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End-of-life notice: American Legal Ethics Library

As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.

Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


Arizona Legal Ethics

1.2   Rule 1.2 Scope of Representation

1.2:100   Comparative Analysis of Arizona Rule

In very broad terms, AZ-ER 1.2 defines the structure of the attorney-client relationship, the lawyer's responsibilities for carrying out the client's objectives in an engagement, and the respective roles of lawyer and client in that endeavor. It is established that the failure of a lawyer to carry out an engagement for which the lawyer has been retained is grounds for the imposition of discipline. Matter of Woltman, 181 Ariz. 525, 892 P.2d 861 (1995); Matter of Blasnig, 181 Ariz. 356, 890 P.2d 1141 (1995); Matter of Kobashi, 181 Ariz. 253, 889 P.2d 611 (1995); Matter of Peartree, 180 Ariz. 518, 885 P.2d 1083 (1994); Matter of Higgins, 180 Ariz. 396, 884 P.2d 1094 (1994); Matter of Engan, 180 Ariz. 13, 881 P.2d 345 (1994); Matter of Struthers, 179 Ariz. 216, 877 P.2d 789 (1994); Matter of Woltman, 178 Ariz. 548, 875 P.2d 781 (1994); Matter of Peartree, 178 Ariz. 114, 871 P.2d 235 (1994); Matter of Augenstein, 177 Ariz. 581, 870 P.2d 399 (1994); Matter of Wurtz, 177 Ariz. 586, 870 P.2d 404 (1994); Matter of Boettcher, 176 Ariz. 314, 861 P.2d 599 (1993); Matter of Fioramanti, 176 Ariz. 182, 859 P.2d 1315 (1993); Matter of Riddle, 175 Ariz. 379, 857 P.2d 1233 (1993); Matter of Soelter, 175 Ariz. 139, 854 P.2d 773 (1993); Matter of Ziman, 174 Ariz. 61, 847 P.2d 106 (1993); Matter of Blasnig, 174 Ariz. 9, 846 P.2d 822 (1993); Matter of Sadacca, 172 Ariz. 173, 836 P.2d 386 (1992); Matter of Engan, 170 Ariz. 409, 825 P.2d 468 (1992); Matter of Lincoln, 170 Ariz. 267, 823 P.2d 1275 (1992); Matter of Grant, 169 Ariz. 498, 821 P.2d 159 (1991); Matter of Rantz, 169 Ariz. 56, 817 P.2d 1 (1991); Matter of Gaynes, 168 Ariz. 574 (1991); Matter of Young, 164 Ariz. 502, 794 P.2d 135 (1991); Matter of Cardenas, 164 Ariz. 149, 791 P.2d 1032 (1990).

1.2:101      Model Rule Comparison

The 2003 amendments to the Arizona Rules of Professional Conduct expanded its title to more accurately describe the subjects addressed in the Rule. The phrase "subject to paragraphs (c) and (d)” was moved to the beginning of paragraph (a) to clarify that all of the actions a lawyer is authorized to take by that paragraph are subject to the restrictions of paragraph (d), and some of them are restricted by paragraph (c). Paragraph (a) was amended to clarify that a lawyer "may take such action on behalf of the client as is impliedly authorized to carry out the representation.”

In the Comment to the Rule, a new paragraph 2 was added, addressing the resolution of disagreements with clients about the means to be used to accomplish the client's objectives. Paragraph 8 of the Comment is also new.

AZ-ER 1.2 is identical to MR 1.2. There are differences, however, between the Comments that accompany the Rules. The language of paragraphs 1 and 13 of the Comment to AZ-ER 1.2 differs slightly from that of the corresponding paragraphs of the Comment to MR 1.2. The Comment to AZ-ER 1.2 has a paragraph 8, and a concluding sentence in paragraph 11, that do not appear in the Comment accompanying MR 1.2

1.2:102      Model Code Comparison

AZ-ER 1.2(a), (b), and (c) do not have counterpart provisions in the Disciplinary Rules of the Code of Professional Responsibility. There were, however, Ethical Considerations contained in Canon 7 of the Code, which provided guidance on a lawyer's obligation to abide by the client's decisions regarding the objectives of the representation. EC 7-7 provides that:

"[i]n certain areas of legal representation not affecting the merits of the cause or substantially prejudicing the rights of a client, a lawyer is entitled to make decisions on his own. But otherwise the authority to make decisions is exclusively that of the client and, if made within the framework of the law, such decisions are binding on his lawyer." EC 7-7.

Similarly, EC 7-8 stated "[i]n the final analysis . . . the lawyer should always remember that the decision whether to forego legally available objectives or methods because of non-legal factors is ultimately for the client and not for himself." EC 7-8.

With respect to AZ-ER 1.2(d), DR 7-102(A)(7) stated that a lawyer shall not "[c]ounsel or assist his client in conduct that the lawyer knows to be illegal or fraudulent." DR 7-102(A)(7). In addition, DR 7-102(A)(6) provided that a lawyer should not "[p]articipate in the creation or preservation of evidence when he knows or it is obvious that the evidence is false." DR 7-102(A)(6). DR 7-106(A) further prohibited a lawyer from disregarding or advising a client to disregard a court rule or a ruling, however, a lawyer can always challenge the validity of a rule or ruling. EC 7-5 also stated that a lawyer "should never encourage or aid his client to commit criminal acts or counsel his client on how to violate the law and avoid punishment therefor." EC 7-5.

AZ-ER 1.2(e) required a lawyer to notify a client of the limitations on a lawyer's conduct, if the lawyer knew that a client expected assistance prohibited by the Arizona Rules of Professional Conduct. AZ-ER 1.2(e). DR 2-110(C)(1)(c), however, permitted a lawyer to withdraw from representation if the client "[i]nsists that the lawyer pursue a course of conduct that is illegal or that is prohibited under the Disciplinary Rules." DR 2-110(C)(1)(c). In addition, DR 9-101(C) prohibited a lawyer from stating or implying that he is capable of improperly influencing any court, legislative body or public official. DR 9-101(C).

1.2:200   Creating the Client-Lawyer Relationship

It is "hornbook law” that the attorney-client relationship is a matter of contract, except when the attorney is appointed to represent the client by a court or other tribunal. 7A C.J.S. Attorney & Client, Section 1669, at 249. The contract may be either express or implied. (See discussion in Section 1.2:210, infra.). On the other hand, a client's claim that an attorney failed to properly provide the services for which the attorney was engaged does not necessarily sound in contract.

The Arizona courts have generally charted a relatively consistent course on the issue of whether and, if so, under what circumstances, a claim that an attorney failed to properly discharge his or her professional obligations can be brought as a claim for breach of contract, rather than (or in addition to) as a claim sounding in tort for professional negligence. In Long v. Buckley, 129 Ariz. 141, 629 P.2d 557 (App. 1981), the issue arose in the context of whether plaintiffs could sustain their claim against Buckley, which was essentially one for professional negligence, as timely filed by relying on the longer (six-year) statute of limitations applicable to actions based upon a written contract, A.R.S. § 12-548. While Division 1 of the Court of Appeals made the observation that: "legal malpractice usually consists of both a tort and a breach of contract,” Id., 129 Ariz. at 145, 629 P.2d at 561, it suggested that there should be a limitation on the circumstances in which such a claim would be deemed to be one truly sounding in contract - when "the act which is alleged to give rise to the breach must bear some connection to the writing itself.” Id., 129 Ariz. at 146, 629 P.2d at 562. The Court eventually held that the six-year contract action statute of limitations would not apply where the contract relied upon was simply a general retainer agreement which did not specify how the representation was to be carried out. Id. That holding was reiterated in Towns v. Frey, 149 Ariz. 599, 721 P.2d 147 (App. 1986), where the Court stated:

Legal malpractice usually consists of both a tort and a breach of contract . . . If one is going to assert a breach of contract claim against a lawyer, the contract relied upon must itself contain an undertaking to do the thing for the nonperformance of which the action is brought.

Id., 149 Ariz. at 601, 721 P.2d at 149 (citation omitted).

In Barmat v. John and Jane Doe Partners A-D, 155 Ariz. 519, 747 P.2d 1218 (1987), the Arizona Supreme Court addressed the question "whether a legal malpractice action «arises out of a contract' so as to be eligible for an award of attorney's fees pursuant to A.R.S. § 12-341.01(A).” Id., 155 Ariz. at 520, 747 P.2d at 1219. The Court eventually answered the question posed in the negative:

We agree that the law implies a contract between lawyer and client, including an implied covenant of competent and ethical representation . . . We do not believe, however, that the breach of an implied covenant in a contract implied in law necessarily brings the action within the statute.

Id., 155 Ariz. at 521, 747 P.2d at 1220 (citation omitted). The same result was reached in Environmental Liners, Inc. v. Ryley, Carlock & Applewhite, 187 Ariz. 379, 387, 930 P.2d 456, 464 (App. 1996):

When it is the gravamen of a legal malpractice claim that a lawyer has violated his implied duty to provide reasonably competent and ethical services, that claim sounds in tort, not in contract, and does not support the award of attorneys' fees under A.R.S. § 12-341.01

The most recent and definitive discussion of the issue is found in Collins v. Miller & Miller, Ltd., 189 Ariz. 387, 943 P.2d 747 (App. 1996). After observing (somewhat inaccurately) that the issue had been addressed previously only in the context of other professions or where the issue was whether the provisions of A.R.S. § 12-341.01 applied, the Court concluded:

. . . even where there is an express contract between the professional and the client, an action for breach of that contract cannot be maintained if the contract merely requires generally that the professional render services. Only if there is a specific promise contained in the contract can the action sound in contract, and then only to the extent the claim is premised on the nonperformance of that promise.

Id., 189 Ariz. at 395, 943 P. 2d at 755 (citations omitted).

