Over the last few decades, perhaps the dominant trend in American legal ethics has been the increased awareness of the need to differentiate the various roles lawyers play. Gone are the days when every type of lawyer could justify aggressive conduct by invoking ethical norms that apply only to criminal defense lawyers. In the academic journals and real world tribunals we’ve forged a broad consensus that lawyers’ ethics vary by the particular function they are serving. You must delineate the role and trace the duties. (There has been criticism of legal “role morality” but the internal game is governed by roles and this is an “internal” piece.)
Yes, the criminal defense lawyer’s motto can still be, “just win, baby, without breaking any bright line rules.” But in the regulatory compliance setting—where there is no zealous adversary, neutral judge or neutral jury—the lawyer must abide by different norms. (Consider, for example, the IRS’s ethics rules or the PTO’s heightened duty of candor.) And the securities lawyer is not governed by the “tell just your half of the story and even then just the good facts” norms of the trial lawyer, but rather must abide by duties of material candor and “truth in context.” (Consider, for example, Vega v. Jones Day, which dealt with alleged “telling just the good facts” in a manner that would have been perfectly ethical in a closing argument.)
In that context, William Simon’s new article disappoints. Simon is, of course, one of our leading theorists in legal ethics. But in this instance, rather than precisely delineating particular roles and then carefully tying ethical norms to each role, Simon conflates disparate scenarios and creates a new, unhelpful master role: “quasi-third-party advisor.” His thesis needs a complete rethinking if not an outright rejection.
At the same time, regarding the particular litigation that Simon uses as a test study, Simon asks the substantive questions one would want to be asked. Unfortunately, Simon’s article cannot provide enough of the background material for a careful reader to say anything more than, “these are issues that need to be carefully scrutinized whenever they are raised in a dispute.” (I still have to obtain and read the key documents, so the most I can provide is a “field guide” of what the disputed issues may have been.) As I understand it, those issues were raised and fully litigated. One of the trials in which the issues were contested was resolved last week with a complete defense verdict exonerating the lawyers—a rare event, as any legal malpractice lawyer will tell you. That verdict doesn’t mean that William Simon was wrong or that the professors he criticizes were correct, but it does suggest that readers of Simon’s article will want to ensure that they understand the particulars of that case before making judgments.
To understand Simon’s article, it’s necessary to recount the factual background of the matters he discusses.
The issues arise from (i) a suit that the law firm of Leeds, Morelli & Brown firm (“Leeds”) prosecuted for 537 aggregated non-class plaintiffs against Nextel (the “Nextel Suit”), and (ii) a subsequent suit against Leeds (the “Leeds Suit”) for its conduct in the Nextel Suit.
Simon’s article states that the Nextel Suit settled only after an extremely complicated “Dispute Resolution and Settlement Agreement" (DRSA) was negotiated between the Leeds firm and Nextel. The DRSA contemplated a process for resolving the various plaintiffs’ claims, and Simon says that it bound them to that process in stringent and troubling ways. We know that aggregate settlements have to be carefully scrutinized for fairness.
While the DRSA was being drafted, Nextel obtained an opinion letter from Professor Geoffrey Hazard and the Leeds firm obtained one from Professor Roy Simon. (Let’s call those the “DRSA Opinions.”) Later, when the Leeds Suits started, Nextel hired an expert testifying witness who concurs with Hazard’s earlier opinion, and Leeds hired two expert witnesses, Professor Bruce Green and a practitioner, each of whom apparently concurs with part or all of Roy Simon’s opinions. According to footnote 60, William Simon himself (i) served as an informal consultant for the plaintiffs who have sued Leeds and (ii) provided expert witness testimony, which was apparently the subject of a successful motion to strike for various reasons.
(Disclosures: Roy Simon is a colleague whom I’ve enjoyed speaking to and dealing with, and whose work I've always found careful. I met Bruce Green at a recent conference and enjoyed conferring with him. I've enjoyed reading his articles. William Simon was pleasant and generous to me the times I’ve spoken to him, and I've enjoyed reading his articles and book.)
At the heart of William Simon’s argument is his neologism, “quasi-third-party advice.” (Sometimes he calls it “quasi-third-party academic advice.”) Based upon a Lexis-Nexis search and one on google as well, I believe that the term exists only in the draft of William Simon’s new article. So what does Simon’s new term mean? And why do we need a new category of lawyering?
