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January|February 2006
Tribunal on Trial David Bosco
A Court in a Storm Aaron Kuriloff
To Have and Hold a Green Card Melissa Nann Burke
A Fix for Junkies Jay Dixit
Setback in Stone Collin Campbell
The Prudent Jurist By William H. Simon
A Wink and a Nod By Len Costa

The Prudent Jurist

By William H. Simon

The law firm of Sidley Austin Brown & Wood and the accounting firm of KPMG recently agreed to pay $225 million to investors who, on the advice of both firms, had bought tax shelters that were subsequently ruled illegal. Should lawyers be penalized whenever a deal they approved turns out to be shady?

IF LAWYERS WERE ROUTINELY PUNISHED FOR BEING WRONG, they would offer opinions only on matters about which they are certain, and those instances are rare. A legal opinion is a prediction, not a guarantee.

There are, however, two circumstances under which lawyers can reasonably be sanctioned for bad advice. Opinions may be fraudulent if they assert facts that the lawyers who wrote them know are untrue, or if they reach conclusions that the lawyers don't believe. Also, opinions may be negligent if they are based on sloppy research or analysis. It's not clear which sin Sidley Austin was charged with. The firm told its clients that the shelters that KPMG had created would "more likely than not" withstand IRS scrutiny. If the lawyers didn't believe this and were hoping instead that the shelters wouldn't attract the attention of the IRS, the lawyers are guilty of fraud. The lawsuit brought by the firm's former clients alleged that even if Sidley Austin acted in good faith, it was guilty of negligence because it was unreasonable to think a court would uphold the shelters. The case was settled for $45 million but Sidley Austin admitted no wrongdoing.

Similar ambiguity surrounds the actions of the White House and Justice Department lawyers who helped draft the notorious "torture memos," in which they advised federal officials that the officials had broad latitude to physically abuse prisoners under interrogation in Iraq or at Guantánamo. The memos used aggressive arguments and, by not citing the most important American precedent about executive power, ignored pertinent authority. If they were an honest attempt to offer legal advice, they were written clumsily. It's tempting to accuse the lawyers of negligence, but because the officials who received the advice have not complained, I suspect that they got what they wanted—arguments to justify a course of action that they were already inclined to take. If so, the authors of the torture memos appear to have been deceptive in casting their highly partisan arguments as balanced advice. A lawyer has a duty not to produce an opinion letter that misleads people. When the lawyer is a government employee, and the eventual audience is the American public, the duty is particularly strong.

Las Vegas Mayor Oscar Goodman was accused of violating state ethics laws for allowing his son, a Las Vegas lawyer, to list his father, a former criminal defense lawyer, as "Of Counsel" to the son's firm. Is it acceptable for a law firm to list a public official as "Of Counsel"?

GOODMAN ESCAPED CENSURE by weaving his way around two prohibitions. Nevada State Supreme Court rules forbid the listing of a public official on a law firm's letterhead unless the official is an active member of the firm. Nevada conflict-of-interest rules prohibit a public official from representing a private party in a matter related to his public responsibilities. Apparently, Goodman practiced in his son's firm just enough to avoid violating the first rule, but not so much as to run afoul of the second. (The mayor said that he gave legal advice to his son "every day," but not in the real estate matter at the heart of the ethics accusation.)

Nevertheless, this conduct stinks. The son's clients should get no benefit from the father's public office; the unmistakable intent of the letterhead is to draw clients to the firm by suggesting otherwise. A full-time public official should not be allowed to lend his name to a law firm, even if he is allowed to practice there occasionally and does so.

In 2003, Ben Cowgill, a Lexington, Ky., lawyer, purchased a list of Google AdWords that included the name of Peter Ostermiller, a Louisville lawyer. When a user searched Google for the word "Ostermiller," an ad for Cowgill's firm and a link to its website would appear on the right side of the screen. Criticized by other lawyers, Cowgill discontinued the link. Cowgill was guilty of unsportsmanlike conduct. Did he also breach the rules of professional responsibility?

THE RULES' RESTRICTIONS ON SELF-PROMOTION deal only with practices that are likely to mislead or put pressure on prospective clients. Although Cowgill may have unfairly deprived Ostermiller of the full value of his Google advertising, he committed no ethical violation. If Ostermiller wishes to lodge a complaint, he will have to do so with Google.

Some lawyers feel that the bar should sanction aggressive but nondeceptive commercial practices as a breach of courtesy to fellow lawyers. But bar associations that seek to rein in aggressive competition worry about violating antitrust laws, and courts that enact rules for this purpose fear that the rules will be struck down by a federal court under First Amendment commercial speech doctrine.

William H. Simon teaches professional responsibility at Columbia Law School and is a contributing editor of Legal Affairs.

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