AZ-ER 1.16(a) provides that, unless a lawyer is directed by a tribunal to continue in a representation, a lawyer shall not either accept or continue in an engagement if:

1. the representation will result in a violation of the Rules of Professional Conduct or other law;

2. the lawyer's physical or mental condition materially impairs the lawyer's ability to represent the client; or

3. the lawyer is discharged.

The general rule in Arizona, both before and after the adoption of the Arizona Rules of Professional Conduct, has been that a client has the right to discharge an attorney at any time, for any reason, and even for no reason. In State Farm Mutual Insurance Company v. St. Joseph's Hospital, 107 Ariz. 498, 489 P.2d 837 (1971), the Supreme Court noted:

. . . the law in Arizona is clear that a client has the absolute right to terminate the attorney-client relationship at any time with or without cause . . . and may without the consent of his attorney settle and compromise his claim with his adversary . . . we . . . reaffirm the power of the client at any time to discharge his attorney and to settle or compromise his own claim. Our law does not bind a person to one attorney merely because he has entered into a contingent fee relationship.

Id., 107 Ariz. at 501-02, 489 P.2d at 840-41 (citations omitted). In Arizona Ethics Opinion No. 94-02the Committee on the Rules of Professional Conduct ("the Committee”) considered, among other things, the propriety of a provision in an attorney's so-called "Personal Injury Employment Agreement,” which stated that: "[u]nder the law, the client has the power, but not necessarily the contract right, to discharge their attorney at any time.” The Committee found that the denomination of this engagement agreement as a "Personal Injury Employment Agreement,” and the inclusion of this particular provision, was unethical because it was likely to interfere with the client's right to have counsel of her or his own choosing, and would deter clients from discharging the lawyer, even if they were dissatisfied with the lawyer's services.

The Comment to AZ-ER 1.16, in the following passage, however, suggests that there may be limitations, under certain circumstances, on the client's right to terminate a lawyer's services:

Whether a client can discharge appointed counsel may depend upon applicable law. A client seeking to do so should be given a full explanation of the consequences. These consequences may include a decision by the appointing authority that appointment of successor counsel is unjustified, thus requiring self-representation by the client.

If the client has severely diminished capacity, the client may lack the legal capacity to discharge the lawyer, and in any event the discharge may be seriously adverse to the client's interests. The lawyer should make special effort to help the client consider the consequences and may take reasonably necessary protective action as provided in ER 1.14.

Comment, AZ-ER 1.16, áá 5, 6.

1.2:210      Formation of Client-Lawyer Relationship

As noted earlier, the attorney-client relationship is generally understood to be a matter of contract, except if the attorney has been appointed by the court. 7A C.J.S. Attorney & Client, Section 1669, at 249. The contract consists of an offer by the lawyer, coupled with the acceptance or consent of a client, or the offer or request by the client, together with the acceptance of the lawyer. Id. The contract may be either express or implied from the circumstances. See Matter of Petrie, 154 Ariz. 295, 299, 742 P.2d 796, 800 (1987); Franko v. Mitchell, 158 Ariz. 391, 397, 762 P.2d 1345, 1351 (App. 1988). An attorney that gives free advice is held to the same standard as an attorney who is paid for services. See Franko v. Mitchell, 158 Ariz. 391, 397, 762 P.2d 1345, 1351 (App. 1988). Where an attorney serves as a mere conduit for the transfer of funds, however, an attorney-client relationship will not ordinarily be created. Ralls v. United States, 52 F.3d 223 (9th Cir. 1995).

 

In order to determine whether an attorney-client relationship has been created, the Arizona Supreme Court has recognized that:

"[t]he relationship is proved by showing that the party sought and received advice and assistance from the attorney in matters pertinent to the legal profession . . . The appropriate test is a subjective one, where «the court looks to the nature of the work performed and to the circumstances under which the confidences were divulged.' Alexander v. Superior Court, 141 Ariz 157, 162, 685 P.2d 1309, 1314 (1984), citing Developments of the Law - - Conflicts of Interest in the Legal Profession, 94 HARV.L.REV. 1244, 1321-22 (1981). An important factor in evaluating the relationship is whether the client thought an attorney-client relationship existed."

Matter of Petrie, supra, 154 Ariz. at 299-300, 742 P.2d at 800-01. In Petrie, the Court held that an attorney-client relationship existed between a lawyer and a couple, who was seeking to adopt a baby. Although the relationship was initially subject to the condition that the couple locate a baby to adopt, upon satisfaction of the condition, the relationship was created. Id. See also Alexander v. Superior Court, 141 Ariz. 157, 685 P.2d 1309 (1984); Research Corporation Technologies, Inc. v. Hewlett-Packard Company, 936 F.Supp. 697 (D.Ariz. 1996); Hrudka v. Hrudka, 186 Ariz. 84, 919 P.2d 179 (App. 1996) (no attorney-client relationship formed where attorney did not open a file or bill time, and potential client did not consider the attorney to be her lawyer). Once created, the relationship gives rise to a continuing duty by the lawyer to represent the client's interests, until the client should reasonably understand that the relationship cannot be relied upon. In re Weiner, 120 Ariz. 349, 586 P.2d 194 (1978). See also General Tire Company v. Industrial Commission of Arizona, 156 Ariz. 174, 750 P.2d 1377 (App. 1988).

In Arizona Ethics Opinion No. 2000-06, however, the Committee on the Rules of Professional Conduct addressed the duties of a lawyer appointed by the Juvenile Court to be guardian ad litem for a juvenile where separate counsel had been appointed to represent the juvenile. The Committee noted that there were several scenarios where such an appointment might be made, such as proceedings where there was a suggestion that the juvenile required inpatient mental health evaluation and treatment. The Committee concluded that, where the lawyer is so appointed, and separate counsel is representing the juvenile, then no attorney-client relationship is formed between the appointed attorney and the juvenile, and the attorney is not bound by the duty of confidentiality imposed by AZ-ER 1.6.

In Arizona Ethics Opinion No. 02-06, the Committee addressed the question as to how a lawyer should structure the relationship when engaged by individuals to form a corporation or other legal entity in which the individuals would be constituents once formed. The Committee said the relationship could be structured in one of two alternative ways. The first was to make the client the yet-to-be-formed entity, provided the incorporators understand and agree that the future entity is the client and that, once the entity if formed, they would have to ratify this action on behalf of the entity. The Committee stressed that, if the engagement is structured in this way, this should be made clear at the initial meeting, in the engagement letter, and periodically thereafter. The forming constituents must also be advised that they are not the lawyer's clients, and of the consequences of that for the confidentiality of information they provide to the lawyer.

The second alternative structure is to represent jointly the incorporators in forming the entity. In that case, the joint clients must be advised of the consequences of such joint representation for the confidentiality of information, and also of the possible obligation of the lawyer to withdraw if a conflict between the joint client arises. Finally, once the entity is formed, the clients must determine whether the lawyer will represent just the entity, just the constituents, or both, provided there is no conflict of interest presented by any of those alternatives.

1.2:220      Lawyer's Duties to Prospective Client

The Arizona courts have recognized that an attorney-client relationship can arise as a consequence of an initial consultation between a lawyer and a prospective client. Foulke v. Knuck, 162 Ariz. 517, 784 P.2d 723 (App. 1989). In that case, the Court of Appeals stated that an attorney-client relationship arose between a lawyer and a prospective client during an initial consultation, even though the lawyer did not represent the client in the subsequent dissolution proceedings. The Court held that the "fact that a consultation is relatively brief does not negate the establishment of an attorney-client relationship.” Id., 162 Ariz. at 520, 784 P.2d at 726. See also Arizona Ethics Opinion No. 74-10.

In Foulke, the lawyer argued that an attorney-client relationship had not been formed, because the lawyer had only provided the prospective client with legal information, as distinguished from legal advice. The Court rejected that contention, stating: "[w]hether one seeks legal information or legal advice from an attorney, the attorney is being consulted for his or her professional, legal expertise.” Foulke v. Knuck, supra, 162 Ariz. at 520, 784 P.2d at 726. Similarly, in State v. Fodor, 179 Ariz. 442, 880 P.2d 662 (App. 1994), the Court of Appeals held that a woman who telephoned a lawyer for the purpose of securing legal advice had established an attorney-client relationship with the lawyer such that the contents of the telephone conversation between them was privileged. Id., 179 Ariz. at 448, 880 P.2d at 668.

The 2003 amendments added a new AZ-ER 1.18 which deals specifically with the "Duties to Prospective Client.” This new Rule recognizes that attorneys regularly communicate with prospective clients, and those communications do not always result in the formation of a formal attorney-client relationship. The Rule imposes on lawyers a duty to preserve confidences imparted to a lawyer by a prospective client, regardless whether the lawyer or firm undertakes the representation of the prospective client. This duty does not apply to information that is communicated unilaterally and unsolicited to the lawyer, or to information imparted by a prospective client who consults the lawyer in an attempt to disqualify that lawyer from representing an adverse party in the matter. Under the new Rule, the firm with which the lawyer who had the contact with the prospective client may avoid imputed disqualification, and may represent a party whose interests are adverse to those of the prospective client, if the lawyer who had the contact is screened from participation in the matter, and the prospective client is notified of that screening. See 1.18 infra.

1.2:230      When Representation Must Be Declined [see 1.16:200-230]

AZ-ER 1.16(a) provides that a lawyer shall not represent a client, or if representation has begun, must withdraw from representation, if (i) the representation will involve the lawyer in a violation of the Rules of Professional Conduct or other law, (ii) the lawyer has a mental or physical condition which materially impairs the lawyer's ability to represent the client, or (iii) the lawyer is discharged by the client. This subject is discussed in more detail in Section 1.16:200, and its subparts, infra.

