Proposed Opinions

Council Actions

At its meeting on October 24, 2014, the State Bar Council withdrew 2013 Formal Ethics Opinion 2, Providing Defendant with Discovery During Representation (Adopted 1/24/14), and adopted the ethics opinion published as a proposed substitute for 2013 FEO 2 in the Fall 2014 edition of the Journal. The adopted ethics opinion is summarized below:

2013 Formal Ethics Opinion 2
Providing Incarcerated Defendant with Opportunity to Review Discovery Materials

Opinion rules that if, after providing an incarcerated criminal client with a summary/explanation of the discovery materials in the client’s file, the client requests access to any of the discovery materials, the lawyer must afford the client the opportunity to meaningfully review relevant discovery materials unless certain conditions exist.
The council also adopted the ethics opinion summarized below:

2014 Formal Ethics Opinion 7
Use of North Carolina Subpoena to Obtain Documents from Foreign Entity or Individual

Opinion rules that a lawyer may provide a foreign entity or individual with a North Carolina subpoena accompanied by a statement/letter explaining that the subpoena is not enforceable in the foreign jurisdiction, the recipient is not required to comply with the subpoena, and the subpoena is being provided solely for the recipient’s records.

Ethics Committee Actions

At its meeting on October 23, 2014, the Ethics Committee voted to send the following proposed opinion to a subcommittee for further study: Proposed 2014 FEO 1, Protecting Confidential Client Information When Mentoring. Upon the recommendation of the Executive Committee of the council, Proposed 2014 FEO 9, Private Lawyer Supervision of Investigation Involving Misrepresentation, was also sent to a subcommittee for study. The Ethics Committee voted to publish a revised version of one proposed opinion and two new proposed opinions. The comments of readers on the proposed opinions are welcomed.

In light of a division between the members of the committee on the question of whether a lawyer may represent multiple parties to a commercial real estate loan closing, the committee voted to publish two proposed opinions that reach different conclusions. Readers are urged to comment on the proposed opinions in order that the committee might benefit from the perspective of the bar at large. On page 39, the Legal Ethics column considers the competing concerns addressed in the two alternative opinions. The alternative proposed opinions appear immediately below.

Proposed 2013 Formal Ethics Opinion 14
Representation of Parties to a Commercial Real Estate Loan Closing
October 23, 2014

Proposed opinion rules that common representation in a real estate commercial loan closing is, in most instances, a “nonconsentable” conflict, meaning that a lawyer may not ask the borrower and the lender to consent to common representation.

Background:

In the standard closing of a commercial loan secured by real property (a “commercial loan closing”), the borrower and the lender have separate legal counsel. The borrower’s lawyer traditionally handles most aspects of the closing, including the preparation of the settlement statement as well as the collection of funds, the payoffs, and the disbursements. The borrower understands that its lawyer represents its interests alone. Unlike a residential real estate closing in which the lender’s documents can rarely be modified once entered into by the borrower/buyer, it is common in a commercial loan closing for the borrower’s lawyer to be actively involved in negotiating provisions of the commitment letter that establishes the basic terms of the mortgage, and to also negotiate specific revisions to the loan documents to address material matters such as default, disbursement of insurance proceeds, permitted transfers, and indemnification.

A large regional bank recently changed its commercial loan closing policies to require all lawyers who close commercial loans with the bank to be employed by law firms that are “authorized” by the bank to close its loans. These lawyers are designated as “Bank’s Counsel.” Bank’s Counsel is asked by the bank to handle the entire closing including the title search, title certification, and the holding and disbursing of the closing funds.
Lawyers who traditionally represent the borrower in a commercial loan closing are concerned about this policy for a number of reasons including the following:

• Having closing funds delivered to the lender’s lawyer instead of the borrower’s lawyer subjects the borrower to responsibility for the funds without the benefit of its own legal counsel’s guidance, protection, and assistance;

• Once the loan funds are committed to the borrower by the lender, they become the responsibility of the borrower. When there is separate, independent representation of the borrower, the protections of malpractice insurance and the closing protection letter are available to the borrower.

• The borrower’s recourses may be limited if closing funds are mishandled and the borrower suffers a loss in connection with Bank’s Counsel’s preparation of the closing statement and disbursement of the loan proceeds. However, when the borrower’s lawyer performs the escrow and closing functions, the lender gets an insured closing letter and a legal opinion relative to authority and enforceability from the borrower’s lawyer and has protection.

• Having the lender’s lawyer perform the property and business due diligence functions may result in the disclosure of confidential information relative to the borrower’s property or its business interests that would not be disclosed if the borrower’s lawyer performed these functions.

• Unless the borrower is sophisticated and instructs its lawyer to be actively involved, the borrower’s lawyer may be placed in the role of “outsider” or passive observer, which may limit the quality and scope of the representation that the borrower receives. It will also invite, notwithstanding disclosure, the perception that the lender’s lawyer is looking out for the interests of all of the parties.

Inquiry #1:

May a lawyer represent both the borrower and the lender for the closing of a commercial loan secured by real property? If so, is informed consent of both the borrower and the lender required, and what information must be disclosed to obtain informed consent?

Opinion #1:

In most instances, a lawyer may not represent both the borrower and the lender for the closing of a commercial loan even with consent.

