R. pt. 10 (2007). These regulations were influenced by an ABA ethics committee opinion proposing distinctive standards for shelter opinions with third-party effects. ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 346 (1982).
24. 31 C.F.R. § 10.35(e)(1)-(2) (2007).
25. 31 C.F.R. § 10.35(c)(3)-(4) (2007).
26. See MODEL RULES OF PROF'L CONDUCT R. 3.1 (2002).
27. Yet another interpretation might see the torture memos as an exercise of legislative rule-making power to immunize the conduct they consider. See Moss, supra note 6, at 1319. Assuming the OLC has such power, the objection would remain that the memos purport to be analyzing pre-existing authority, not making law.
28. 31 C.F.R. § 10.35(c)(3)(ii) (2007).
29. 31 C.F.R. § 10.35(c)(3)(iii) (2007).
30. 31 C.F.R. §§ 10.22, 10.35(c)(1) (2007).
31. 31 C.F.R. § 10.35(c)(2) (2007).
32. 31 C.F.R. § 10.35(c)(3)(a) (2007).
33. Barnett, supra note 5, at 98-99. Vinson & Elkins's "true issuance" opinions for Enron were qualified by the assumption that a court would not recharacterize the transactions in question as loans (rather than sales). Since the whole point of the opinions was to justify accounting treatment that depended entirely on the correctness of this assumption, the opinions were disclaiming responsibility for the only issue that was material to their purpose. Batson Report, supra note 1, at 23, 34-35.
34. ABA Comm. on Legal Opinions, Third-Party Legal Opinion Report, 47 BUS. LAW. 167, § 9, at 196-97 (1991).
35. For the story of OPM, see Stuart Taylor, Jr., Ethics and the Law: A Case History, N.Y. TIMES, Jan. 9, 1983, § 6 (Magazine), at 31. The relevant rules then (as now) plainly permitted warnings of ongoing fraud.
36. See, e.g., RESTATEMENT (SECOND) OF TORTS § 551(2)(d) (1977).
37. ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 92-366 (1992).
38. MODEL RULES OF PROF'L CONDUCT R. 1.6(b)(3) (2002).
39. Circular 230-type standards are designed primarily for ex ante opinions. They may require some softening in the litigation context. A less demanding standard of "due diligence" might seem appropriate where the expert's factual assumptions will be subject to adversarial challenge and demands for evidentiary support. It might also seem appropriate to leave the parties more discretion to choose and shape issues when opposing lawyers and experts stand ready to fill any lacunae. Still, the basic standards of clarity, candor, and reasoned explanation apply. Moreover, one should not overestimate the power of the adversarial process to neutralize the defects of opinion evidence. Most cases are settled, and I have heard more than one academic expert justify large retainers on the ground that the mere announcement that he has agreed to testify substantially increases the settlement value of the client's claim. Such assertions imply an influence that could readily be abused despite adversarial checks. For a discussion of the problems of expert testimony and a range of possible responses, see Gross, supra note 10; Harrison, supra note 8.
40. Memorandum from Sherron Watkins, Former Vice President for Corp. Dev., Enron Corp., to Kenneth Lay, Former CEO and Chairman, Enron Corp. (Aug. 2001), reprinted in Destruction of Enron-Related Documents by Andersen Personnel: Hearing Before the Subcomm. on Oversight and Investigations of the Comm. on Energy and Commerce, 107th Cong. 39-44 (2002), available at http://republicans.energycommerce.house.gov/107/action/107-80.pdf [hereinafter Watkins Memorandum].
41. SPECIAL INVESTIGATIVE COMMITTEE OF THE BOARD OF DIRECTORS OF ENRON CORP., REPORT OF INVESTIGATION 106 (2002), available at http://fl1.findlaw.com/news.findlaw.com/hdocs/docs/enron/sicreport/ sicreport020102.pdf [hereinafter ENRON INVESTIGATIVE COMMITTEE REPORT]
42. Watkins Memorandum, supra note 37, at 43.
43. Letter from Max Hendrick III, Vinson & Elkins LLP, to James Derrick, Executive Vice President and General Counsel, Enron Corp. (Oct. 15, 2001), reprinted in Destruction of Enron-Related Documents by Andersen Personnel: Hearing Before the Subcomm. on Oversight and Investigations of the Comm. on Energy and Commerce, 107th Cong. 46-54 (2002), available at http://republicans.energycommerce.house.gov/107/action/107-80.pdf [hereinafter V & E Letter].
