The Business Of Law

As I’ve written before, here and here, the rules of legal ethics are being forced to adapt to changing circumstances in the profession caused by the social networking revolution.  The latest example of this is a legal ethics ruling out of Florida in which the state’s Judicial Ethics Advisory Committee said that judges and lawyers should avoid “friending” one another on the popular social networking site Facebook.   (The opinion specifically says it isn’t picking on Facebook:  the rule would apply to similar types of social networking sites).

The AP has a nice write up of the Florida situation here.

Specifically, the committee was worried that “friendships” could create the impression that lawyers have a special relationship with their judge friends that could give rise to some kind of undue influence.  I appreciate the concern but am afraid that the cure does more harm than good.

One of the judges from Florida quoted in the AP story said the following: “We as judges can still be good judges and still have friends. Part of our job is to not let that friendship interfere in any way with our decisions,” he said.  Of course, he’s exactly right: Judges will always have relationships with attorneys who practice before them.

But here is where I think that the Florida advisory committee might have gotten this one wrong.  When does less information ever lead to greater safety?  If a judge feels that he or she knows a particular lawyer well enough to allow that person to view the pictures of the judge’s last skiing vacation with the kids, wouldn’t it be better for everyone to know that?

Consider what happened before and continues now in the Facebook age.  Judges and lawyers talk when they meet in the changing room at the country club or when they see each other in the local grocery store.  The medium is different (golf course, grocery store, or social networking site) but the relationship is no different. In fact, on Facebook, one could argue that the relationship is much more transparent.

One of the many advantages of our increasingly interconnected world is the idea that it promotes greater transparency.

We know judges have friends, and we know that the possibility exists that those relationships could influence their decisions.  We hope they don’t, but we know it’s possible.  So again I ask:  isn’t it better to know about those potential relationships?

Facebook and other social networking sites don’t create relationships; they are a manifestation of them, a medium through which those relationships occur.  In the case of judges and lawyers, I’d prefer that those relationships were out in the open, where everyone could see them and thus be the judge (pardon the pun) of whether a judicial decision is influenced by a friendship.

A recent Florida District Court of Appeal case could raise serious implications for so-called “third-party litigation financing” (TPLF).  TPLF is the practice of providing money to a party to a lawsuit with repayment of the loan contingent on the party “winning” the case.

Here’s how it works:  I am hurt, I want to sue the party that hurt me, but I cannot afford the costs of litigation.  Currently, there are lenders who will loan me the money to pursue the matter (based on their belief that I will win) and if/when I reach a settlement or am awarded damages, I have to pay back the loan plus interest.

The Florida case was significant since it held that a third-party funder was by law, a “party” to the lawsuit, rather than an arms-length lender.  The reason that this matters is because the court then held the lender liable for the other side’s attorney’s fees and costs — just as it held the named plaintiff liable.  That’s important, because if you’re a party to a lawsuit you expose yourself to all kinds of responsibility and liability that a lender certainly doesn’t bargain for.

For me, the Florida ruling is a chilling one for lenders because it says that if a lender lends you the money for a lawsuit, and tries to protect its loan by involving itself in the case, then they may have the same liability that you do.   In its decision, the court focused on the degree to which the lender sought to participate in the plaintiff’s prosecution of the lawsuit in order to protect its loan, honing in on the fact that the lender had the right to approve the choice of counsel, “veto power over whether litigation was filed, who would file it, and how it would be pursued,” and “final say over any settlement”.

Granted this lender played a much more active role than typical TPLFs but what a slippery slope the court’s decision starts us down.

Keep in mind that the court wasn’t saying the plaintiff was a shill for the lender.  But consider the potential ramifications of this decision.  Imagine that after you take over your father-in-law’s business, you find that you have to sue a big distributor that has just breached its supply contract, which may result in your company going under.   “Dad” knows the business better than you, he knows just the right lawyer, and has a serious personal stake in his son-in-law’s ability to provide for his daughter.  Maybe he still has some of his money tied up in the business.  So he gets involved and loans money to fund the lawsuit on the condition that he actively participates in how it is run. Do you now have to warn him that he might be on the hook for attorney’s fees if you lose?

Let’s step back from my intentionally one-sided fact pattern and talk about what is really going on here.  There is an ongoing war between those in favor of TPLF as a way to help people most in need get their day in court and those that see it as the work of the devil.   In October, 2009, the U.S. Chamber Institute for Legal Reform (an interest group founded by the U.S. Chamber of Commerce) issued a paper outlining their view of the matter.  In it, they wrote:

“The root of the problem with third-party litigation financing is that it introduces a stranger to the attorney-client relationship whose sole interest is a financial one. “

(As an aside, it’s always interesting when the U.S. Chamber of Commerce is attacking people for having a “financial interest.”)

However, that’s not the Chamber’s real argument.  Its real argument is that access to lending will increase the number of cases that are brought.  For the business community, which sees lawsuits not as an access to justice issue but simply another cost of doing business, that’s a problem.  Right now, businesses rely on the fact that most people don’t know how to or have the money to protect themselves.  If lenders are willing to finance suits, it becomes easier for people to sue, and that means more litigation, more settlements, and more money (and by the way, more compensated tort victims, though they always seem to forget that part).