Simon’s terminology goes like this. When a lawyer gives advice to a client, that is “first party advice.” When a lawyer gives an opinion to the opposing party in the transaction, that’s a “traditional third party opinion.” Simon cites the classic example of the lender’s insistence that the borrower’s lawyer send the lender an opinion letter stating that the borrower is duly incorporated, that it is authorized to borrow money, etc. That traditional function is governed by the “evaluator” role (2.3). Note that this isn’t “advice” in the normal sense. It’s more like a factual evaluation upon which the opposing third party relies when it enters into an arms-length transaction with the lawyer’s client. But, so far so good, as Simon has invoked two well-known categories of lawyer behavior.
What, then, is a “quasi-third-party advice situation? Simon says:
By contrast, quasi-third party advice may not be directly addressed to third parties. Often, although there is a tacit understanding that the client will show the opinion to third parties if he needs to, the client is the only explicit addressee. In other cases, the opinions are addressed directly to third-parties, but the addressees are too diffuse or remote to satisfy the privity requirements for strong duties.
That loose definition could contain a wide variety of scenarios, including the standard four sub-roles of advocate, negotiator, counselor, and evaluator. Simon then offers three disparate examples of what it seems he wants the reader to understand as “quasi-third-party advice scenarios.” First, he mentions on the legal defense of good faith reliance on counsel without regard to any particular context—so that example is quite broad. Second, he mentions the duties that a lawyer owes to a publicly held corporate client—which takes in an enormous amount of lawyering. Third he refers to the lawyer who is serving as an expert witness—which is a much narrower category. But, clearly, if those three examples are what Simon means by “quasi-third-party advice” roles, then we are dealing with a big grab-bag of roles.
To add to the confusion, as Simon makes a string of analogies and allusions in his article, he refers to what he considers a rogue’s list of legal scoundrels. The legal ethics community is familiar Simon’s examples: the lawyers for OPM, the lawyers who wrote the OLC torture memos, the Kaye Scholer lawyers for Lincoln Savings & Loan, Enron’s lawyers, and so on. Presumably Simon is suggesting that those are all “quasi-third-party advice” settings. Otherwise, why discuss them?
But notice that, again, we are dealing with a variety of legal settings. Some of those lawyers were transactional lawyers putting together (fraudulent) business deals (OPM). Others were government lawyers charged with interpreting law and settling legal disagreements within the Executive Branch (torture memos). Others were litigators dealing with a regulatory agency in a quasi-compliance, quasi-litigation setting (Lincoln Savings). Others were big firm corporate lawyers doing deals, drafting SEC disclosure documents, and then doing a whistle-blower investigation for a high-flying public company (Enron). So, rather than clarify the problem, Simon’s allusions muddy the issue of what roles govern which lawyers.
In a few places, mostly in the footnotes, Simon expressly grapples with his conflation of roles. For example, Simon offers an extended analysis of the ethical duties of a lawyer giving ex ante tax planning advice. But, in footnote 34, when Simon analogizes between the tax advisor and the expert witness, he offers an unsatisfying reconciliation of those different roles
Compare those two roles in terms of transparency and the degree to which they endure adversarial challenge—two metrics Simon is concerned about. The ex ante tax compliance advisor knows that the IRS is an over-worked bureaucracy that can scrutinize only a fraction of the tax returns and that the return may be too complicated for the IRS to readily grasp even if it’s audited. Not surprisingly, the IRS’s new ethics code has greatly restricted the zealous advocacy that a tax advisor is permitted to practice. In contrast, in terms of transparency and accountability, the expert witness works in a radically different environment. An expert witness expects to be subjected to document production demands, a thorough deposition under oath (often video-taped), formal challenge on credentials, in limine motions, motions to strike, cross-examination at trial, criticism from an opposing expert at trial, attack during closing argument, and, finally, the jury’s verdict. It’s just not helpful to lump tax advisors and expert witnesses into a catch-all category of “quasi-third-party advisors.”
Later, in footnote 60, when discussing his own role in the underlying disputes, Simon claims that his roles of academic and litigation consultant are “continuous.” Indeed, throughout the article, Simon invokes academic norms to criticize the behavior of academics who serve as litigation consultants and expert witnesses. How to reconcile those roles is an important question. But Simon’s conflation of the roles needs a lot more explaining than we are given in footnote 60. Why exactly, should a professor-lawyer who participates in litigation have different duties than a mere lawyer would have in the exact same litigation role? If the academic’s norm of openness is to prevail, when exactly can an academic provide services governed by Model Rule 1.6 or by a contractual confidentiality agreement? Those are all important issues that are not fully developed in the piece.