1.2:240      Client-Lawyer Agreements

Although the attorney-client relationship is essentially contractual in nature, it was previously held that a written employment or engagement agreement was ordinarily not required in order to establish an attorney-client relationship. The relationship could be express or implied from the circumstances. Matter of Petrie, 154 Ariz. 295, 742 P.2d 796 (1987). New AZ-ER 1.5(b), however, added by the 2003 amendments, now requires in most instances a written engagement agreement which sets forth the "scope of the representation and the basis or rate of the fees and expenses . . .” In addition, the absence of payment by the client to the lawyer is not dispositive of whether an attorney-client relationship has been established. Franko v. Mitchell, 158 Ariz. 391, 762 P.2d 1345 (App. 1988). As discussed in Section 1.2:210, supra, the test for determining whether an attorney-client relationship has been formed is a subjective one, with an important factor being whether the client thought such a relationship existed.

AZ-ER 1.2(c) now provides that: "A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent. As the Comment to this aspect of the Rule explains:

The scope of services to be provided by a lawyer may be limited by agreement with the client or by the terms under which the lawyer's services are made available to the client. Representation provided through a legal aid agency may be subject to limitations on the types of cases the agency handles. When a lawyer has been retained by an insurer to represent an insured, for example, the representation may be limited to matters related to the insurance coverage. A limited representation may be appropriate because the client has limited objectives for the representation. In addition, the terms upon which representation is undertaken may exclude specific means that might otherwise be used to accomplish the client's objectives. Such limitations may exclude actions that the client thinks are too costly or that the lawyer regards as repugnant or imprudent.

Although this Rule affords the lawyer and the client substantial latitude to limit the representation, the limitation must be reasonable under the circumstances. If, for example, a client's objective is limited to securing general information about the law the client needs in order to handle a common and typically uncomplicated legal problem, the lawyer and client may agree that the lawyer's services will be limited to a brief telephone consultation. Such a limitation, however, would not be reasonable if the time allotted was not sufficient to yield advise upon which the client could rely. Although an agreement for a limited representation does not exempt a lawyer from the duty to provide competent representation, the limitation is a factor to be considered when determining the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. See ER 1.1.

Although paragraph (c) does not require that the client's informed consent to a limited representation be in writing, a specification of the scope of representation will normally be a necessary part of the lawyer's written communication of the rate or basis of the lawyer's fee as required by ER 1.5(b). See ER 1.0(e) for the definition of "informed consent”.

Comment, AZ-ER 1.2, áá 6-8.

In Arizona Ethics Opinion No. 91-03, the Committee on the Rules of Professional Conduct ("the Committee”) considered an inquiry as to the propriety of the practice of a lawyer preparing pleadings and rendering advice to clients who would file the pleadings and pursue the cases as pro per litigants. The Committee concluded that it was proper for an attorney to represent clients on such a limited basis, so long as: (1) the client consents to the limitation on the scope of the representation after consultation; (2) the scope of the representation is not so limited as to cause the attorney to violate any of the Rules of Professional Conduct or other law; and, (3) the attorney does not advise the client to do something that the attorney would be prohibited from doing.

In Arizona Ethics Opinion No. 94-02, the Committee analyzed whether a certain Personal Injury Employment Agreement was ethically proper, and identified several provisions that failed to comply with various provisions of the Arizona Rules of Professional Conduct. Initially, the employment agreement contained a provision limiting the client's right to discharge the attorney to situations where there was "good cause” for the lawyer's dismissal. The Committee determined that this limitation on the client's right to discharge the attorney ran afoul of both AZ-ER 1.2 and AZ-ER 1.16. In addition, the employment agreement gave the attorney the ability to abandon the client's case if the attorney determined that the case did not have sufficient merit, or if the amount of work necessary to achieve a settlement or judgment exceeded the amount of the fee that the lawyer would receive from the matter. This provision was deemed misleading, because it suggested that the lawyer had the unilateral right to withdraw from a matter in litigation. The employment agreement also contained a provision which purported to give the attorney unlimited authority to "settle, adjust, file and prosecute by suit” the personal injury claim. This provision was deemed too broad, because it failed to state that the attorney could not settle or compromise the client's claim without the client's consent.

The Opinion further concluded that the employment agreement failed to comply with the requirements for contingent fee agreements set forth in AZ-ER 1.5(c), which requires that such fee agreements be in writing and specify the method by which the fee was to be calculated, including the percentages that would accrue to the lawyer in the event of a recovery. The agreement before the Committee was found to be deficient because it did not specify whether expenses were to be deducted before or after the contingent fee was calculated. (See also discussion in Sections 1.5:600 and 1.8:1120, infra.) Finally, the Committee concluded that the employment agreement violated AZ-ER 1.16(d) by stating that the attorney could withhold the client's file after termination of the representation. AZ-ER 1.16(d) specifically provides that, upon the termination of representation, a lawyer must surrender "papers and property to which the client is entitled.”

1.2:250      Lawyer's Duties to Client in General

Upon the establishment of an attorney-client relationship, the lawyer becomes a fiduciary with a duty of loyalty, care and obedience to the client. Matter of Piatt, 191 Ariz. 24, 951 P.2d 889 (1997). A lawyer has a duty of utmost good faith to the client, and is bound to discharge the duties to the client with strict fidelity. In re Baker, 102 Ariz. 346, 429 P.2d 665 (1967). This duty of good faith includes the obligation to keep the client apprised of matters that may adversely affect the client's interests. Mageary v. Hoyt, 91 Ariz. 41, 369 P.2d 662 (1962). Attorneys continue to owe current clients a duty of loyalty even if they are not acting as the clients' attorney in a particular transaction in which the client is involved and represented by another. In the Matter of the Estate of Fogleman, 197 Ariz. 252, 3 P.3d 1172 (App. 2000).

It was previously held that a lawyer also has a duty to act as a zealous advocate of the client. Hitch v. Pima County Superior Court, 146 Ariz. 588, 708 P.2d 72 (1985). In Hitch, the Supreme Court recognized that "[a]s a representative of his client, a lawyer must act as a zealous advocate, demonstrating loyalty to his client and giving him the best legal advice possible within the bounds of the law.” Id., 146 Ariz. at 592, 708 P.2d at 76. The 2003 amendments to the Rules, however, deleted all references to lawyers acting as "zealous” advocates or representing clients "with zeal.” In addition, a lawyer owes to each client a duty of undeviating loyalty, which is "not just a casual obligation to be turned on or off as the dictates of the moment indicate or particular employment may demand.” Matter of Evans, 113 Ariz. 458, 462, 556 P.2d 792, 796 (1976). This duty of loyalty runs to insureds, even when the attorney is being compensated by the insurance company. Parsons v. Continental National American Group, 113 Ariz. 223, 550 P.2d 94 (1976); Farmers Insurance Company of Arizona v. Vagnozzi, 138 Ariz. 443, 448, 675 P.2d 703, 708 (1983).

When representing a client, a lawyer has the duty to exercise a reasonable degree of skill and care when performing the lawyer's professional duties. Sarti v. Udall, 91 Ariz. 24, 369 P.2d 92 (1962). There have been various different articulations of the lawyer's duty to clients, and the relevant standard of care, in legal malpractice cases. In Molever v. Roush, 152 Ariz. 367, 370, 732 P.2d 1105, 1108 (App. 1986), the Court characterized the attorney's duty as being "to act as a reasonably careful and skillful attorney.” See also Martin v. Burns, 102 Ariz. 341, 429 P.2d 660 (1967); Sarti v. Udall, 91 Ariz. 24, 369 P.2d 92 (1962). In Phillips v. Clancy, 152 Ariz. 415, 418, 733 P.2d 300, 303 (App. 1986), the Court characterized the attorney's duty as being "to exercise that degree of skill, care, and knowledge commonly exercised by members of the profession . . .” See also Toy v. Katz, 192 Ariz. 73, 961 P.2d 1021 (App. 1997); Collins v. Miller & Miller, Ltd., 189 Ariz. 387, 943 P.2d 747 (App. 1996). The Court of Appeals elaborated, to some degree, on this articulation of the applicable standard, in Baird v. Pace, 156 Ariz. 418, 752 P.2d 507 (App. 1987):

That standard [for legal malpractice] requires an attorney to act for his client in a reasonably careful and skilled manner in view of his special professional knowledge . . . He must ". . . possess such a reasonable knowledge of the law as is ordinarily possessed by other attorneys, and to discover those additional rules of law which, although not commonly known, may be readily found by standard research techniques.”

Id., 156 Ariz. at 420, 752 P.2d at 509 (citations omitted).

In Toy v. Katz, 192 Ariz. 73, 85, 961 P.2d 1021, 1033, the Court cited AZ-ER 1.1 as authority for the proposition that the defendant attorney "was bound to discharge his professional responsibilities competently with the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” To the extent that suggests that the standard for imposing malpractice liability is equivalent to the standard for imposing discipline for a violation of AZ-ER 1.1, it is inconsistent with the decision of the Arizona Supreme Court in Matter of Curtis, 184 Ariz. 256, 908 P.2d 472 (1995). That proceeding arose out of Curtis' representation of one client who had hired a contractor to construct a swimming pool at the client's residence. After discovering that the job was more difficult than originally anticipated, the contractor ceased work and declared bankruptcy. There was a dispute between Curtis and the client concerning the scope of his engagement to deal with this situation. Curtis claimed that he had only been hired to look into the contractor's bankruptcy filing, did so, discovered that the contractor had no assets and advised the client that further action would be futile. The client claimed that Curtis was hired to secure a lift of the bankruptcy stay so that the client could pursue a claim against the Contractor's Recovery Fund. The Hearing Officer agreed with the client, as did the Court, and found that Curtis' failure to do what he was retained to do constituted a violation of AZ-ER 1.1. The Court went on to observe, however:

Neither failure to achieve a successful result nor mere negligence in the handling of a case will necessarily constitute an ER 1.1 violation. We recognize the important distinction between conduct by an attorney that is simply negligent and conduct that rises to the level of an ethical violation. Clearly, the Bar must be vigilant in guarding the rights of clients, "but care should be taken to avoid the use of disciplinary action . . . as a substitute for what is essentially a malpractice action . . .” Thus, although not every negligent act violates an ethical rule, neglect in investigating the facts and law necessary to present a client's claim crosses the fine line between simple neglect and conduct warranting discipline.

