May 21, 2019

Colorado Supreme Court: Attorney Violated Colo. RPC 1.8(a)(3) by Not Obtaining Informed Consent for Business Transaction

The Colorado Supreme Court issued its opinion in In the Matter of James C. Wollrab on Monday, June 25, 2018.

Colorado Rules of Professional Conduct—Attorney Discipline—Colo. RPC 1.8—Colo. RPC 4.2.

In this attorney discipline proceeding, the supreme court was confronted with questions as to what Colorado Rules of Professional Conduct 1.8 and 4.2 require of an attorney who enters into a business relationship with his client. The court concluded that the attorney in this case violated Rule 1.8(a)(1) when he signed a lease with his client’s company without complying with any of Rule 1.8(a)’s prophylactic requirements. The attorney also violated Rule 1.8(a)(3) when he entered into an option agreement with his client without obtaining his client’s informed, written consent to his role in the deal. However, because the attorney had the implied consent of his client’s independent counsel for the purposes of the option agreement, he did not violate Rule 1.8(a)(1) or (2) or Rule 4.2 in that transaction. The court remanded the case to the hearing board for determination of the appropriate sanction in light of its conclusions.

Summary provided courtesy of Colorado Lawyer.

The Colorado Lawyer: Effective Conflict Waivers

Editor’s Note: This article originally appeared in the February 2015 issue of The Colorado Lawyer. Reprinted with permission.

By J. Randolph Evans, Shari L. Klevens, and Lino S. LipinskyEvans-Klevens-Lipinsky


Authors’ Note:
The references to “safest courses to proceed,” “safest course,” or “best practices” in this series of articles in the “Whoops—Legal Malpractice Prevention” department are not intended to suggest that the Colorado Rules require such actions. Rather, these references reflect actual experience and results from defending legal malpractice claims, where attorneys are often best served if they follow the best practice rather than simply complying with the bare minimum that the Rules of Professional Conduct require.

For example, as explained in this article on “Effective Conflict Waivers,” a client’s oral consent to a conflict waiver should always be confirmed in writing for an obvious reason—to avoid factual disputes that may result from differing recollections or testimony. Hence, the best practice is to obtain a written confirmation signed by the client. This protects both the attorney and the client because it reduces the risk that the client will later disclaim having provided the consent. The Colorado Rules, however, also permit the attorney to document the client’s consent to the waiver in a writing provided to the client, although experience suggests that this is not a best practice. In any event, as stated in the article, the writing, whether obtained by or transmitted to the client, must be created within a reasonable time of obtaining the client’s oral consent to the conflict waiver. The authors welcome and comments and feedback on these articles and are happy to discuss them.


By performing fast and broad computer searches, attorneys and law firms are able to identify potential conflicts of interest. But, like the dog that catches the bus, many attorneys encountering a potential conflict invariably face the important question of “What now?”

Identifying potential conflicts of interest is only half the battle. The other half requires attorneys to seek and obtain the client’s written consent to the representation after obtaining informed consent. After all, a potential conflict of interest that has not been resolved in accordance with the applicable ethical rules is still a conflict.

Informed Consent for Purposes of Resolving Potential Conflicts

Informed consent is required to enable a client to make an educated decision regarding whether to agree or object to a representation. For a former client, it involves accepting the risk that the attorney could use confidential information against the former client on behalf of a new client. For current clients who share an attorney, it involves waiving the right to insist that the attorney protect only their interests, as opposed to protecting their collective interests with the other clients.

According to the Colorado Rules of Professional Conduct (Rules), to obtain informed consent, an attorney must provide a full disclosure that demonstrates he or she has made reasonable efforts to ensure that the client or other person has obtained information reasonably adequate to make an informed decision.[1] Comment 6 to Rule 1 explains, in relevant part:

Ordinarily, this will require communication that includes a disclosure of the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client or other person of the material advantages and disadvantages of the proposed course of conduct and a discussion of the client’s or other person’s options and alternatives. . . . [A] lawyer who does not personally inform the client or other person assumes the risk that the client or other person is inadequately informed and the consent is invalid.

