The Colorado Bar Association Ethics Committee withdrew Formal Opinion 95, “Funds of Missing Clients.” This opinion addressed what to do with funds that were held in a lawyer’s trust account but the client’s whereabouts were no longer known to the attorney. The opinion recommended obtaining an advance agreement from the client to donate unclaimed funds, or to allow the lawyer to withdraw small amounts of the funds to use in locating the client, or to proceed under the Unclaimed Property Act. The opinion was withdrawn on Saturday, May 21, 2016.
Colorado Court of Appeals: Potential Conflict of Interest Relevant in Determination of Prejudice to Defendant
The Colorado Court of Appeals issued its opinion in People v. Villanueva on Thursday, May 5, 2016.
Benjamin Garcia-Diaz’s wife called the police for a domestic violence incident, and authorized a search of the residence. Police found $30,000 worth of cocaine during the search. Garcia-Diaz retained Charles Elliot to defend the domestic violence charges, and although the prosecution moved to add drug charges, the motion was still pending when Garcia-Diaz disappeared in March 2005. His body was found in September 2005, and Martin Villanueva was arrested for the murder.
Villanueva retained Elliot, who had represented him in the past. Elliot advised Villanueva that the prosecution might seek to disqualify him because of his prior representation with Garcia-Diaz, and later Elliot entered into an agreement with the prosecution where neither party would mention his prior representation of Garcia-Diaz. The trial court was never told about the conflict of interest.
At trial in 2006, the prosecution’s theory of the case was that Garcia-Diaz was about to enter into an agreement with the prosecution and would have laid the blame on Villanueva, his supplier, so Villanueva shot him at a crucial time. In fact, as Elliot knew, Garcia-Diaz had not negotiated at all with the prosecution and was not preparing to blame Villanueva, but because of his agreement Elliot could not rebut the prosecution’s theory.
Villanueva was eventually convicted and sentenced to life in prison without the possibility of parole. His conviction was affirmed on direct appeal. He then filed a Crim. P. 35(c) motion alleging that Elliot’s performance was deficient because he had a conflict of interest that adversely affected his trial performance. The district court denied the postconviction motion.
On appeal, the court of appeals evaluated Villanueva’s claims under the framework set forth in West v. People, 2015 CO 5, which clarified the correct standard for evaluating conflict of interest claims. Under West, to show an adverse effect from a conflict of interest, the defendant must identify a plausible defense or strategy, show that the alternative strategy was objectively reasonable, and establish that counsel’s failure to pursue the alternative strategy was linked to the conflict. Villanueva contended that Elliot was ineffective for failing to rebut the prosecution’s theory of the case. The trial court determined that because Villanueva showed only a potential conflict, not an actual conflict, his argument failed. However, under West, Villanueva needed only to show a potential conflict.
The court of appeals remanded for the district court to consider whether Elliot’s duties to Garcia-Diaz were inherently in conflict with Villanueva’s suggested alternative strategy of rebutting the prosecution’s evidence regarding whether Garcia-Diaz was about to snitch on Villanueva.
The Colorado Court of Appeals issued its opinion in Calvert v. Mayberry on Thursday, April 21, 2016.
Disciplinary Proceeding—Oral Contract—Colo. RPC 1.8(a)—Issue Preclusion—Void Agreement—Equitable Lien—Unclean Hands.
In a question of first impression, the Colorado Court of Appeals decided that an attorney who enters into a contract with a client that violates Colo. RPC 1.8(a) cannot later enforce the contract against the client.