We conclude that Respondent's actions or inactions went beyond mere lack of success or an act falling below the applicable standard of care. Respondent could not provide competent representation because he failed to have, attempt to obtain, or apply the "legal knowledge, skill, thoroughness and preparation reasonably necessary” for his representation of Client in this matter. ER 1.1 (emphasis added). Respondent may not have known what to do or how to do it, but for whatever reason he did not attempt a thorough review of the matter and did not prepare or do anything beyond a cursory check of the bankruptcy file. Respondent ultimately did no more than tell Client what he knew before hiring Respondent. We conclude that Respondent violated ER 1.1

Id., 184 Ariz. at 261-62; 908 P.2d at 477-78 (citations omitted) (emphasis in original). The Court did not elaborate, either in this or any other Opinion, upon the difference between the amount and character of evidence required to warrant the imposition of discipline for violating AZ-ER 1.1, and that sufficient to sustain a malpractice verdict.

1.2:260      Client's Duties to Lawyer

There are no statutes, cases or ethical rules that specify duties which a client owes to the client's lawyer. AZ-ER 1.16(b)(4), however, permits a lawyer to withdraw from representation of a client, if "the client fails substantially to fulfill an obligation to the lawyer regarding the lawyer's services and has been given reasonable warning that the lawyer will withdraw unless the obligation is fulfilled.” This provision certainly suggests that a client has, or can have under the terms of a properly crafted engagement agreement, obligations to the lawyer, and that the lawyer may withdraw from representation if the client fails to honor them. Thus, the Comment to AZ-ER 1.16 also provides that "[a] lawyer may withdraw if the client refuses to abide by the terms of an agreement relating to the representation, such as an agreement concerning fees or court costs or an agreement limiting the objectives of the representation.” (See also discussion in Sections 1.5:230 and 1.16:600, infra.)

1.2:270      Termination of Lawyer's Authority

AZ-ER 1.16(a)(3) provides that a lawyer shall withdraw from representing a client if the lawyer has been discharged. The Comment to this aspect of that Rule states that a "client has a right to discharge a lawyer at any time, with or without cause, subject to liability for payment for the lawyer's services.” This was the Rule prevailing in Arizona even before the adoption of the Arizona Rules of Professional Conduct. In State Farm Mutual Insurance Company v. St. Joseph's Hospital, 107 Ariz. 498, 489 P.2d 837 (1971), the Supreme Court noted:

. . . the law in Arizona is clear that a client has the absolute right to terminate the attorney-client relationshp at any time with or without cause. . . and may without the consent of his attorney settle and compromise his claim with his adversary . . . we . . . reaffirm the power of the client at any time to discharge his attorney and to settle or compromise his own claim. Our law does not bind a person to one attorney merely because he has entered into a contingent fee relationship.

Id., 107 Ariz. at 501-02, 489 P.2d at 840-41 (citations omitted). In Arizona Ethics Opinion No. 94-02, the Committee on the Rules of Professional Conduct ("the Committee”) considered, among other things, the propriety of a provision in an attorney's so-called "Personal Injury Employment Agreement,” which stated that: "[u]nder the law, the client has the power, but not necessarily the contract right, to discharge their attorney at any time.” The Committee found that the denomination of this engagement agreement as a "Personal Injury Employment Agreement,” and the inclusion of this particular provision, was unethical because it was likely to interfere with the client's right to have counsel of her or his own choosing, and would deter clients from discharging the lawyer, even if they were dissatisfied with the lawyer's services.

The Comment to AZ-ER 1.16, in the following passage, however, suggests that there may be limitations, under certain circumstances, on the client's right to terminate a lawyer's services:

Whether a client can discharge appointed counsel may depend upon applicable law. A client seeking to do so should be given a full explanation of the consequences. These consequences may include a decision by the appointing authority that appointment of successor counsel is unjustified, thus requiring self-representation by the client.

If the client has severely diminished capacity, the client may lack the legal capacity to discharge the lawyer, and in any event the discharge may be seriously adverse to the client's interests. The lawyer should make special effort to help the client consider the consequences and may take reasonably necessary protective action as provided in ER 1.14.

Comment, AZ-ER 1.16, áá 5, 6.

Once an attorney has been discharged by the client, parties to litigation are entitled to continue dealing with that attorney as counsel of record if the parties have no knowledge of the termination. Schatt v. O.S. Stapley Company, 84 Ariz. 58, 323 P.2d 953 (1958). Once the parties learn, however, that counsel of record is no longer the party's true attorney, they must so notify the court and proceed in accordance with the court's direction. Id.

There are other circumstances where an attorney is required to withdraw from representation, as well as circumstances where an attorney is permitted to terminate an engagement. Those are discussed extensively in Sections 1.16:200 and 1.16:300, infra. Attorneys who seek to terminate the representation of a client must notify the client of the lawyer's intent to withdraw from representation in a manner from which someone could reasonably determine that the relationship can no longer be depended upon. In re Weiner, 120 Ariz. 349, 352, 586 P.2d 194, 197 (1978). See also In re American Continental Corporation/Lincoln Savings and Loan Securities Litigation, 794 F.Supp. 1424, 1452 (D.Ariz. 1992) (attorneys must inform clients in a clear and direct manner when the client's conduct violated the law, and the lawyer must withdraw if the clients continue the objectionable activity).

1.2:300   Authority to Make Decisions or Act for Client

The attorney-client relationship is governed by the law of agency. Balmer v. Gagnon, 19 Ariz.App. 55, 504 P.2d 1278 (1973). As an agent of the client, the attorney has the authority to make certain types of decisions on behalf of the client. There are, however, limitations placed upon the attorney's power to act on behalf of the client; certain decisions are specifically reserved to the client.

1.2:310      Allocating Authority to Decide Between Client and Lawyer

AZ-ER 1.2(a) specifically states that a "[S]ubject to paragraphs (c) and (d), a lawyer shall abide by a client's decisions concerning the objectives of representation and, as required by ER 1.4, shall consult with the client as to the means by which they are to be pursued.” The Rule thus draws a line of demarcation between decisions as to the "objectives” of the representation, which are the client's exclusive province, and decisions as to the "means” by which those objectives are to be achieved, as to which the lawyer need only "consult” with the client. In addition, AZ-ER 1.2(a) provides that the client is responsible for determining whether to accept an offer of settlement in civil matters, and for determining what plea shall be entered, whether to waive the right to a jury trial, and whether the client will testify, in criminal matters.

The Arizona courts have characterized the attorney-client relationship as an agency relationship, in which the lawyer acts as an agent for the client. Cahn v. Fisher, 167 Ariz. 219, 805 P.2d 1040 (App. 1990); Garn v. Garn, 155 Ariz. 156, 745 P.2d 604 (App. 1987); Balmer v. Gagnon, 19 Ariz.App. 55, 504 P.2d 1278 (1973). In Garn, the Court of Appeals recognized that "[a]s part of an attorney's apparent authority, an attorney is responsible for the day-to-day tactical decisions involved in the process of litigation.” Garn v. Garn, supra, 155 Ariz. at 160, 745 P.2d at 608. In addition, in court proceedings, an attorney is presumed to be authorized to represent the client for whom the attorney has appeared. For example, statements made by an attorney retained to represent a party have been admitted as statements authorized by that party, and thus excluded from the operation of the hearsay rule by Rule 801(d)(2) of the Arizona Rules of Evidence. Reed v. Hinderland, 135 Ariz. 213, 660 P.2d 464 (1983); Bogue v. Better-Bilt Aluminum Co., 179 Ariz. 22, 875 P.2d 1327 (App. 1994); Copeland v. City of Yuma, 160 Ariz. 307, 772 P.2d 1160 (App. 1989).

An attorney is not, however, the client's general agent; there are limitations on the attorney's authority to act for the client. An attorney has apparent and/or implied actual authority, manifested by the client's act of retaining the attorney, to do that which attorneys are normally authorized to do in the course of litigation, and to bind the client thereto. Garn v. Garn, 155 Ariz. 156, 745 P.2d 604 (App. 1987). A lawyer, however, generally is not authorized, merely by the fact that the lawyer has been retained to handle litigation, to impair a client's substantial rights or the cause of action itself without the client's consent. Hays v. Fischer, 161 Ariz. 159, 777 P.2d 222 (App. 1989); United Liquor Co. v. Stephenson, 84 Ariz. 1, 322 P.2d 886 (1958). Thus, an attorney has no implied or apparent authority to settle or compromise a claim, and may not stipulate to a compromise settlement of a pending lawsuit, without the client's express, actual authorization. Garn v. Garn, supra. Once a client has expressly authorized an attorney to compromise a lawsuit, the attorney may enter into an agreement on the client's behalf and that agreement is binding on the client. Hays v. Fischer, supra, 161 Ariz. at 163, 777 P.2d at 227.

1.2:320      Authority Reserved to Client

As discussed in Section 1.2:310, supra, AZ-ER 1.2(a) provides that the client is responsible for determining whether to accept an offer of settlement in civil cases. Thus, in United Liquor Company v. Stephenson, 84 Ariz. 1,3, 322 P.2d 886, 887, the Supreme Court stated that "[a]n attorney does not, by the general authority arising out of his employment, have an implied or inherent power to compromise and settle his client's cause of action.” See also Hays v. Fischer, 161 Ariz. 159, 777 P.2d 222 (App. 1989); Garn v. Garn, 155 Ariz. 156, 745 P.2d 604 (App. 1987). If an attorney is given the express authority to compromise a claim, the attorney has the power to settle it, and the client will be bound to the settlement. Hays v. Fischer, supra; Garn v. Garn, supra. A lawyer who fails to communicate the existence of a written settlement offer to the lawyer's clients is subject to discipline. Matter of Varbel, 182 Ariz. 451, 897 P.2d 1337 (1995). Similarly, the imposition of discipline, including disbarment, is warranted where a lawyer settles cases without the client's permission and converts the settlement proceeds to the lawyer's own use. Matter of LaLonde, 172 Ariz. 60, 834 P.2d 146 (1992).

