State Bar of Arizona Ethics Opinions
01-01: Restrictive Covenants; Criminal Representation; Court-Appointed Lawyers; Public Defenders
Attorneys should not enter into county indigent criminal defense contracts that prohibit representation of those contract clients in related civil matters adverse to the county. [ERs 1.8(f), 5.6]
Several attorneys inquire about the ethical propriety of a proposed provision in an Arizona county's indigent criminal defense contract. The proposed provision is as follows:
ATTORNEY further agrees not to engage in any claim, lawsuit or other litigation against the COUNTY, its officers, employees or agents, by any party arising from damages, injuries or other losses allegedly sustained by a person during arrest, incarceration and/or prosecution related to a case for which ATTORNEY provided representation to that person pursuant to a COUNTY Indigent Legal Services Agreement.
Whether an attorney may agree to terms in an indigent criminal defense contract that would prohibit that lawyer from representing those clients against the county in any related civil suit.
RELEVANT ETHICAL RULES
ER 1.8. Conflict of Interest: Prohibited Transactions
* * * *
(f) A lawyer shall not accept compensation for representing a client from one other than the client unless:
(1) the client consents after consultation;
(2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; and
(3) information relating to representation of a client is protected as required by ER 1.6.
* * * *
ER 5.6. Restrictions on Right to Practice
A lawyer shall not participate in offering or making:
(a) a partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or
(b) an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a controversy between private parties.
A proposed county indigent criminal defense contract would indefinitely bar the contracting private lawyer from representing appointed clients in related civil cases against the county. The first section of this Opinion addresses the ethical rules that apply after the contract's expiration. The second section discusses the rules that apply during the contract term. Although the Committee concludes that the attorney should not agree to limit his or her practice either during or after the contract term, the analysis follows two different ethical routes.
I. Agreement To Forego Representation After the Contract Has Expired.
ER 5.6(a) generally prohibits lawyers from entering into restrictive covenants that limit the lawyer's right to practice after termination of the relationship. Ordinary commercial standards for restrictive covenants do not apply in attorney contracts. ER 5.6, Comment; see Valley Medical Specialists v. Farber, 194 Ariz. 363, 982 P.2d 1277, 1282-83 (1999). The reasons are twofold. First, restrictive covenants limit the professional autonomy of lawyers. Second, restrictive covenants undercut the freedom of a client to choose a lawyer. In Valley Medical Specialists, a case involving a restrictive covenant among doctors, the Arizona Supreme Court referred to the public policy considerations that preclude the use of ordinary commercial standards to evaluate restrictive covenants among lawyers. A client always is entitled to be represented by counsel of his own choosing. The attorney-client relationship is consensual, highly fiduciary on the part of counsel, and the attorney may do nothing that restricts the right of the client to repose confidence in any counsel of his choice. No concept in the practice of law is more deeply rooted. Valley Medical Specialists v. Farber, 982 P.2d at 1283, quoting Dwyer v. Jung, 133 N.J. Super. 343, 336 A.2d 498, 501 (Ct. Ch. Div.), aff'd 137 N.J. 135, 348 A.2d 208 (App. Div. 1975).
The Committee has identified the same concern in a prior Opinion, "that restrictive covenants among lawyers will diminish the public's ability to employ counsel of choice, which interest outweighs a lawyer's interest in the potential unfair competition for existing clients." Ariz. Op. 95-04 at 3.
Although the issue most commonly arises in the context of partnership or dissolution agreements among lawyers, this Committee has held that ER 5.6(a) also applies to an "employment agreement" between a lawyer and a client. Ariz. Op. 95-04. In that Opinion the Committee analyzed provisions of a severance agreement between a corporation and its in-house attorney, concerning disclosure of the corporation's confidential information. The Committee decided that the agreement implicated the same policy considerations that discourage restrictive covenants between attorneys. Id. at 3-5. The Committee approved the agreement, but only because it imposed restrictions consistent with the lawyer's independent ethical obligation of confidentiality. Id. at 6-7.
The ABA Committee on Ethics and Professional Responsibility also has used similar reasoning with respect to an employment agreement with an in-house lawyer that would have prevented the lawyer from representing clients against the corporation in the future, even after the lawyer had ceased working for the corporation. ABA Formal Op. 94-381. The ABA found the proposed agreement impermissibly overbroad to the extent that it would have applied to unrelated future matters not subject to ER 1.9, the conflict of interest rule for former clients.