Let’s start to distinguish the roles with more precision. First let’s consider Professor Green and the two lawyer practitioners hired to be ex post expert witnesses in the Leeds Suit. While there is an issue about how to reconcile being an academic and an expert witness, the traditional answer has been that the academic behaves like any other expert witness would. Leaving aside for now the issue of whether that traditional answer still satisfies, there is no reason to invoke the newly minted role of “quasi-third-party advice giver” when we simply mean to say, “Professor Green was an expert witness.” More accurately, Simon’s article should simply say, “Professor Green was my opposing expert witness.”
I’ve already discussed the long-established and hard-fought procedures that set the limitations on expert witnesses. Simon barely touches on those rules in his piece and instead offers his strained analogies to tax compliance work, etc. Again, running the gauntlet as an expert, as Professor Green did, is worlds apart from serving secretly as an ex ante compliance lawyer. Simon’s article ought to either apply the legal standards for expert witness testimony or make a convincing argument for abandoning those standards in favor of new standards. The article does neither.
It’s not necessarily fatal for Simon's argument that the trial court's jury instruction validated the central thesis of Professor Green’s opinion—that the conflicts in the Nextel Suit were consentable. But that fact will give the reader reason to insist on a more thorough set of facts before criticizing Professor Green's opinion. Certainly there is nothing in the body of Simon's article suggesting that there was anything unusual or inappropriate with Professor Green's expert witness work.
Moreover, everyone who has ever been involved in litigation will proceed with extra caution when listening to one expert witness (William Simon) criticize the opposing expert. Being involved in a litigation can lead one to take a more strident view than he or she would if he or she hadn’t been allied with one party in a heated, emotional litigation. So, it's necessary to get a feel for the fuller record before drawing any conclusions. Based upon my experience as a litigator, I’m not inclined to criticize one testifying expert witness solely on the criticism of the opposing expert.
At this point I would turn to the work of Professors Hazard and Roy Simon. But I don’t have the DRSA yet, so I can’t evaluate their positions. But I can offer this framework for analysis. First, aggregate settlements have benefits and drawbacks. The proper use of those settlements is currently a hot topic with evolving standards. (See, Nancy Moore’s recent work on the split between the ABA and ALI.) The fairness of aggregate settlement procedures turns on factors like transparency, ability to “opt in” or “opt out,” and the adequacy of the payments to the plaintiffs. All of those issues should be discussed and vetted. I would expect that in a case with 587 plaintiffs there would be some who “opt out,” object or complain. That’s perfectly normal and appropriate. Indeed, as a plaintiff’s law firm heads toward such a settlement, it’s expected that there will be legal challenge, and that’s why the firm would want to obtain advice from a legal ethicist.
We’ve seen that aggregate settlements can sometimes lead to collusion between the defendant and the plaintiff’s law firm. (See the bodies of work by John Coffee and Deborah Rhode.) We know that class action litigation has developed mechanisms to grapple with those problems—mechanisms like class certification hearings, the creation of sub-classes, judicial oversight of settlements, the opportunity of plaintiffs to object or opt-out, formal legal objection by the plaintiffs, and the use of specialist counsel and expert witnesses by objectors.
Again, I haven’t yet seen the DRSA or the actual testimony (and neither has the reader of Simon’s article). But it’s not premature to ask about transparency and the proper role of such an advisor. As is the case with class action settlements, the settlement process needs to be subject to criticism. Usually that scrutiny is supplied by the judge and by objecting plaintiffs. It’s fair to ask those questions about the Nextel Suit, and the place to look for answers is probably in the record of the just-completed Leeds Suit. I would expect that an advisor regarding such a settlement would be acutely conscious of the probability of legal challenge and that there would be avenues for objectors to complain. In other words, I would be surprised if such advisors weren't constrained in important ways. If, however, we were to find that the advice was never really capable of being tested, then we'd want to revise the procedures.
It’s always perilous to offer ethics opinions about a litigation you’re not involved with. It’s perilous to draw conclusions based on the views of just one side in a litigation. It’s perilous to condemn someone’s ethics in a developing area of law.
If we are to analyze the Nextel Suit and the Leeds Suit, we should begin with a close reading of the standards developed in class action cases, or we should begin with a persuasive argument about why those standards shouldn’t govern here. But the “quasi-third-party advice” construct should be substantially rethought or, more likely, simply abandoned. We can no longer argue that all cats are gray in the dark. Progress in legal ethics has been the process of splitting disparate roles and treating each role appropriately. We’re no longer “lumpers.” Progress in legal ethics requires careful attention to particular functions and roles. The new role of “quasi-third-party advisor” doesn't help us.