Rule 1.7 prohibits the representation of a client if the representation involves a concurrent conflict of interest unless certain conditions are met. A concurrent conflict of interest exists if the representation of one client will be directly adverse to another client or the representation of one client may be materially limited by the lawyer’s responsibilities to another client. Rule 1.7(a). The closing of a commercial loan secured by real estate is an “arm’s length” business transaction in which large sums of money are at stake, the documentation is complex, and the opportunities to negotiate on behalf of each party are numerous. As observed in the comment to Rule 1.7:

Even where there is no direct adverseness, a conflict of interest exists if a lawyer’s ability to consider, recommend, or carry out an appropriate course of action for the client may be materially limited as a result of the lawyer’s other responsibilities or interests. For example, a lawyer asked to represent a seller of commercial real estate, a real estate developer, and a commercial lender is likely to be materially limited in the lawyer’s ability to recommend or advocate all possible positions that each might take because of the lawyer’s duty of loyalty to the others. The conflict in effect forecloses alternatives that would otherwise be available to the client. The mere possibility of subsequent harm does not itself preclude the representation or require disclosure and consent. The critical questions are the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client.

Rule 1.7, cmt. [8].

Rule 1.7(b) allows a lawyer to proceed with a representation burdened with a concurrent conflict of interest, but only if the lawyer determines that the representation of all of the affected clients will be competent and diligent and each affected client gives informed consent. In other words, the lawyer must decide whether the conflict is “consentable.” Rule 1.7, cmt. [2]. If the lawyer’s exercise of independent professional judgment on behalf of any client will be compromised, the conflict is not consentable. As noted in the comment to Rule 1.7:

[S]ome conflicts are nonconsentable, meaning that the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent...Consentability is typically determined by considering whether the interests of the clients will be adequately protected if the clients are permitted to give their informed consent to representation burdened by a conflict of interest...[R]epresentation is prohibited if in the circumstances the lawyer cannot reasonably conclude that the lawyer will be able to provide competent and diligent representation.

Rule 1.7, cmt.[14]-[15]. Although deleted from the comment to Rule 1.7 when the Rules of Professional Conduct were comprehensively revised in 2003, the following is an excellent test for determining whether a conflict is “consentable”: “when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent.” Rule 1.7, cmt. [5] (2002).

In RPC 210, the Ethics Committee held that a lawyer may represent the seller, borrower/buyer, and lender in a residential real estate closing with the informed consent of all of the parties. Even so, the opinion includes the following cautionary language:

A lawyer may reasonably believe that the common representation of multiple parties to a residential real estate closing will not be adverse to the interests of any one client if the parties have already agreed to the basic terms of the transaction and the lawyer’s role is limited to rendering an opinion on title, memorializing the transaction, and disbursing the proceeds. Before reaching this conclusion, however, the lawyer must determine whether there is any obstacle to the loyal representation of both parties. The lawyer should proceed with the common representation only if the lawyer is able to reach the following conclusions: he or she will be able to act impartially; there is little likelihood that an actual conflict will arise out of the common representation; and, should a conflict arise, the potential prejudice to the parties will be minimal.

A commercial loan closing is substantially different from a residential closing in which there is little opportunity to negotiate on behalf of the borrower/buyer once the purchase contract and loan commitment letter are signed. In a commercial loan closing, there are numerous opportunities for a lawyer to negotiate on behalf of the parties, so impartiality is rarely possible. There are also numerous opportunities for an actual conflict to arise between the borrower and the lender and, if a conflict does arise, the prejudice to the parties would be substantial. Therefore, common representation in a commercial loan closing is, in most instances, a “nonconsentable” conflict, meaning that a lawyer may not ask the borrower and the lender to consent to common representation. Restatement (Third) of The Law Governing Lawyers, §122, Comment g(iv), cites decisions in which the court denied the possibility of client consent as a matter of law in certain categories of cases. These decisions include Baldasarre v. Butler, 625 A. 2d 458 (N.J. 1993), in which the Supreme Court of New Jersey observed:

This case graphically demonstrates the conflicts that arise when an attorney, even with both clients’ consent, undertakes the representation of the buyer and the seller in a complex commercial real estate transaction. The disastrous consequences of [the lawyer’s] dual representation convinces us that a new bright-line rule prohibiting dual representation is necessary in commercial real estate transactions where large sums of money are at stake, where contracts contain complex contingencies, or where options are numerous. The potential for conflict in that type of complex real estate transaction is too great to permit even consensual dual representation of buyer and seller. Therefore, we hold that an attorney may not represent both the buyer and seller in a complex commercial real estate transaction even if both give their informed consent.

635 A. 2d at 467. See also Fla. Bar. Prof’l Ethics Comm., Op. 97-2 (1997)(lawyer may not represent both buyer and seller in closing of sale of business where material terms of contract have not been agreed to or discussed by parties).

