LEO: Communication with Adverse Party  LE Op. 1233

 

Communication with Adverse Party - Disclosure - Representing

Client Within the Bounds of the Law: Attorney Threatening Suit

for Punitive Damages; Duty to Reveal Knowledge of Crime to

Appropriate Authorities.

 

May 8, 1989

 

You have advised that an attorney has been employed by a condominium unit

owners' association to recover condominium dues improperly retained by the

developer. The attorney discovered that the checks for the condominium

dues, most of which were payable to the association, were delivered to the

developer who deposited the same in the developer/declarant's account,

which account was apparently commingled with other funds of the developer.

The funds were then apparently remitted to the construction lender and

applied against the construction loan indebtedness of the

developer/declarant. Upon being informed that the funds should not have

been remitted to the lender, the developer has attempted without success

to have the funds returned.

 

The attorney intends to file suit in behalf of the client unit owners for

fraudulent conversion of funds. In an attempt to resolve the matter

expeditiously and avoid the filing of a lawsuit which would include a

claim for punitive damages, the attorney confronted the developer with

these findings and urged him to remit the claimed sums plus interest

thereon.

 

You wish to know whether it is ethically permissible for the attorney to

give the developer a deadline for payment in order to avoid a claim for

punitive damages, or does this constitute a threat or a form of extortion

since the monies are properly due. In addition, you ask to what extent the

attorney may discuss with the developer the potential criminal aspect of

his actions.

 

With regard to the first part of your question, the Committee opines that

proposing a deadline as a means to negotiate a settlement is ethically

permissible in the zealous representation of a client. Disciplinary Rule 7-

101(A) [ DR:7-101] states that a lawyer shall not intentionally fail to

seek the lawful objectives of his client through reasonably available

means permitted by law and the disciplinary rules, unless in the

professional judgment of the attorney the client's objective may be

limited, waived or denied and unless the conduct or claim which the client

wishes to pursue is unlawful, repugnant or imprudent. As long as the

attorney believes or is convinced after making a reasonable investigation,

that the action taken on behalf of his client would not merely serve to

harass or maliciously injure another and that such action is warranted

under existing law or can be supported by good faith argument for an

extension, modification, or reversal of existing law, then it is not

violative of any disciplinary rule or ethical consideration under the

Virginia Code of Professional Responsibility. (See DR:7-102(A)(1) and (2))

 

As to the second part of the first question regarding communicating to

the developer the potential criminal aspects of his actions, the committee

directs your attention to DR:7-103(A)(2), which states that during the

course of the representation of a client, a lawyer shall not 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 interest of his client. He may,

however, through service of process, communicate his client's position,

allegations or claims; but, DR:7-104 proscribes the use of threats to

present criminal or disciplinary charges solely to obtain an advantage in

a civil matter. Therefore, such conduct would be unethical.

 

Your second question concerns the funds which may have been illegally

diverted and later applied for the developer/declarant's own use, thereby

constituting embezzlement. You inquire as to what duties the attorney

would have, if any, to notify the Commonwealth's Attorney's Office of the

likelihood of such criminal activity, or is the attorney's duty fulfilled

by reporting the same to his client unit owners and leaving with them the

decision of whether or not to prosecute.

 

In the view of the Committee, the Code of Professional Responsibility

requires an attorney to represent his client zealously, within the bounds

of the law, and to keep the client reasonably informed about matters in

which the lawyer's services are being rendered. (See DR:7-101, DR:7-102

and DR:6-101) Thus, the attorney must inform the client of any knowledge

he has gained through his investigation that a felony or crime has been

committed which is the cause of the subject representation. Accordingly,

he must also advise the client what course of action to follow which would

be in his best interest. However, the attorney's ethical obligation to

notify the Commonwealth's Attorney's Office of the likelihood of any

criminal activity being committed, if the client should choose not to

prosecute, is controlled by DR:7-102(3), which provides that in the

course of representing a client, a lawyer shall not conceal or knowingly

fail to disclose that which he is required by law to reveal. Although the

Committee is unaware of any specific Virginia statutory requirement to

report the matter, the Committee directs your attention to the possibility

of the common law crime of misprision of a felony or the statutory

prohibition against compounding or concealing an offense. Thus, whether a

lawyer has a legal obligation to reveal any knowledge he may have of any

felonious criminal activity affecting the laws of this Commonwealth raises

a legal issue beyond the purview of the Committee.

 

Committee Opinion May 8, 1989

 

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