ethicsThe brouhaha that engulfed the final draft of the Restatement of the Law, Liability Insurance (RLLI) at last month’s American Law Institute (ALI) annual meeting drew more publicity and concern than any ALI work product that I can recall.  And for good reason.  As numerous commentators observed—including Washington Legal Foundation’s Glenn Lammi and Mintz Levin’s Kim Marrkand—several provisions of the Restatement draft presented at the annual meeting deviated from the current legal rule in a majority or plurality of states.  Simply put, this “Restatement” does a lot less restating and a lot more revising than ought to be seen in something traveling under this banner.

Others have done an excellent job of describing where ALI’s Restatement draft falls short in characterizing current law, so there is no need to reiterate those arguments here.  But for clarity’s sake, let me say that I am referring specifically to at least the following provisions of the draft:

  • Permitting policyholders to introduce extrinsic evidence in interpreting insurance contracts, which contradicts the ‘parole evidence’ rule.
  • Radically shifting the consequences of breaching the duty to defend (in the absence of bad faith).
  • Fee shifting; and
  • Creating a duty for insurers to make a reasonable settlement offer in the absence of a demand.

These and other criticisms seemingly motivated ALI’s decision to withdraw the RLLI draft on the eve of a final membership vote.

As the Restatement project’s Reporters get back to work, they should consider a risk the draft posed which, to my knowledge, thus far has gone unnoticed.  There may well be a troubling but overlooked ethical problem with what is transpiring.  The Model Rules of Professional Conduct spell out a familiar set of duties owed by lawyers to their clients, to the tribunals before which they appear, and to the profession itself.  These duties apply to attorneys practicing as plaintiffs’ attorneys, defense counsel, as jurists, as law professors, or—presumably—as Reporters (and perhaps even voters) for a Restatement issued by the American Law Institute.

Although the model rules themselves do not bind anyone, they form the basis for the ethics rules adopted by states across the United States.  State supreme courts enforce these rules against ethical breaches, including with license suspensions and disbarment.  So, for example, the Pennsylvania Rules of Professional Conduct discussed below are based on the Model Rules.  Because the ALI is based in Philadelphia and the main Reporter for the Restatement of the Law, Liability Insurance (Tom Baker) is a professor at the University of Pennsylvania Law School, I will refer to Pennsylvania’s ethical rules herein.

One might not immediately think of the relevance of professional rules of ethics when considering the Restatement project, but I believe these rules do come into play.  Although the prior criticisms of the draft were lodged as claims that the Restatement was not living up to its own terms, it is important to recognize that by misstating the law, these aspects of the Restatement may also implicate at least three ethical rules:

  • Rule 3.1, Meritorious Claims and Contentions
  • Rule 3.3, Candor Toward the Tribunal; and
  • Rule 4.1, Truthfulness in Statements to Others

Let’s consider each of these rules in turn and why they may apply to ALI’s latest Restatement.

Rule 3.1 Meritorious Claims and Contentions

“A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law. …”

The application of this rule involves the requirement for making a “good faith argument for an extension … of existing law.”  Although a lawyer is not bound by the majority rule and must not concede the current rule in a particular jurisdiction without argument, a lawyer must recognize when a modification of law is being called for and make a good-faith argument for that change.  Citing the Restatement for the proposition that something is the majority position—when it is not—is not the kind of good-faith argument this ethical rule countenances.  Which brings us to:

Rule 3.3(a)(1) Candor Toward the Tribunal

“(a) A lawyer shall not knowingly:

(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;”

The Comments to the Pennsylvania rules note that, “[t]his Rule sets forth the special duties of lawyers as officers of the court to avoid conduct that undermines the integrity of the adjudicative process. … [A]lthough a lawyer in an adversary proceeding is not required to present an impartial exposition of the law or to vouch for the evidence submitted in a cause, the lawyer must not allow the tribunal to be misled by false statements of law or fact or evidence that the lawyer knows to be false.” (emphasis added).  The Comments also explain that:  “Legal argument based on a knowingly false representation of law constitutes dishonesty toward the tribunal. … The underlying concept is that legal argument is a discussion seeking to determine the legal premises properly applicable to the case.”

In other words, if this Restatement is adopted, major portions of it may not be cited to courts of law ethically without some pretty significant caveats.  Importantly, an attorney may not cite the Restatement’s position on the four points of law cited above as though they represent (or restate) the predominant rule across the country—because they do not.

Rule 4.1 Truthfulness in Statements to Others

“In the course of representing a client a lawyer shall not knowingly:

(a) make a false statement of material fact or law to a third person;”

Hence, assuming the draft Restatement is adopted without revision, the following problem arises.  If a lawyer cites the new Restatement to suggest that it presents the majority rule, when in fact it does not, that lawyer is both making a false statement of law to a tribunal in violation of Rule 3.3 and in all likelihood making a false statement of law to a third person in violation of Rule 4.1.  Citing to the Restatement and pretending that it presents a majority view cannot launder the lawyer’s misrepresentation.  Just as a lawyer would violate the rules of ethics by directly stating that a rule follows the majority of states when it does not, so too a lawyer would violate the rules of ethics by indirectly stating the same thing through a misleading citation to the Restatement.

An organization like the American Law Institute, ostensibly concerned in part with “promot[ing] the clarification and simplification of the law …” should balk at adopting a Restatement that can be so easily abused to misstate the law.  ALI should not want to be a party to leading courts astray on the current status of the law or to courting ethical violations by others by putting this out there.

Although murkier, a case can be made that the Reporters drafting the Restatement, and indeed members who are asked to vote for its adoption, have an ethical duty under the rules to not restate the law erroneously.  Even if the rules themselves do not go that far, to the extent that these individuals anticipate that the Restatement will be cited to tribunals (as it already has been), including a false account of the majority view, the many esteemed lawyers who comprise ALI should think twice about whether they want to facilitate this kind of future deception or set a trap for unwary counsel and judges who may not realize that the Restatement is not accurate.

ALI’s Style Manual seeks to account for the possibility that so-called Restatements may not restate the law after all.  And it calls for reporters to fess up in those situations.  “The Institute … needs to be clear about what it is doing.  For example, if a Restatement declines to follow the majority rule, it should say so explicitly and explain why.”  A Handbook for ALI Reporters, p. 6.  Elsewhere the manual notes: “Some Restatements may contain elements addressed to institutions other than courts.  Such elements should be labeled appropriately, for example, as ‘suggestions for legislation.’” Handbook, p. 4.  Where a Reporter fails to follow this practice, that Reporter courts mischief and skirts the ethical rules at the same time.

Even if, given the various caveats and notes inserted throughout the Draft, one can honestly claim that the final product itself—taken as a whole—does not mislead, this document still courts ethical violations.  Few, if any, attorneys will quote the Restatement in its entirety on a particular point of law.  The Reporters and others working on a revised draft Restatement of the Law, Liability Insurance must consider whether they want to bring this ethical problem down on the ALI or themselves—or be a party to the likely misuse of the Restatement to mislead tribunals across the country about the state of the law in this topic area.

Also published by on WLF’s contributor page.