In summary, dual representation of the borrower and the lender for the closing of a commercial real estate loan is a nonconsentable conflict of interest unless the following conditions can be satisfied: (1) the contractual terms have been finally negotiated prior to the commencement of the representation; (2) there are no material contingencies to be resolved; (3) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (4) it is unlikely that a difference in interests will eventuate and, if it does, it will not materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that should be pursued on behalf of a client; (5) the lawyer reasonably concludes that he will be able to act impartially in the representation of both parties; (6) the lawyer explains to both parties that his role is limited to executing the tasks necessary to close the loan and that this limitation prohibits him from advocating for the specific interests of either party; (7) the lawyer discloses that he must withdraw from the representation of both parties if a conflict arises; and (8) after the foregoing full disclosure, both parties give informed consent confirmed in writing.

Regardless of the above conditions allowing common representation of the borrower and lender, consent may never be sought to represent the lender, the borrower, and the seller of real property if the seller will provide secondary financing for the transaction and accept a secondary deed of trust. In this situation, the risks to the interests of the seller are too great to permit a lawyer to seek consent to common representation.

Inquiry #2:

The bank intends for Bank’s Counsel to represent only the bank (lender) but to handle all aspects of the closing.

May a lawyer represent only the lender but handle all aspects of a commercial loan closing including the title search, title certification, marshalling the necessary documents, and holding and disbursing of the closing funds? If so, what information must be disclosed by Bank’s Counsel to the borrower relative to the role of Bank’s Counsel?

Opinion #2:

Yes, a lawyer may be the lead lawyer for the closing (“the closing lawyer”) provided the lawyer represents only one party—either the lender or the borrower. Because the title work and other due diligence are for the benefit of the lender, there is no prohibition on the lender’s lawyer performing these tasks. See 2004 FEO 10 (because buyer is the intended beneficiary of the deed although not a signatory, buyer’s lawyer may prepare deed without creating a lawyer-client relationship with seller). However, if the closing lawyer represents the lender, certain conditions must be satisfied.

In 2006 FEO 3, the Ethics Committee considered whether a lawyer may represent a lender on the closing of the sale to a third party of property acquired by the lender as result of foreclosure by execution of the power of sale in the deed of trust on the property. The opinion holds (among other things) that a lawyer may serve as the closing lawyer and limit his representation to the lender/seller if there is disclosure to the buyer:

Attorney A must fully disclose to Buyer that [the lender/seller] is his sole client, he does not represent the interests of Buyer, the closing documents will be prepared consistent with the specifications in the contract to purchase, and, in the absence of such specifications, he will prepare the documents in a manner that will protect the interests of his client, [the lender/seller], and, therefore, Buyer may wish to obtain his own lawyer. See, e.g., RPC 40 (disclosure must be far enough in advance of the closing that the buyer can procure his own counsel), RPC 210, 04 FEO 10, and Rule 4.3(a). Because of the strong potential for Buyer to be misled, the disclosure must be thorough and robust.

Consistent with the holding in 2006 FEO 3, in a commercial loan closing, the lender’s lawyer may serve as the closing lawyer provided the borrower is informed that the closing lawyer will not represent its interests and will interpret loan documents in the light that is most favorable to the lender; the borrower is given a reasonable opportunity to retain its own counsel and is not misled as to its right to do so; the lawyers for both parties advise their clients about the risks and benefits of a having the lender’s lawyer serve as the closing lawyer; and the borrower’s lawyer is allowed to observe and participate in the transaction to the extent necessary to protect the borrower’s interests.

This opinion cannot address all of the concerns expressed in the Background section above relative to the additional risks to the borrower if the lawyer for the closing is the lender’s lawyer. However, if the closing funds are deposited to and disbursed from the trust account of the lender’s lawyer in accordance with the requirements of the trust accounting rule, Rule 1.15, the funds should not be at risk. To the extent that there are other risks to the interests of the borrower, the borrower’s lawyer must analyze those risks and advise the borrower about steps that may be taken to minimize the risks including negotiating with the lender’s lawyer for aspects of the closing to be handled by the borrower’s lawyer.

ALTERNATIVE Proposed 2013 Formal Ethics Opinion 14       
Representation of Parties to a Commercial Real Estate Loan Closing
October 23, 2014

Note: Differences between this alternative proposed opinion and the proposed opinion above are shown with overstrikes.

Proposed opinion rules that common representation in a real estate commercial loan closing is, in most instances, a “nonconsentable” conflict, meaning that a lawyer may not ask the borrower and the lender to consent to common representation.

Background:

[There are no changes to this section.]

Inquiry #1:
May a lawyer represent both the borrower and the lender for the closing of a commercial loan secured by real property? If so, is informed consent of both the borrower and the lender required, and what information must be disclosed to obtain informed consent?

Opinion #1:

In most instances No, a lawyer may not represent both the borrower and the lender for the closing of a commercial loan even with consent.