44. Id. at 46-47.
45. Id. at 53-54.
46. ENRON INVESTIGATIVE COMMITTEE REPORT, supra note 38, at 176.
47. Id. at 177.
48. See, e.g., Roger C. Cramton, Enron and the Corporate Lawyer: A Primer on the Legal and Ethical Issues, 58 BUS. LAW. 143, 166 n.109 (2002);
49. Mike France, Can Law Profs Consult - and Keep Their Distance?, BUS. WK., Feb. 2, 2004, at 71.
50. The Wolfram letter is transcribed infra at Appendix I.
51. ENRON INVESTIGATIVE COMMITTEE REPORT, supra note 38, at 158-65. On Watkins's recommendation, see Batson Report, supra note 1, at 166.
52. FIN. ACCOUNTING STANDARDS BD., STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 125: ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES app. ¶ 23 (1996) (explaining that proper treatment depends on specified "factors pertinent under applicable law"). See generally Lawrence A. Cunningham, Sharing Accounting's Burden: Business Lawyers in Enron's Dark Shadows, 57 BUS. LAW. 1421, 1436-38 (2002) (noting the pervasiveness of "mixed questions of accounting and law" in business practice and specifically in structured finance).
53. United States v. Simon, 425 F.2d 796, 805-07 (2d Cir. 1969) (holding that compliance with GAAP does not exonerate an otherwise misleading statement); see also HAZEN, supra note 12, § 12.9[9], at 610-11 (same).
54. Batson Report, supra note 1, at 165.
55. Watkins Memorandum, supra note 37, at 40.
56. See, e.g., TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976) (noting that information is material for proxy disclosure purposes when "there is a substantial likelihood that a reasonable shareholder would consider [information] important in deciding how to vote").
57. Batson Report, supra note 1, at 161-62. Watkins, however, was mistaken in saying that the firm had given "true sale" opinions with respect to the "Raptors." Id. at 162.
58. Compare Steven L. Schwarcz, The Limits of Lawyering: Legal Opinions in Structured Finance, 84 TEX. L. REV. 1, 27-28, 31-32 (2005),
59. with William H. Simon, Earnings Management as a Professional Responsibility Problem, 84 TEX. L. REV. 83, 88-91 (2005).
60. Cramton, supra note 45, at 165-67.
61. V & E Letter, supra note 40, at 53.
62. In re Enron, 235 F. Supp. 2d 549, 668 n.103, 704-05 (S.D. Tex. 2002). The plaintiffs in the securities class action agreed to dismiss the claims against V & E in late 2006. Kristen Hays, Law Firm Could Be Cut Free From Suit: Enron Case Plaintiffs Ask To Dismiss V&E, HOUS. CHRON., Dec. 9, 2006. It seems unlikely that this decision implies anything about the issues addressed in Wolfram's opinion. The largest obstacle to recovery was the doctrine that there is no private right of action for aiding and abetting, as opposed to primary, securities fraud. Cent. Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164 (1994). Although not privately redressable under federal law, aiding and abetting securities fraud is a (publicly enforceable) wrong under the securities laws, as well as under professional responsibility rules, MODEL RULES OF PROF'L CONDUCT R. 1.2(d) (2002). It is also a privately enforceable wrong at common law. See RESTATEMENT (SECOND) OF TORTS § 876(a) (1977).
63. E.g., YALE UNIV., YALE UNIVERSITY FACULTY HANDBOOK ch. X, ¶ (B)(1)(a) (2002), available at http://www.yale.edu/provost/handbook/yfhtoc.html (mandating that faculty adhere to the "highest standards of ethical conduct, truth, and accuracy"); id. ch. X, ¶ (B)(1)(b) (forbidding "secret or classified research" because it is inconsistent with goals of "open publication, free discussion, or access to research").