In Arizona Ethics Opinion No. 03-05, the Committee on the Rules of Professional Conduct ("the Committee”) concluded that an attorney for a plaintiff or claimant could not ethically enter into any settlement agreement that would require the attorney to indemnify the settling parties from any lien claims against the settlement proceeds. The principal basis for this conclusion was that AZ-ER 1.8 precludes attorneys from providing financial assistance to a client by paying or advancing medical expenses, and would similarly preclude the attorney from guaranteeing, or accepting ultimate liability for, the payment of such expenses. The Committee went on to note that, while AZ-ER 1.2 generally requires an attorney to abide by a client's decision whether to accept an offer of settlement, a settlement that would require the attorney to hold settling parties harmless violates AZ-ER 1.8, and the attorney cannot agree to such a condition. If the client insists that the attorney do so, then the attorney would be required to withdraw.

In Arizona Ethics Opinion No. 88-02, the Committee held that, when a health care provider asks a lawyer's client to sign a lien against the proceeds of the client's personal injury claim, the lawyer must explain to the client any significant limitations upon the enforcement of the lien, and the extent to which the client's granting of the lien may affect the client's subsequent rights against the provider. The ultimate decision whether or not to grant the lien, however, the Committee pointed out, is the client's, and the lawyer must explain that to the client as well.

In criminal matters, AZ-ER 1.2(a) provides that the defendant is responsible for determining what plea shall be entered, whether to waive the right to a jury trial, and whether to testify at trial. In addition, in Quinton v. Superior Court of the State of Arizona, 168 Ariz. 545, 815 P.2d 914 (App. 1991), the Court held that the defendant, and not the defendant's lawyer, must waive the defendant's rights under the double jeopardy clause. In finding that there the defendant had not knowingly and/or expressly waived those rights, the Court observed that "[i]n dealing with waivers of constitutional rights in criminal cases, the defendant's waiver must be voluntarily, knowingly and intelligently made . . . because of the importance of the right being waived, the waiver must be express rather than implied.” Id., 168 Ariz. at 459, 815 P.2d at 918.

1.2:330      Authority Reserved to Lawyer

In both civil and criminal matters, the lawyer has the implied authority to make day-to-day tactical decisions regarding the litigation process and those decisions are binding upon the client. Wyatt v. Wehmueller, 167 Ariz. 281, 806 P.2d 870 (1991); Garn v. Garn, 155 Ariz. 156, 745 P.2d 604 (App. 1987). The attorney also controls the drafting of all pleadings. Buehman v. Smelker, 50 Ariz. 18, 68 P.2d 96 (1937). An attorney's authority to make tactical decisions includes the authority to stipulate to waive a competency hearing and submit the issue of the defendant's competency to stand trial for decision on the basis of experts' reports. State v. Blier, 113 Ariz. 501, 557 P.2d 1058 (1976); State v. Contreras, 112 Ariz. 358, 542 P.2d 17 (1975). The lawyer also has the authority to elect to proceed to trial before a particular judge. State v. Reid, 114 Ariz. 16, 559 P.2d 136 (1976).

Consistent with this principle, the client is, as a general rule, charged with the acts and omissions of the client's attorney in handling litigation matters. Thus, relief under Rule 60 of the Arizona Rules of Civil Procedure from a dismissal for lack of prosecution is not warranted by the fact that the dismissal was due to an attorney's action or inaction. Panzino v. City of Phoenix, 196 Ariz. 442, 999 P.2d 198 (2000); McKernan v. Dupont, 192 Ariz. 550, 968 P.2d 623 (App. 1998); Mission Insurance Company v. Cash, Sullivan & Cross, 170 Ariz. 105, 822 P.2d 1 (App. 1991).

A slightly different rule is followed in the discovery context, where the issue is whether the sanction of dismissal, or the entry of a party's default, should be ordered for discovery abuse. In that context, it has been held that dismissal of an action, or the entry of a default, is warranted only where the party personally shares complicity in the abusive behavior. Groat v. Equity American Insurance Co., 180 Ariz. 342, 884 P.2d 228 (App. 1994); Nesmith v. Superior Court, 164 Ariz. 70, 790 P.2d 768 (App. 1990). To sustain the imposition of the sanction of dismissal or the entry of default for discovery or disclosure violations, the trial court must make an express finding that a party, as opposed to that party's counsel, has obstructed the discovery process. Wayne Cook Enterprises v. Fain Properties Ltd. Partnership, 196 Ariz. 146, 993 P.2d 1110 (App. 1999). If there is a question as to whether the misconduct involved was that of a party or counsel, a hearing should be conducted to resolve it. AG Rancho Equipment Co. v. Massey-Ferguson, Inc., 123 Ariz. 122, 598 P.2d 100 (1979); Weaver v. Synthes, Ltd., 162 Ariz. 442, 784 P.2d 268 (App. 1989); Lenze v. Synthes, Ltd., 160 Ariz. 302, 772 P.2d 1155 (App. 1989); Robinson v. Higuera, 157 Ariz. 622, 760 P.2d 622 (App. 1988). See McAuliffe, Arizona Civil Rules Handbook - 2003 Edition (West Group 2003), pp. 411-13. See also discussion in Section 1.2:360, infra.

At trial, a lawyer is given wide discretion to make objections "as in his judgment the exigencies of the case require. State v. Haley, 87 Ariz. 29, 33, 347 P.2d 692, 694 (1959). A client may be precluded from asserting issue on appeal, if the client's attorney fails to properly preserve them. See State v. Tison, 129 Ariz. 526, 633 P.2d 335 (1981). In Tison, the defendant claimed error in the admission at trial of certain incriminating statements that had not been challenged at a suppression hearing before the trial court. The Supreme Court ruled that this circumstance precluded the defendant from raising that issue on appeal, explaining: "[w]hen a defendant chooses legal representation, the power of decision is delegated to the lawyer . . . and his decision may be binding upon the defendant, even though rights of constitutional dimensions have been lost.” Id., 129 Ariz. at 535-36, 633 P.2d at 345.

The Comment to AZ-ER 1.2 recognizes that disagreements may arise between the lawyer and the client concerning the means employed to accomplish the objectives of the representation. As it explains:

On occasion, however, a lawyer and a client may disagree about the means to be used to accomplish the client's objectives. Clients normally defer to the special knowledge and skill of their lawyer with respect to the means to be used to accomplish their objectives, particularly with respect to technical, legal and tactical matters. Conversely, lawyers usually defer to the client regarding such questions as the expense to be incurred and concern for third persons who might be adversely affected. Because of the varied nature of the matters about which a lawyer and client might disagree and because the actions in question may implicate the interests of a tribunal or other persons, the Rule does not prescribe how such disagreements are to be resolved. Other law, however, may be applicable and should be consulted by the lawyer. The lawyer should also consult with the client and seek a mutually acceptable resolution of the disagreement. If such efforts are unavailing and the lawyer has a fundamental disagreement with the client, the lawyer may withdraw from the representation. See ER 1.16(b)(4). Conversely, the client may resolve the disagreement by discharging the lawyer. See ER 1.16(a)(3).

Comment, AZ-ER 1.2, á 2.

1.2:340      Lawyer's Authority to Act for Client

As noted earlier, the attorney-client relationship is governed by the principles of agency law. Cahn v. Fisher, 167 Ariz. 219, 805 P.2d 1040 (App. 1990); Garn v. Garn, 155 Ariz. 156, 745 P.2d 604 (App. 1987). Under agency law, a lawyer can bind a client, if the client expressly authorizes the attorney to perform the actions in question (express authority), if the attorney is in a position where third persons using reasonable discretion would be justified in assuming that the attorney possessed the requisite authority from the client (apparent authority), or if the party, with full knowledge of them, ratifies the attorney's actions (ratification). Garn v. Garn, supra, 155 Ariz. at 162, 745 P.2d at 610. As discussed in Section 1.2:330, supra, an attorney generally possesses apparent authority to bind clients on tactical and procedural matters that arise in the day-to-day processing of litigation. See State v. Tison, 129 Ariz. 526, 633 P.2d 335 (1981); State v. Reid, 114 Ariz. 16, 559 P.2d 136 (1976); State v. Haley, 87 Ariz. 29, 347 P.2d 692 (1960). But see Wyatt v. Wehmueller, 167 Ariz. 281, 806 P.2d 870 (1991), where the Court held that, although an attorney had the requisite authority to file a lis pendens as a tactical measure, the lawyer's failure to notify the client of having done so rendered it inappropriate to subject the client to statutory damages under the wrongful lien statute.

Consistent with this principle, the client is, as a general rule, charged with the acts and omissions of the client's attorney in handling litigation matters. Thus, relief under Rule 60 of the Arizona Rules of Civil Procedure from a dismissal for lack of prosecution is not warranted by the fact that the dismissal was due to an attorney's action or inaction. Panzino v. City of Phoenix, 196 Ariz. 442, 999 P.2d 198 (2000); McKernan v. Dupont, 192 Ariz. 550, 968 P.2d 623 (App. 1998); Mission Insurance Company v. Cash, Sullivan & Cross, 170 Ariz. 105, 822 P.2d 1 (App. 1991).