We at Sokolove support more access to the civil justice system.  We’ve made it our business for over thirty years.  If lenders are able to allow more people to have their day in court, that is a positive development in our view.  Agree? Disagree? I’d love to hear from you.

Martin Lomasney, a legendary Boston politician from the West End, coined a now-popular expression regarding communicating.  He famously advised his young associates, to “never write if you can speak; never speak if you can nod; never nod if you can wink.”

Lomasney would surely spit out his Ward 8 (a drink named in his honor) if he learned that many lawyers are now communicating with their clients via text messaging. But that’s exactly what’s happening.

Like it or not, the mobile communications revolution has hit the legal profession, and according to a recent article in Lawyers USA (subscription required), more and more clients are wanting their attorneys to communicate with them via text message, online chat, or instant messaging applications such as Blackberry Messenger.

That’s good news in some ways for the clients who feel like their lawyer is now more accessible than ever, and they can communicate with them in ever-faster ways.  But according to legal malpractice experts these new media pose new challenges for attorneys.  Here are some of the pitfalls as reported by Lawyer’s USA:

1.    Texting increases the likelihood of errors and miscommunication because of the short rapid phrases and use of abbreviations.

2.    Texting and messenger features employed by smart phones can lead to loss of sensitive data and information.  It’s still fairly easy to lose your phone. But imagine losing your phone with all kinds of sensitive client information stored in old text messages on it.

3.    Texting can also lead to violations of information security because you can’t be sure who’s on the other end of a text message.  Most phones are not as secure as email accounts, and anyone could pick up a cell phone and start texting.

4.    Finally, texting can lead to document recovery and chain of custody issues because text messages can be inadvertently deleted very easily, and they are not typically backed up by a server.

I suspect the same will happen with respect to text messaging and other forms of online and mobile communication.  The times they are a–changin’ and we as lawyers will, once again, have to change the rules and mores  along with them.

As my fellow ethics lawyer Ellen Pansky of Pansky Markle & Ham said in the article:

“Both in a civil action for malpractice or in a disciplinary proceeding, if a lawyer can’t document [that he or she] had a certain communication there is something of a presumption it didn’t happen.”

This is of course exactly what Martin Lomasney wanted.  But for attorneys, it’s better to have a record of what transpired and to preserve that record.

All of that said, I must say that this feels like a bit of much ado about nothing.  I remember when lawyers first started using email and there was somewhat of a hue and cry citing many of the very same concerns now being raised about instant messaging and texting.  Eventually it all died down as the courts and state bars conceded, without saying so, that the prevalence of email required its acceptance as a communication method between  lawyers and their clients.  Today it would be nearly impossible to find attorneys who don’t use email.

Greetings readers, my name is Gabriel Miller, and I’m the General Counsel of Sokolove Law.  As the top lawyer for the largest marketer of legal services in the country, I spend a great deal of my time watching very closely the rules of professional responsibility across the country.  From time to time, I’ll weigh in here to comment on interesting happenings in the area of legal ethics.

Last week, law.com brought news that Connecticut outlawed the practice of hiring so-called “runners” to solicit legal business for personal injury lawyers.  The Law.com article had a great description of how the system worked:

“People known as “runners” would be on stand-by, listening to police scanners and waiting for an auto accident to occur so they could rush to the scene. Their job was to contact accident victims and steer them toward specific doctors, chiropractors and, often, personal injury lawyers. The runners would be paid for each client they delivered; sometimes the runners would wait in busy hospital emergency rooms and spot people waiting to be treated and then whisk them out with a promise that they knew a doctor who could see the person immediately.

Runners also obtained police reports and contacted accident victims at their homes. Connecticut trial lawyer, Kathryn Emmett also had heard from other trial lawyers that some accident victims were being encouraged to file insurance claims and lawsuits based on phony injuries”

Connecticut joins 9 other states who have outlawed this practice, punishing lawyers with up to a year in jail and fines up to $5,000 if they are caught hiring “runners”.

What’s really interesting about the law is that it brought trial attorneys and the insurance companies together on the same side of a political debate.  In fact part of the impetus for the law came from the Connecticut Trial Lawyer’s Association, whose members starting hearing about runners’ unscrupulous practices from their clients.

The practice is more common than one might think with lawyers in Philadelphia, New York, and New Jersey having been convicted in recent years for violations of anti-runner laws.

Simply put, the practice of hiring runners, and other such actions give all attorneys, but particularly personal injury lawyers a bad name. There is a big difference between providing access to the civil justice system by educating people about their legal rights and options, and preying on people when they are the most vulnerable.

The Connecticut Trial Lawyers and their colleagues around the country are smart to support reasonable regulation to weed out the bad actors.

If you have a question about this or another topic on legal ethics and professional responsibility or if you know of a topic you’d like me to comment on, drop me a note.