64. See DEREK BOK, UNIVERSITIES IN THE MARKETPLACE: THE COMMERCIALIZATION OF HIGHER EDUCATION 64-66, 143-44 (2003);
65. DEBORAH L. RHODE, IN PURSUIT OF KNOWLEDGE: SCHOLARS, STATUS, AND ACADEMIC CULTURE 59-61 (2006);
66. see also YALE UNIV., supra note 58, ch. X, ¶ (B)(1)(c) ("[Researchers must] be able to publish the results of their research without prior approval of a sponsor.").
67. STANFORD UNIV., RESEARCH POLICY HANDBOOK: RESEARCH MISCONDUCT: POLICY ON ALLEGATIONS, INVESTIGATIONS AND REPORTING § 1(A)(3) (2006), available at http://www.stanford.edu/dept/DoR/rph/2-5. html.
68. STANFORD UNIV., RESEARCH POLICY HANDBOOK: OPENNESS IN RESEARCH, § 1 (2007), available at http://www.stanford.edu/dept/DoR/rph.
69. My discussion of the Kaye Scholer case and Hazard's opinion draws on William H. Simon, The Kaye Scholer Affair: The Lawyer's Duty of Candor and the Bar's Temptations of Evasion and Apology, 23 LAW & SOC. INQUIRY 243, 247-61 (1998).
70. PRACTISING LAW INST., THE ATTORNEY-CLIENT RELATIONSHIP AFTER KAYE SCHOLER 397 (1992).
71. Id. at 398.
72. Id.
73. E.g., Marvin E. Frankel, Lawyers Can't Be Stool Pigeons, N.Y. TIMES, Mar. 14, 1992, at A22.
74. When The American Lawyer criticized his opinion, Hazard vaguely distanced himself from it, noting that it was "kind of preliminary." Susan Beck & Michael Orey, They Got What They Deserved, AM. LAW., May 1992, at 68, 75. Hazard coauthored a textbook which conceded that the OTS charges were "at least as strong" as those a federal court held sufficient to withstand summary judgment in a case against another firm that represented Lincoln.
75. GEOFFREY C. HAZARD ET AL., THE LAW AND ETHICS OF LAWYERING 793 n.91 (2d ed. 1994). In his reply to my 1998 criticism, he indicated that he was not aware what the precise factual allegations or charges were at the time Kaye Scholer drafted its report of his opinion.
76. Geoffrey Hazard, The Duty or Option of Silence, 23 LAW & SOC. INQUIRY 339, 339 (1998) [hereinafter Hazard, Duty or Option].
77. Hazard, Duty or Option, supra note 67, at 339.
78. My hesitation arises from awareness that important academic values sometimes produce oppressive over-regulation. Human subjects review boards are a notable example. See Philip Hamburger, The New Censorship: Institutional Review Boards, 2004 SUP. CT. REV. 271, 343-50.
79. In the course of litigation, the client's reliance on advice of counsel as a defense usually constitutes a waiver of attorney-client privilege by "putting in issue" the otherwise confidential communications, In re Echostar Commc'ns Corp., 448 F.3d 1294, 1299 (Fed. Cir. 2006), and the decision to call an expert as a witness at trial opens his opinions to broad discovery. 2 JACK WEINSTEIN ET AL., WEINSTEIN'S EVIDENCE ¶ 503(a)[3][01] nn.17-18, at 503-36 (1996). My transparency proposal generalizes the principle reflected in these cases that, when an expert seeks to influence a public controversy with an opinion, both the opinion and its bases should be open to public scrutiny.
80. Current rules require or condition benefits on the disclosure of certain transactions but generally do not require advance disclosure of opinions. See supra note 16 and accompanying text.