As discussed in Section 1.2:320, supra, the client retains the sole power, in civil cases, to accept a settlement offer. In Hays v. Fischer, 161 Ariz. 159, 777 P.2d 222 (App. 1989), however, the Court of Appeals held that, when a client expressly authorizes an attorney to enter into an agreement compromising a claim, the client will be bound to the agreement. In Canyon Contracting Company v. Tohono O'Odham Housing Authority, 172 Ariz. 389, 837 P.2d 750 (App. 1992), moreover, the Court of Appeals recognized that a settlement agreement can be enforced based upon the theory of apparent authority if the first party's conduct allows the second party to reasonably conclude that the first party's attorney was authorized to settle, and the second party's reliance on the attorney's apparent authority was reasonable. See also Arizona Title Insurance and Trust Company v. Pace, 8 Ariz.App. 269, 445 P.2d 471 (968).

In criminal matters, as also discussed in Section 1.2:320, supra, the client retains authority to determine what plea shall be entered, whether to waive the right to a jury trial, and whether to testify at trial. The attorney must usually obtain the client's express authority to act and bind the client with respect to those matters. In State v. Corrales, 138 Ariz. 583, 595, 676 P.2d 615, 627 (1983), however, the Supreme Court held that a defendant may be bound by an attorney's trial decision to waive constitutional rights, so long as the attorney made "a deliberate choice to waive known and understood rights.”

1.2:350      Lawyer's Knowledge Attributed to Client

AZ-ER 1.4 requires a lawyer to keep a client reasonably informed about the representation, and to respond to clients' requests for information. In keeping with that Rule, a client is usually held to be bound by the knowledge of the client's lawyer. Hackin v. First National Bank of Arizona, 5 Ariz.App. 379, 427 P.2d 360 (App. 1967). In Hackin, however, the Court of Appeals ruled in favor of a client whose attorney had withdrawn without notifying the client of an impending trial date. The Court concluded: "that plaintiff Hackin should not be prejudiced by the fact that his former attorney represented his father and, at the last minute, became disenchanted with his father.” Id., 5 Ariz.App. At 385, 427 P.2d at 366. An attorney's obligation to keep clients informed as to the status of their matters, and to respond to requests for information, is discussed more extensively in in the Section of this Narrative devoted to Rule AZ-ER 1.4.

Similarly, a notice sent to a lawyer is generally presumed to constitute notice to the clients the lawyer is representing in the matter. In Bates & Springer of Arizona, Inc. v. Friermood, 109 Ariz. 203, 507 P.2d 668 (1973), the Supreme Court held that a letter sent to an attorney, advising that certain property was available for the attorney's clients to take possession, was imputed notice to the clients of that fact.

1.2:360      Lawyer's Act or Advice as Mitigating or Avoiding Client Responsibility

As a general, but not invariable, rule, an attorney's action on behalf of a client, within the scope of the attorney's authority, are attributed to the client. In State v. Scott, 24 Ariz. App. 203, 537 P.2d 40 (App. 1975), the Court of Appeals clarified that a defendant is bound to the acts and omissions of both prior counsel and present counsel. Additionally, the attorney's neglect or misconduct is usually attributed to the client as well. In Balmer v. Gagnon, 19 Ariz.App. 55, 504 P.2d 1278 (App. 1973), the Court of Appeals held that a client was bound to the terms of an erroneously worded release which the lawyer had failed to correct before sending it to the other side. The Court explained: "[t]he neglect of the attorney is equivalent to the neglect of the client himself when the attorney is acting within the scope of his authority.” Id., 19 Ariz.App. At 57, 504 P.2d at 1280.

In General Electric Capital Corporation v. Osterkamp, 172 Ariz. 185, 836 P.2d 398 (App. 1992), the Court of Appeals held that a lawyer's misunderstanding or ignorance of the Arizona Rules of Civil Procedure is not a sufficient basis for setting aside the entry of a default against the client. Similarly, an attorney's erroneous belief that Rule 6(e) of the Arizona Rules of Civil Procedure extended the time for filing an answer under Rule 55(a)(3) of those Rules does not constitute the "excusable neglect” necessary to warrant vacating a default. Baker International Associates v. Shanwick International Corporation, 174 Ariz. 580, 851 P.2d 1379 (App. 1993). The same rule has been applied where relief is sought from a dismissal for failure to prosecute. Thus, it has been held that relief under Rule 60 of the Arizona Rules of Civil Procedure from a dismissal for lack of prosecution is not warranted by the fact that the dismissal was due to an attorney's action or inaction. Panzino v. City of Phoenix, 196 Ariz. 442, 999 P.2d 198 (2000); McKernan v. Dupont, 192 Ariz. 550, 968 P.2d 623 (App. 1998); Mission Insurance Company v. Cash, Sullivan & Cross, 170 Ariz. 105, 822 P.2d 1 (App. 1991).

A slightly different rule is followed in the discovery context, where the issue is whether the sanction of dismissal, or the entry of a party's default, should be ordered for discovery abuse. In that context, it has been held that dismissal of an action, or the entry of a default, is warranted only where the party personally shares complicity in the abusive behavior. Groat v. Equity American Insurance Co., 180 Ariz. 342, 884 P.2d 228 (App. 1994); Nesmith v. Superior Court, 164 Ariz. 70, 790 P.2d 768 (App. 1990). To sustain the imposition of the sanction of dismissal or the entry of default for discovery or disclosure violations, the trial court must make an express finding that a party, as opposed to that party's counsel, has obstructed the discovery process. Wayne Cook Enterprises v. Fain Properties Ltd. Partnership, 196 Ariz. 146, 993 P.2d 1110 (App. 1999). If there is a question as to whether the misconduct involved was that of a party or counsel, a hearing should be conducted to resolve it. AG Rancho Equipment Co. v. Massey-Ferguson, Inc., 123 Ariz. 122, 598 P.2d 100 (1979); Weaver v. Synthes, Ltd., 162 Ariz. 442, 784 P.2d 268 (App. 1989); Lenze v. Synthes, Ltd., 160 Ariz. 302, 772 P.2d 1155 (App. 1989); Robinson v. Higuera, 157 Ariz. 622, 760 P.2d 622 (App. 1988). See McAuliffe, Arizona Civil Rules Handbook - 2003 Edition (West Group 2003), pp. 411-13.

In a similar vein, the Supreme Court has held that, when an attorney's neglect is legally excusable, the client may obtain relief from a default judgment entered as a consequence of that neglect. Coconino Pulp and Paper Company v. Marvin, 83 Ariz. 117, 317 P.2d 550 (1957). But see Jarostchuk v. Aricol Communications, Inc., 189 Ariz. 346, 942 P.2d 1178 (App. 1997) (a legal secretary's miscalculation of the deadline for filing an appeal to Superior Court from an adverse arbitration award did not constitute "excusable neglect”). Additionally, in Wyatt v. Wehmueller, 167 Ariz. 281, 806 P.2d 870 (1991), the clients of an attorney who had filed an improper lis pendens, without notifying the clients, were held not subject to liability for damages under A.R.S. § 33-420(A), as the scienter requirement of the statute could not be satisfied by imputing the attorney's knowledge to the clients.

1.2:370      Appearance Before a Tribunal

A lawyer appearing in court is presumed to be representing the person on whose behalf an appearance is made. In State v. Hopson, 112 Ariz. 497, 499, 543 P.2d 1126, 1128 (1975), the Supreme Court recognized that "[d]efense counsel represents and speaks for his client when addressing the court.” In addition, a defendant is bound to the courtroom concessions of an attorney made in the defendant's presence. See State v. Tison, 129 Ariz. 526, 633 P.2d 335 (1981); State v. Reid, 114 Ariz. 16, 559 P.2d 136 (1976); State v. Haley, 87 Ariz. 29, 347 P.2d 692 (1960); State v. Hughes, 22 Ariz.App. 19, 522 P.2d 780 (App. 1974); Long v. Arizona Portland Cement Company, 2 Ariz.App. 332, 408 P.2d 852 (App. 1966).

1.2:380      Authority of Government Lawyer

The professional conduct of all members of the State Bar of Arizona, including lawyers working for the government, is governed by the Arizona Rules of Professional Conduct. The Scope of the Rules (set forth in the Preamble) specifically acknowledges that the "responsibilities of government lawyers may include authority concerning legal matters that ordinarily reposes in the client in client-lawyer relationships.” Preamble, Arizona Rules of Professional Conduct, Rule 42, RASC. Examples of such responsibilities include the authority to settle a case, or to appeal an adverse judgment. The Preamble explains that the authority in such matters is usually vested in the Attorney General, the County Attorney or a United States Attorney.

In addition, government lawyers may be able to represent several government agencies simultaneously in intergovernmental disputes, which is generally not permissible for lawyers in private practice. The Preamble specifically states that the Arizona Rules of Professional Conduct do not abrogate this authority possessed by a government lawyer. The Preamble to the Rules, as amended in 2003, also recognizes that government lawyers "may have authority to represent the «public interest' in circumstances where a private lawyer would not be authorized to do so.” Preamble, á 18.

1.2:400   Lawyer's Moral Autonomy

AZ-ER 1.2(b) states that a lawyer's representation of a client "does not constitute an endorsement of the client's political, economic, social or moral views or activities.” As the Comment to this aspect of the Rule explains:

Legal representation should not be denied to people who are unable to afford legal services, or whose cause is controversial or the subject of popular disapproval. By the same token, representing a client does not constitute approval of the client's views or activities.

Comment, AZ-ER 1.2, á 5.

On the other hand, a lawyer is not merely a technician bound to merely carry out the client's objectives so long as they comply with law and the restrictions placed upon the lawyer by the Arizona Rules of Professional Conduct. As the Preamble explains in defining the "Scope” of the Arizona Rules of Professional Conduct:

The Rules presuppose a larger legal context shaping the lawyer's role. That context includes court rules and statutes relating to matters of licensure, laws defining specific obligations of lawyers and substantive and procedural law in general. . . Compliance with the Rules, as with all law in an open society, depends primarily upon understanding and voluntary compliance, secondarily upon reinforcement by peer and public opinion and finally, when necessary, upon enforcement through disciplinary proceedings. The Rules do not, however, exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile human activity can be completely defined by legal rules. The Rules simply provide a framework for the ethical practice of law.

