Ransomware & Cybersecurity Insurance

As I’ve often blogged, Rules 1.1 and 1.6 require lawyers to act competently to safeguard client data.

Last month, I became aware of a law firm that was the subject of a ransomware attack. The cyber attacker blocked the firm’s access to client files and demanded a ransom.

Reminder: if a lawyer’s electronic files are compromised in a cyber attack, the question of whether the lawyer violated the Rules of Professional Conduct will likely turn on whether the lawyer took reasonable precautions to safeguard against the unauthorized access of client data.  In other words, being the victim of an attack is not, in & of itself, an ethics violation.

For example, consider two scenarios.

Scenario 1:  Lawyer operates a solo practice.  Lawyer employs a state-of-the art security system.  Nevertheless, a determined criminal uses C-4 to detonate into the office, into the safe, and then steals Lawyer’s files.

Scenario 2:  Attorney operates a solo practice.  Attorney keeps client files in an unlocked cabinet that’s on the front porch.  A lazy criminal walks up the steps, opens a drawer, and takes some of Attorney’s files.

Between the two, my guess is that a hearing panel is more likely to conclude that Lawyer is the one who took reasonable precautions against the inadvertent or unauthorized disclosure of confidential information.

In any event, on the subject of ransomware, here are few thoughts:

As always, let’s be careful out there.

Hill Street Blues




So You Want to Represent Both Buyer & Seller?

Facts:  Mother owns home.  Mother wants to sell home to Son.  Mother & Son agree on the details, without the assistance of counsel.  Mother and Son ask Attorney to handle the purchase & sale, and to represent each of them at closing.

Wait a minute! Is it already April 1?  Mother & Son agreeing on details – of anything – without the assistance of counsel? In what crazy world does that happen?!?!

Anyhow, I digress.  Does Attorney have a conflict? If so, can it be waived?

According to IIlinois State Bar Professional Conduct Opinion 2017-04, the answer is yes there’s a conflict, and it likely cannot be waived.

According to the Illinois State Bar:

  • Representation of a buyer in a real estate transaction is directly adverse to representation of a seller.
  • Thus, Attorney has a conflict.
  • It is not reasonable for Attorney to believe that Attorney will be able to provide competent and diligent represntation to both Mother & Son.
  • Thus, the conflict cannot be waived.

A few relevant passages from the opinion:

  • “Pursuant to Rule 1.7(b)(1), the lawyer must analyze whether the lawyer may reasonably believe that the lawyer will be able to provide competent and diligent representation to each affected client. The question is whether a reasonable lawyer would conclude that the lawyer could provide the required diligence and competence to both the buyer and the seller in the transaction.”
  • ” In our view, if the buyer and the seller have not already executed a valid sales contract, the lawyer could not reasonably believe that he or she could provide competent and diligent representation to both the buyer and the seller. The lawyer could not negotiate on behalf of one client without harming or potentially harming the other client. The lawyer’s obligations and loyalties are so divided that the lawyer could not reasonably believe that the lawyer could provide adequate representation to both parties.”
  • “Even if the parties agree on the terms of the sale, and have already executed the sales contract, we believe that it is highly unlikely that a lawyer could properly represent both the buyer and seller in concluding the transaction. Issues often arise “after the parties have executed the contract and prior to closing that would require the lawyer to give unqualified advice to his or her client.”

Vermont’s Rule 1.7 is identical to the Illinois rule.  In Vermont, “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.”  Rule 1.7(a).  A concurrent conflict exists:

  • if the representation of a client will be directly adverse to another; Rule 1.7(a)(1), or,
  • if there is a significant risk that the representation of a client will be materially limited by the lawyer’s responsiblities to another. Rule 1.7(a)(2).

So, in Vermont, Attorney has a concurrent conflict:

  • if the representation of Mother will directly adverse to Son; or,
  • if there is a significant risk that the representation of Mother or Son will be materially limited by Attorney’s duties to the other.

If a concurrent conflict exists, Vermont’s 1.7 allows it to be waived if 4 criteria are met. The first is in Rule 1.7(b)(1): Attorney must reasonably believe that Attorney will be able to provide competent and diligent representation to both Mother and Son.

The Illinois State Bar concluded that it would not be reasonable for Attorney to believe such a thing. The opinon cites to the VBA Advisory Ethics Opinion 2004-3.

In the VT opinion, the Vermont Bar Associatioin’s Professional Responsibility Committee concluded that “an attorney may not simultaneously represent a client who is selling a parcel of real property and provide limited representation to the buyer of the same real estate by providing a title insurance policy to such buyer.”

The opinion is not exactly on point with the hypo with which I started this post.  However, the Committee went through exactly the correct analysis. Is there a concurrent conflict? If so, can it be waived.

In addressing the questions, the Comittee referred to an advisory opinion it had issued in 1978: VBA Advisory Ethics Opinion 78-04.  The opinion was rendered pursuant to the old Code of Professional Responsibility, the rules that governed until September 1, 1999.  Under the Code, even when faced with a conflict, a lawyer was allowed to “represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.”  Code of Professional Responsibility, DR-5-105(C).

The Committee concluded that the rule’s two phrases had equal meaning.  That is, “[i]t is important to emphasize, however, that consent – even if knowledgeably given – is not a general panacea to conflicts of interest. It will only vitiate the conflict if ‘it is obvious that [the lawyer] can adequately represent the interest of each.’ ”

From there, the 1978 Committee concluded that:

  • “It is difficult to see how a lawyer could ever make full disclosure in the real estate area given the myriad of problems that may arise. Moreover, real estate transactions often involve parties of different legal sophistication and disclosures suitable to one may be insufficient for the other.”

And, that

  • In [its view], the Committee reaffirms its position that representation of both purchase and seller in a normal ‘arms-length’ real estate transaction is unethical, at least when the representation of neither side is in any way limited.”

Now, perhaps times have changed. And, as did the Illinois and Vermont comittees in each of the three opinions I cited to in my blog, I am not going to try to list each and every situation in which a waiver may be valid under Rule 1.7(b).

All I’m saying is this: if Attorney wants to represent both Mother and Son, I read Rule 1.7(b) as requiring that it be reasonable for Attorney to believe that he can provide competent and diligent representation to each.

As always, let’s be careful out there folks.

Hill Street Blues