Tuesday, March 12, 2013

"What is the Risk?"

Stephen Gillers, Regulation of Lawyers
"What is the Risk?"

This problem raises the issue of whether a lawyer has a duty to inform a client of risk that is likely too difficult to calculate with precision. The client has requested that the lawyer assess whether the client will have better odds of avoiding damages above $3 million at trial. While Rule 1.4 and Restatement § 20 recognize that a lawyer must provide the client with prompt information related to the case, this request falls outside of what is “reasonably necessary” for the client to make an informed decision on how to proceed.

Rule 1.4 acknowledges the client’s interest in participating in the means (the strategizing) of a settlement dispute/litigation, and outlines a lawyer’s duty to inform and consult with clients accordingly. In particular, Rule (a)(2) says that a lawyer must reasonably consult with a client about the means by which the client’s objectives are going to be accomplished, 3) keep client reasonably informed about the status of the matter, 4) promptly comply with reasonable requests for information, and 5) inform client of any relevant limitation on the lawyer’s conduct when the lawyer knows the client expects assistance not permitted by the Rules of Professional Conduct or other law. Moreover, Rule 1.4(b) says that a lawyer must explain a matter to the extent that is “reasonably necessary” to permit the client to make an informed decision regarding the representation. As a summary, Restatement §20 states that a lawyer must not only keep a client reasonably informed about the representation, but must also promptly comply with a client’s reasonable requests for information.

Given these rules, Moon must be careful not to provide information that may mislead the client.  While the Rules and Restatement do not provide explicit provisions prohibiting lawyers from providing numerical estimates of risk, the ability to do so is obviously outside the scope of a lawyer's ability, and could potentially pave the way for a malpractice suit.  Instead of providing a percentage to Knott, Moon should attempt to understand his client's goals and objectives, as Rule 1.4(a)(2) directs.  For example, for some companies, $7 million might greatly affect the business or force it into bankruptcy, while $3 million would not.  For other companies, any amount might drastically impact its operations and thus the client would have a different risk profile and be less inclined to settle.  As long as Moon promptly complies with reasonable requests for information and keeps Knott reasonably informed, he will not be subject to any sanctions for violating the Rules. 

In the end, Moon will want to frame the risks of litigation in a way that is tailored to Knott's objectives for the company.  This way, Moon can avoid giving a number that in reality, he is unable to ascertain.  While Moon would ideally want to give favorable numbers to Knott and exert confidence in the company's position, he must only provide information for "reasonable requests" and to the "extent reasonably necessary" under both Restatement § 20 and Rule 1.4. Providing a number he cannot support would be setting himself up for failure in the event the case does proceed to litigation and the company loses.  Instead of giving a number, he could also try to convey the potential merits of the claims and issues affecting the outcome in layman's terms so that Knott better understands the reasons for uncertainty.​

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