Rule 42, RASC ,Preamble, áá 15, 16.

1.2:500   Limiting the Scope of Representation

AZ-ER 1.2(c) provides that a "lawyer may limit the scope of his representation if the limitation is reasonable under the circumstances and the client gives informed consent.” As the Comment to this aspect of the Rule explains:

The scope of services provided by a lawyer may be limited by agreement with the client or by the terms under which the lawyer's services are made available to the client. Representation provided through a legal aid agency may be subject to limitations on the types of cases the agency handles. When a lawyer has been retained by an insurer to represent an insured, for example, the representation may be limited to matters related to the insurance coverage. A limited representation may be appropriate because the client has limited objectives for the representation. In addition, the terms upon which representation is undertaken may exclude specific means that might otherwise be used to accomplish the client's objectives. Such limitations may exclude actions that the client thinks are too costly or that the lawyer regards as repugnant or imprudent.

Although this Rule affords the lawyer and client substantial latitude to limit the representation, the limitation must be reasonable under the circumstances. If, for example, a client's objective is limited to securing general information about the law the client needs in order to handle a common and typically uncomplicated legal problem, the lawyer and client may agree that the lawyer's services will be limited to a brief telephone consultation. Such a limitation, however, would not be reasonable if the time allotted was not sufficient to yield advice upon which the client could rely. Although an agreement for a limited representation does not exempt a lawyer from the duty to provide competent representation, the limitation is a factor to be considered when determining the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. See ER 1.1

Comment, AZ-ER 1.2, áá 6, 7.

1.2:510      Waiver of Client or Lawyer Duties (Limited Representation)

In Arizona Ethics Opinion No. 91-03, the Committee on the Rules of Professional Conduct ("the Committee”) analyzed the ethical propriety of the practice of domestic relations attorneys in a certain county of preparing pleadings, and giving legal advice to clients, but then permitting those clients to file those pleadings and prosecute the action as a pro per litigant. The Committee concluded that it was proper for the lawyers to agree to represent clients on such a limited basis, so long as the client consented after consultation, the scope of the representation was not so limited that it violated AZ-ER 1.1, and the attorney did not counsel the client to engage in prohibited conduct. The Opinion noted that this form of limited representation might be necessary for people of limited financial means.

In In re Soll, 181 B.R. 433 (Bkrtcy. D. Ariz. 1995), an Arizona Bankruptcy Court found that the attorney for a creditor failed to obtain the requisite authority from the client to take possession of, and operate a bar, when the attorney was aware that the scope of his representation was limited under a power of attorney to the collection of purchase money notes.

1.2:600   Prohibited Assistance

AZ-ER 1.2(d) provides that a lawyer shall not assist a client, or advise a client, to engage in conduct that the lawyer knows is criminal or fraudulent. A lawyer may, however, discuss the legal consequences of a course of action, and may counsel a client to determine the validity, scope or meaning of a law. As the Comment to this aspect of the Rule explains:

Paragraph (d) prohibits a lawyer from knowingly counseling or assisting a client to commit a crime or fraud. This prohibition, however, does not preclude the lawyer from giving an honest opinion about the actual consequences that appear likely to result from a client's conduct. Nor does the fact that a client uses advice in a course of action that is criminal or fraudulent of itself make a lawyer a party to the course of action. There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity.

When the client's course of action has already begun and is continuing, the lawyer's responsibility is especially delicate. The lawyer is required to avoid assisting the client, for example, by drafting or delivering documents that the lawyer knows are fraudulent or by suggesting how the wrongdoing might be concealed. A lawyer may not continue assisting a client in conduct that the lawyer originally supposed was legally proper but then discovers is criminal or fraudulent. The lawyer must, therefore, withdraw from the representation of the client in the matter. See ER 1.16(a). In some cases, withdrawal alone might be insufficient. It may be necessary for the lawyer to give notice of the fact of withdrawal and to disaffirm any opinion, document, affirmation or the like. In extreme cases, a lawyer may be required to disclose information relating to the representation to avoid being deemed to have assisted the client's crime or fraud. See ER 4.1.

Comment, AZ-ER 1.2, áá 10, 11.

1.2:610      Counseling Illegal Conduct

In Arizona Ethics Opinion No. 2001-04, the Committee considered the obligations of a lawyer in a civil case who receives from a client documents containing privileged or otherwise confidential information which the client had obtained from an employee of the adverse party. On that issue, the Committee concluded that the lawyer must refrain from examining the materials or making use of them, notify (with the client's consent) opposing counsel of the receipt of them, and either abide by opposing counsel's instructions as to the disposition of them or seek a ruling from the court. If the client refuses to consent to notifying opposing counsel, the lawyer may not do so, but must still refrain from examining or using the materials. If the lawyer does so, withdrawal is not required. The Committee went on to observe that, if there is evidence that the client has some complicity in obtaining the materials, and intends to continue to do so, the lawyer must counsel the client about the legal consequences of that course of conduct and instruct the client to discontinue. If the client refuses to do so, then the lawyer may, but is not required to, advise the adverse party or the authorities. The lawyer must also refuse to accept any additional documents of that nature obtained by the client.

In Arizona Ethics Opinion No. 87-05, the Committee on the Rules of Professional Conduct ("the Committee”) analyzed whether an attorney could ethically advise a client arrested for driving under the influence of alcohol to refuse a blood, breath or urine test. The Committee determined that a lawyer who advises a client to refuse one or all of those tests will not violate the Arizona Rules of Professional Conduct, because the client has a statutory right to do so. The Committee cautioned, however, that the most prudent course of action was for the lawyer to advise the client of the legal consequences of a refusal to submit to the tests, and to allow the client to make the decision whether or not to do so.

In Arizona Ethics Opinion No. 95-02, the Committee considered whether a criminal defense attorney was required to provide information concerning the client's intentions to appear at trial. The Committee concluded that, if the attorney has actual knowledge that the client will not appear, and the client's failure to appear will be willful, then the attorney must so advise the court.

1.2:620      Assisting Client Fraud

In Arizona Ethics Opinion No. 88-08, the Committee considered an inquiry from a lawyer whose client in a marital dissolution matter had inadvertently but surreptitiously tape recorded a privileged conversation between her spouse and the spouse's lawyer, in which the spouse revealed the existence of additional funds which would be subject to division in the divorce proceedings, and the lawyer counseled how that could be avoided. The Committee concluded that the attorney could seek to preserve the money, but could not use the tape recording as evidence that the money existed. If the lawyer disclosed the existence of the tape recording or used its contents, then the lawyer would be ratifying or possibly assisting the client's illegal conduct, and might also be exposing the client to criminal liability. The Committee recognized that the client might expect the lawyer to use the recording in the litigation, but reiterated that the lawyer could not properly do so, and advised the lawyer to explain to the client the ethical limitations on the lawyer's ability to use the tape.

In Arizona Ethics Opinion No. 92-02, the Committee considered whether a lawyer had an ethical obligation to reveal the client's correct name to the court. The lawyer had been retained by "John Doe” for representation in a criminal matter. While out on bail, "John Doe” had been arrested on other charges, and had given his name as "John Smith” to the arresting officers. The inquiring lawyer was subsequently retained by the defendant for representation on these new charges and, during the course of that engagement, learned that the defendant's true legal name was "John Smith.” The Committee concluded that the attorney must advise the client that the attorney could not use the client's false name with the court, because to do so would be assisting the client in committing a fraud upon the court. If the client refused to correct the false name given in one of the proceedings, then the lawyer was obligated to seek to withdraw, but could not disclose the client's use of a false name. If the request to withdraw was denied, then the attorney was obligated to proceed with the representation, but without using the false name for the client. See also In re American Continental Corporation/Lincoln Savings and Loan Securities Litigation, 794 F.Supp. 1424, 1452 (D.Ariz. 1992) (attorneys must advise clients in a clear and direct manner when the client violated the law, and if the client continues the objectionable activity, the attorney must withdraw).

The Court of Appeals has recognized that an attorney who assists a client in perpetrating a fraudulent conveyance may be liable for damages suffered by the client's defrauded creditors. In McElhanon v. Hing, 151 Ariz. 386, 728 P.2d 256 (App. 1985), affirmed in part and vacated in part on other grounds 151 Ariz. 403, 728 P.2d 273 (1986), the Court held that a judgment creditor can seek monetary damages from a lawyer who assisted clients in perpetrating a fraud on that creditor. In order to prevail, the judgment creditor needed to prove (1) that the attorney committed actual fraud, and not merely constructive fraud, (2) the remedies under the Uniform Fraudulent Conveyance Act were not adequate, and (3) damages would be limited to the lesser of the amount of the creditor's judgment, or the value of the property at the time of the fraudulent transfer. Id., 151 Ariz. at 404, 728 P.2d at 273.

1.2:630      Counseling About Indeterminate or Uncertain Law

AZ-ER 1.2(d) provides that a lawyer may counsel a client to make a good faith effort to determine the validity, scope or meaning of the law. The Comment to this aspect of the Rule recognizes that, in some circumstances, a law, statute or regulation may need to be disobeyed in order to determine its scope, validity or meaning.

The Arizona courts have also recognized that an attorney will not be liable:

. . . while acting in good faith and in a belief that his conduct is for the benefit of his client, for a mere error of judgment or for a mistake in a point of law that has not been settled by the highest court of the jurisdiction and upon which reasonable lawyers may differ.

Martin v. Burns, 102 Ariz. 341, 343, 429 P.2d 660, 662 (1967). In Martin, the Supreme Court held that a lawyer who did not raise the question of the appealability of an order setting aside a default judgment, was not guilty of malpractice, because there were no cases that addressed the issue. See also Molever v. Roush, 152 Ariz. 367, 732 P.2d 1105 (App. 1986); Talbot v. Schroeder, 13 Ariz.App. 230, 475 P.2d 520 (App. 1970).

