Irresponsible by Design – NDAs as an example and how SRA ‘investigates’

Watching the Women and Equalities Select Committee evidence this week on NDAs (see here) a couple of thoughts struck me which may be worth mentioning.

Firstly, the evidence of the City partner portrayed an interesting, common attitude among lawyers. The point the Committee was dealing with was that NDA’s often/sometimes are casually/deliberately opaque about the rights of the subject of the NDA; in particular, how public interest disclosures are permitted under the agreement. I would say, some of these NDA’s are irresponsible by design.

The line taken, which was meant as a helpful suggestion, was that someone else ought to provide guidance to complainants, perhaps on a website somewhere, as to what these opaque or deliberately one-sided agreements really meant. It is tempting to add here, that this help should be given on a website, far far away. A second suggestion was that perhaps the regulators, the Law Society, specialist interest groups, or similar, could get together to tell the lawyers what kinds of agreements were acceptable.

Neither of these are terrible suggestions, but they seek to solve a problem rather removed from the origin of that problem and they miss the fundamental point that it is the lawyer who is responsible for the drafting of their own agreement. It is the lawyer who has to make sure that their agreements are lawful and does not take advantage of their opponent. It could very well be the lawyer who is held criminally responsible if a deliberately opaque agreement is likely to lead to the suppression of evidence.

And, in fact, it might be difficult for a regulator, or representative body, to give watertight guidance on such matters because – as lawyers are always fond of reminding us – every case is different. Each context is important. And, in any event, ultimately it is not the regulator or the representative body which interprets legality or professional misconduct, it is the Solicitors Disciplinary Tribunal or the courts. The SRA, for understandable reasons, is taking a line that says it is better that the professionals get used to taking and accepting the responsibility which is properly their own. They could take another line which is to try and regulate with much more detail. I will leave it to the reader’s own imagination as to how the lawyers would respond to that kind of detailed intervention. Ok, here’s a hint: creative compliance and lots of complaining.

The second point is that Paul Philip, CEO of the SRA, I think indicated in his evidence that any allegation about a suspect NDA which is put to them will be investigated. This is not normally how the SRA deals with complaints. As I understand it, they do not investigate every complaint that is made, even if on its face it, such a complaint may contain a well-founded allegation of misconduct. They prioritise according to the nature of the allegations and the evidence before them as well as the risk posed by the behaviour alleged. It is an interesting question as to which approach is the right one. The hearing provides some uncomfortable viewing for the SRA, particularly the admission that they did not seek a copy of the nondisclosure agreement from Allen and Overy when they met with them to discuss the Zelda Perkins case. Mr Philip properly accepted that this was an error. Such errors are likely born of a flexible approach to investigation.


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NDA Evidence to Select Committee

I have submitted evidence to the Commons Women and Qualities Committee. I was going to do a quick summary but Legalfutures beat me to the punch and probably did a better job of it too. Lest anyone think I am being critical of the SRA, I am not: they acted quickly and well. I do think, though, there is probably a need to go further, and to keep this issue under review.

My evidence also includes a detailed analysis of how NDAs like the Zelda Perkins might give rise to a criminal offence and why some of the evidence given to the Committee revealed a less than satisfactory understanding of professional ethics. You can read it here.


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NDA hearings: Perkins, Mansell and the Missing Man

I tried last night to tweet points of note from the evidence given by Zelda Perkins (complainant against Weinstein); Mark Mansell (Partner, Allen & Overy, drafter (in part at least) of the now infamous NDA; and others in the Now listening to Zelda Perkins evidence. You can watch the evidence for yourself. It’s well worth doing so, if only to watch a series of lawyers grappling with explaining their professional principles and rules. Mr Mansell will be expecting a few very uncomfortable passages to be written about him in the eventual report. I will be writing more about that in due course. For now, I am confining myself to reconstructing my tweets from last night, as I think some will find the summary of points made in the session of interest. I will make a few general points at the end. I should say I tweeted only those points that struck me as new or particularly interesting. It was not an attempt to create a comprehensive summary. Secondly, where my tweets are unclear I have sought to clarify them (although this is rare, it is not a completely verbatim reporting of my twitter stream, I have corrected obvious errors and added some text in square brackets occasionally).

First some points from Zelda Perkin’s evidence:

First point that stopped me and made my jaw drop. She saw a partner at SMB [Simons Muirhead & Burton who represented her 20 years ago in her dispute with Weinstein] initially but case was handed to a 2 year PQE to negotiate with A&O et al.

That L did an incredible job, she says, but was under as much duress as her, and out of their depth.