81. This conception is noted and criticized in Gross, supra note 10, at 1148-52.
82. Vaughn v. Leeds, Morelli & Brown, P.C., No. 04 Civ. 8391, 2005 WL 1949468 (S.D.N.Y. Aug. 12, 2005) (Prudential Securities Inc.); Ficklin v. Penguin Group (USA), Inc., No. L-3765-03, 2007 WL 560983 (Super. Ct. of N.J., App. Div. Feb. 26, 2007); Complaint, Ganci v. Prudential Ins. Co., Civ. No. L-1806-05 (N.J. Super. Ct., Bergen Co. Mar. 20, 2007); Complaint, Lee v. Leeds, Morelli & Brown, No. 8651/05 (N.Y. Supreme Ct., Kings County Mar. 22, 2005) (Bear Stearns).
83. FED. R. CIV. P. 23(a), (e). A notable illustration of the role of experts can be found in the district court opinion in Georgine v. Amchem Products, Inc., 157 F.R.D. 246, 296-99, 302-03, 306-10 (E.D. Pa. 1994) (discussing the expert testimony of Professors Geoffrey Hazard, Susan Koniak, Roger Cramton, John Coffee, and John Freeman), vacated, 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997).
84. I learned about the Nextel settlement as a consultant to plaintiffs' counsel in some of the cases arising from settlements negotiated by LM&B. 1578
85. Retainer Agreement, Signed by Denise McNeil (undated) [hereinafter Retainer I] (authorizing representation by Leeds & Morelli in claims against Nextel); Retainer Agreement, Signed by Alencia Ashton-Moore (undated) [hereinafter Retainer II] (same). Copies of all documents pertaining to LM&B and the Nextel case are on file with the author.
86. Retainer I, supra note 76; Retainer II, supra note 76.
87. Defendants Leeds, Morelli & Brown, P.C., Lenard Leeds, Steven Morelli, Jeffrey Brown, James Vagnini, and Bryan Mazzola's Supplemental Summary of Expert Opinions Served Pursuant to C.R.C.P. 26(a)(4), at 3, 12, 19, McNeil v. Leeds Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Nov. 28, 2005) [hereinafter LM&B Supplemental Disclosure]; Deposition of Steven A. Morelli Esq. at 61, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Sept. 18, 2006).
88. Press Release, Nextel Communications, Inc. (June 20, 2000), available at http://phx.corporate-ir.net/phoenix.zhtml?c=63347&p=irol- newsArticle&ID=99828&highlight=.
89. Letter from Gregory I. Rasin to Jeffrey K. Brown, Esq. 1 (Aug. 29, 2001) (on file with author).
90. Dispute Resolution and Settlement Agreement 29 (Sept. 28, 2000) (on file with author) [hereinafter DRSA].
91. Id. ¶¶ 5, 7(a), 7(e); id. Exhibit A ¶ 2 (individual agreement).
92. Id. ¶ 7.
93. Id. ¶ 7(g).
94. Id. ¶ 6(a).
95. Id. ¶ 5.
96. Id. ¶ 1(c).
97. Id. ¶ 11(a).
98. Id. ¶¶ 11(a), 14.
99. Id. ¶ 11(a).
100. Id. ¶ 11(b).
101. Id.
102. Id. ¶ 12.
103. Id.
104. Id. ¶ 1(c).
105. Id.
106. Id. ¶ 2(c).
107. Id.
108. Id. ¶ 4(a).
109. Id. ¶ 4(c); id. Exhibit A, ¶ 1; id. Exhibit D, ¶ 2.
110. Id. ¶ 7(a); id. Exhibit A, ¶ 1.
111. Id. ¶ 11(a).
112. Dispute Resolution and Settlement Agreement amend. No. 2 (Feb. 7-8, 2001) (on file with author).
113. DRSA, supra note 81, Exhibit A.
114. Deposition of James Vagnini Esq. at 53, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Sept. 20, 2006); Highlights of the Settlement Agreement with Nextel (undated) (on file with author).
115. Highlights of the Settlement Agreement with Nextel, supra note 105, ¶ 29.
116. Id. ¶ 30.
117. Deposition of James Vagnini Esq. at 53-61, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Sept. 20, 2006) [hereinafter Vagnini Deposition]; Deposition of Steven A. Morelli Esq. at 38-39, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Sept. 18, 2006) [hereinafter Morelli Deposition].
