Lawyers play an important part in business, but they must follow model rules regarding ethics. This lesson addresses legal ethics in business law, including malpractice, attorney-client privilege and conflicts of interest.
Lawyers play an important part in many business decisions. In the regular course of business, lawyers are required to observe certain rights and duties. These legal obligations to clients and others are also generally known as legal ethics.
Lawyers have a code of ethics that provides individual attorneys with the minimum professional, behavioral and moral standards expected in their business dealings. Many different professions, especially those requiring a license, have a professional code of ethics. For attorneys, the code is known as the Model Rules of Professional Conduct and is set out by the American Bar Association. All states have adopted a form of this code, though different states have adopted different versions of the rules.
Once a state enacts a rule, that rule becomes enforceable public law. This means that an attorney can be punished for a violation of the code. A lawyer's ethical violation will result in discipline by the appropriate bar association. Discipline can include a fine, a suspension of his or her license to practice law, or even a permanent loss of that license. Let's take a look at some ethical considerations covered in this code.
Let's start with malpractice. Legal malpractice refers to negligence or misconduct by a lawyer in the course of his or her professional duties. The code of ethics sets out a minimum standard of care and conduct that a lawyer must achieve. When a lawyer fails to achieve that standard, the lawyer commits malpractice. This is most common in the case of negligent errors.
For example, let's say that Caitlyn Client hires Lenny Lawyer to represent her in her divorce. Caitlyn and her husband are arguing over some land. Caitlyn tells Lenny that she should be awarded the land because she inherited it from her grandmother, and it's always been in her family. However, Lenny fails to pull the land deed or title and doesn't present any evidence regarding Caitlyn's sole ownership. As a result, the land is awarded to Caitlyn's husband.
Lenny failed to act with the legal skill and knowledge that is ordinarily expected of licensed lawyers, and Caitlyn was harmed as a result. Lenny committed legal malpractice. Caitlyn can file a complaint against Lenny with the bar association and also ask the judge to re-hear her argument.
Now let's take a look at the attorney-client privilege. This privilege protects confidential communications between a client and his or her lawyer. It protects exclusive communications made between the parties in the course of their business together. This ethical rule promotes open communication and complete disclosure between the parties.
If the client chooses, he or she may waive the privilege and disclose certain information. However, the attorney may not. Also, keep in mind that courts determine the availability of the privilege on a case-by-case basis. Clients should know that there's no set rule providing absolute protection for all communications.
There are numerous exceptions to attorney-client privilege. For example, communications made in furtherance of a crime, such as fraud, are not protected. If an attorney is accused of wrongdoing, he or she can disclose communications that would disprove the accusation. This exception benefits attorneys in malpractice and similar disputes. Also, communications that aren't exclusive to the attorney and client aren't privileged.
Let's go back to Caitlyn's divorce case. Let's say Caitlyn tells Lenny she's hiding several hundred thousand dollars from her husband. She says she used fake names and offshore bank accounts to siphon large portions of their income for her own use. She doesn't want any of this money awarded to her husband. Lenny cannot misstate Caitlyn's worth without perpetuating a fraud on the court. Therefore, Caitlyn's disclosure to Lenny isn't protected by the attorney-client privilege.
Conflicts of Interest
Lastly, let's take a look at conflicts of interest. A conflict is a clash between an attorney's professional obligations and personal interests. It arises when an attorney uses the attorney-client relationship for his or her personal benefit. The code of ethics forbids this behavior because attorneys are sworn to uphold the best interests of their clients. An attorney can't properly perform that duty while also trying to achieve personal gain.
For example, let's say that Lenny advises Caitlyn to sell her vacation home in Barbados in order to fund her divorce. Caitlyn puts it on the market for half the home's value in order to facilitate a quick sale, and Lenny quickly purchases it. This is a conflict of interest, and Lenny can be disciplined for his actions.
Let's review. Lawyers have certain legal obligations to clients and others. These duties are generally known as legal ethics and are set out in the American Bar Association's Model Rules of Professional Conduct. This code of ethics includes numerous rules, but some of the most common involve malpractice, the attorney-client privilege and conflicts of interest.
Malpractice means negligence or misconduct by a lawyer in the course of his or her professional duties. The attorney-client privilege protects confidential communications between a client and his or her lawyer. A conflict of interest occurs when an attorney uses the attorney-client relationship for his or her personal benefit.
After reviewing this lesson, you'll have the ability to:
- Explain what legal ethics are and summarize the key provisions of the Model Rules of Professional Conduct
- Describe the model rules on malpractice, attorney-client privilege and conflict of interest
- Identify communications that are not protected by the attorney-client privilege