Rule 1.7 prohibits the representation of a client if the representation involves a concurrent conflict of interest unless certain conditions are met. A concurrent conflict of interest exists if the representation of one client will be directly adverse to another client or the representation of one client may be materially limited by the lawyer’s responsibilities to another client. Rule 1.7(a). The closing of a commercial loan secured by real estate is an “arm’s length” business transaction in which large sums of money are at stake, the documentation is complex, and the opportunities to negotiate on behalf of each party are numerous. As observed in the comment to Rule 1.7:

Even where there is no direct adverseness, a conflict of interest exists if a lawyer’s ability to consider, recommend, or carry out an appropriate course of action for the client may be materially limited as a result of the lawyer’s other responsibilities or interests. For example, a lawyer asked to represent a seller of commercial real estate, a real estate developer, and a commercial lender is likely to be materially limited in the lawyer’s ability to recommend or advocate all possible positions that each might take because of the lawyer’s duty of loyalty to the others. The conflict in effect forecloses alternatives that would otherwise be available to the client. The mere possibility of subsequent harm does not itself preclude the representation or require disclosure and consent. The critical questions are the likelihood that a difference in interests will eventuate and, if it does, whether it will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of the client.

Rule 1.7, cmt. [8].

Rule 1.7(b) allows a lawyer to proceed with a representation burdened with a concurrent conflict of interest, but only if the lawyer determines that the representation of all of the affected clients will be competent and diligent and each affected client gives informed consent. In other words, the lawyer must decide whether the conflict is “consentable.” Rule 1.7, cmt. [2]. If the lawyer’s exercise of independent professional judgment on behalf of any client will be compromised, the conflict is not consentable. As noted in the comment to Rule 1.7:

[S]ome conflicts are nonconsentable, meaning that the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent...Consentability is typically determined by considering whether the interests of the clients will be adequately protected if the clients are permitted to give their informed consent to representation burdened by a conflict of interest...[R]epresentation is prohibited if in the circumstances the lawyer cannot reasonably conclude that the lawyer will be able to provide competent and diligent representation.

Rule 1.7, cmt.[14]-[15]. Although deleted from the comment to Rule 1.7 when the Rules of Professional Conduct were comprehensively revised in 2003, the following is an excellent test for determining whether a conflict is “consentable”: “when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent.” Rule 1.7, cmt. [5] (2002).

In RPC 210, the Ethics Committee held that a lawyer may represent the seller, borrower/buyer, and lender in a residential real estate closing with the informed consent of all of the parties. Even so, the opinion includes the following cautionary language:

A lawyer may reasonably believe that the common representation of multiple parties to a residential real estate closing will not be adverse to the interests of any one client if the parties have already agreed to the basic terms of the transaction and the lawyer’s role is limited to rendering an opinion on title, memorializing the transaction, and disbursing the proceeds. Before reaching this conclusion, however, the lawyer must determine whether there is any obstacle to the loyal representation of both parties. The lawyer should proceed with the common representation only if the lawyer is able to reach the following conclusions: he or she will be able to act impartially; there is little likelihood that an actual conflict will arise out of the common representation; and, should a conflict arise, the potential prejudice to the parties will be minimal.

A commercial loan closing is substantially different from a residential closing in which there is little opportunity to negotiate on behalf of the borrower/buyer once the purchase contract and loan commitment letter are signed. In a commercial loan closing, there are numerous opportunities for a lawyer to negotiate on behalf of the parties, so impartiality is rarely possible. There are also numerous opportunities for an actual conflict to arise between the borrower and the lender and, if a conflict does arise, the prejudice to the parties would be substantial. Therefore, common representation in a commercial loan closing is, in most instances, a “nonconsentable” conflict, meaning that a lawyer may not ask the borrower and the lender to consent to common representation. Restatement (Third) of The Law Governing Lawyers, §122, Comment g(iv), cites decisions in which the court denied the possibility of client consent as a matter of law in certain categories of cases. These decisions include Baldasarre v. Butler, 625 A. 2d 458 (N.J. 1993), in which the Supreme Court of New Jersey observed:

This case graphically demonstrates the conflicts that arise when an attorney, even with both clients’ consent, undertakes the representation of the buyer and the seller in a complex commercial real estate transaction. The disastrous consequences of [the lawyer’s] dual representation convinces us that a new bright-line rule prohibiting dual representation is necessary in commercial real estate transactions where large sums of money are at stake, where contracts contain complex contingencies, or where options are numerous. The potential for conflict in that type of complex real estate transaction is too great to permit even consensual dual representation of buyer and seller. Therefore, we hold that an attorney may not represent both the buyer and seller in a complex commercial real estate transaction even if both give their informed consent.

635 A. 2d at 467. See also Fla. Bar. Prof’l Ethics Comm., Op. 97-2 (1997)(lawyer may not represent both buyer and seller in closing of sale of business where material terms of contract have not been agreed to or discussed by parties).
 
In summary, dual representation of the borrower and the lender for the closing of a commercial real estate loan is a nonconsentable conflict of interest unless the following conditions can be satisfied: (1) the contractual terms have been finally negotiated prior to the commencement of the representation; (2) there are no material contingencies to be resolved; (3) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (4) it is unlikely that a difference in interests will eventuate and, if it does, it will not materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that should be pursued on behalf of a client; (5) the lawyer reasonably concludes that he will be able to act impartially in the representation of both parties; (6) the lawyer explains to both parties that his role is limited to executing the tasks necessary to close the loan and that this limitation prohibits him from advocating for the specific interests of either party; (7) the lawyer discloses that he must withdraw from the representation of both parties if a conflict arises; and (8) after the foregoing full disclosure, both parties give informed consent confirmed in writing.

