C-233

November, 1984

SYLLABUS

A lawyer on the staff of a group legal services plan represents the beneficiaries of the plan, not the plan itself. A nonlawyer plan administrator may not interfere with the staff lawyer's independent professional judgment on behalf of the beneficiary-client. Where the plan requires the staff lawyer to take action contrary to what the lawyer believes is in the best interest of the client, and the conflict cannot be resolved, the lawyer must withdraw from the representation.

References: MCPR DR 2-103(D), DR 3-101(A), DR 4-101(B), DR 5-101(A), DR 5-107, DR 6-101(A)(3), DR 7-101, DR 7-102; CI-857, CI-859.

TEXT

A staff lawyer for a prepaid legal services plan asks a number of questions concerning ethical duties: (1) whether a "lawyer-client" relationship exists between staff lawyers and beneficiaries of the plan who seek legal services from the lawyer; (2) how much supervision and control administrators of the plan, whether lawyers or nonlawyers, may exercise over the discretion of the staff lawyer regarding client matters; (3) how should certain conflicts of interest be resolved.

It is clear that the beneficiary of the legal services is the "client" of the staff lawyer who renders legal services for the plan. MCPR DR 2-103(D)(4)(d) provides:

"The member or beneficiary to whom the legal services are furnished, and not such organization, is recognized as the client of the lawyer in the matter . . . ."

Thus the relationship between the staff lawyer and the beneficiary is that of lawyer-client, with all the obligations and duties that relationship implies.

Nonlawyer plan administrators may in no way be permitted to exercise control or direction over the lawyer's handling of client matters. To do so would permit them to engage in unauthorized practice of law in violation of MCPR DR 3-101(A). In CI-857 and CI-859, the committee ruled that members of the Wayne County Neighborhood Legal Services Corporation could not allow persons not admitted to the practice of law in Michigan to monitor or direct clients' files. To the extent that it does not interfere with the independent professional judgment of the staff lawyer, and with the consent of the beneficiary (which we assume is required by the plan), plan administrators may participate in the review of cases and may make suggestions regarding handling of the files.

The question as to whether lawyers acting as administrators and managers of the plan may exercise control over litigation strategies in clients' cases is much more difficult to answer, based on the information we have. Specifically, it has been asked whether those lawyers may review all pleadings and motions prepared by the staff lawyer and veto the contents, or insist on the inclusion of additional counts and allegations.

If the lawyer/plan administrators recognize that under MCPR DR 2-103(D)(4)(d), the member, not the organization, is the client of the plan, then it would appear that they could supervise the file to the extent of including or deleting information from pleadings. This would be similar to the actions of senior partner in a law firm on behalf of a firm client on a file handled by one of the firm's associates.

On the other hand, if those lawyers are acting in the interest of some party other than the beneficiary of the plan, then there are two problems with their seeking to direct litigation strategy. First, disclosure of the client's file to a lawyer not representing that client is prohibited by MCPR DR 4-101(B), which prohibits disclosure of a client's secret or confidence unless the client has consented after full disclosure. Unless the plan requires the beneficiary to agree to disclosure of confidences and secrets provided to the staff lawyer, disclosure to a supervising lawyer working for the plan, as opposed to the beneficiary, would be a breach of the lawyer-client privilege. Further, MCPR DR 5-107 states:

"A lawyer shall not permit a person who recommends, employs, or pays him to render legal services for another to direct or regulate his professional judgment in rendering such legal services."

MCPR DR 5-107(B) applies with equal force where the person seeking to direct the performance of legal services is a lawyer who does not represent the client.

May a lawyer/administrator require a staff lawyer to close a client's file, ending legal services to the client, even though the client's legal matter or problem is unresolved? Without knowing the contents of the plan on file or the information provided to the beneficiary at the time legal representation is sought, it is difficult to answer this question. We assume that the client has not agreed that the case may be closed or dropped prior to resolution, and that the lawyer is faced with a direct order which requires action contrary to the lawyer's best legal opinion regarding the handling of the client's case. In this regard we have been referred to MCPR DR 6-101(A)(3), which prohibits a lawyer from neglecting a legal matter entrusted to the lawyer. Further, MCPR 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 Disciplinary Rules . . . ."

It appears that in this situation the lawyer is faced with an irreconcilable conflict. The lawyer's personal interest in retaining employment with the legal services plan interferes with the lawyer's independent professional judgment on behalf of the client. In such a situation, the lawyer is obligated to seek to convince the supervising lawyer that the proposed course of action is not in the best interest of the client, and failing that should withdraw after full disclosure to the client. MCPR DR 5-101(A) provides that a lawyer shall decline proffered employment where the lawyer's own personal interest will interfere with the exercise of professional judgment on behalf of the client. Likewise, where such a conflict develops after representation has commenced, the lawyer should withdraw from the representation.