The Colorado Supreme Court disbarred the attorney after a hearing board determined he had committed ethical violations, including some against the former client in this case. Specifically, the hearing board found that the attorney had loaned the former client over $100,000 and secured his interest in the loan funds by recording a false deed of trust in the chain of title on her house. The hearing board also found that the attorney had not complied with Colo. RPC 1.8(a) when he made the loans to the former client. The attorney then filed this case to recoup money he had loaned to the former client, claiming that he had an oral agreement with the client for repayment of the loans, and alternatively asserting that the trial court should impose an equitable lien on the former client’s house. The trial court granted summary judgment for the former client and her daughter (to whom she had quitclaimed her interest in the house), finding that because the oral contract between the former client and the attorney violated Colo. RPC 1.8(a), the attorney was ethically prohibited from enforcing that agreement.
The attorney appealed. On appeal, the former client contended that the doctrine of issue preclusion barred the attorney from relitigating factual issues that were litigated during the disciplinary proceeding. The court agreed; therefore, the hearing board’s factual findings bind the attorney in this case, including its finding that the attorney violated Rule 1.8(a) when he entered into the oral contract with the former client, and the oral contract between the attorney and the former client is void and unenforceable. The attorney contended that the trial court erred in applying the doctrine of unclean hands to bar his request for an equitable lien. Based on the attorney’s misconduct, the court disagreed. The attorney also asserted a fraud claim against the former client’s daughter, but his allegations did not support this claim, and it failed as a matter of law. The district court properly entered summary judgment.
The judgment was affirmed and the case was remanded to the trial court to determine whether fees should be awarded to the former client and her daughter.
Summary provided courtesy of The Colorado Lawyer.
I can appreciate a well-crafted cocktail. But when I am in a situation where such beverages are being served, I never get involved in a conversation about someone’s legal problems. And I strongly encourage you to do the same.
Here’s a short story that explains why.
An associate at a law firm — not a litigator in any way — attended a social function and had a few more than she should have. She got involved in a conversation with another guest about a personal injury matter. In addition to sharing some generic advice, the associate also let the guest know there was still plenty of time to deal with the matter, saying the statute of limitations in that jurisdiction was two years. Unfortunately, unbeknownst to our heroine, there was an exception to the statute in play and the actual time to file suit was six months. The guest, relying on the advice, did not obtain legal counsel until after the filing deadline had passed.
The young lawyer and her firm were eventually sued for malpractice.
The Accidental Client
We all know drinking and driving can have serious consequences — when your judgment and reflexes are impaired, accidents can happen. Mixing cocktails and legal advice is similarly problematic. It’s too easy for a casual setting, coupled with a few adult beverages, to cloud your thinking. You may then find yourself dealing with an accidental client.
Malpractice claims can easily arise out of these situations, but the risk isn’t limited to cocktail parties. Casual conversations online with extended family members or friends and gatherings with members of your church congregation or other community organizations are all situations where you should proceed with caution.
You can’t overlook the office setting, either.
Should you be concerned about passing along a little casual advice in a conversation with a corporate constituent while representing the entity itself? How about discussing issues with beneficiaries while representing the estate, trying to help a prospective client out during that first meeting when you know you are going to decline the representation? Or what about being a good Samaritan by making a few suggestions on the phone to someone who clearly has a problem but really can’t afford an attorney? How about answering a few questions from an unrepresented third party?
The answer is, of course, yes — these are all situations that can easily lead to an accidental client.
“No Good Deed Goes Unpunished”
Old sayings became old sayings because they have a ring of truth to them.
I am always surprised by what attorneys say when they have to deal with a claim brought by an accidental client. Comments like “I never intended to create an attorney-client relationship,” “There was no signed fee agreement,” and “No money was exchanged so how could this be?” are common.
Guess what: It’s not about you! Typically, it is more about how the individual you interacted with responded to the exchange. If they happened to respond as if they were receiving a little legal advice from an attorney, and that response was reasonable under the circumstances, it can start to get muddy. Worse yet, if it was reasonably foreseeable that this individual would rely or act on your casual advice — and then, in fact, did so to their detriment — you may have a serious problem on your hands.