Regardless of the above conditions allowing common representation of the borrower and lender, consent may never be sought to represent the lender, the borrower, and the seller of real property if the seller will provide secondary financing for the transaction and accept a secondary deed of trust. In this situation, the risks to the interests of the seller are too great to permit a lawyer to seek consent to common representation.

Inquiry #2:

[There are no changes to this section.]

Proposed 2014 Formal Ethics Opinion 8
Accepting an Invitation from a Judge to Connect on LinkedIn
October 23, 2014

Proposed opinion rules that a lawyer may accept an invitation from a judge to be a “connection” on a professional networking website, and may endorse a judge. However, a lawyer may not accept a legal skill or expertise endorsement or a recommendation from a judge.

Facts:

Lawyer has a profile listing on LinkedIn, a social networking website for people in professional occupations. The website allows registered users (“members”) to maintain a list of contact details on their LinkedIn pages for people with whom they have some level of relationship via the website. These contacts are called “connections.” Members can invite anyone (whether a site user or not) to become a connection.

LinkedIn can be used to list jobs and search for job candidates, to find employment, and to seek out business opportunities. Members can view the connections of other members, post their photographs, and view the photos of other members. Members can post comments on another member’s profile page. Members can also endorse or write recommendations for other members. Such endorsements or recommendations, if accepted by the recipient, are posted on the recipient’s profile listing.

Inquiry #1:

May a lawyer with a professional profile on LinkedIn accept an invitation to connect from a judge?

Opinion #1:

Yes. Interactions with judges using social media are evaluated in the same manner as personal interactions with a judge, such as an invitation to dinner. In certain scenarios, a lawyer may accept a judge’s dinner invitation. Similarly, in certain scenarios, a lawyer may accept a LinkedIn invitation to connect from a judge. However, if a lawyer represents clients in proceedings before a judge, the lawyer is subject to the following duties: to avoid conduct prejudicial to the administration of justice; to not state or imply an ability to influence improperly a government agency or official; and to avoid ex parte communications with a judge regarding a legal matter or issue the judge is considering. See Rule 3.5 and Rule 8.4. These duties may require the lawyer to decline a judge’s invitation to connect on LinkedIn.

Rule 8.4(d) provides that it is professional misconduct for a lawyer to “engage in conduct that is prejudicial to the administration of justice.” Rule 8.4(e) provides that it is professional misconduct for a lawyer to “state or imply an ability to influence improperly a government agency or official.” Lawyers have an obligation to protect the integrity of the judicial system and to avoid creating an appearance of judicial partiality. See 2005 FEO 1.

If a lawyer receives an invitation to connect from a judge during the pendency of a matter before the judge, and the lawyer concludes that accepting the invitation will impair the lawyer’s compliance with these duties, the lawyer should not accept the judge’s invitation to connect until the matter is concluded. The lawyer may communicate to the judge the reason the lawyer did not accept the judge’s invitation. Such a communication with the judge is not a prohibited ex parte communication provided the communication does not include a discussion of the underlying legal matter.

Rule 3.5 prohibits lawyers from engaging in ex parte communications with a judge. Because connected members can post comments on each other’s profile pages, the connection between a judge and a lawyer appearing in a matter before the judge could lead to improper ex parte communications. Therefore, while the lawyer has a matter pending before a judge, the lawyer may not use LinkedIn or any other form of social media to communicate with the judge about the pending matter.

Rule 8.4(f) provides that it is professional misconduct for a lawyer to “knowingly assist a judge or judicial officer in conduct that is a violation of applicable rules of judicial conduct or other law.” To the extent that a judge is prohibited by the North Carolina Code of Judicial Conduct from participating in LinkedIn, or from sending invitations to connect to lawyers, a lawyer may not assist the judge in violating such prohibitions.

Inquiry #2:

May the lawyer send an invitation to connect to a judge?

Opinion #2:

Yes, subject to the limitations described in Opinion #1.

Inquiry #3:

A LinkedIn member has the option of displaying a “skills & expertise” section within his profile. A member can add items to the “skills & expertise” section of his profile page. In addition, some connections can add a new item to another member’s “skills & expertise” section, can “endorse” a skill or expertise already listed for the member, or write a recommendation for the member. A member who is being endorsed by another member will receive a notification containing the identity of the endorser and the specific skill or expertise that is being endorsed. The member may decline the endorsement entirely or choose the specific endorsements to be displayed. The endorsed member may also subsequently edit the “skills & expertise” section to “hide” selected endorsements. If a member endorses another member, and the endorsement is not declined by the recipient, the endorser’s name and profile picture will appear next to the skill on the endorsed member’s profile.

A recommendation is a comment written by a LinkedIn member to recognize or commend another member. When someone recommends a member, the recommended member will receive a message in the recommended member’s LinkedIn inbox and a notification on the member’s “Manage Recommendations” page. Recommendations are only visible to connections. A member can choose to hide a recommendation from the member’s profile but cannot delete it. Recommendations written for others can be withdrawn or revised.

May a lawyer endorse a judge’s legal skills or expertise or write a recommendation on the judge’s profile page?

Opinion #3:

Yes, subject to the limitations explained in Opinion #1.

Inquiry #4:

May a lawyer accept an endorsement or recommendation from a judge and display the endorsement or recommendation on his profile page?