118. Complaint ¶¶ 28-57, Johnson v. Nextel Commc'ns, Inc., No. 1:07-cv-08473 (S.D.N.Y. Oct. 23, 2006); Deposition of Denise L. McNeil at 92-95, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County July 6, 2006); Deposition of Alencia V. Ashton-Moore at 72-83, 120-21, 251-55, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Nov. 16, 2005).
119. LM&B Supplemental Disclosure, supra note 78, at 28; Deposition of Roy Simon at 18, McNeil v. Leeds, Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Oct. 19, 2006).
120. Letter from Geoffrey C. Hazard, Jr., to Mary Elizabeth McGarry, Esq. (Sept. 28, 2000), reprinted infra app. II.
121. Id. at 149.
122. MODEL RULES OF PROF'L CONDUCT R. 5.6(b) (2002).
123. Letter from Hazard, supra note 111.
124. MODEL RULES OF PROF'L CONDUCT R. 1.7(a)(2) (2002).
125. Id. R. 1.7(b)(1) (2000).
126. MODEL RULES OF PROF'L CONDUCT R. 1.7(b)(4) (2002) ("informed consent"); MODEL RULES OF PROF'L CONDUCT R. 1.7(b)(2) (2002) ("consent[] after consultation"). Hazard also opines that the payment provision does not violate Model Rule 1.8(f) which says that a lawyer may not accept payment from someone other than the client unless "the client gives informed consent" and there is "no interference with the lawyer's independence of professional judgment." MODEL RULES OF PROF'L CONDUCT R. 1.8(f) (2002); Hazard, supra note 111. Since the issues presented by this rule are virtually the same as those presented by Rule 1.7(b), I do not discuss them separately.
127. Hazard, supra note 111.
128. Id.
129. RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 31 cmt. d. (2000).
130. Hazard, supra note 111.
131. Deposition of Roy Simon, supra note 110, at 11-22.
132. News Story by Sarah Wallace (WABC-TV television broadcast Nov. 4, 2003) (on file with author).
133. References to the experts' pretrial opinions are to the following documents in the Denver case: (1) Defendant Nextel Commc'ns, Inc.'s Supplemental C.R.C.P. 26(a)(2)(B)(I) and (II) Expert Witness Disclosures, McNeil v. Leeds Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Apr. 16, 2007) [hereinafter Nextel Disclosure]; (2) Defendants Leeds, Morelli & Brown, P.C., Lenard Leeds, Steven Morelli, Jeffrey Brown, James Vagnini and Bryan Mazzola's Second Supplemental Summary of Expert Opinions Served Pursuant to C.R.C.P. 26(a)(4), McNeil v. Leeds Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Apr. 13, 2007) [hereinafter LM&B Second Supplemental Disclosure]; (3) Defendants Leeds, Morelli & Brown, P.C., Lenard Leeds, Steven Morelli, Jeffrey Brown, James Vagnini and Bryan Mazzola's Expert Endorsement Pursuant to C.R.C.P. 26(a)(2)(b), McNeil v. Leeds Morelli & Brown, P.C., No. 03-CV-893 (Colo. Dist. Ct., Denver County Nov. 28, 2005) [hereinafter LM&B Expert Endorsement]; and (4) LM&B Supplemental Disclosure, supra note 78.
134. Nextel Disclosure, supra note 124, at 7.
135. Id. at 4-6; LM&B Expert Endorsement, supra note 124, at 3, 5-6; LM&B Supplemental Disclosure, supra note 78, at 7-10, 23-29.