L was vociferous in saying the agreement was unlike any NDA they had seen and was very board. She says, L offered no suggestion that it was not enforceable

The negotiations at A&O sound rather longer than in press stories, although ZP often in a meeting room whilst her lawyer fought it out with A&O by the sound of it. Extraordinary [to me] 5pm-5am negotiation

Interesting suggestion at a number of points that ZP stiffened resolve of her lawyer considerably, e.g. they wanted to ask for £20k, she pushed them to ask for much more.

If I understand her evidence correctly, her L told [by Weinstein’s lawyers] to destroy a note of ‘almost a full admission’ by HW during negotiation?

Other stuff about the terms – forbidding them to talk to doctors, lawyers, police w/o them all signing an NDA, I’ve not focused on here, as its more or less what we’ve seen reported.

She was worried about being sued or going to jail if she broke the NDA

Next up A&O lawyer (MM) and SMB lawyer (TL) Former involved in negotiations, TL here representing her firm.

Not taking evidence on the particular case because of client confidentiality. ‘IN most cases’ the NDAs are less extensive. [Thereby discussing the case in a backhanded way. Partial waiver of LPP 😉 ? Bindmans holds a copy (why?)]

It is worth emphasising here, that this leads to MM commenting on general practice in ways which are clearly implied to be, by the Committee, and I think often by him, to be about the particular agreement under consideration. My impression is where he has things to say about the agreement which he can defend himself with he is happy to talk about the agreement under this pretence of commenting in general. And where he has nothing to say, or perhaps where he is privy to confidential information he cannot reveal, he prays in aid the defence that he cannot talk about the specific agreement. So he is able to, or forced to, depending on your perspective, speak selectively about the agreement. I don’t criticise him for this, it’s totally understandable. But it does lead to a little imbalance or a lack of clarity on some points. Let me return to the tweets of MM’s evidence…

[MM says] Not common not to give a party a copy of the NDA. Extremely rare, very very rare.

Justification offered is risk document might become public domain and so they would need to restrict the number of copies.

Does not see stopping or limiting participation in a criminal process as reasonable. Thinks can seek to prevent disclosure of confidential information that is not necessary for the process.

Seems to say can prevent voluntary disclosure. [I] Might not be understanding [his point here].

i.e. I might not be understanding the evidence there. It’s not very clear.

Can see why in theory it [an agreement of the type the Commmittee has sight of, i.e. ZP’s agreement] might be seen as perverting the course of justice. But has never done it.

Relies on a kind of lawyer boiler plate, I would always say nothing in the agreement overrides ordinary regulatory obligations, as meaning the agreement does not PtCoJ

What I take MM to mean here is that if he puts in a kind of disclaimer in the NDA, which says something along the lines of this does not reflect your regulatory obligations (which I think is the language he uses), then the agreement signals the individual can cooperate with police investigations (for instance). It’s a bit like putting in a disclaimer of personal injury liability that this does not affect your statutory rights, if you like. I’m going to tackle this approach on another day.

Chair puts it to him that he has sanctioned documents that clearly limit disclosure in cases of criminal and civil disclosure.

He’s invited to rethink the document. He restates the boilerplate argument.

He suggests SRA document [their Warning notice on NDAs] has changed the picture, the Chair says it’s stating the position as it was (i.e. he can’t claim the rules have changed).

He half concedes he would draft the terms differently to make clear there were not restrictions on their ability to speak to the authorities.

He says he can understand the [effect the] agreement will have on people like ZP

He says NDAs should not be used to cover up criminal activity. He’s then asked, so how many times have you done that? I get involved when they’ve decided not to go to the authorities[, he says].

Ahh, the costs question [How much did A&O get paid]. Maybe, I won’t get side-tracked with that.

They’re going to get that [costs info] in writing. I’m surprised he says he doesn’t know. I’d have thought he’d look it up or get briefed on it as part of his prep.

Gets all the professional principles put to him. Says essentially he’s just negotiating and that meets his obligations, he might draft it differently now although says the professional principles were broadly the same.

What’s different now is whisteblowing, regulatory obligations, and something about further disclosure which I didn’t quite catch.

Further legal advice is inhibited by the agreement we are told. That would not be a normal requirement, he says.

Would like clearer rules on NDAs.

[He is asked are] Through the night negotiations normal? On occasion parties anxious to agree something as quickly as possible or in different time zones. Otherwise not at all common.

Is it appropriate to have alleged perpetrator in the room in a negotiation? He can’t talk about this case but [otherwise?] only in a mediation. He would advise the alleged perpetrator not to be in the room.

Says he does do things to try and make sure clients take their post NDA obligations seriously.

We then switch to evidence from a partner at SMB, who was not involved in the original case. Occasionally MM also makes points worth noting.