Opinion #4:

No. Displaying an endorsement or recommendation from a judge on a lawyer’s profile page would create the appearance of judicial partiality and the lawyer must decline. See Rule 8.4(e).

Inquiry #5:

May a lawyer accept and post endorsements and recommendations on his LinkedIn profile page from persons other than judges?

Opinion #5:

Lawyers are professionally obligated to ensure that communications about the lawyer or the lawyer’s services are not false or misleading. See Rule 7.1(a). Provided that the content of the endorsement or recommendation is truthful and not misleading in compliance with the requirements of Rule 7.1, the lawyer may post endorsements and recommendations from persons other than judges on the lawyer’s LinkedIn profile page. See 2012 FEO 8.

Inquiry #6:

Lawyer A previously accepted and displayed on his LinkedIn profile page an endorsement or recommendation from Lawyer B, who subsequently became a judge. Is Lawyer A required to remove Lawyer B’s endorsement or recommendation?

Opinion #6:

Yes, if Lawyer A knows, or reasonably should know, that Lawyer B has become a judge. See Opinion #4.

Inquiry #7:

Do the holdings in this opinion apply to other social media applications such as Facebook, Twitter, Google+, Instagram, and Myspace?

Opinion #7:

The holdings apply to any social media application that allows public display of connections, endorsements, or recommendations between lawyers and judges.

Proposed 2014 Formal Ethics Opinion 10
Lawyer Owned Adoption Agency
October 23, 2014

Proposed opinion rules that a lawyer who handles adoptions as part of her or his law practice and also owns a financial interest in a for-profit adoption agency may represent an adopting couple utilizing the services of the adoption agency, but may not represent the biological parents.

Facts:

Attorneys A and B, who handle independent adoptions as part of their law practice, also manage a for-profit adoption agency called “Adopt a Child.” Adopt a Child is a limited liability company. Attorneys A and B receive compensation from Adopt a Child. The agency’s office is located in separate office space within Attorneys A and B’s firm. It has a separate telephone number, signage, fax machine, and copy machine. Adopt a Child is staffed by one employee. Adopt a Child contracts with independent social workers to screen and counsel birthmothers. Without assistance or influence from Attorneys A and B, a social worker conducts a home study on the adopting couple. The social worker then prepares a report which is reviewed by a supervisor and a review committee. A director of Adopt a Child may or may not be a member of the review committee. If the review committee approves the home study, the adoption proceeds. The adopting couple then engages a lawyer to represent their interests. If the home study report is unfavorable, the report is sent to the Department of Social Services. The adopting couple thereafter cannot become a client of Adopt a Child.

Typically, adopting couples learn about Adopt a Child through the agency’s website and advertisements. An initial consultation with Attorney A or Attorney B is arranged. Attorney A or Attorney B meets with the adopting couple to discuss the adoption process. If the adopting couple has identified a child to adopt, then Attorneys A and B proceed with the legal work necessary to complete an independent adoption. If the adopting couple is interested in adoption, but needs assistance in finding a child, a list of licensed adoption agencies is provided to the adopting couple. The adopting couple is informed that Attorneys A and B manage and own Adopt a Child. The adopting couple is encouraged to investigate other available agencies. If the adopting couple decides to use Adopt a Child, the adopting couple is given an application form and asked to pay a $200 application fee. Once approved, the adopting couple becomes a client of Adopt a Child.

Adopting couples pay a $4,500 fee to Adopt a Child, which gives adopting couples the following services: a completed home study, a family profile by a local artist, a two-page website, and access to birthmothers. Once there is a match between a birthmother and an adopting couple, the adopting couple signs a fee contract with the law firm and pays a legal fee to the law firm for legal services. Additional fees may occur in the form of pass-through costs for the birthmother’s living and medical expenses, and legal fees as necessary for termination of parental rights, interstate legal representation, etc. The adopting couple is informed that if there is a conflict of interest, such as a dispute between the birthmother and the adopting couple or between the adopting couple and Adopt a Child, the adopting couple must hire another lawyer to represent them.

Inquiry #1:

May Attorneys A and B co-manage and accept compensation as managers of Adopt a Child and provide legal services to the adopting couple and Adopt a Child?

Opinion #1:

Yes. The primary concern in this inquiry is the ability of Attorneys A and B to identify and manage conflicts of interest. Actual or potential conflicts of interest exist based on (1) the lawyers’ ownership of Adopt a Child, and (2) the referral of an adopting couple represented by Attorney A or Attorney B to Adopt a Child, or the referral of a client of Adopt a Child to Attorney A or Attorney B for legal representation in the adoption.

Rule 1.7 prohibits concurrent conflicts of interest. One type of concurrent conflict of interest exists if the representation of one or more clients may be materially limited by a personal interest of the lawyer. Comment [10] to Rule 1.7 provides, “[t]he lawyer’s own interests should not be permitted to have an adverse effect on representation of a client. In addition, a lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed financial interest.”

