Prof.
Ronald D. Rotunda recently wrote concerning lawyers’ duty to be
truthful in negotiations: its essence and its limits. As Prof.
Rotunda wrote, Rule 4.1 of the Model Rules imposes a duty on lawyers
to make no false statements of material fact or law, and Illinois
Rule 4.1 tracks the Model Rule. Prof. Rotunda cites several cases
bearing on lawyers’ duties to be truthful in contexts other than
appearances before tribunals, including Fire Insurance Exchange v.
Bell by Bell, 643 N.E.2d 310 (Ind. 1994). In that case, the
Indiana Supreme Court held that an opposing party has a right, as a
matter of Indiana law, to rely on material representations made by
opposing counsel. In Bell, the representation at issue was
that of a defense lawyer, allegedly to the effect that policy limit
on a homeowner’s policy was $100,000. In fact, the policy limit was
$300,000.
But
the Bell court did not address the truth or falsity of the
alleged statements, or indeed whether the lawyer made the allegedly
false statements at all.
The
trial court in Bell had denied motions for summary judgment by
the defendant lawyer and his firm; the appellate court affirmed that
denial after an interlocutory appeal; and the Indiana Supreme Court
partly affirmed the appellate court. It upheld the denial of the
lawyer’s and the firm’s motions for summary judgment, and it took the
opportunity to enshrine in Indiana law the principle of reliance on
the material representations of an opposing attorney. It remanded the
case to the trial court for further proceedings, which presumably
would have involved fact-finding: did the lawyer actually say what
was alleged? What was his intent, or the true state of his knowledge
of the policy limits?
The
same kind of fact-finding is done in disciplinary investigations
concerning lawyers’ representations of material fact and law. But do
those investigations always lead to disciplinary sanctions against
the lawyer? Some points to consider:
- The
attorney who was accused of making an intentional misrepresentation
in Bell has no disciplinary history in Indiana. - According
to the Illinois ARDC’s most recent Annual Report (for 2013; the 2014
report will be released in the coming weeks), lawyers were accused of
“fraudulent or deceptive conduct” in 64 of the 83 formal, public
disciplinary cases filed during calendar year 2013 (i.e. 77%
of all cases filed), having docketed 693 investigations (11.4% of the
6,073 total investigations docketed) that concerned the
respondent-lawyer’s alleged dishonest conduct.
The
above facts show that lawyers’ conduct potentially involving
dishonesty can and will be scrutinized and judged; but that not every
case in which dishonesty is alleged leads to a disciplinary sanction.
One
Illinois case that sheds specific light on lawyers’ representations
to opposing counsel is In re Landis, M.R. 22970, 2005PR0069
(March 16, 2009). In Landis, the respondent represented one
side of a real estate transaction involving a bridge loan. Based on
the representations of his client (the lender), he believed the
parties had agreed that the interest rate would be a certain
percentage per month. Therefore, when revising drafts of the
promissory note relating to the loan, the respondent inserted the
words “per month” in connection with the interest rate. The
opposing lawyer did not notice that the respondent had done that
before or during the closing. It was brought to her attention after
the closing, when her clients disputed that they had agreed to that
term (they contended that they had agreed to pay interest on a yearly
basis).
The
Hearing Board – the body before which trial-level hearings are held
at the ARDC – concluded that the respondent’s conduct did not
warrant discipline, and recommended dismissal of the charges. The
Hearing Board determined that the respondent’s changes to the
promissory note were extensive and obvious, and that he had not made
the change to the interest rate term with any dishonest intent (since
he believed, based on his client’s representation, that the “per
month” term reflected the parties’ agreement). The Hearing Board
noted that the respondent “should have done more to communicate the
changes” to his opposing counsel, but that “his conduct d[id] not
rise to the level of an ethical violation.” It also cautioned,
reasonably, that “[o]ther attorneys should not construe this
decision as a general statement that there can be no ethical
violation based on adding words to or removing words from a document
without notifying your opposing counsel.” The Review Board of the
Commission (the appellate tribunal) affirmed the Hearing Board, and
the Supreme Court (which of course has final say in all disciplinary
matters) entered an order confirming the Review Board’s report and
recommendation, and dismissed all charges against the respondent.
In
tune with that admonition, I do not cite Landis as an
indication that Illinois law is opposite to Indiana law as clarified
in Bell. It is not the case
that Indiana lawyers’ material representations can always be relied
upon, while Illinois lawyers’ may not. Lawyers must be careful
to make representations in negotiations that are true and not
misleading, and to communicate adequately with all parties to the
negotiation or transaction. Rule 4.1 mandates as much, and common
sense would say that Illinois lawyers’ material representations can,
may, and will be relied upon. But Landis does show that not
every accusation of a material misrepresentation leads to discipline
against the attorney. That’s not a license to be anything less than
careful and truthful, but it does provide us some insight into how
the Court holds us to the standards of Rule 4.1.
ethics forward. 