These authorities guide the present inquiry. As in the cited opinions, the proposed contract here would condition the attorney's employment on a commitment not to represent certain clients in certain civil matters. The attorney would lose a measure of professional independence. More important, the client would lose the ability to choose the attorney as his representative in the civil case. That choice could well be obvious from the client's point of view; the attorney knows the relevant facts. The client is familiar with the attorney, and likely has come to trust him or her. The client is entitled to make his choice without interference from a restrictive covenant between the lawyer and the county.
The Committee concludes that the proposed contract runs afoul of ER 5.6, by barring representation of indigent clients after the attorney has completed the contract.
II. Agreement To Forego Representation During the Contract Period.
Rule 5.6(a) applies by its terms only after the "termination" of a professional relationship. While a professional relationship is ongoing, the governing rules are those that limit conflicts of interest. The question then is whether any of the conflict of interest rules restrict the lawyer's latitude to agree to the proposed limits on his or her practice during the contract term.
Obviously, an ongoing attorney-client relationship often limits a lawyer's ability to accept other representations. See, e.g., ER 1.7 (conflicts of interest involving current clients). An attorney could not ethically accept a representation directly adverse to the county, while representing the county as a client. ER 1.7(a). Principles of substantive law external to the ethical rules determine whether an attorney-client relationship exists. Preamble to Arizona Rules of Professional Conduct. Applying the relevant Arizona law, the Committee concludes that the "county" is not a "client" of the lawyers who have indigent defense contracts with the county.
The Court of Appeals recently held that a "dual representation" arises when a liability insurer hires a lawyer to represent an insured. Paradigm Insurance Company v. The Langerman Law Offices, P.A., 196 Ariz. 573, 2 P.2d 663 (App. 1999), review granted May 23, 2000. The court explained that the interests of the insurer and the insured typically overlap. In such cases, one attorney representing both insurer and insured makes economic and practical sense. By contrast, the interests of a criminal defendant and the county that prosecutes him or her inevitably are adverse. The county has no economic or practical incentive to protect the defendant's interests, beyond ensuring that the defense provides the assistance of counsel required by the Sixth Amendment to support a valid conviction. The county, unlike the insurer, functions mostly as a third-party payor on the defendant's behalf.
A lawyer cannot allow a relationship with a third-party payor to limit his or her actions as an attorney-client relationship would. ER 1.8(f)(2). Indeed, the lawyer may not accept compensation from one other than the client unless, inter alia, "there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship." This Committee recently cited, as an example of impermissible interference in the client-lawyer relationship, a contract provision that gave an insurer the right to decide which attorney in the contracting firm would represent its insured. Ariz. Op. 99-08 at 5.
The proposed contract at issue here, like the insurance carrier's contract in Ariz. Op. 99-08, intrudes on the attorney-client relationship. The contract would cut off the client's access to the attorney in specific kinds of cases. In other words, it would limit the scope of the attorney-client relationship. An attorney may not accept such a limitation as quid pro quo for third-party fee payment.
Obviously, there are limits on a lawyer's professional autonomy and a client's right to choose counsel. A law firm or a business may condition an employment relationship on a lawyer's foregoing other legal work during the term of employment, for economic as well as conflict of interest reasons. In the present case, however, the county is not the client's "employer" in the formal sense of the word. The county and the lawyer both expect that the lawyer will maintain a private practice in addition to his or her county contract. The Committee expresses no opinion on the validity of a contract provision meant to ensure that the lawyer devotes enough time and resources to his or her contractual responsibilities. That plainly is not the purpose of the provision at issue here.
Although ER 5.6(a) would not apply during the term of the proposed contract, ER 1.8(f) nevertheless prohibits the attorney from accepting the proposed limitation on representation during the contract term, because it would unacceptably interpose the county into the lawyer-client relationship with the criminal defendant.
ERs 5.6(a) and 1.8(f) make unethical an indigent criminal defense contract provision that prevents the attorney from representing his or her defendant clients in related civil matters adverse to the contracting government entity. The Bar's broader obligation to the public outweighs the commercial considerations that underlie the proposed restriction.