Before Adopt a Child may refer an adopting couple to Attorneys A and Attorney B for legal services, the agency, acting through the two lawyers, must reasonably conclude that the lawyers can adequately protect the interests of the adopting couple and that their professional judgment on behalf of the adopting couple will not be adversely affected by their financial interest in Adopt a Child. The adopting couple must give informed consent to the representation, confirmed in writing. As part of the disclosure necessary for informed consent, the adopting couple must be informed that in the event of a conflict between the adopting couple and Adopt a Child, Attorneys A and B must withdraw from the representation and the adopting couple will need to obtain new counsel. See Rule 1.7(b).

If a couple that wants to adopt is already a client of either Attorney A or Attorney B, the lawyers may refer the couple to Adopt a Child for adoption services only in compliance with the Rules of Professional Conduct.

The referral of the adopting parents to Adopt a Child implicates Rule 5.7 as well as Rule 1.8. Adopt a Child provides “law-related services.” Rule 5.7 sets out the ethical responsibilities for a lawyer who provides such services. Comment [6] to Rule 5.7 provides that when a client-lawyer relationship exists with a person who is referred by a lawyer to an ancillary business controlled by the lawyer, the lawyer must comply with Rule 1.8(a) pertaining to business transactions with clients. See also Rule 1.8, cmt. [1]. Pursuant to Rule 1.8(a) a lawyer may only enter into a business transaction with a client if: (1) the transaction and terms are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client; (2) the client is advised in writing of the desirability of seeking, and is given a reasonable opportunity to seek, the advice of independent legal counsel on the transaction; and (3) the client gives informed consent, in writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction. Accordingly, a lawyer must make these disclosures and secure the requisite consent before providing law related services to a client.

In 2000 FEO 9 the Ethics Committee held that a lawyer who was also a certified public accountant could provide legal services and accounting services from the same office. The opinion cites Rule 1.7 and provides that the lawyer may offer accounting services to his legal clients, provided the lawyer fully discloses his self-interest in making a referral to himself, and the lawyer determines that the referral is in the best interest of the client.

Before referring legal clients to Adopt a Child, Attorneys A and B must make an independent professional determination that the services offered by Adopt a Child will best serve the interests of the adopting couple. In addition, the adopting couple must be informed that, if they become clients of Adopt a Child, they are not obligated to employ Attorneys A and B to handle the legal work related to an adoption, and that they have the right to legal counsel of their choice. Likewise, if a couple comes for a legal consultation concerning adoption with Attorneys A and B, Attorneys A and B must explain the relationship between Adopt a Child and their firm and their financial interest in the agency before referring the adopting couple to their agency. The adopting couple must be given access to other agencies and the freedom to choose another adoption agency even if they decide to retain Attorneys A and B to perform their legal work.

If Attorneys A and B comply with the requirements set out in Rule 1.7(b), Rule 1.8(a), and Rule 5.7, they may refer their legal clients to Adopt a Child. Similarly, if Attorneys A and B comply with the requirements of Rule 1.7(b) and Rule 1.8(a), they may accept referrals from Adopt a Child.

Inquiry #2:

May Attorneys A and B simultaneously represent the adopting couple, Adopt a Child, and the birth parent(s)?

Opinion #2:

No. Rule 1.7(a) provides that a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if (1) the representation of one client will be directly adverse to another client; or (2) the representation of one or more clients may be materially limited by the lawyer’s responsibilities to another client.

In an informal opinion, the ABA opined as follows:

An adoption is a highly emotional undertaking for both the adoptive and the biological parent. In such situations, the lawyer must take particular care that the client fully understands the significance of the legal actions being taken. The lawyer has the obligation not only to advise the client of the legal rights and responsibilities, but also to counsel regarding the advisability of the action contemplated. See Rule 1.4. The biological parent is entitled to a full disclosure of all rights and obligations involved in the consent to the adoption, revocation of consent, post-adoptive rights, and post-adoptive restrictions, as well as the rights and obligations assumed by the adoptive parent. Where represented by counsel, the biological parent has the right to expect the lawyer to anticipate the consequences of the surrender and advise accordingly.

The rights surrendered by the biological parent and those assumed by the adoptive parent are in potential conflict. The biological parent’s right to revoke the consent is in direct conflict with the interests of the adoptive parent. The biological parent has the right to independent advice regarding the revocation of the consent.

The lawyer representing the adoptive parent owes the duty to counsel the adoptive parent and to assist the adoptive parent in securing the consent and avoiding revocation. The rights of the adoptive parent after the adoption decree is final may be antagonistic to perceived rights of the biological parent.

The inherent conflicts cannot be reconciled. Thus, the lawyer seeking to represent both the adoptive and biological parents in a private adoption proceeding cannot have a reasonable belief that the representation of one client would not adversely affect the relationship with or representation of the other client. See Rule 1.7

ABA Comm. on Ethics and Prof’l Responsibility, Informal Op. 87-1523 (1987).

We agree with the reasoning of the ABA opinion and conclude that it is a nonconsentable conflict for Attorneys A and B to represent the birth parents and simultaneously represent the adopting couple and/or Adopt a Child.

Inquiry #3:

What, if any, communication may Attorneys A and B have with a birth parent?

Opinion #3:

Rule 4.3 provides:

[i]n dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not: (a) give legal advice to the person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such person are or have a reasonable possibility of being in conflict with the interests of the client; and (b) state or imply that the lawyer is disinterested. When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer’s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding.

