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John Steele, Attorney at Law www.johnsteelelaw.com.

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1 John Steele, Attorney at Law

2 John Steele Attorney at Law (USA) © John Steele 2011

3 “The lawyer is exclusively occupied with the details of predatory fraud, either in achieving or in checkmating chicane, and success in the profession is therefore accepted as marking a large endowment of that barbarian astuteness which has always commanded men's respect and fear.” Thorstein Veblen

4 “Parties prefer to deal based on trust because it lowers the transaction costs inherent in the alternative approach of bargaining based on mutual suspicion.” G. Richard Shell, Opportunism and Trust in the Negotiation of Commercial Contracts, 44 Vand L. Rev. 221, 225 (1991)

5 Topics 1. What law governs? 2. Roles 3. Rules 4. Fraud

6 Topics 5. Drafting Issues 6. Competence 7. Confidentiality 8. Conflicts

7 1. What Law Governs?

8 Regulation: State Judiciary Cal. Supreme Court State Bar of California 4/29/2015 8

9 California Legislative Control 4/29/ State Bar Act (Business & Professions Code §6000, et seq.)

10 American Bar Association 4/29/  Model Rules of Professional Conduct  ABA Ethics Committee Opinions

11 2. Roles

12 Client Attorney Representative of client Courts Exec. Branch Legislature Public Markets Private Markets Private Life Adversaries Non-adversary Third Parties Attorney- Client Relationship ACR Roles: Litigator; Advisor; Negotiator; Evaluator Fiduciary Duties Fees Decisions

13 Roles 1. Negotiator (4.1) 2. Counselor (2.1) 3. Evaluator (2.3) 4. Escrow/Fiduciary (cases) 5. Litigator

14 Roles running to non-clients Evaluator (Describe the client for the benefit of a third party)

15 Roles running to non-clients Escrow (Crooks v. State Bar, 3 Cal.3d 346 (1970))

16 3. Rules

17 What law governs? RulesNegotiator role MR/CRPC (new)  1.1  1.2(a) & (d)  4.1  8.4 / B&P Code §6068(d)

18 Rule 1.2: Limits of Lawyering Rules“Card Sharp” Shall not: counsel/assist crime or fraud

19 Rule 8.4; B&P Code §6068(d) Shall not lie or deceive

20 Rule 4.1 WrinklesNegotiator role No false statements Fact or law Some bluffing OK Must disclose to prevent crime/fraud

21 4. Fraud

22 1. False statement (or silence + duty to speak) 2. Knowledge of falsity 3. Reliance 4. Causation 5. Damages

23 Duty to speak: general rule 4/29/ Caveat emptor No duty to reveal material facts Rejects continental tradition Veblen: “achieving and checkmating chicane”

24 Duty to speak: exceptions 4/29/ Legal duty (fiduciary) 2. Contractual duty 3. Statutory duty 1. Securities law 2. Environmental law 4. Once you speak Certain fundamental mistakes

25 Not disclosing hidden fact 4/29/ Have a theory! 2. Counsel the client 3. Disclaim duty?

26 Fraud: lawyer speaks to 3 rd party Vega 121 Cal App 4 th 282 (2004)

27 Fraud: lawyer speak to 3 rd party Favila v. Katten Muchin Rosenman, L.L.P. 188 Cal. App. 4th 189 (2010)

28 Fraud: lawyer speaks to 3 rd party Cicone v. URS 183 Cal. App. 3d 194 (1986) (false statement of client’s intent to perform)

29 Fraud: lawyer opines/evaluates to 3 rd party Roberts v. Ball, Hunt, 57 Cal.App.3d 104 (1976) Home Budget Loans, Inc. v. Jacoby & Meyers Law Offices, 207 Cal.App.3d 1277 (1989)

30 Fraud: federal securities law (who “speaks” through the documents?) Central Bank of Denver, 511 U.S. 164 (1994)(no aiding and abetting liability) Stoneridge, 552 U.S. 148 (2008)(no “enterprise liability”) Janus, __ U.S. __ (201_)(defining primary and secondary participants) Thompson v. Paul, 547 F.3d 1055 (9 th Cir. 2008)(lawyers primarily responsible for their own statements)

31 5. Drafting Issues

32 Taking advantage of poor lawyering Rest. Contracts §161, cmt. d (generally may take advantage of poor lawyering) ABA Eth. Guidelines for Settlement Negotiations, §§ 4.1.2, Brown v. County of Genesee, 872 F.2d 169 (6 th Cir. 1989) Stare v. Tate, 98 Cal.Rptr. 264 (Cal. Ct. App. 1971)

33 Missing paragraphs & scriveners errors: let them know? 4/29/ ABA Op Rest. Contracts §161(b)-(c) & illus. 8 Charter Comm. v. Irell & Manella Inform client?

34 Deliberately ambiguous clauses 4/29/ A species of fraud? Intent to deceive? Risk to client Risk to lawyer Counseling client

35 Invalid and iffy clauses? 4/29/ A species of fraud? Lawyer primarily responsible? Risk Counseling client

36 Hiding Changes? 4/29/  Intent to deceive?  “Track changes”  Henning v. Ahern, 601 N.W.2d 14 (Wis. Ct. App. 1999)(party made last minute change without alerting other party; reasonable jury could find fraud)

37 6. Competence

38 Subject Matter Competence 4/29/ Viner v. Sweet 30 Cal.4 th 1232 (2003) (DC-based lawyer allegedly missed non-compete issue)

39 Competence: Execution of agreement 4/29/ McCort Divorce Case Post-nup had multiple versions Different versions executed Lawyer secretly reassembled “true” contract

40 2011 US Dist LEXIS (6/3/11) Superior Seafood v. Hanft Fride

41 2011 US Dist LEXIS (6/3/11) Superior Seafood v. Hanft Fride  Consent decree didn’t preserve plaintiff’s rights to use mark on other products  SJ affirmed for lawyers

42 7. Confidentiality

43 Confidentiality & Privilege: settlement discussions RulesLimited protections?  Federal Rule of Evidence 404  California Evidence Code §§

44 When a client intends fraud 4/29/  ABA/SEC approach  Remonstrate  Withdraw?  Disaffirm?  Must reveal if “may” under ABA 1.6?

45 When a client intends fraud 4/29/  California approach  Remonstrate  Withdraw  Disaffirm/reveal?  New rule – “must reveal” if permitted by new CRPC 1.6 or B&P §6068(e)

46 8 Conflicts

47 Client Identity 670 F. Supp. 2d 201 (SDNY 2009) Merck v. Prothera (DQ granted)

48 2011 Mass. Super. LEXIS 60 (5/3/11) Chang v. Winklevoss

49 2011 Mass. Super. LEXIS 60 (5/3/11) Chang v. Winklevoss Deposition witness Accommodation client? Claims against co- clients? Left out of settlement?

50 2011 US Dist LEXIS (3/28/11) England v. Feldman Law Group

51 2011 US Dist LEXIS (3/28/11) England v. Feldman Law Group  Represented licensee  When third party sued, represented licensee and licensor  Didn’t get conflict waiver  Didn’t advise licensor of rights against licensee

52 John Steele Attorney at Law (USA) © John Steele 2011


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