Prof. Ronald D. Rotunda recently wrote concerning lawyers’ duty to be truthful in negotiations: its essence and its limits. As Prof. Rotunda wrote, Rule 4.1 of the Model Rules imposes a duty on lawyers to make no false statements of material fact or law, and Illinois Rule 4.1 tracks the Model Rule. Prof. Rotunda cites several cases bearing on lawyers’ duties to be truthful in contexts other than appearances before tribunals, including Fire Insurance Exchange v. Bell by Bell, 643 N.E.2d 310 (Ind. 1994). In that case, the Indiana Supreme Court held that an opposing party has a right, as a matter of Indiana law, to rely on material representations made by opposing counsel. In Bell, the representation at issue was that of a defense lawyer, allegedly to the effect that policy limit on a homeowner’s policy was $100,000. In fact, the policy limit was $300,000.
But the Bell court did not address the truth or falsity of the alleged statements, or indeed whether the lawyer made the allegedly false statements at all.
The trial court in Bell had denied motions for summary judgment by the defendant lawyer and his firm; the appellate court affirmed that denial after an interlocutory appeal; and the Indiana Supreme Court partly affirmed the appellate court. It upheld the denial of the lawyer’s and the firm’s motions for summary judgment, and it took the opportunity to enshrine in Indiana law the principle of reliance on the material representations of an opposing attorney. It remanded the case to the trial court for further proceedings, which presumably would have involved fact-finding: did the lawyer actually say what was alleged? What was his intent, or the true state of his knowledge of the policy limits?
The same kind of fact-finding is done in disciplinary investigations concerning lawyers’ representations of material fact and law. But do those investigations always lead to disciplinary sanctions against the lawyer? Some points to consider:
- The attorney who was accused of making an intentional misrepresentation in Bell has no disciplinary history in Indiana.
- According to the Illinois ARDC’s most recent Annual Report (for 2013; the 2014 report will be released in the coming weeks), lawyers were accused of “fraudulent or deceptive conduct” in 64 of the 83 formal, public disciplinary cases filed during calendar year 2013 (i.e. 77% of all cases filed), having docketed 693 investigations (11.4% of the 6,073 total investigations docketed) that concerned the respondent-lawyer’s alleged dishonest conduct.
The above facts show that lawyers’ conduct potentially involving dishonesty can and will be scrutinized and judged; but that not every case in which dishonesty is alleged leads to a disciplinary sanction.
One Illinois case that sheds specific light on lawyers’ representations to opposing counsel is In re Landis, M.R. 22970, 2005PR0069 (March 16, 2009). In Landis, the respondent represented one side of a real estate transaction involving a bridge loan. Based on the representations of his client (the lender), he believed the parties had agreed that the interest rate would be a certain percentage per month. Therefore, when revising drafts of the promissory note relating to the loan, the respondent inserted the words “per month” in connection with the interest rate. The opposing lawyer did not notice that the respondent had done that before or during the closing. It was brought to her attention after the closing, when her clients disputed that they had agreed to that term (they contended that they had agreed to pay interest on a yearly basis).
The Hearing Board – the body before which trial-level hearings are held at the ARDC – concluded that the respondent’s conduct did not warrant discipline, and recommended dismissal of the charges. The Hearing Board determined that the respondent’s changes to the promissory note were extensive and obvious, and that he had not made the change to the interest rate term with any dishonest intent (since he believed, based on his client’s representation, that the “per month” term reflected the parties’ agreement). The Hearing Board noted that the respondent “should have done more to communicate the changes” to his opposing counsel, but that “his conduct d[id] not rise to the level of an ethical violation.” It also cautioned, reasonably, that “[o]ther attorneys should not construe this decision as a general statement that there can be no ethical violation based on adding words to or removing words from a document without notifying your opposing counsel.” The Review Board of the Commission (the appellate tribunal) affirmed the Hearing Board, and the Supreme Court (which of course has final say in all disciplinary matters) entered an order confirming the Review Board’s report and recommendation, and dismissed all charges against the respondent.
In tune with that admonition, I do not cite Landis as an indication that Illinois law is opposite to Indiana law as clarified in Bell. It is not the case that Indiana lawyers’ material representations can always be relied upon, while Illinois lawyers’ may not. Lawyers must be careful to make representations in negotiations that are true and not misleading, and to communicate adequately with all parties to the negotiation or transaction. Rule 4.1 mandates as much, and common sense would say that Illinois lawyers’ material representations can, may, and will be relied upon. But Landis does show that not every accusation of a material misrepresentation leads to discipline against the attorney. That’s not a license to be anything less than careful and truthful, but it does provide us some insight into how the Court holds us to the standards of Rule 4.1.