136. Nextel Disclosure, supra note 124, at 5; LM&B Supplemental Disclosure, supra note 78, at 8, 17, 25-26.
137. Nextel Disclosure, supra note 124, at 4-5; LM&B Supplemental Disclosure, supra note 78, at 9, 17, 26.
138. LM&B Expert Endorsement, supra note 124, at 3, 5-7.
139. LM&B Supplemental Disclosure, supra note 78, at 16.
140. Id. at 23; see also id. at 28. Doctrine suggests that reliance on advice of another has at most limited bearing in determining whether a lawyer has fulfilled professional responsibilities. See People v. Katz, 58 P.3d 1176, 1187 (Colo. O.P.D.J. 2002) (rejecting advice-of-counsel as defense to bar disciplinary charges); Florida Bar v. St. Louis, 967 So. 2d 108, 118 (Fla. 2007) (same); MODEL RULES OF PROF'L CONDUCT R. 5.2(b) (2002) (noting that a "subordinate lawyer" does not violate rules if she acts in accordance with supervisor's "reasonable resolution" of an arguable professional duty).
141. Nextel Disclosure, supra note 124, at 6.
142. Hazard wrote: Ms. Dubofsky will explain that Nextel retained Geoffrey Hazard to evaluate and opine upon the ethical implications of the consultancy arrangement with LM&B, that Professor Hazard concluded that the arrangement was ethical, and that LM&B reviewed his written opinion before entering the provisions. Ms. Dubofsky will opine that under these circumstances, the DRSA's consulting provision is ethical and appropriate, and within the standard of care for lawyers practicing in Colorado in 2000. LM&B Supplemental Disclosure, supra note 78, at 28. Hennessey also gives strong weight to Hazard's opinion in this issue. Nextel Disclosure, supra note 124, at 6.
143. Roy Simon and Green testified at the trial in the Denver case in November 2007 that resulted in a verdict for defendants. I have not seen any reports of their testimony. Hazard did not testify because the claims against Nextel had been dismissed prior to the trial.
144. Courts that have considered the practice of simultaneously negotiating recovery and fees have accepted it only with discomfort and qualification. For example, a notable decision says that the "better practice" is to negotiate recovery before discussing fees and that simultaneously negotiated settlements should be subjected to "careful scrutiny." Cisek v. Nat'l Surface Cleaning, Inc., 954 F. Supp. 110, 111 (S.D.N.Y. 1997). That was a class action, and thus the court's approval was required for settlement. Our case - where the fees were negotiated before the recovery - involved informal aggregation of claims that were never filed in court, and hence there was no opportunity for any kind of public scrutiny.
145. As things turned out, Nextel agreed to accept LM&B's tender of 576 consents in return for LM&B's agreement to lower its fee to reflect the 11 hold outs. LM&B Supplemental Disclosure, supra note 78, at 77. LM&B might have anticipated that Nextel would accept consents from less than all the claimants, but it could not have been sure of any such leniency - the concession required negotiation of an amendment to the DRSA - and it seems unlikely that failure with respect to more than a small fraction would have been excused.
146. Flat-rate compensation is not unknown, but in the civil sphere it is usually found in situations involving either (1) routine transactions, such as uncontested divorces or consumer bankruptcies, or (2) situations where there is a long-term relation between sophisticated business clients and their lawyers.
147. DRSA, supra note 81, Exhibit A, ¶ 3. Green asserts that the fee arrangement was "a benefit to LM&B's clients" for this reason. LM&B Supplemental Disclosure, supra note 78, at 17.
148. See, e.g., 42 U.S.C.A. § 2000e-5(k) (2007). Unless the agreement specifies otherwise, fee awards go entirely to the client, and the contingency fee percentage is applied only to the damage award. RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §§ 35 cmt. d, 38(3)(b) & cmt. f (2000). The agreements (retainers) with LM&B that I (and presumably, Green and Roy Simon) have seen did not specify otherwise.