Any communication between a birth parent and the law firm must be limited to providing or collecting information to be used to complete the forms required by Adopt a Child.

Attorneys A and B must ensure that the birth parent(s) are provided with a written disclosure statement that explains that Adopt a Child is not a law firm; Attorneys A and B do not represent the birth parent(s) and cannot provide the birth parent(s) with legal advice; any communication with the law firm does not create a client-lawyer relationship; and the birth parent(s) are entitled to retain separate legal representation; and that the adopting couple will pay the legal fees.

Proposed 2014 Formal Ethics Opinion 11
Notice to Parents Prior to Seeking Nonsecure Custody Order
October 23, 2014

Proposed opinion rules that a DSS lawyer must follow legal guidelines as to the notice to parents required prior to filing a petition alleging abuse, neglect, or dependency, and must comply with Rule 3.5 as to an ex parte motion for nonsecure custody.

Facts:

N.C. Gen. Stat. § 7B-500(a)(2001) permits a law enforcement officer or a department of social services worker to take temporary physical custody of a child without a court order if there are reasonable grounds to believe that the juvenile is abused, neglected, or dependent and that he would be injured or could not be taken into custody if it were first necessary to obtain a court order. In other cases when immediate removal is deemed necessary, the Division of Social Services (DSS) must file a petition alleging abuse, neglect, or dependency, and obtain a nonsecure custody order.

The petition alleging abuse, neglect, or dependency must be filed prior to the request for a nonsecure custody order. The parties to the action are DSS as petitioner, the respondent parents, the child (who is appointed a guardian ad litem), and, depending upon the facts, a legal guardian, legal custodian, or adult caretaker of the child. N.C. Gen. Stat. § 7B-401.1 (2013). Upon the filing of the petition, respondent parents are each appointed provisional counsel by the clerk. The provisional counsel remain appointed to each parent unless the parent does not appear at the hearing; the court finds that the parent is not indigent; the parent retains his/her own counsel, or the parent waives his/her right to counsel. N.C. Gen. Stat. § 7B-602 (2013). Very specific criteria for nonsecure custody are set out in N.C. Gen. Stat. § 7B-503 (2011). Pursuant to N.C. Gen. Stat. § 7B-506 (2013), if nonsecure custody is needed for more than seven calendar days, there must be a hearing on the merits within that time.

The instant inquiry involves a family where there is a pending DSS action and each parent has been appointed counsel. The children have been adjudicated abused, neglected, and/or dependent, and the case is in the permanency planning and review stage.

The respondent mother is pregnant (it it is unknown whether the father is the same father as in the underlying abuse, neglect, or dependency action). Upon the birth of the infant, DSS intends to file a petition alleging abuse, neglect, or dependency and to file an ex parte motion for nonsecure custody as to the newborn child.

Inquiry #1:

Is the lawyer for DSS required to notify the respondent parents’ lawyers prior to or at the time of filing the new petition alleging abuse, neglect, or dependency as to the newborn child?

Opinion #1:

The issue of notice is a legal question not governed by the Rules of Professional Conduct. The DSS lawyer must follow the legal guidelines established as to the notice or service required prior to or at the time of filing the petition alleging abuse, neglect, or dependency.

If the law does not require such notice, it would not be a violation of the Rules of Professional Conduct for the DSS lawyer to provide the parents’ lawyers with notice prior to or at the time of the filing, particularly when the parents’ lawyers have requested such notice as to the unborn child. Rule 1.2(a)(2) provides:

A lawyer does not violate this rule by acceding to reasonable requests of opposing counsel that do not prejudice the rights of a client, by being punctual in fulfilling all professional commitments, by avoiding offensive tactics, or by treating with courtesy and consideration all persons involved in the legal process.

Inquiry #2:

Is the lawyer for DSS required to notify the respondent parents’ lawyers prior to or at the time of filing the ex parte motion for nonsecure custody as to the newborn child?

Opinion #2:

Rule 3.5 governs a lawyer’s communication with a judge about a pending matter. Rule 3.5(a)(3) provides that a lawyer shall not communicate ex parte with a judge or other official except in the course of official proceedings; in writing, if a copy is furnished simultaneously to the opposing party; orally, upon adequate notice to the opposing party; or “as otherwise permitted by law.”

The lawyer for DSS must comply with Rule 3.5(a)(3) as to any ex parte communications with a judge following the filing of the petition relative to the newborn child. Whether an ex parte motion for nonsecure custody is specifically authorized by law is a legal question beyond the purview of the Ethics Committee. For this exception to apply, however, there must be “a statute or case law specifically and clearly authorizing such communication. Such authorization may not be inferred by the absence in the statute or case law of a specific statement requiring notice to the adverse party or counsel prior to the ex parte communication.” 2001 FEO 15.

As noted above, N.C. Gen. Stat. § 7B-500(a) permits a law enforcement officer or a department of social services worker to take temporary physical custody of a child without a court order if there are reasonable grounds to believe that the juvenile is abused, neglected, or dependent and that the child would be injured or could not be taken into custody if it were first necessary to obtain a court order. This opinion has no effect on the procedure set out in § 7B-500.

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