Now to SMB, TL who is an employment lawyers. The lawyer who did this case declined to come [the missing man of this blog title]. First she knew of it was what was published in the media.

Not sure how useful/interesting this is going to be [given she was not involved in the case]. But am listening to it [in fact I only make a few comments…].

She can’t really ‘not comment on the actual document’ in the way A&O could ‘not comment’ on it. She does say the inability to keep a copy wholly exceptional. Sounds like she’s never seen it to me. Would say she should not sign it, and unethical

MM says he only acted for HW/Miramax once on this case. Quite important that [because it would support a view that A&O would not know HW had a series of cases like this; also why did Miramax or HW change thir lawyrs on such cases – if that is what they did?]

He can’t remember where the language in the document (that he won’t talk about) came from [the implication which is not directly addressed is that Miramax, HW, or his US lawyers may have suggested the wording]

[MM asked, ]Should lawyers write agreements in ways ordinary people can understand them? Yes, is the answer. *Imagine*

MM is asked to express regret. He sort of seems to say he does. In that cagey half apology way which we all use from time to time.

After that evidence there is evidence from Max Winthrop (Law Society Employment Law Committee I believe), Suzanne McKie QC (as an experienced practitioner dealing with claimants), Gareth Brahams (in his capacity as the Employment Law Association Chairman). I’d lost my appetite for tweeting by this stage, although there are lots of interesting things in this evidence too. Some key points which I noticed:

SM said that in 25 years she had seen respondent lawyers (plenty but not all or most was the implication) behave disgracefully. She talked of coercion and pressure, even midway through hearings.

None of these three witnesses have any experience of denying a party a copy of the NDA, which they seemed say was wholly extraordinary and in breach of their professional obligations

ELA chair was asked what the ELA was doing to raise awareness of these issues. He was stumped. Said they’d discuss at their next meeting (something he appeared to have realised he should do for the first time at that moment) and that members were free to write articles for their (newsletter? Magazine?) if they wanted to.

Two (I think) of these three witnesses wanted the CPS or the SRA to clarify the criminal law on perverting the course of justice. Perhaps they meant they’d like the CPS or the SRA to clarify their approach to interpreting the law on perverting the course of justice.

There was also a general tendency to hope the SRA would provide more guidance on what was expected of lawyers. This is a familiar point, with lawyers pleading for more regulation in times of uncertainty. They don’t really mean it I think, not deep down – they just want an excuse for not having to think for themselves about their exposure to risk, which I may return to in due course. It leads to one last point, generally, I should say that the witnesses gave very clear and reasonable evidence, it seemed to me, and the Committee probed without much grandstanding (almost none actually – which I think is to be commended given some of the Select Committee hearings I have watched). I think the professionals sometimes showed a limited understanding of their professional obligations and the law on perverting the course of justice (this may have been tactical or a response to the stress of the occasion – something I may return to too). At one point a Committee member Philip Davies crystallises the central point exposed by the evidence: Why is it, he asked, that Lawyers are very clear on one principle, the client’s interest but very unclear on the other ones – the obligation to behave with integrity, the obligation to protect the rule of law and the administration of justice, independence and so on? He gets half an answer. But only half. And I think the answer is wrong as a result. I’m going to come back to those two halves soon.

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DoNotLie – A quick post on ChatBot ethics

I was taking a look at one of the most famous chatbots, DoNotPay, today to prep some thoughts on lawtech for a talk I am giving next week. I thought I would try it out. When asked what I could be helped with I typed in parking ticket and picked the medical emergency option and quickly got directed to a chatbot that could help with parking tickets. I was asked a series of simple questions which included:

where was the appointment (hospital)

who was I taking (I said my wife)

what was the nature of the medical emergency (pregnancy)

Very quickly, a draft letter/email was produced which I am then free to adopt to deal with my problem. It’s done in an instant. And it said this (I have only excerpted the first few paragraphs by way of illustration)…


Apart from the grammar problems, which I am not so worried about, the Bot did a very nice and super-quick job of providing a draft appeal letter, basically asking the administrator of the fines to respond decently to my extenuating circumstances. Perhaps the main point of importance is I’d use it again to get myself going if I had a real problem, but there are two other points worth noting.

One is there is an obvious factual error. A very simple statement of facts from me to the chatbot is mangled. I can easily correct it, but I wonder if more subtle slips like that would generally be picked up by non-vigilant consumers of the product. I don’t think the fact-mangling was user-error by me. I think the Bot made a clear mistake. If I am right, was it negligently built? Who is responsible, and how far does that depend on me being able to read and correct for the mistake?