149. Roy Simon does make a response to this query, but it seems more a hypothetical debating point than a reasoned conclusion: "Professor Simon will explain to the jury the positive effect on an adversary such as Nextel in terms of a 'cap' on attorneys' fee exposure and how such an arrangement can result in higher settlements paid to claimants." LM&B Supplemental Disclosure, supra note 78, at 8-9. As opposed to the alternative of Nextel agreeing to pay the one-third attorneys' fee contingency of the original retainers, capping attorneys' fees but not damages eliminated the variance with respect to only a quarter of the expected value of Nextel's exposure. Even if Nextel was so risk averse that it valued this trivial reduction in risk - which seems highly unlikely in the case of a company sold for $35 billion in 2005 - it is hard to see how it could have compensated the claimants for it. It did not agree to pay any minimum amount to the claimants in the DRSA, and once the DRSA was concluded, it had no incentive to offer any further concessions. Roy Simon makes one more, equally implausible argument for claimant benefit: "Professor Simon will explain how [the flat rate] arrangement greatly benefits a client and allows the lawyer to focus on the merits of the client's claims rather man have concern over compensation for the lawyers themselves." LM&B Supplemental Disclosure, supra note 78, at 8. All payment arrangements "allow" the lawyer to focus on the client's claims; the objection to the flat rate is that it minimizes his material interest in doing so.
150. Vagnini Deposition, supra note 108, at 53-54, 56; Morelli Deposition, supra note 108, at 38.
151. GEOFFREY C. HAZARD, JR., W. WILLIAM HODES & PETER R. JARVIS, 1 THE LAW OF LAWYERING § 10.8, at 10-23 (3d ed. Supp. 2004).
152. Hazard, supra note 111.
153. MODEL RULES OF PROF'L CONDUCT, Terminology (1999) (defining "consultation"). The current version defines the required "informed consent" to include "explanation about the material risks of and reasonably available alternatives to the proposed course of conduct." MODEL RULES OF PROF'L CONDUCT R. 1.0 (2002).
154. Model Rule 1.5(b) - not mentioned by Hazard - provides that "the basis or rate of the fee" should be communicated to a new client "preferably in writing." MODEL RULES OF PROF'L CONDUCT R. 1.5(b) (2002).
155. LM&B Supplemental Disclosure, supra note 78, at 4-5, 15, 17.
156. MODEL RULES OF PROF'L CONDUCT R. 1.5(a)-(b) (2002).
157. Nextel Disclosure, supra note 124, at 4-5; LM&B Supplemental Disclosure, supra note 78, at 9, 17-24, 26-27.
158. DRSA, supra note 81, ¶ 7(a); accord id. Exhibit A, ¶ 1.
159. Hazard, supra note 111.
160. See ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 99-414 (1999).
161. E.g., Leardi v. Brown, 474 N.E.2d 1094, 1099-1100 (Mass. 1985).
162. See MODEL RULES OF PROF'L CONDUCT R. 5.6(b) (2002).
163. Hazard, supra note 111.
164. As support for this claim, Hazard offered only citations to Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), and Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997). Hazard, supra note 111. Neither case has any clear relevance to the Nextel situation. In both, the conflicts concerns arose because clients were differently situated in substantive or strategic terms (for example, clients with present as opposed to only potential future claims; class member clients versus individual claimants), and in both there was at least a background concern that the assets available to satisfy the claims were limited so that the gains of one group would only come at the expense of another. In our case, there was no reason to think that new claimants would be differently situated or that their claims would affect the amount available for LM&B's original clients.
165. Hazard, supra note 111.
166. See ABA Comm. on Ethics and Prof'l Responsibility, Formal Op. 93-371 (1993) (noting that one purpose of the rule is to prevent "the use of such agreements [that] may provide clients with rewards that bear less relationship to the merits of their claims than they do to the desire of the defendant to 'buy off plaintiff's counsel"). For discussion, see Luban, supra note 4, at 2624-25.
167. Compare Stephen Gillers & Richard W. Painter, Free the Lawyers: A Proposal to Permit No-Sue Promises in Settlement Agreements, 18 GEO. J. LEGAL ETHICS 291 (2005) (criticizing rule),
168. with David A. Dana & Susan P. Koniak, Secret Settlements and Practice Restrictions Aid Lawyer Cartels and Cause Other Harms, 2003 U. ILL. L. REV. 1217, 1222-24 (defending rule).
169. LM&B Supplemental Disclosure, supra note 78, at 28.
170. This position was adopted in In re Conduct of Brandt, 10 P.3d 906, 918 n.13 (Or. 2000).