Risk Update

Real Risk — Real Housewives’ DQ Denied, Lawyers’ Risk Being Businesspeople

Posted Dan Bressler

“‘Real Housewives’ Star Can’t Oust Tweeting Lawyer From Law Firm Bankruptcy Probe” —

  • “A bankruptcy judge has blocked “The Real Housewives of Beverly Hills” cast member Erika Girardi from ousting a lawyer investigating her dealings with her estranged husband’s bankrupt law firm, ruling that allegedly inflammatory social media posts don’t warrant disqualification.”
  • “Ms. Girardi had requested a court ruling to disqualify Ronald Richards, a special litigation counsel in the bankruptcy case of Thomas Girardi’s now-defunct law firm Girardi Keese, for “false and inflammatory social media posts and public statements” he made on YouTube and Twitter.”
  • “Judge Barry Russell of the U.S. Bankruptcy Court in Los Angeles said on Wednesday the disqualification request ‘appears to be nothing more than a blatant attempt by Ms. Girardi to impede Mr. Richards’ efforts … to investigate allegedly fraudulent transfers.'”
  • “While conducting his investigation, Mr. Richards has made public comments on Twitter and in YouTube appearances regarding both the bankruptcy case and the Girardis themselves, and often punctuates his tweets with the hashtag #GirardiFraud.”
  • “The judge’s written ruling on Wednesday said Mr. Richards’ conduct ‘failed to constitute any ethical violations that would disqualify him’ from efforts to dig up funds for Girardi Keese’s creditors.”
  • “Mr. Richards tweeted in June that evidence shows Ms. Girardi “is more than just an innocent spouse.’ Mr. Richards also sat for interviews for a documentary about Girardi Keese, Mr. Girardi and Ms. Girardi, according to Ms. Girardi’s motion seeking to disqualify him. The ABC News documentary, titled ‘The Housewife and the Hustler,’ was released on Hulu in June and featured multiple creditors in the bankruptcy case.”

While written with a moonlighting solo practitioner in mind, this analysis is interesting in the context of firms looking to offer “value added” services to clients to cultivate broader/deeper relationships and grow revenue. (For example, I know of one law firm that was looking to get into the crisis communications management business for clients facing the pressures of the public eye.) With those opportunities come risks to navigate: “Ethics Forum: Questions and Answers on Professional Responsibility” —

  • “The best answer is be a lawyer or be a business person. Doing both can potentially get a lawyer in trouble because one has an obligation to their clients and to devote most of their time to their law practice. Further, business and law are different. A business has the goal of making money. Law has the goal of helping people, which is why it is a profession.”
  • “The big question is, when one runs a business, how does one avoid having the Rules of Professional Conduct apply to their non-legal business. The Rules of Professional Conduct can make someone very uncompetitive if their competitors don’t have to abide by the same rules.”
  • “Rule 5.7(a) is fairly clear that if a lawyer provides nonlegal services to recipients that are not distinct from the legal services then the Rules of Professional Conduct apply. Therefore, if a lawyer has their law practice, but is also running a tax business out of the same office then the Rules of Professional Conduct are going to apply to that lawyer in the tax business.”
  • “Under Rule 5.7(b), if the nonlegal services are distinct from the legal services then the Rules of Professional Conduct still would apply if the lawyer knows or should know that the recipient might believe that they are getting the protection of an attorney-client relationship.”
  • “Under Rule 5.7(c), a lawyer who is an owner or employer or affiliated with an entity providing nonlegal services can still be subject to the Rules of Professional Conduct if the lawyer knows that the recipient might believe that they are receiving the protection of the attorney-client relationship. Paragraph D tries to provide an exception. That paragraph states that Subsection B and Subsection C don’t apply if the lawyer makes reasonable efforts to avoid any misunderstanding with the recipient of the nonlegal services, and clearly states that the services are not legal services, and also makes clear that the attorney-client relationship does not apply or exist.”
  • “The comment notes that this communication has to be made before entering into the agreement for the service of the nonlegal work. It has to be done in a way that an average person would understand what it means.”
  • “It is so important for a lawyer to recognize that the use of nonlegal services has to be carefully reviewed and properly presented to the client. Clearly, some businesses can become very uncompetitive if a lawyer is held to their higher standards of the Rules of Professional Conduct.”