The second point is that, at least arguably, it has manufactured a ‘defence’ which is false. I said nothing to say I was prevented from parking due to the pressure of the situation. It might be true, it might not (I made the situation up). Again, I might correct that mistake if I were so inclined, but the Bot is leading me down a path here, isn’t it? If the Bot’s statement is unfounded, and /or untrue, then it is encouraging me to lie, isn’t it? It is not too difficult to imagine bot-users rationalising the approach as simply a lawyerly tactic which is acceptable, rather than dishonest. Who takes responsibility for that?

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NDAs: Time to take abusive defence seriously

Thanks to the excellent work of the Financial Times, nondisclosure agreements are in the news again. We know relatively little about the NDAs in the Presidents Dinner case, other than an allegation that the waitresses were asked to sign them without reading them. Although, the Prime Minister is reportedly ‘looking into’ whether such agreements need regulation. I want to return to the Weinstein case where it has been reported, but not verified, that an NDA drafted by Allen & Overy in relation to allegations of impropriety made by Zelda Perkins.

  • The report says that if “any criminal legal process” involving Harvey Weinstein or Miramax requires [Perkins] to give evidence, she will give 48 hours notice to Mark Mansell, a lawyer at Allen & Overy, “before making any disclosure”.
  • In the event her evidence is required, “you [she] will use all reasonable endeavours to limit the scope of the disclosure as far as possible”, adding that she will agree to give “reasonable assistance” to Miramax “if it elects to contest such process”.

And that the NDA was concluded through, “days of gruelling questioning at Allen & Overy’s London office, capped by a 12-hour session before a phalanx of Mr Weinstein’s lawyers that broke at 5am”. I have written previously about the here, where I suggested that the facts might be investigated as a potential attempt to pervert the course of justice. Again, I emphasise the need for some caution, as we do not know all the facts, or whether these facts are accurate.

I have been thinking further about this and reading the SRA’s Walk the Line document, which provides a resource for solicitors to think about their obligations around litigation and steps leading up to potential or threatened litigation. That’s document focuses on a range of potential problems including:

  • “predatory litigation against third parties, where the solicitor, in the interest of the client, uses the threat of litigation to obtain settlement, often from several opponents, on cases that have no real merit, but where the cost of settlement is less than the financial, emotional or reputational cost of fighting the claim.”
  • And, “taking unfair advantage of a third party.”
  • And finally, “excessive litigation, where the solicitor fails to consider their other duties when following a client’s wish to pursue aggressive and, in particular, speculative litigation.”

It is worth noting also that the Walk the Line document identifies using litigation (or the threat of it) to “silence criticism or stall another process,” as an abuse.

How might Walk the line help us think about the Weinstein case? In general terms, it reminds lawyers of their obligations not only to clients but to third parties and to the administration of justice. The points about threats of litigation remind us that ethical litigation extends more broadly than litigation itself.

The language of Walk the Line is often couched in the bringing of litigation. This is a slightly one eyed approach. In principled terms, it must be true that the mounting of defences of no real merit are similarly problematic to the bringing of predatory claims. We perhaps see a similar ‘claimants are the problem’ emphasis in the next statement, “The most harmful examples are often predatory litigation schemes, which can become widespread and affect very large numbers of individuals.” If, as has been suggested to me, employment lawyers regularly advise on NDA’s in ways which inhibit the disclosure of criminal conduct, one might not call them predatory litigation schemes, but they are certainly analogous. Defendants, not just claimants, can be a problem: but are they? What would the arguments be?

The starting point for lawyers thinking about their obligations to the administration of justice is usually taken to be the recognition that they must not, “attempt to deceive or knowingly or recklessly mislead the court” (O5.1 in the Solicitors Code). This includes not being complicit in another person deceiving or misleading the court (O(5.2)). The code provides examples, indicative behaviours (IBs), suggesting that, “constructing facts supporting your client’s case or drafting any documents relating to any proceedings containing: (a) any contention which you do not consider to be properly arguable.” IB(5.7) is likely evidence of knowingly or recklessly misleading the court.

One argument would be that either in the course of negotiations or by the inclusion of the above clauses in an NDA, Weinstein’s lawyers are contending that such clauses are enforceable. It might be argued that “contentions” are only arguments about facts, but there is no necessary reason for this being so. Without engaging in a detailed interpretation of the Code, the first part of IB (5.7) deals with the construction of facts [in any form] and the second part deals with the drafting of documents containing contentions. There is no reason that I can see for not thinking that contentions could – indeed should – include contentions about law. Indeed, more broadly, it is well understood that lawyers are obliged to draw to the attention of courts authorities and provisions which are contrary to their argument if they are not brought up by their opponent. Such an obligation would fit with seeing contentions as including contentions of law. Furthermore, in broad terms, the courts place higher obligations on lawyers not to mislead the court (and their opponents) about the legal basis of any claim than they do about facts: one is not generally obliged to correct an opponent’s mistake around facts, but one might be if they make a mistake about law (such as missing out a key case that which supports them). Again, such an obligation would fit with an idea that one should not mislead the court knowingly or recklessly when making points of law. One can, however, I should emphasise, make legal points which are arguable, even if one does not believe them to be correct.

