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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.

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Ohio Legal Ethics Narrative

II. Counselor

RULE 2.3 EVALUATION FOR USE BY THIRD PERSONS

2.3:100 Comparative Analysis of Ohio Rule

2.3:101 Model Rule Comparison

Ohio Rule 2.3 is identical to the Model Rule, with the exception of the addition of "agree to" prior to "provide" in division (a).

2.3:102 Ohio Code Comparison

The following sections of the Ohio Code of Professional Responsibility are listed in the Correlation Table (Appendix A to the Rules) as related to Ohio Rule 2.3: None.

2.3:200 Undertaking an Evaluation for a Client

Ohio Rule 2.3(a) provides as follows:

A lawyer may agree to provide an evaluation of a matter affecting a client for the use of someone other than the client if the lawyer reasonably believes that making the evaluation is compatible with other aspects of the lawyer's relationship with the client.

See Ohio Rule 2.3 cmts. [1] (evaluation under Rule "may be performed at the client's direction or when impliedly authorized to carry out the representation; providing examples) & [2] (evaluation under Rule distinguished from investigation of one with whom lawyer does not have lawyer-client relationship; "[t]he question is whether the lawyer is retained by the person whose affairs are being examined").

As Hazard and Hodes emphasize, it "applies when a lawyer evaluates or conducts a 'legal audit' of his own client and makes the results available to a third party." 1 Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering § 25.2, at 25-3 (3d ed. Supp. 2004) (emphasis in original). Examples include title searches ordered by the client-vendor for delivery to the prospective buyer, Ohio Rule 2.3 cmt. [1]; registration statements prepared by lawyers for issuers of stock, which statements are required to be filed with the government and are used by potential investors, id.; auditors' requests for legal information concerning the client, referred by the client to its lawyer, Ohio Rule 2.3 cmt. [6]; and opinions with respect to whether a corporation is authorized to enter into a proposed transaction, Laws. Man. on Prof. Conduct (ABA/BNA) § 71:701 (2003). With respect to auditors' requests, Comment [2] references the procedure set forth in ABA Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for Information, reprinted in Committee on Audit Inquiry Responses, Auditor's Letter Handbook (1976 & Supp. 1998), and 31 Bus. Law. 1709 (1976).

In situations like these, it is important to ascertain whether conducting such an evaluation is consistent with the lawyer's duties to the client. Ohio Rule 2.3 cmt. [3]. Even if it is, before undertaking the evaluation the lawyer still needs to counsel the client regarding the impact that undertaking this role may have on the client, particularly the necessity to disclose client information and to follow any duties the law may impose on the lawyer in favor of the third party. Id.

At times there may be a conflict between the need to provide an evaluation and the impact that that evaluation may have on the client's interests. If proceeding with the evaluation may affect the client's interests "materially and adversely," the lawyer should not undertake such an evaluation without the client's informed consent. Ohio Rule 2.3(b) & cmt. [5].

Where making a third-part evaluation is permissible, the lawyer who proceeds to do so must be careful to avoid any confusion over the lawyer's role in this setting, and thus should make clear to all concerned who has retained him. Ohio Rule 2.3 cmt. [2].

As to the evaluation itself, material limitations on the scope of the evaluation should be set forth in the report. Ohio Rule 2.3 cmt. [4]. See ABA, Annotated Model Rules of Professional Conduct 280 (6th ed. 2007) (commentary). If the lawyer has relied on the conclusions of others, that fact should be stated in the opinion; further, the lawyer/evaluator should not simply accept the client's version of the facts material to the opinion if he or she has reason to doubt the accuracy of those facts. Id. Stated another way, if the lawyer is relying, without independent investigation, on facts provided by the client, that should be stated in the opinion, but such a disclaimer would not protect the lawyer if those facts provided by the client are known by the lawyer to be false. "In no circumstances is the lawyer permitted to knowingly make a false statement of material fact or law in providing an evaluation under this Rule." Ohio Rule 2.3 cmt. [4]. See 1 Restatement (Third) of the Law Governing Lawyers § 51(2) cmt. e, at 360-61 (2000); id. at § 95(3).

Be aware that if you are a lawyer advising publicly held companies or their auditors about the materiality of pending litigation, which advice is going to end up in documents going to the SEC, you ought to think about whether your advice is subject to the Sarbanes-Oxley Act (see 15 USC § 7245) and the SEC rules promulgated thereunder (17 CFR Part 205). See also Dan K. Webb & Scott P. Glauberman, Up the Ladder: Litigator Responsibilities Under the Sarbanes-Oxley Act, Litig., Summer 2004, at 21. Nonlitigators helping a client prepare documents to be filed with the SEC also must pay attention to Sarbanes-Oxley and the SEC rules. See further discussion of Sarbanes-Oxley at section 1.13:310.

2.3:300 Duty to Third Persons Who Rely on Lawyer's Opinion

  • Primary Ohio References: Ohio Rule 2.3
  • Background References: ABA Model Rule 2.3
  • Commentary: ABA/BNA 71:706; ALI-LGL § 95; Wolfram § 13.4.4

Neither the Rule nor its comments provides much insight on the lawyer's duty to third persons -- the only reference is in Comment [3], which states that "[b]ecause an evaluation for someone other than the client involves a departure from the normal client-lawyer relationship, careful analysis of the situation is required. . . . Even when making an evaluation is consistent with the lawyer's responsibilities to the client, the lawyer should advise the client of the implications of the evaluation, particularly the necessity to disclose information relating to the representation and the duties to the third person that these rules and the law impose upon the lawyer with respect to the evaluation. The legal duties, if any, that the lawyer may have to the third person are beyond the scope of these rules." Ohio Rule 2.3 cmt. [3].

