Compatibility With the Client Relationship

Compatibility With the Client Relationship

Rule 2.3(a) sets the first condition on evaluating a client's matter for an outsider: the lawyer must reasonably believe that making the evaluation is compatible with other aspects of the lawyer's relationship with the client.¹ Two parts of that sentence do the work. The standard is a reasonable belief. The object of the belief is the rest of the relationship, meaning every other role and duty the lawyer carries for the same client, such as advocate in a pending dispute or advisor on continuing obligations. A lawyer who cannot form that belief on the facts at hand has no permission to give the evaluation.

The word reasonably makes the test objective. A lawyer's sincere conviction that the evaluation fits is not enough; the belief must be one a careful lawyer could hold on the facts the lawyer actually knows, including the lawyer's other assignments for the client. A purely subjective test would filter out nothing, because a lawyer eager to close a deal or please a client could satisfy it by announcing that it was satisfied. An objective test lets a court or disciplinary authority ask what the circumstances really showed, so the lawyer needs a genuine basis before sending the evaluation.

The object of the belief matters because an advocate and an evaluator work for the same client at jobs that can pull apart. An advocate champions the client's position against an opponent. An evaluator gives an outsider an honest account on which the outsider will pay money or take a risk. When one lawyer holds both jobs on the same or a related transaction, the litigating position can soften the report, or the report can expose what the advocate needs to keep quiet. The outsider who relies on a softened report is misled, and the client whose weaknesses are exposed loses the loyalty it was paying for. Screening for compatibility before the evaluation addresses both risks at the outset.

The comment to Rule 2.3 supplies the clearest example of an incompatible pairing. If the lawyer is acting as advocate in defending the client against charges of fraud, it would normally be incompatible with that responsibility for the lawyer to perform an evaluation for others concerning the same or a related transaction.² The Ninth Circuit pointed to Rule 2.3 in SEC v. Fehn, where a lawyer represented a client in an SEC investigation of earlier disclosure violations and, at the same time, advised that client on ongoing disclosure requirements. The court called the dilemma especially pronounced in that setting.³

Fehn deserves careful use, because the court expressed no opinion on whether the lawyer's representation in the investigation was compatible with counseling the same client on disclosure compliance.⁴ The case is an aiding-and-abetting decision. It found the knowledge element established because the lawyer knew his client refused to disclose, in the quarterly reports, his potential liability for past securities law violations.⁵ It shows where the compatibility concern comes from: a lawyer defends a client over past conduct while shaping what the client tells outsiders about it. It does not hold that such dual roles are incompatible, and an answer that cites it for that holding overstates it.

The fact that moves the answer is pending advocacy over the same or a related transaction. Where no dispute exists, the evaluator's report and the lawyer's other work point the same way. Where the lawyer is defending the client against charges of wrongdoing in the transaction being evaluated, the report and the defense collide.

Insurance defense shows the same question in a setting where the evaluation is permitted but the lawyer's loyalty stays fixed. A lawyer retained to defend an insured may give the insurer an honest assessment of a settlement offer, which is an evaluation for the use of someone other than the client.⁶ The tension peaks when the claim exceeds the policy limits and the insured wants to settle within them while the insurer does not. To the extent the two disagree, the lawyer should act as advocate for the insured, not for the insurance company.⁷ Sharing the assessment with the insurer does not displace that role.

An exam stem on this point usually states the lawyer's other role in a phrase, such as defending the client in a fraud suit or representing the insured in litigation, and then adds a request from an outsider. Ask whether, given that other role, a reasonable lawyer could believe the evaluation fits. The lawyer's own assurance that it fits does not answer that question.