Of course, what I have said so far applies specifically to the duty to the court and this case has not gone anywhere near a court yet. If, and I emphasise again that it is an if, a lawyer could not stand up and properly argue that the inhibitions on Ms Perkins cooperation with the police, then could they make the same point elsewhere? We do not know, whether and how, such clauses might have gone into the Weinstein NDA. Let us assume, for the sake of argument, that Weinstein’s lawyers argued that: such clauses were necessary, such clauses were enforceable, and Ms Perkins’ lawyer acceded. Or, let us imagine that the clauses were included without any discussion. Let us assume also that 5.1 and 5.2 are not directly engaged by such discussions, even though they are conducted in the shadow of potential litigation. What might the professional rules say about that situation?

Before I get too far into that, let me deal with one important matter. I am dealing with what follows on the assumption that an NDA which seeks to inhibit the signatory from disclosing potentially criminal conduct by third parties would be struck down as unenforceable. There might be a range of opinion on this, and this would depend in part on the facts of the particular case; but in general terms (and I emphasise I am not an employment or contract lawyer) the quite strong view that I am picking up is that this assumption is probably a correct view on the facts as reported. I emphasise that the further one gets from this assumption the harder it is to see any problem of professional ethics arising (at least in the sense of whether professional Codes may have been breached).

So, back to what is of particular interest to me…

It might be argued that a lower standard of honesty and integrity is demanded of lawyers when they are away from court. On the one hand, this makes sense: lawyers might be expected to be particularly careful when dealing with the courts and their opponents in litigation. On the other hand, there is always the judge and one’s opponent (if represented) to guard against misbehaviour when the court is engaged. In particular, there are greater structural protections against abuse when the court (or an opponent) is able to exercise some supervision over how parties behave and matters are better documented. To my mind, the absence or weakening of such structural protections is an argument for a similar obligation of honesty and integrity away from the court. Indeed the Bar’s Code of Conduct recognises an obligation not to knowingly or recklessly mislead or attempt to mislead anyone (rc9.1). The solicitors code of conduct is expected to contain similar obligations when it is revised (See Annex 1 here). And whenever I raise with solicitors the difference between the bar and the solicitors’ current codes of conduct, to ask the question whether solicitors can knowingly or recklessly mislead people away from the court, they dismiss the suggestion out of hand. In the abstract at least, they think that solicitors do have an obligation not to knowingly or recklessly mislead an opponent because of their duty to act with integrity.

The need to consider one’s duty to act with integrity is strengthened by an obligation under O(11.1): “you do not take unfair advantage of third parties in either your professional or personal capacity.” This is supplemented by examples: IB(11.7) taking unfair advantage of an opposing party’s lack of legal knowledge where they have not instructed a lawyer; and IB(11.8) demanding anything for yourself or on behalf of your client, that is not legally recoverable, such as when you are instructed to collect a simple debt, demanding from the debtor the cost of the letter of claim since it cannot be said at that stage that such a cost is legally recoverable. The argument here would be that demanding unenforceable elements in an NDA is akin to claiming something that is not legally recoverable.

It could be argued that 11.7 indicates that unfair advantage problems are confined to unrepresented parties. Again, I think this is probably a misreading. The Code does not require any such reading. The outcome does not confine the obligation to acting against unrepresented parties. And, Walk the Line suggests that in being, “careful not to take unfair advantage of the opponent or other third parties …Special care is needed where the opponent is unrepresented .” Special care, of course, indicates that the SRA thinks some care is needed whether or not the parties are represented. If we assume for a moment that Weinstein’s lawyers managed to exploit a lack of knowledge or understanding in Perkins’ lawyer (again, this is speculation not fact), they are not necessarily protected simply by the fact that Perkins was represented. Of course, as the SRA note, “solicitors involved in litigation [need not generally… ] ensure that their opponents do not fall into traps of their own making.” But any misinformation around the meaning, effect, and/or enforceability of the clauses in the NDA might well be sufficient to lead to a ‘taking advantage’ finding, as might anything done to actively encourage a misunderstanding on the part of their opponent’s lawyer (or the opponent herself) about the NDA.