May a staff lawyer permit himself or herself to be dissuaded from preparing individualized legal documents, such as wills, because the policy of the plan requires strict adherence to standardized computer programs for preparing documents of that sort? Again, it is vital that the staff lawyer bear in mind that the client is the beneficiary of the plan, not the plan administrators. The lawyer must thus do everything in his or her power to adequately and vigorously represent the client, rather than promote the use of standardized computer programs which may not be suited to the client's needs.

May staff administrators determine the frequency, extent and content of a staff lawyer's correspondence with the client and/or adverse parties? Additionally, may client grievances about staff lawyers be resolved with the use of union liaisons who are not lawyers, without reference to Supreme Court mandated grievance and dispute resolution programs? First, it is the lawyer's obligation to take all steps to vigorously represent the client. Any attempt by a person who does not represent that client to interfere with the representation, including refraining from contacts with the client, should be resisted.

With respect to resolution of client grievances, we know of nothing that requires participation in Supreme Court mandated grievance and dispute resolution programs. If the client is adequately represented in the in-house resolution measures, we see nothing wrong with their use. On the other hand, if the union liaisons are seeking to protect the plan staff lawyers, and acting as advocates in their behalf, then client must be advised of the availability of Supreme Court mandated grievance procedures, which guarantee a neutral forum for resolution of questions.

The inquirer next identifies a number of recurring conflicts and asks for guidance with respect to dealing with them.

a.A staff lawyer and the client believe that the joinder of a General Motors subsidiary or benefits carrier (for example: Blue Cross and Blue Shield) is advisable in the case but the plan prohibits such joinder and requires the staff lawyer to proceed with the case without joinder.

b.The plan either withholds information or prohibits a staff lawyer from seeking or obtaining information in the possession of the employer, for example pension information, even though the information is necessary for the client's case.

In both of these situations, the lawyer's obligation remains to the beneficiary of the plan. Where the plan requires the lawyer to take steps that would prejudice the client's rights, or interfere with the lawyer's independent professional judgment on behalf of the client, it must yield to ethical obligations and state law. The lawyer must fully advise the client as to the possible effect on the client's case, and, if the client desires to follow a course of action contrary to that allowed by the plan, the lawyer must withdraw.

May a staff lawyer prepare pleadings and other court filings for the client, which the client intends to file with the court under the client's name, without the lawyer's having filed an appearance? This Committee's jurisdiction extends only to questions governed by the Michigan Code of Professional Responsibility; the Committee does not interpret laws or court rules regarding whether a lawyer must sign his or her own work product. We therefore decline to address this issue. We note that MCPR DR 7-102(B) governs the conduct of a lawyer who believes a client has perpetrated a fraud on a tribunal. To the extent that the client seeks benefits from the court only available to an unrepresented person, the lawyer must make the lawyer's participation known to the court with the client's consent or refuse to perform the services.

Must a staff lawyer defend a client in a civil action where the client has no valid legal defense to the action? This situation is no different from the traditional situation of lawyers retained by an insurance company to represent an insured in a civil tort suit. In that case the lawyer does everything possible within ethics rules to represent the client's interest and to minimize any possible consequences to the client. Further, if the plan provides for any settlement payment, the lawyer has the obligation to try to settle the case within the limits of the client's benefits. It is not up to the lawyer to decide whether the client has a valid defense or not, but to work vigorously on behalf of the client.

Finally, we are asked to consider the use of a form called "authorization to settle," which a client is required to sign before a lawyer can file a lawsuit on the client's behalf. On that form the client is required to state a specific dollar amount acceptable as a settlement of the lawsuit. If the client later refuses to accept the amount stated in the authorization to settle, the plan requires the staff lawyer to move to withdraw from the case. Again, it appears that the plan's provisions may interfere with the lawyer's exercise of independent professional judgment on behalf of the client. If in the lawyer's judgment a client's case has changed in value during the course of preparing the lawsuit, the lawyer has the obligation to so advise the client. If the value of the case should increase during discovery, and the client, recognizing that increase, refuses a settlement at the value of the original authorization to settle, the staff lawyer must advise the client about the increase in the value of the case and then seek to withdraw because of the prohibitions of the plan. Where interests differ, the lawyer may not serve two masters.

In conclusion, it is our opinion that all questions asked can be resolved, once the underlying premise that the beneficiary is the client has been established. Analogies to long-standing lawyer-client relationships are helpful in this situation. Specifically, it must be recognized that senior lawyers in a law firm have always been able to override the decisions of more junior lawyers with respect to the handling of lawsuits, without violating ethics rules and where loyalty to the client is not questioned. Further, an analogy may be drawn to insurance defense litigation, in that lawyers paid by insurance companies have always recognized that their first obligation is to the insured, not the insurer. To the extent that the interests of the two may be consolidated, that is always the optimum solution. Where the two interests diverge, however, the interests of the insurance company have always had to give way. Similarly here, where the lawyer's obligation to the client, the plan's beneficiary, diverges from the interest of the plan itself, the lawyer's obligation to the beneficiary is supreme.