For the disclosure to be effective, it must enable a former or existing client to fully appreciate the risks of granting consent. It is not sufficient for an attorney to simply advise a client that there is a potential conflict of interest and to ask for consent without providing an explanation and additional information.

A Simple Waiver Isn’t Enough

Similarly, it is not sufficient merely to confirm a client’s waiver of the conflict and consent to the representation. An effective disclosure requires more. The Rules require that an attorney

propose a course of conduct to [the client or other person] with adequate information and explanation about the material risks of [giving consent] and reasonably available alternatives to the proposed course of conduct.[2]

In general terms, this means that an attorney should disclose whatever information a reasonable person would expect and need before waiving an important right.

There are topics that every attorney should include when seeking a client’s consent or waiver. However, there is no template that attorneys can use as a form for full disclosure when seeking a client’s consent to a representation, because the type and content of a disclosure required for effective consent varies depending on the facts and circumstances of the specific representation. For example, the scope and content of full disclosure will often depend on the sophistication of the client, the nature of the representation, prior representations, and the length of the relationship.[3]

Written Consent

Does the client’s consent have to be in writing? Under the Rules, the answer is yes. Rules 1.7(b)(4) and 1.9(a) require that informed consent be “confirmed in writing.” Comment 20 of Rule 1.7 further requires that the writing be obtained or transmitted within a “reasonable time” after receipt of oral consent. Additionally, Comment 20 emphasizes the importance of written consent:

[T]he writing is required in order to impress upon clients the seriousness of the decision the client is being asked to make and to avoid disputes or ambiguities that might later occur in the absence of a writing.

Invariably, once problems arise, clients have different recollections about the extent of the disclosure, their understanding of the risks, and whether they consented to the representation. That is why the safest way to proceed is to require that all clients consent in writing to a multiple or successive representation.

The easiest course is to include a signature line on the full disclosure letter and have the client return an executed copy. This simple measure serves to protect both the client (by making sure the client receives full disclosure in writing) and the attorney.

Client Consultation: Next Steps

Now that you have a client in your office, what steps should you take? First, identify the proposed representation and then state what consent the attorney seeks. General waivers involve a different kind of disclosure than a limited waiver for a specific representation. Hence, tailoring the full disclosure necessarily involves clarifying exactly which type of waiver the attorney seeks.

In the multiple representation context, this means advising the client that the attorney is requesting permission to jointly represent the client along with others. In the successive representations context, this means advising a former client that the attorney is requesting permission to represent a new client in a matter involving the former client.[4]

Second, identify the risks. There should be no mincing of words when disclosing the potential risks to a client. Subtle implication and suggestion do little when an attorney is attempting later to prove that a client consented to a representation after full disclosure. To be effective, the disclosure should clearly and plainly articulate the risks so that, if necessary, a court can determine that the client understood and accepted the risks by providing consent to the representation.

In the multiple representation context, this means identifying the kinds of things that an attorney cannot and will not do because the representation involves more than one client. For example, the attorney will not explore or pursue claims by one client against another client, such as opposing parties in the same transaction, a testator and beneficiary of a will, or spouses in a dissolution of marriage proceeding. Similarly, a lawyer who prosecuted a case could not subsequently represent the accused in a civil action against the government involving the same facts.[5] In addition, information communicated by one client may be disclosed to the other clients. Other limitations on the attorney’s ability to act may also need to be disclosed, depending on the context.

The important point is to ensure that the consenting clients understand the limitations that arise from a joint representation, as opposed to the representation of a single client. In the successive representation context, this means explaining the risk that the attorney may have learned confidential information that may be used on behalf of a new client. The standard is not whether an attorney actually did learn confidential information in the prior representation that can be used against a former client. Instead, to trigger an attorney’s obligation to obtain a former client’s consent, all that is required is that the new representation be “substantially related” to the former representation.[6] The existence of confidential information is presumed.

Third, advise the clients of their right to consult with independent counsel in deciding whether to agree to the multiple or successive representation. The safest course is to encourage independent counsel on all issues arising out of the potential conflict of interest.