A further point, going to integrity is that,

If a solicitor knows that a client’s case is not honestly brought, they must not act. Where suspicion arises or the context is high-risk, the solicitor’s duty to the administration of justice and the public interest would demand proper verification of the instructions and evidence. Correspondence with lay opponents in particular must not be misleading or intimidating. (In the matter of Brian Miller and David Gore, Solicitors Disciplinary Tribunal, 2010, cited in Walk the Line).

The first point is whether defending an allegation through a gag clause can be described as a case dishonestly brought? It may well depend on how it is defended, although the grilling described above suggests that it was defended and defended quite aggressively. On the other hand, it will likely be alleged that this was merely an investigation not a defence. I am not very impressed by such shallow semantics myself: what matters is the honesty not the action undertaken. Again, interpreting what is going on here requires a broader look at the context and factual matrix as it was ought to have been known to the lawyers.

If we return to IB11.8, might an obligation in an NDA amount to a demand for something (silence) which is not legally attainable (or recoverable in the words of the indicative behaviour)? Let us imagine there is a reason advanced that, if it had some foundation, justifies inhibiting a victim from talking to the police. I am finding it hard to imagine such a situation, particularly in the context of a pattern of repeated incidents of the kind that are alleged, but even so. With a foundation offered, Weinstein’s solicitors would be obliged to properly verify the instructions and the evidence on which it is based. So a point of investigation would be, did they? Similarly, if there was a repeated pattern of incidents which the lawyers were aware or ought to have been aware, then that too should weigh in their mind when acting aggressively for their client.

The same point applies to the solicitor’s obligation not to allow one’s independence to be compromised. Independence is mandatory on solicitors and includes independence from the client, where the solicitor’s obligation to protect the rule of law, or the need to maintain the profession’s reputation is engaged (for example, the SDT have said solicitors):

“must and should on occasion be prepared to say to [their] client ‘What you seek to do may be legal but I am not prepared to help you do it’.” (In the matter of Paul Francis Simms, Solicitors Disciplinary Tribunal, 2002 cited in Walk the Line).

This last comment is an interesting, I think potentially controversial, one, suggesting there are situations where a lawyer need not, sometimes must not, assist clients in taking advantage of their legal interests. In this case, if we imagine there is a strained but just about arguable case that the NDA is enforceable, the contexts in which the claims are brought (again, if we assume a pattern of incidents of the kind reported in the press) might mean the arguable point should not be advanced. In a way, this might merely restate that the lawyer is independently responsible for the tactics adopted in any particular case. They cannot simply say they are acting on instructions as an excuse for aggressive actions. All lawyers have to think independently about the implications of those actions. The SRA suggest that whether or not a claim [or defence] is abusive, “is determined heavily by the proportionality of the claimant’s actions, and ultimately by the merits of their claim should it reach a court”. Weak merits, or very weak merits at least, and disproportionate – if arguably legal – responses can then be called into question.

An interesting point remaining is whether simply dropping into the agreement a clause that one knows or strongly suspects is not enforceable might be sufficient here? If the merits are extremely weak and the clauses disproportionate, then it seems to me it can be criticised on the basis that independence, and other principles in the Code are comprmised. It might also be argued that the lawyer is contending that the enforceability of such a clause is properly arguable by the fact of its inclusion. In this way the questions arise again: are they taking advantage of their opponent? A finder a fact would be wary of saying that such advantage had been taken, or that an opponent had been misled, but that may depend on the circumstances.

The SRA document sensibly concludes with this reminder, “There will always be complex situations where maintaining the correct balance between duties is not simple and all matters must of course be decided on the facts . It is important for solicitors to recognise their wider duties and not to rationalise misconduct on the mistaken basis that their only duty is to their client .” To which I would add, nor should they lay claim to the idea that they were merely advisers, irresponsible for their client’s wrongs. We have shown elsewhere how such an attitude can diminish a lawyers ethical inclination. That kind of attitude may be part of the problem here, as may the claim made by some employment lawyers that NDAs ‘walk the line’ of enforceability by design, and therefore do not warrant ethical sensitivity. That they walk the line of enforceability by design redoubles my concern that they do merit scrutiny.

The facts of this case and my reading of the Walk the Line document suggests to me a few things:

1.There plainly needs to be an investigation of the Weinstein case and similar cases. I imagine this is underway.

2. The SRA, and perhaps to the Bar Standards Board, should conduct a sectoral review of practices around nondisclosure agreements.

