Ethics Opinon 1976-14
TRANSACTIONS BETWEEN ATTORNEY AND ADVERSE PARTY AFTER JUDGMENT
has obtained a money judgment on behalf of his client against
another party who was represented by counsel at trial. The
successful attorney has learned certain facts concerning
the rental property owned by the adverse party during the
course of the litigation; more particularly, he has learned
that there are defects in the condition of the premises,
that no income has been generated from the property for
one year, and that the property has been listed for some
time with a real estate broker who has been unable to sell
or rent the property.
successful attorney has received an assignment of the judgment
from his client and desires to enter into direct negotiations
with the losing party for the purchase of the property in
question. He intends to offer as part consideration for
the purchase a forgiveness of the judgment which he has
received by way of assignment. He further intends to write
a letter to this effect to the owner of the property, and
to inform his former adversary counsel by way of letter
of his intention to enter into negotiations with the owner
of the property.
the attorney in this case ethically enter into direct negotiations
with the adverse party who had been represented by counsel,
and can he ethically purchase property from him under the
conditions set forth herein?
or unlawful practice would be committed by the attorney
seeking to enter into direct negotiations with a formerly
adverse party, who had been represented by counsel, for
the purchase of property owned by the adverse party where
a judgment had been entered against the adverse party and
the attorney had received an assignment of the same.
STATUTES AND RULES OF ETHICS
Rules of Professional Conduct, Rule 7-103, provides in part:
of the State Bar shall not communicate directly or indirectly
with a party whom he knows to be represented by counsel
upon the subject of controversy without the express consent
of such counsel.
7 of the American Bar Association Code of Professional Responsibility
provides in part:
CONSIDERATION 7-18 The legal system in its broadest sense
functions best when persons in need of legal advice or assistance
are represented by their own counsel. For this reason a
lawyer should not communicate on the subject matter of the
representation of his client with a person he knows to be
represented in the matter by a lawyer, unless pursuant to
law or rule of court or unless he has the consent of the
lawyer for that person. If one is not represented by counsel,
a lawyer representing another may have to deal directly
with the unrepresented person; in such an instance, a lawyer
should not undertake to give advice to the person who is
attempting to represent himself, except that he may advise
him to obtain a lawyer.
RULE 7-104 Communicating With One of Adverse Interest.
During the course of his representation of a client a lawyer
Communicate or cause another to communicate on the subject
of the representation with a party he knows to be represented
by a lawyer in that matter unless he has the prior consent
of the lawyer representing such other party or is authorized
by law to do so.
Give advice to a person who is not represented by a lawyer,
other than the advice to secure counsel, if the interests
of such person are or have a reasonable possibility of being
in conflict with the interests of his client.
4 of the American Bar Association Code of Professional Responsibility
should preserve the confidences and secrets of a client.
Bar Association Informal Opinion number 827 held that when
litigation is over and the subject of controversy has been
reduced to final judgment, it is not improper for the plaintiff's
attorney to deal directly with the defendant to collect
the final judgment, even in face of the prohibition of Canon
9 of the former Canons of Professional Ethics (no superseded
by Disciplinary Rule 7-104 of the Code of Professional Responsibility)
which it was said was designated to prevent "overreaching"
and unfairness during the pendency of litigation. Under
this ruling the decision to contact opposing counsel or
to obtain the consent of opposing counsel in the previous
litigation would not be an ethical problem, but a matter
of judgment as to professional courtesy.
appear that the purposes of Rule 7-103 of the California
Rules of Professional Conduct are to some extent similar
to the purposes of Disciplinary Rule 7-104 of the Code of
Professional Responsibility, in that both seem to be designed
to prevent "overreaching". With respect to Rule
7-103, an important condition of its application is the
clause "upon a subject of controversy"; and as
to Disciplinary Rule 7-104 the condition is expressed as
"the subject of representation." So far as the
application of Rule 7-103 and Disciplinary Rule 7-104 are
concerned, the issues presented by the hypothetical situation
considered in this memorandum distill down to whether the
lawyer is seeking to deal with his adversary "upon
a subject of controversy" and whether this constitutes
hypothetical situation seems analytically to present two
general "subjects of controversy". The first one
is the original lawsuit in which the attorney has obtained
a judgment for his client, and the other is the purchase
of the real property which was the subject of the original
controversy. With respect to the first "subject of
controversy" it would appear that this matter has been
resolved by judgment. To the extent that collection of the
judgment involves a subject of controversy, it is arguably
a different subject of controversy from the original controversy
in which the adverse party was represented by counsel. The
opportunities for "overreaching" are less, and
of a different nature as implied in ABA Informal Opinion
827 referred to hereinabove. Furthermore, the information
obtained by the attorney in this case during the course
of litigation would not appear to give the attorney any
particular advantage in the execution of the judgment which
has been assigned to him.
respect to the second general "subject of controversy"--that
is the purchase of property--this does not appear to be
the type of controversy referred to in Rule 7-103, but is
merely the type of adversary situation that any two parties
seeking to contract with one another would find themselves
in. Furthermore, as to this second "subject of controversy"
it seems clear that the adverse party has not been represented
by counsel, and therefore Rule 7-103 would not apply literally
to this situation. While the information received by the
attorney during the course of litigation may put the attorney
in a better position to negotiate for the purchase of the
property, the information could probably have been obtained
by any potential purchaser sufficiently diligent to do the
research. In any event, it seems difficult to characterize
the use of this information by the attorney negotiating
for the purchase of property of the adverse party as "overreaching"
because it is information which legitimately should be considered
to affect the value of the property, in the supply and demand
approach to evaluation.
Canon 4 of the Code of Professional Responsibility has any
application in this case might depend to some degree upon
the source of the information which the attorney received.
However, the information received by the attorney in this
case is not likely to be confidential information and is
most certainly known by the adverse party who is the owner
of the property up for sale unsuccessfully. In any event,
this issue concerns the relationship of the attorney to
his original client and the hypothetical does not present
sufficient information to fully resolve this issue.
respect to Rule 5-101 of the California State Bar Rules
of Professional Conduct, this memorandum offers no opinion
regarding the transaction whereby the lawyer took an assignment
from his client of his claim against the adverse party since
there are insufficient facts to render such an opinion.
committee believes that although the attorney is not required
to contact the attorney for the former adverse party and
obtain his consent to the negotiations, he should do so
as a matter of professional courtesy and as a demonstration
of good faith.
opinion is advisory only and is not binding upon the State
Bar, the Board of Governors, its agents or employees.
This opinion was issued by the Legal Ethics Committee of
the San Diego County Bar Association. It is advisory only
and is not binding upon any member of the SDCBA, any other
member of the State Bar of California, the State Bar of
California or its Board of Governors, or any persons or
tribunals charged with regulatory responsibilities. The
SDCBA, its officers, directors, agents, and the Legal Ethics
Committee members assume no responsibility or liability
in rendering this opinion.