I share this not with a desire to convince you to keep quiet and never try to help someone. By all means, be helpful. The world could use a few more good Samaritans, and a desire to help others is a good thing as long as you stay the course. I share this because I want you to be cognizant of the risk involved whenever you decide to step into those waters.
Here’s the Bottom Line
Accidental clients are for real and there is no such thing as “legal lite.” So if you are enjoying a wonderful evening at a party, cocktail in hand, and find yourself conversing with another guest who has just learned you are an attorney and wants to “pick your brain,” don’t talk about legal issues you are not well-versed in. If you feel compelled to pass along a little advice, then remember to ask questions so you understand the entire situation. Just know that you may be held to the accuracy of that advice later on, so you might want to jot down a few notes as soon as you can.
Finally, know that it’s okay to say you’re not the right person to be asking, particularly after you’ve had a few.
That said, salute!
The Colorado Supreme Court issued its opinion in Colorado Ethics Watch v. Independent Ethics Commission on Monday, April 25, 2016.
Constitutional Interpretation—Amendment 41—CRS § 24-18.5-101(9)—Judicial Review.
In this original proceeding, the Supreme Court considered whether the Independent Ethics Commission’s (IEC) decision to dismiss a complaint against a public officer as frivolous is subject to judicial review. Plaintiff contended that the General Assembly authorized such review when it enacted CRS § 24-18.5-101(9), which provides that “[a]ny final action of the commission concerning a 18 complaint shall be subject to judicial review.” The Supreme Court concluded that, while the General Assembly may authorize judicial review of IEC’s enforcement decisions, it may not encroach on the IEC’s decisions not to enforce. Therefore, the Court held that the General Assembly’s “judicial review” provision does not apply to frivolity dismissals. Accordingly, the Court made its rule to show cause absolute and remanded the case to the trial court with instructions to dismiss plaintiff’s complaint.
Summary provided courtesy of The Colorado Lawyer.
Colorado Supreme Court Adopts Changes to Colorado Rules of Professional Conduct, Colorado Appellate Rules
The Colorado Supreme Court adopted Rule Change 2016(04), 2016(05), and 2016(06) last week, approving changes to the Colorado Rules of Professional Conduct and the Colorado Appellate Rules.
Rule Change 2016(04), adopted and effective April 6, 2016, enacts substantial changes to the Colorado Rules of Professional Conduct. Many of the changes were to the Comments to the Rules, and language was added to many comments about lawyers contracting outside their own firms to provide legal assistance to the client. Additionally, a new model pro bono policy was added to the Comment to Rule 6.1. The changes are extensive; a redline and clean version is available here.
Rule Change 2016(05) amended Rules 35, 40, 41, 41.1, and 42 of the Colorado Appellate Rules, adopted and effective April 7, 2016. The changes to the affected rules were extensive, and the Comments to those rules generally explain the changes. Rule 41.1 was deleted and incorporated into Rule 41. A redline and clean version of the rule change is available here.
Rule Change 2016(06), adopted and effective April 7, 2016, amended the Preamble to the Rules Governing the Practice of Law, Chapters 18 to 20 of the Colorado Rules of Civil Procedure. The Preamble addresses the Colorado Supreme Court’s exclusive jurisdiction and its ability to appoint directors of certain legal programs to assist the court. The Preamble also sets forth the court’s objectives in regulating the practice of law. A clean version of the newly adopted Preamble is available here.
For all of the Colorado Supreme Court’s adopted and proposed rule changes, click here.
For years people have been warning that law firms of all sizes are major targets for cyber-criminals. If your firm didn’t take that seriously before, then there are two major hackings last week that should get your attention.
The Wall Street Journal reported that cyber criminals breached Cravath, Weil Gotshal, and several other unnamed firms (read the article here: http://on.wsj.com/1MzYlN2). The paper states that it’s not clear what (or whether) information was taken, but the focus is on the possibility of confidential information being stolen for purposes of insider trading.
