Samuel C. Stretton. Samuel C. Stretton.

Ethically you should not use in-house attorneys, paralegals located in other states.

I am in-house counsel working with an insurance company and want to save money. To do so, I would utilize paralegals and in-house office attorneys with a company that is located in other states to prepare documents, pleadings and strategy. Then outside counsel would be hired to review the documents and then appear in the local court. Is this ethical?

The starting point to answer this question is the specialized conflict of interest of rule, Rule 1.8 of the Rules of Professional Conduct. Rule 1.8(f) states as follows: “A lawyer shall not accept compensation for representing a client from one other than the client unless the client gives informed consent; there is no interference with the lawyer’s independence or professional judgment or with the attorney-client relationship; and information relating to the representation of the client is protected as required by Rule 1.6 (that is the confidentiality rule).”

The key language in Rule 1.8(f) in terms of the question presented is “no interference with the lawyer’s independence and professional judgment or with the client-lawyer relationship.”

It appears that the arrangement proposed in the question would violate the lawyer’s independence and judgment. In other words, insurance companies are paying the bills, but the outside lawyer is the one who represents the client. To have from another state a group of paralegals and in-house lawyers making strategy decisions, deciding how the case is to be filed, deciding how to answer the case and preparing all documents and then providing those to outside counsel in the state to prepare those and file them would appear to directly violate Rule 1.8(f). Even though the outside counsel licensed in the state would review the documents and presumably could make changes, the direction of the case is being dictated by the insurance company and their out-of-state paralegals. Further, the attorney-client relationship would be impaired. The in-house counsel and out-of-state paralegals are discussing the facts with the client and then giving the information to the outside attorney. It would be almost impossible to preserve confidentiality under those circumstances. Rule 1.6 of the Rules of Professional Conduct could be implicated since there is a breach of confidentiality.

Also, there is some concern that the use of the paralegals and lawyers who are not licensed in the state, but are in-house in another state, could be the unauthorized practice of law or they could be involved in law-related activities in Pennsylvania since they are not licensed in Pennsylvania. The Pennsylvania Rules of Disciplinary Enforcement, Rule 217(j) would be violated. Those lawyers would have to act as paralegals and have to register and be supervised by the Pennsylvania lawyer who also would have to register with the Disciplinary Board.

Practicing law and running a business is sometimes two different things. Although, obviously, running a law practice is also running a business, a business puts profit and revenue first while a law practice puts ethics, service to clients and professionalism first. Therefore, although there might be a bright idea to save money from a business standpoint this would fail miserably in terms of duties and obligations owed to a client. This proposed arrangement may make great business sense, but it makes terrible ethical sense.

The independence of the lawyer would be undermined and confidentiality of the client would be nonexistent. That is prohibited by Rule 1.8. Therefore, the answer to the question is that the practice would appear to violate the Rules of Professional Conduct and could result in discipline. The direct answer is don’t do it.

Every judge has to be aware of the limitations of their role in the settlement discussion process.

As a judicial officer, how far can I go in the settlement negotiations where the case will be tried by jury if it doesn’t settle?

Every lawyer who tries civil cases knows and feels the anger of a trial judge when the judge is strongly urging settlement and the parties or one of the parties won’t agree to anything reasonable. Many court systems—such as in federal court—utilize a federal magistrate judge to do the settlement conferences or another member of the judicial team does the settlement conference. The trial judge rarely gets involved, but sometimes right before the trial, the judge will attempt to make the final push toward a settlement.

Under Rule 2.6 of the Code of Judicial Conduct, a judge must accord every person in a proceeding the right to be heard according to law. Under 2.6(b), the following is noted: “A judge may encourage parties to a proceeding and their lawyers to settle matters in a dispute but shall not act in any manner that coerces any party into settlement.”

Comment 2 to Rule 2.6 provides additional guidance. Comment 2 notes as follows: “The judge plays an important role in overseeing the settlement of disputes, but should be careful that efforts to further settlement do not undermine any party’s right to be heard according to law. A judge should keep in mind the effect that the judge’s participation in settlement discussions may have, not only on the judge’s own views of the case, but also on the perceptions of the lawyers and the parties if a case remains with the judge after settlement efforts are unsuccessful.”

That comment then provides a list for the judge to consider a factor, including whether the parties gave voluntary consent to the judge’s participation in a settlement, whether parties and counsel are sophisticated in legal matters (hopefully counsel is sophisticated), whether the case is tried by a judge or jury, whether the parties participate with their counsel in the settlement negotiations, whether any of the parties are unrepresented by counsel, and whether the case is either civil or criminal. These factors help to provide guidance as to the degree of judicial involvement in the settlement process.

Comment 3 to Rule 2.6 is even more pointed.

“Judges must be mindful of the effect settlement discussions can have, not only on their objectivity and impartiality, but also on the appearance of their objectivity and impartiality.”

That comment then goes on to state that if a judge gains information during the settlement that could influence decisions during trial, the judge should seriously consider recusing themselves.

Therefore, the Code of Judicial Conduct does not preclude a judge from participation in settlement conferences, but the rules do provide guidance as to what a judge can and cannot do. One of the major issues, of course, is how the judge acts. Yelling or screaming is not the way to do a settlement conference and implied threats also are prohibited. But, a judicial officer can often aid in pushing parties to do the right thing and to reach a compromised settlement that’s beneficial to all. But, every judge has to be aware of the limitations of their role in the settlement discussion process.

Chester County lawyer Samuel C. Stretton has practiced in the area of legal and judicial ethics for more than 35 years. He welcomes questions and comments from readers. If you have a question, call Stretton directly at 610-696-4243 or write to him at 301 S. High St. P.O. Box 3231, West Chester, Pennsylvania, 19381.