Answers to Summer 2011
California Bar Exam Questions

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Summer 2011 Bar Question 4

Professional Responsibility

Austin had been a practicing physician before he became a lawyer. Although he no longer practices medicine, he serves on a local medical association committee that works to further the rights of physicians to be compensated fairly by health insurance providers. The committee develops recommendations, but its members do not personally engage in public advocacy. Austin is a close friend of several of the other physicians on the committee, though as a lawyer he has never represented any of them.

In his law practice, Austin represents BHC Company, a health insurance provider. BHC has been sued in a class action by hundreds of physicians, including some of Austin’s friends, for unreasonable delay, and denial and reduction of reimbursements for medical services. Austin initially advised BHC that he was not confident it had a defense to the lawsuit. After further research, however, Austin discovered that a stated policy of the health care law is the containment of health care costs. He advised BHC that he could plausibly argue that reimbursements to physicians may legally be limited to avoid a dramatic increase in the health insurance premiums of patients. He explained that he would argue for a modification of existing decisional law to allow such a result based on public policy.

When Bertha, counsel for the class of physicians, heard the defense Austin planned to assert in the lawsuit, she wrote him a letter stating that if he presented that defense she would report him to the state bar for engaging in a conflict of interest.

1. What, if any, ethical violations has Austin committed as an attorney? Discuss.

2. What, if any, ethical violations has Bertha committed? Discuss.

Answer according to California law and ABA authorities.

All questions © 2011 California State Bar Exam. All rights reserved

Professional Responsibility
Question 4, Summer 2011

1. A’s ethical violations
Duty of Loyalty, Conflict of Interest
An attorney shall not undertake to represent two clients whose interests are actually adverse. Here, A is representing BHC, an insurer, defending it against a claim by physicians that it has unfair reimbursement policies. A also sits on an advisory board that seeks to promote fair reimbursement of physicians. The subject of the lawsuit in the BHC matter and the interests of the advisory board are diametrically opposite.
However, A is not representing the advisory board. He does not offer them legal advice, he does not advocate for them and he does not represent its interests in court. The advisory board is not a client. Therefore, A has not violated the ethical duty of loyalty where clients interests are adverse.

Duty of Loyalty, Independence of Judgment
An attorney shall not represent a client when the attorney’s own interests may interfere with his independence of judgment. Here, A is a former physician who is actively engaged in ensuring that physicians are fairly compensated by insurers. A’s client, BHC, is an insurer being sued for not fairly compensating physicians. A’s own personal interests might cloud his judgment.

If an independent attorney evaluating the situation would see a danger of the attorney’s conflict, then the attorney must inform his client of the potential conflict and seek a written waiver from the client.

In this case, A is taking advantage of his contacts within the physician community and on the advisory board in order to advance his law practice. If BHC has retained A for a large-scale class action insurance defense, it is likely that A’s practice is insurance defense. So there is not in fact a conflict between BHC and A. However, an independent attorney may still see the potential for a conflict given A’s ostensible interest in protecting physicians.

A had a duty to inform BHC of the potential conflict with his own interests and to obtain a written waiver from BHC. He did not do so. Therefore, he has violated his ethical duty of loyalty.

Duty of Respect
An attorney has a duty not to bring dishonor to the profession in any of his actions. Here, it seems that A has an insurance defense law practice and he apparently is on the medical advisory board to further his law practice and not to foster the board’s goals of ensuring fair reimbursement by insurers. It is true that the board is not A’s client, since he does not advocate their interests or represent them in court. So there is no actual conflict of interest between clients. But A is not on the board to guarantee physicians fair compensation. In undertaking to defend BHC, it is clear that the board’s goal is not one he shares. Admittedly, the argument he plans to make -- that the health care law cost containment policy justifies lowering physician reimbursement -- is one he is planning on making in court, and not as a policy proposal before the board. A’s violation would be clearer if the advisory board engaged in advocacy to change the law or if A was arguing before the board to lower physician reimbursement rates.  Even so, A’s motives appear to be unethical. For that reason, he may be violating his duty of respect for the profession.

Duty not to Make Frivolous Claims or Defenses.
An attorney has a duty to the court not to maintain a legal argument that is not well founded in fact or in law. Here, A at first did not see any defense for BHC’s reimbursement practices which delay and deny physician claims. Then A concocted the argument that the policy behind the health care law is cost containment and that he would argue that BHC’s failure to pay physician claims is a form of cost containment mandated by the law. A is planning on offering this as a defense in the class action against BHC. Since legitimate cost containment measures do not include delaying and denying legitimate physician claims for services rendered under current law, it is a frivolous defense and is sanctionable by the court, as well as being an ethical violation.

2. B’s ethical violations
Duty not to engage in illegal or unethical conduct. An attorney has a duty not to violate the law or her ethical responsibilities. Making a threat of legal or administrative process in order to prevent an attorney from taking an action is engaging in illegal or unethical conduct. Here, B is threatening A to prevent him from making a legal argument in a lawsuit. The appropriate response is to file a motion for sanctions before the court. But B is planning to report A for conflict of interest, and as discussed above, A does not have a conflict of interest. Therefore, B is using administrative process to threaten A not to take a course of action, and that is an ethical violation.

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