The other major breach is so big that it has its own hashtag— search Twitter for #PanamaPapers or #PanamaLeaks. According to Reuters, the target was a law firm in Panama who specializes in setting up offshore companies. Hackers stole data from the firm and provided that data to journalists who promptly revealed it to the public (read the article here: http://reut.rs/25GEy4X). The information allegedly reveals a network of offshore loans. According to the BBC, the stolen data reveals how the law firm, “has helped clients launder money, dodge sanctions and avoid tax” (read the BBC’s article here: http://www.bbc.com/news/world-35918844). Political figures and friends of popular politicians are allegedly implicated, according to the report.
My concern is not about the obvious political ramifications. My concern is about the ethical ramifications to lawyers. The danger of hacking is real.
No report has implicated any type of ethical wrongdoing on the part of any firm. That needs to be restated and made abundantly clear: there has been no report of any evidence of ethical impropriety by any of the law firms mentioned in the news. I am bringing this to your collective attention because it should serve as a warning. Confidential client information was stolen from that law firm in Panama… which reminds us that we are targets.
All lawyers are targets. Small firms, large firms, in-house counsel, government lawyers, you name it. The bad guys know that lawyers are the custodians of valuable information and they are coming after us in a big way. The message for all of us is clear: you could be subject to an ethics grievance if you don’t take proper steps to secure your clients’ information.
The responsibility to protect our client information is nothing new. However, these recent events require us apply an increased sense of urgency to evaluating our compliance with that duty. Have you, or your firm, taken the necessary steps to adequately protect your clients’ information? Have you considered the fact that bad guys could be targeting you? What steps have you taken to counteract the potential piracy that could be aimed at your clients’ information?
You could be darn sure that someone is going to be asking those questions to the firms that were targeted in the hacks. Maybe you need to put yourself in their position and ask, “how would we fare if that review was directed toward us?”
Our duty of competence requires that we take appropriate steps to protect our clients’ confidential information. And remember that you, as the lawyer, have the primary ethical duty, not your IT people. Furthermore, various ethics opinions have held that, in some circumstances, the lawyer needs to understand the underlying technology itself.
If these issues weren’t on the front burner in your office before, these two hacks should be causing you to shift your priorities.
The Colorado Court of Appeals issued its opinion in Foster v. Plock on Thursday, March 10, 2016.
Claim Preclusion—Attorney Fees.
This case stemmed from Foster’s dissolution of marriage action but also involved related criminal and tort cases. Plock represented Foster’s wife (wife) in the dissolution action, but was not a named party in any of the other cases.
Wife filed to dissolve her marriage to Foster, and a temporary civil protection order was issued by the domestic relations court barring Foster from contacting wife.
The court ordered a Parental Responsibilities Evaluation (PRE), which reported that Foster had an extensive criminal history. The PRE recommended that the court grant wife sole decision-making authority for the minor child. Foster requested a second evaluator, who noted that it was questionable whether all the crimes in the first report had actually been committed by Foster, but made the same recommendation. Both PREs were confidential and not to be “made available for public inspection” without court order.
Two misdemeanor criminal cases arose against Foster from multiple violations of the domestic court’s temporary civil protection order. In May 2013, the district attorney in one of those cases contacted Plock and asked whether he had any information that would be helpful to the criminal court in sentencing if Foster was convicted. Plock emailed him both PREs without Foster’s knowledge or consent, and without a court order releasing the PREs. The PREs were used in sentencing and, on Foster’s motion, ordered to be sealed.
In November 2013, Plock filed a motion with the domestic relations court admitting that he had disclosed the PREs to the prosecuting attorney, and in July 2014 the court sanctioned Plock and ordered him to pay Foster’s attorney fees associated with responding to Plock’s motion in which he admitted disclosing the PREs to the prosecutor.