3. The SRA should also, whilst it is thinking about this, revisit the Walk the Line document. It contains a subtle but significant and continuing bias in its focus: claimant lawyers may, sometimes do, bring abusive claims, but defendants and their lawyers may defend claims abusively too. whatever the rights or wrongs of the Weinstein case, the level of risk and the level of harm associated with such agreements is high. That needs greater attention.

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ABS simpliciter

The Gazette is reporting that the SRA, “has rejected the suggestion that innovative business structures present a greater risk of financial failure.” And in particular have said, or rather Crispin Passmore their Executive Director has said, that, “alternative business structures listed on the stock exchange or attracting private equity investors were no more likely to be profit-hungry than any other kind of legal services provider.”

I think this is a simplification which, if the Gazette have reported it accurately and fully, the regulators would be wiser to be a bit wary of.

What I think the SRA are right to push back against is those in the profession who are too quick to claim that lawyers are unsullied by the profit motive. It is flat out daft. Lawyer firms are businesses either by necessity (they need to make a profit to survive) or design (they want to make a profit because status, reward, and the joys of moolah are important to them). An important point here is that there are potentially intrinsic and extrinsic motivations at work in law firms. Let’s call those two motivations a justice orientation and a self-enhancement orientation for simplicity. Lawyers, indeed human beings generally, each balance those two orientations differently: for some self-enhancement is more important than others, similarly for some justice is more important than self-enhancement (see here for a study on commercial lawyers on this point and here for one on law students).* The same is very likely true for law firms. For this reason, some are more profit-hungry than others.

The same is also true for other businesses: the owners, managers, and employees all have their own justice/self-enhancement dispositions. Lawyers do not have a monopoly over the justice disposition and businesses do not have a monopoly over the self-advancement disposition. In this very simplistic sense, one would not have a reason for saying that ABSs cannot be more or less justice-oriented than law firms.

It is not that simple though. Firstly, there is important evidence that business structures, particularly financial incentives, influence how lawyers balance justice and self-enhancement concerns. In particular, in-house lawyers have been shown to take riskier decisions where they are more strongly aligned – through bonuses for example – with the commercial imperatives of the business (see this post where I discuss some of the research at length). Stronger financial incentives can and probably do mean in-house lawyers allow or help their clients to breach laws more often. I’d bet my bottom dollar the same is true for private practitioners in ABSs or law firms.

Again, at one level, it can be argued that both law firms and ABSs have mechanisms for aligning the commercial imperatives of the business and the behaviour of their lawyers. ABSs and law firms might be so similar as to be the same. If that were true, the SRA would be right to argue that there is no in principle reason for thinking that ABSs are worse than solicitors firms. Indeed, there are lots of reasons for thinking that firms have quite bad approaches to the management of incentives. Also, as that post on in-housers shows, other factors compete for and modify the influences on legal decision-making. ABSs might be better or worse in terms of the panopoly of potential influences on decisions and conduct.

The trouble is, it is not simply an in-principle decision. There is an important empirical question which is what are the influences work in ABSs and solicitors firms really and how strong or weak are they really? One would expect a great deal of variation between the groups: some ABSs will do a good job of managing those influences, as will some firms, and vice versa. That is not the same, however, as there not being some general differences between the two groups, or for particular subsets within those groups. Variation within groups does not mean there is no variation between groups.

To give a particular example, it is to my mind rather surprising to suggest that – in general – ABSs funded by venture capital would not be riskier. In general terms, it seems to me plausible, that generlaly they would be more driven by short-term economic interests than ABSs and law firms generally. And, again in general, they would also be more likely to have less sympathy for, interest in, create less space for, or manage for, a justice orientation in terms of the staff they attract and the way they deliver their work. In that sense, I think firms funded by venture capital probably are – at least a bit – more likely to be profit hungry than ordinary firms. My prior is that it is as daft to say otherwise as it is for law firms to say they are unsullied by the profit motive. The same may also be true for those listed on the stock exchange. No doubt many readers will be muttering about Carillion, given recent news.

I don’t want oversimplify; it is important to bear in mind that there may be benefits to some of the models which are riskier in regulatory terms. In particular, transformational change in the legal services market, should such a thing be possible, might be more likely to come from organisations with new ‘unlawerly’ ideas and a higher risk appetite. It might be – is in plenty of circumstances – worth tolerating higher regulatory risk for such potential benefits – but we should not pretend the risks are lower simply to seek out the benefits.