1.2:700   Warning Client of Limitations on Representation

What is now AZ-ER 1.4(a)(5) requires a lawyer, who knows that a client expects assistance prohibited by the Arizona Rules of Professional Conduct, to consult with the client regarding the limitations placed upon the lawyer's conduct.

In Arizona Ethics Opinion No. 88-08, the Committee on the Rules of Professional Conduct considered an inquiry from a lawyer whose client in a marital dissolution matter had inadvertently but surreptitiously tape recorded a privileged conversation between her spouse and the spouse's lawyer, in which the spouse revealed the existence of additional funds which would be subject to division in the divorce proceedings, and the lawyer counseled how that could be avoided. The Committee concluded that the attorney could seek to preserve the money, but could not use the tape recording as evidence that the money existed. If the lawyer disclosed the existence of the tape recording or used its contents, then the lawyer would be ratifying or possibly assisting the client's illegal conduct, and might also be exposing the client to criminal liability. The Committee recognized that the client might expect the lawyer to use the recording in the litigation, but reiterated that the lawyer could not properly do so, and advised the lawyer to explain to the client the ethical limitations on the lawyer's ability to use the tape.

In Arizona Ethics Opinion No. 2001-04, the Committee addressed the obligations of a lawyer in a civil case who receives from a client documents that contain privileged or otherwise confidential information which the client had obtained from an employee of the adverse party. The Committee endorsed the views of ABA Formal Opinion No. 94-382, and held that the lawyer must refrain from examining the materials or making use of them, notify (with the client's consent) opposing counsel of the receipt of the materials, and either abide by opposing counsel's instructions as to their disposition, or seek a ruling from the court. If the client refuses to consent to notifying opposing counsel, the lawyer may not do so, but must still refrain from examining or using the materials. If the lawyer does so, then the lawyer is not required to withdraw. If there is evidence that the client has some complicity in obtaining the materials, and intends to continue to do so, the lawyer must counsel the client about the legal consequences of that and tell the client to discontinue. If the client refuses to do so, then the lawyer may, but is not required to, advise the adversary or the authorities. The lawyer must also decline to accept from the client any further materials of a similar nature.

1.2:800   Identifying to Whom a Lawyer Owes Duties

The attorney-client relationship does not always involve an attorney representing an individual who pays for the legal services rendered to that individual. Attorneys also represent corporations, other organizations, trusts, and individuals whose legal bills are paid by another. In each of those cases, the attorney's duties, and to whom they are owed, may vary according to the relationship involved.

1.2:810      Prospective Clients [see 1.2:220]

The Arizona courts have recognized that an attorney-client relationship may be formed during the initial consultation between a lawyer and a prospective client, even if the lawyer is not eventually retained. Foulke v. Knuck, 162 Ariz. 517, 784 P.2d 723 (App. 1989). Upon creation of the attorney-client relationship, the lawyer owes a client a duty of loyalty, care and allegiance. Matter of Piatt, 191 Ariz. 24, 951 P.2d 889 (1997).

The 2003 amendments added a new AZ-ER 1.18 which deals specifically with the "Duties to Prospective Client.” This new Rule recognizes that attorneys regularly communicate with prospective clients, and those communications do not always result in the formation of a formal attorney-client relationship. The Rule imposes on lawyers a duty to preserve confidences imparted to a lawyer by a prospective client, regardless whether the lawyer or firm undertakes the representation of the prospective client. This duty does not apply to information that is communicated unilaterally and unsolicited to the lawyer, or to information imparted by a prospective client who consults the lawyer in an attempt to disqualify that lawyer from representing an adverse party in the matter. Under the new Rule, the firm with which the lawyer who had the contact with the prospective client may avoid imputed disqualification, and may represent a party whose interests are adverse to those of the prospective client, if the lawyer who had the contact is screened from participation in the matter, and the prospective client is notified of that screening.

1.2:820      Persons Paying for Representation of Another [see 1.7:400]

AZ-ER 1.8(f) prohibits a lawyer from accepting compensation from someone other than a client unless (1) the client gives informed consent, (2) there is no interference with the lawyer's professional judgment or with the attorney-client relationship, and (3) the lawyer protects the confidentiality of information relating to the representation as required by AZ-ER 1.6. The purpose of the Rule is to reenforce that the attorney must always exercise independent professional judgment on behalf of the client being represented, regardless of the source of payment for the lawyer's services.

Perhaps the most common situation where this Rule is implicated is where an insurance carrier retains counsel to defend one of its insureds. [Issues arising out of this tripartite relationship are discussed extensively in Sections 1.7:410 and 1.8:720, infra.] In its decision in Paradigm Insurance Co. v. Langerman Law Offices, P.A., 200 Ariz. 146, 24 P.3d 593 (2001), the Supreme Court noted that there is always the potential conflict between the interests of the insurer and those of the insured. When the potential for a future conflict between the insurer and the insured is great, or has become an actual conflict, then AZ-ER 1.7 may restrict the lawyer's ability to represent, or to continue to represent, either. Where there is no actual conflict, however, or the potential for future conflict is not substantial, then the lawyer may represent both insurer and insured, but the lawyer's primary allegiance must be to the insured. See also State Farm Mutual Automobile Ins. Co. v. Federal Ins. Co., 72 Cal.App.4th 1422, 86 Cal.Rptr.2d 20 (1999). In the event that a conflict between the insured and insurer arises, then the attorney's duty of loyalty is to the insured, and the attorney can no longer represent the insurer.

Previously, in Parsons v. Continental American Group, 113 Ariz. 223, 550 P.2d 94 (1976), the Supreme Court had held that an attorney retained by an insurance carrier to represents its insured could not act as an agent of the insurer and reveal to it information learned from the insured that was detrimental to the insured's claim for coverage. Where the attorney retained by the carrier learns from the insured in confidence information that defeats coverage, and reports that information to the insurer, without the insured's consent, then "such conduct constitutes a waiver of any policy defense and is so contrary to public policy that the insurance company is estopped as a matter of law from disclaiming liability under an exclusionary clause in the policy.” Id., 113 Ariz. at 228, 520 P.2d at 99. See also Farmers Insurance Company v. Vagnozzi, 138 Ariz. 443, 675 P.2d 703 (1983).

1.2:830      Representing an Entity [see also 1.13:200]

AZ-ER 1.13(a) provides that "[a] lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” AZ-ER 1.13(b) further states that, if a lawyer knows that an officer, employee, or other person affiliated with the organization has either acted, or intends to act, in a manner related to the representation that violates a law or other legal obligation of the organization, and such action is likely to cause substantial injury to the organization, the lawyer must act in the best interest of the organization. Actions the lawyer may take include urging reconsideration of the matter, advising that a separate legal opinion be obtained, and/or referring the matter to the organization's highest authority. If the highest authority in the organization insists upon conduct that will violate the law and is likely to result in injury to the organization, AZ-ER 1.13(c) permits the lawyer to withdraw from the representation.

Similarly, when it becomes apparent that the organization's interests have become adverse to those of a director, officer, shareholder or other constituent of the organization, the lawyer representing the organization shall explain the identity of the lawyer's client. AZ-ER 1.13(d). A lawyer may, however, represent one or more officers, directors, employees, shareholders or other constituents of the organization, so long as the representation does not violate the conflict of interest rules of AZ-ER 1.7. AZ-ER 1.13(e).

1.2:840      Representing a Fiduciary [see also 1.13:520]

In Matter of Estate of Shano, 177 Ariz. 550, 869 P.2d 1203 (App. 1993), the Court of Appeals that an attorney representing the personal representative or special administrator of an estate has a "derivative fiduciary duty” of fairness and impartiality to the successors and beneficiaries of that estate. In Shano, the Court upheld the trial court's disqualification of an attorney representing the special administrator of an estate, because the attorney had previously represented the beneficiary under a holographic will involving the same estate. The Court held that, as the attorney for the special administrator, the lawyer owed a derivative fiduciary duty to the successors to the estate, including the surviving spouse, and his duty of loyalty to his former client, the beneficiary under the holographic will, impaired his ability to discharge his fiduciary duties.

The Court recently had the opportunity to clarify the apparent breadth of the holding in Shano in its decision in In the Matter of the Estate of Fogelman, 197 Ariz. 252, 3 P.3d 1172 (App. 2000). In Fogelman, the Court reiterated that the attorney representing the personal representative or administrator of an estate owes a "derivative fiduciary duty” of fairness and impartiality to beneficiaries and successors, but explained that such duty was one imposed by Arizona's Probate Code, and not the Arizona Rules of Professional Conduct. The Court specifically held that successors and beneficiaries of an estate are not clients of the lawyer representing the personal representative. See also Wilmot v. Wilmot, 203 Ariz. 565, 58 P.3d 507 (2002); Capitol Indemnity Corp. v. Fleming, 203 Ariz. 589, 58 P.3d 965 (App. 2002).

1.2:850      Class Action Clients

There are no Arizona authorities that discuss the impact of AZ-ER 1.2, or any other provision of the Arizona Rules of Professional Conduct, on the ethical duties and obligations of lawyers who undertake representation of a class in a class action brought pursuant to Rule 23 of the Arizona Rules of Civil Procedure. In its discussion of the importance of providing effective notice to absent class members, who will be bound by any judgment entered in such an action, the Court of Appeals in A.J. Bayless Markets, Inc. v. Superior Court of Pima County, 145 Ariz. 285, 700 P.2d 1385 (1985) quoted, with obvious approval, the following passage from the decision in Greenfield v. Villager Industries, Inc., 483 F.2d 824, 832 (3rd Cir. 1973):

Not the least important of the fiduciary duties shared by counsel and the court is their duty to ensure that class members have knowledge of proceedings in which a final judgment may directly affect their interests.

Id., 145 Ariz. at 288, 700 P. 2d at 1388.