During this time period, Foster filed 11 separate lawsuits regarding the first PRE alleging libel, slander, and outrageous conduct. These cases were all consolidated and all defendants moved to dismiss. Foster then filed 11 amended complaints against wife and the first investigator alleging that each had caused the disclosure of the PREs to the prosecutor in the criminal case. Plock wasn’t named in any of these cases, but in the complaint against wife, it was alleged that she, through her attorney, caused the PREs to be disclosed. In May 2014 the district court dismissed all of Foster’s complaints. Foster appealed but then voluntarily dismissed the appeal.
Four months after the dismissal and 10 months after he learned that Plock had disclosed the PREs to the prosecutor, Foster filed this action against Plock alleging invasion of privacy, defamation, and outrageous conduct. The court granted Plock’s motion to dismiss based on both claim and issue preclusion.
On appeal, Foster argued that it was error to conclude that his claims were barred by claim preclusion because there was no identity of subject matter, claims, or parties. The Court of Appeals disagreed. Specifically, the Court found that all of the elements of claim preclusion had been met: (1) finality of the first judgment, (2) identity of subject matter, (3) identity of claims for relief, and (4) identity or privity between parties to the actions.
Foster and Plock both requested attorney fees. The Court denied Foster’s request, but agreed that Plock was entitled to a mandatory award of attorney fees and costs on appeal under CRS §§ 13-17-201 and 13-16-113(2).
The judgment was affirmed and the case was remanded for a determination of reasonable attorney fees to be awarded to Plock.
The Colorado Court of Appeals issued its opinion in Rocky Mountain Exploration, Inc. v. Davis Graham & Stubbs, LLP on Thursday, March 10, 2016.
Rocky Mountain Exploration (RMEI) owned oil and gas interests in leaseholds in North Dakota. In 2006, it sold 80% of its leasehold interest to Tracker. In 2009, Tracker attempted to purchase RMEI’s remaining 20% interest, but it was unsuccessful and relations between Tracker and RMEI became strained. Tracker then agreed to purchase the interest together with Lario, with Lario acting as Tracker’s agent in the purchase so that RMEI would not refuse to deal with Tracker.
Davis Graham & Stubbs (DGS) represented Tracker in the deal but refused to represent Lario due to a conflict of interest. However, DGS handled the negotiations for Lario and Tracker because of its representation of Tracker. Lario variously referred to DGS as its attorney, and DGS made no attempt to correct Lario’s mistake.
After the sale closed and RMEI discovered Tracker’s interest, RMEI sued Lario and Tracker, their officers individually, and DGS. All parties except DGS settled. RMEI asserted fraud and civil conspiracy claims against DGS based on the use of Lario as a “strawman” purchaser in the transaction. DGS moved for summary judgment, contending that RMEI could not establish a duty owed by DGS to support the fraud claims, and that RMEI had failed to establish that Tracker owed RMEI fiduciary duties. The district court agreed with DGS and granted its motion, also ruling that the use of a strawman purchaser is not fraudulent.
The Colorado Court of Appeals affirmed, noting that agents are frequently used in business transactions and there is nothing fraudulent about using a strawman purchaser. The court of appeals noted that RMEI’s situation did not fit the narrow circumstances allowing a third party to avoid a contract, and that RMEI could have insisted on a contractual prohibition on assignment of interests.
The court of appeals affirmed the district court’s grant of summary judgment to DGS.
Colorado Court of Appeals: Political Party Can Establish Expenditure Committee Not Subject to Contribution Limits
The Colorado Court of Appeals issued its opinion in Colorado Republican Party v. Williams on Thursday, February 25, 2016.
Independent Expenditure Committee—Political Party—Contributions—Constitutional Limits—Campaign and Political Finance Amendment—Fair Campaign Practices Act.
The Colorado Republican Party (Party) is a Colorado unincorporated nonprofit association. The Party created an Independent Expenditure Committee (IEC) to make independent expenditures and raise funds through donations and otherwise in any amount from any permissible source to fund that committee. The Party filed the current lawsuit seeking declaratory relief to confirm its actions. The district court granted summary judgment, concluding that the current constitutional and statutory scheme allows a political party to create an IEC and that such a committee is not subject to any contribution limits applicable to political parties under the Campaign and Political Finance Amendment and the Fair Campaign Practices Act.