Importantly, an attorney seeking a client’s consent should not advise a client on whether to give consent. Instead, the attorney’s role should be limited to fully disclosing the risks without actually advising the client about whether to give consent.

Fourth, confirm what will happen if an actual conflict develops that precludes the continued representation. Clients may agree, for example, that the attorney may continue to represent one of the clients if an actual conflict develops. Alternatively, the clients may insist that, under such circumstances, an attorney withdraw from the entire representation. In either case, it is important that the clients agree before the representation begins.

Both the multiple and successive representation rules require a consultation with the attorney for the client to consent. In most cases, the consultation will be in person. Unfortunately, although it is important to answer any questions a client may have, the consultation actually does little to protect an attorney from a later allegation challenging the client’s consent to the representation.

In addition to the consultation, there must be a written component. The most important document for effective consent is a writing, typically a letter. The letter should be jointly addressed to all of the clients (for a multiple representation), or to the former client (for successive representations), and should include a discussion of all the material risks of the representation.

Conclusion

Effective conflict waivers require a writing confirming the affected clients’ informed consent. There is no checklist or formula that an attorney can use in discussing conflict waivers with a client, or in drafting a written waiver for the client’s execution. These must be tailored to the unique circumstances of each situation. The four steps above, however, provide a helpful starting point for the attorney.


Notes

[1] See, e.g., Colo. RPC 1, cmt. [6].

[2] Colo. RPC 1.0(e).

[3] See Colo. RPC 1.7, cmt. [22] for additional information on how the effectiveness of informed consent will be evaluated.

[4] See Colo. RPC 1.9, cmt. [1]. A client transitions from a current client to a former client when the attorney–client relationship is terminated, such as when the attorney or the client provides the other with a writing confirming that the relationship has concluded.

[5] See Colo. RPC 1.9, cmt. [1].

[6] See Colo. RPC 1.9(a).

Randy Evans is an author, litigator, columnist and expert in the areas of professional liability, insurance, commercial litigation, entertainment, ethics, and lawyer’s law. He has authored and co-authored eight books, including: The Lawyer’s Handbook; Georgia Legal Malpractice Law; Climate Change And Insurance; Georgia Property and Liability Insurance Law; Appraisal In Property Damage Insurance Disputes; and California Legal Malpractice Law. He writes newspaper columns (the Atlanta Business Chronicle, the Recorder, and the Daily Report) and lectures around the world. He served as counsel to the Speakers of the 104th – 109th Congresses of the United States. He co-chairs the Georgia Judicial Nominating Commission. He serves on the Board of Governors of the State Bar of Georgia. He handles complex litigation throughout the world. He has been consistently rated as one of the Best Lawyers in America, Super Lawyer (District of Columbia and Georgia), Georgia’s Most Influential Attorneys, and Georgia’s Top Lawyers for Legal Leaders. Along with numerous other awards he has been named the “Complex Litigation Attorney of the Year in Georgia” by Corporate International Magazine, and Lawyer of the Year for Legal Malpractice Defense in Atlanta. He is AV rated by Martindale Hubble.

Shari Klevens is a partner in the Atlanta and Washington, D.C. offices of McKenna Long & Aldridge LLP. Shari represents lawyers and law firms in the defense of legal malpractice claims and advises and counsels lawyers concerning allegations of malpractice, ethical violations, and breaches of duty. In addition, Shari is the Chair of the McKenna’s Law Firm Defense and Risk Management Practice and is a frequent writer and lecturer on issues related to legal malpractice and ethics. Shari co-authored Georgia Legal Malpractice Law and California Legal Malpractice Law, which address the intricacies and nuances of Legal Malpractice law and issues that confront the new millennium lawyer. She also co-authored The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance, which is an easy-to-use desk reference offering practical solutions to real problems in the modern law practice for every attorney throughout the United States.