2 Restatement (Third) of the Law Governing Laywers § 95(3) (2000) sheds a bit more light on the issue; pursuant to the Restatement a lawyer providing an evaluation to a nonclient "must exercise care with respect to the nonclient to the extent stated in § 51(2) [1 Restatement (Third) of the Law Governing Lawyers § 51(2) (2000)] and not make false statements prohibited under § 98 [2 Restatement (Third) of the Law Governing Lawyers § 98 (2000)]." The comments state that the § 51(2) duty in this context "is to provide a fair and objective opinion." 2 Restatement (Third) of the Law Governing Laywers § 95 cmt. c, at 20 (2000).

The Restatement further elaborates on the duty of care as follows: Under § 51, a lawyer owes a duty to use care within the meaning of § 52(1) (i.e., "the competence and diligence normally exercised by lawyers in similar circumstances") to a nonclient who reasonably relies on the lawyer's opinion, "unless the jurisdiction's general tort law excludes liability on the ground of remoteness." Restatement (Third) of the law Governing Lawyers §  51(2) cmt. e, at 359 (2000). For a discussion of Ohio law on this issue, see this section infra. See also Charles W. Wolfram, Modern Legal Ethics § 13.4.4, at 710 (1986) (evaluator should act candidly with due regard to interests of those who can be expected to rely on the opinion).

Nationally, there is a "growing body of law" holding lawyers liable to nonclient third parties who foreseeably and reasonably rely on the lawyer's opinion. Laws. Man. on Prof. Conduct (ABA/BNA) § 71:701 (2003). There is at least one Ohio case, decided when the OHCPR was in effect, that can arguably be put in this category, even though the lawyer's "opinion" was rendered under circumstances considerably more informal than those envisioned under MR 2.3. See Orshoski v. Krieger, No. OT-01-009, 2001 Ohio App. LEXIS 5018 (Ohio App. Ottawa Nov. 9, 2001) (prospective subdivision lot purchaser made inquiry of real-estate agent (son of subdivision developer) and then relied on oral opinion of lawyer for subdivision developer, who relayed to prospective purchaser lawyer's erroneous opinion that placing prefabricated home on lot would not violate restrictive covenant; motion to dismiss in lawyer's favor reversed; court of appeals held that nonclient's complaint stated negligent representation claim upon which relief could be granted). Orshorski is at odds with the traditional Ohio rule that a lawyer is not liable to a nonclient third party unless that party is in privity with the client (expressly found not to be the case in Orshorski) or the lawyer acts maliciously (not alleged in Orshoski). See Scholler v. Scholler, 10 Ohio St.3d 98, 462 N.E.2d 158 (1984). For further discussion of Orshoski and the Scholler rule, see section 1.1:410.

2.3:400 Confidentiality of an Evaluation

Pursuant to the provisions of Ohio Rule 2.3(b), prior to the lawyer's undertaking of an evaluation for a third party of a matter affecting a client, the client must give "informed consent," "[w]hen the lawyer knows or reasonably should know that the evaluation is likely to affect the client's interests materially and adversely . . . ." The informed-consent requirement enables the client to make an intelligent decision in those instances in which the evaluation may involve disclosure of confidential client information. See Ohio Rule 2.3(c) (except where disclosure authorized, information protected by Ohio Rule 1.6); see also the commentary to MR 2.3(c), ABA, Annotated Model Rules of Professional Conduct 281-82 (6th ed. 2007) (disclosure in evaluation results in loss of confidentiality). This, in turn, may waive attorney-client and work-product protections. Id. at 282; 2 Restatement (Third) of the Law Governing Laywers § 95 cmt. d (2000). E.g., In re John Doe Corp., 675 F.2d 482 (2d Cir. 1982) (conversations between corporate general counsel and corporation's auditor in course of annual audit not protected by attorney-client privilege or work-product immunity).

According to Wolfram:

Confidentiality in evaluation is a matter of careful planning and execution of the evaluation and, most importantly, of the development of the terms of the undertaking in consultation with the client before it begins. A well-advised client would likely require that the lawyer submit a draft evaluation report to the client for review prior to its release to third parties.

Charles W. Wolfram, Modern Legal Ethics § 13.4.3, at 708 (1986).

While not evaluation cases as such (with one possible exception discussed below), there are a number of analogous Ohio decisions holding material not privileged where it was intended that the material be disseminated to third parties. See, e.g., Walsh v. Barcelona Assocs., Inc., 16 Ohio App.3d 470, 476 N.E.2d 1090 (Franklin 1984), and other cases cited at section 1.6:430. The same operative principle — lack of intent of confidentiality — would appear to apply in any instance of authorized disclosure of otherwise confidential evaluation materials to nonclients undertaken pursuant to Ohio law.

Consistent with the foregoing analysis, one of the cases cited in section 1.6:430, Johndahl v. Columbus Trotting Ass'n, Inc., 104 Ohio App. 118, 147 N.E.2d 101 (Franklin 1956), arguably could be considered an evaluation case akin to Ohio Rule 2.3. In Johndahl, the attorney for a partnership prepared incorporation papers containing confidential information, to be submitted to the appropriate state authorities, as intended by the partnership. At the trial, the lawyer testified and submitted evidence as to these matters. On appeal, plaintiff argued that admission of the lawyer's evidence was error, because the information was privileged. The court of appeals disagreed:

The facts which were carried into the application for incorporation of the partnership and the appraisal of its assets became public property or were provided to [the lawyer] with the intention that they be so used and therefore may not be said to be confidential in nature.

104 Ohio App. at 128, 147 N.E.2d at 109. Again, the overriding principle in Johndahl, as well as the other cases cited in 1.6:430, is the absence of intention that the information be held confidential, a circumstance that also applies in the context of evaluations for use by nonclients containing disclosure of confidential information pursuant to Ohio Rule 2.3.