On appeal, intervenor Colorado Ethics Watch, a nonprofit organization authorized to do business in Colorado, contended that the district court erred when it interpreted the Fair Campaign Practices Act to allow a political party to establish an IEC not subject to the source and contribution limits set forth in the Colorado Constitution, article XXVIII (the Campaign and Political Finance Amendment) and CRS §§ 1-45-101 to -118 (the Fair Campaign Practices Act). The current legislative scheme and pertinent case law, however, provide no barrier to the Party’s establishment of the IEC.
Ethics Watch also asked the Court of Appeals to conclude as a matter of law, based on federal precedent, that any IEC established by a political party is per se incapable of independence in that it is always controlled by or coordinated with the party, therefore subjecting the committee to source and contribution limits. The Court declined to “read an exception to the law that is not there.”
The order was affirmed.
On Wednesday, February 24, 2016, the Colorado Judicial Ethics Advisory Board issued C.J.E.A.B. Opinion 2016-01. This opinion addresses whether it is appropriate for a judge sitting on a nonprofit board to personally write or call donors to thank them for their contributions. The requesting judge asked the Advisory Board to consider if such communication would be considered fundraising in violation of the Colorado Code of Judicial Conduct.
The Advisory Board considered applicable provisions of the Code of Judicial Conduct and determined that, in cases where the judge is not soliciting further donations, implicitly or explicitly, it is acceptable for the judge to personally thank donors for their contributions in her role as board member of the nonprofit organization.
The Colorado Judicial Ethics Advisory Board is a committee of the Colorado Supreme Court consisting of judges and non-judges who provide ethical advice to judicial officers who request an opinion on prospective conduct. There are seven committee members: four judges, one lawyer, one non-lawyer citizen, and one law professor. Any Colorado judicial officer may request an opinion. Requests may be submitted to any member of the Advisory Board or to Christine Markman, staff attorney to the Colorado Supreme Court. Requests may be submitted on the Advisory Board’s form, JDF 2.
At what point in litigation does a duty arise to preserve evidence? If your client deletes electronic files, can you be held responsible? What sanctions arise from failure to preserve evidence? These questions and more are addressed in the Colorado CLE handbook, Lawyers’ Professional Liability in Colorado: Preventing Legal Malpractice and Disciplinary Actions. Anna Martinez, a litigation attorney at Franklin D. Azar & Associates, PC, is the author of Chapter 29, “Preservation and Spoliation of Evidence”:
Learn about preservation issues and more at the Colorado CLE program, “Preventing Legal Malpractice 2016.” Two half-day programs will be offered for Preventing Legal Malpractice. On March 11, 2016, in Denver, CLE will host “Staying Above the Line,” where topics to be discussed will include Top Ten Ethics Complaints, Trends in Legal Malpractice, Intra-Firm Privilege, and Preservation and Spoliation of Evidence. Register here or call (303) 860-0608. On March 17, 2016, in Colorado Springs, CLE will present “Managing Risks.” Topics to be addressed at “Managing Risks” include Avoiding an Accidental Attorney-Client Relationship, Tech Traps, Trends in Legal Malpractice, and the Top Ten Ethics Complaints. Register here or call (303) 860-0608.
As an extra incentive, ALPS offers up to a 10% premium credit for each attorney in a firm who receives 3 CLE credits annually in the areas of ethics, risk management, loss prevention, or office management. ALPS is a lawyers’ malpractice carrier endorsed by the CBA. Learn more at try.alpsnet.com/Colorado. Additionally, HUB International is the endorsed broker for the CBA. HUB can help attorneys secure professional liability insurance in order to run a successful practice.