Lino Lipinsky de Orlov is a litigation partner in the Denver office of McKenna Long & Aldridge, LLP.  He represents clients in all aspects of commercial litigation, mediation, arbitration, and appeals.  He has developed particular experience in complex business cases, particularly those involving creditor’s rights, real estate, trade secrets, and employment disputes.  Mr. Lipinsky also frequently speaks and writes on legal issues relating to technology, employment law, and ethics.   He is a member of the Colorado Bar Association’s Board of Governors and serves on the Board of the Colorado Judicial Institute.  He is a former President of the Faculty of Federal Advocates.  Among his honors, Chambers USA has recognized Mr. Lipinsky as one of Colorado’s leading general commercial litigators, and he has been included in The Best Lawyers in America.  He received his A.B. degree, magna cum laude, from Brown University and his J.D. degree from New York University School of Law, where he was a member of the New York University Law Review.

 

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Tenth Circuit: Signed Release Barred Plaintiff’s Negligence Claim Against Outdoor Education Center

The Tenth Circuit published its opinion in Squires v. Breckenridge Outdoor Education Center on Tuesday, May 7, 2013.

In 2008, Plaintiff, a legally blind child with cerebral palsy and cognitive delays, was severely injured while skiing at Breckenridge Ski Resort in Colorado. Before the trip, Defendant sent documents regarding the trip to the participants’ parents, including Plaintiff’s mother, Mrs. Squires. The documents included a Letter to Students and a Release. Plaintiff and her mother signed the Release.

On the first day of skiing, Plaintiff was injured when another skier lost control and skied into the tethers connecting Plaintiff and her instructor. Plaintiff filed this action claiming Defendant’s negligence and gross negligence caused her injuries. Defendant moved for summary judgment, arguing the Release barred Plaintiff’s negligence claim and there was no evidence to support her gross negligence claim. The magistrate judge granted summary judgment in favor of Defendant on Plaintiff’s negligence claim, and denied Defendant’s motion on Plaintiff’s gross negligence claim. This claim proceeded to a jury, which found Defendant not liable. Plaintiff appealed.

On appeal, Plaintiff argued the Release was unenforceable. She reasoned that the Release was invalid under the four-part test articulated in Jones v. Dressel, 623 P.2d 370 (Colo. 1981), and that her mother did not make an informed decision as required by C.R.S. § 13-22-107.

In determining whether an exculpatory agreement is valid, Colorado courts consider four factors: (1) the existence of a duty to the public; (2) the nature of the service performed; (3) whether the contract was fairly entered into; and (4) whether the intention of the parties is expressed in clear and unambiguous language. Jones, 623 P.2d at 376.

Plaintiff challenged only the magistrate judge’s conclusion on the fourth factor. In making this  determination, Colorado courts examine “the actual language of the agreement for legal jargon, length and complication, and any likelihood of confusion or failure of a party to recognize the full extent of the Release provisions.” Chadwick v. Colt Ross Outfitters, Inc., 100 P.3d 465, 467 (Colo. 2004). The Tenth Circuit found the Release signed by Plaintiff and her mother clearly and unambiguously waived any negligence claims Plaintiff might have brought against Defendant. Contrary to Plaintiff’s argument, Colorado law does not require that exculpatory agreements refer to the specific activity in which the plaintiff participated and was injured.

The Tenth Circuit then turned to whether Mrs. Squires’s consent to the Release was voluntary and informed, as required by C.R.S. § 13-22-107. Plaintiff argued it was not voluntary and informed, because her mother did not understand the risks involved with adaptive skiing and, specifically, the use of bi-skis. Considering not only the language of the Release, but also the information Defendant provided to Plaintiff and Mrs. Squires in connection with the Release, as well as Mrs. Squire’s actual knowledge on the date she signed the Release, the Tenth Circuit concluded Mrs. Squires’s decision to Release Plaintiff’s prospective negligence claims against Defendant was informed. Mrs. Squires had sufficient information from which to evaluate the degree of risk Plaintiff faced.

The Court concluded the Release satisfied both the Jones test and the voluntary and informed requirement of § 13-22-107 and was, therefore, enforceable.

The magistrate judge’s order granting summary judgment to Defendant on Plaintiff’s negligence claim is AFFIRMED.