Of course I might be wrong. Venture capitalists might be just as balanced as lawyers or, more likely, law firms might be as financially driven as VCs. My central point is that we do not know enough about the competing strengths and weaknesses of ABSs in general or law firms, in general, to really, to begin to quantify properly the relative levels of risk. The SRA may have information which it is not shared which enables this quantification, but I doubt it. More likely, is the common approach of legal service regulators which is to make a claim in sympathy with their general policy and, because there is an absence of evidence, say there is no evidence to contradict it, or to cling to rather slim evidence in the favour of their preferred position. The LSB’s work on innovation tends to fall into this camp, for example. It is a product of small budgets and the hopes that they have for changing the legal services market,

In some ways, I do not criticise the approach: all decision-makers have to proceed in the absence of perfect, often even adequate, evidence. What I would criticise, however, is an un-nuanced awareness of the very significant gaps in knowledge and how they might impact on the correctness of, or in the implementation of policy. To reduce it to its simplest: I do not think we know how profit hungry law firms are in general and how profit hungry ABSs are in general. All will want profits, but some will want profits more than others. I would, in particular, speculate that certain kinds of ABSs would be generally at the upper end of profit-hungry spectrum and, again to speculate, in general, that would mean that ABSs were indeed more profit-hungry than law firms. Even if I am wrong about that it would be bizarre in the extreme to claim that ABSs and law firms risk profiles were the same. After all if ABSs are just like law firms why have ABSs? It would be rather convenient if they were different only in positive attributes.

That is not to say there would not be exceptions, or that (say) ABSs funded by venture capital should be forbidden, or indeed that they should necessarily be heavily regulated, but it would suggest they are probably somewhat higher risk. And that the higher risk should be borne in mind by the regulators when licensing, supervising, and/or investigating such licensees rather than finessed because of an overly-simple argument and absence of evidence. I supported, and continue to support, the introduction of ABSs into legal services. But I do not support the simple stories that are told about them. Quindell and so on remind us of the potential for spectacular failure. Firms fail too. Example and counter-example may not be enough to defend ABS policy if there is another spectacular implosion. Put another way, scandals are not rational and nor is the current argument about ABSs. Those arguments need a more robust foundation than they currently have.

*if you are interested in the studies but cannot gain access, please feel free to email me.


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US, UK firms and the modifying of lockstep: a response (Guest Post)

I wanted to respond to the Lawyer Watch note about profit enhancement in firms and its impact on ethical behaviour. Because I do not want to be seen to be betraying confidences this is anonymous, but I spent long periods as a partner in each of what one might call a top 10 London commercial firm and in a major US based international firm. The former had a lockstep structure, so each year a partner received a bigger profit share until the plateau was reached. And yes, we did lose people to more profitable firms. The latter had a ‘modified lockstep’ so that only a reasonably small group of partners were given the largest share of profits. This still meant that a partner involved in Labor Law was capable of earning quite large sums of money, but not as much as a partner who could bring in large clients involved in cutting-edge transactions or litigation, contributing considerable amounts to the overall profits. Partners moved elsewhere, but rarely for more money. My English friends asked me how I liked the US model compared to strict lockstep, and my response was that provided that partners had a high degree of confidence in the profit allocation process, which we did, I preferred the US style arrangement where effort and outcome were properly rewarded. I also felt that my firm (at least whilst I was there) treated partners who were having bad patches much better than the English lock step firms who appear to think that a partner of 52 is at the end of his or her useful life and needs to be pushed out.

Both firms were admirable corporate citizens, but my US firm was by any measure outstanding. In addition to normally exceeding the target of 2% of overall hours being devoted to pro bono work, the firm sponsored lawyers outside the firm with enough money to live whilst they provided legal advice and, often, litigation support, for all sorts of socially responsible not-for-profits as they tackled the many problems of US society. And there was one programme that I was particularly proud of; the firm sent a large number of lawyers with a wide ethnic mix into a college with an overwhelmingly non-white student base to help teach and support students, and to make the students realise that they could aspire to do whatever they wanted.

My US partners would have said, not that these activities held back profits, but that the profits made allowed the firm to do so much for the community.

And I would say something similar about ethical behaviour. The pursuit of profit does not need to be unethical. Any sensible partner in a legal firm knows that the good reputation of the firm is the biggest source of future success. Cutting ethical corners in one year can lead to loss of income in future years. It can, I think, be partly attributed to the extremely litigious nature of the US (by most standards) but I found my US colleagues far more aware of ethical requirements than what I see in London firms (not all of them of course). My US firm consistently turned work down, some of it potentially extremely lucrative, over ethical concerns.

When lawyers decide on their careers, they make choices. I have nothing but admiration for those who chose to work in law centres, or in charities or otherwise to devote themselves to helping those less well off. But I know that I would be bad at that, and it turned out that I was reasonable at commercial law. Once someone becomes a commercial lawyer it is reasonable that some degree of profit maximisation is involved, and there is no inexorable link between that and poor behaviour. ‘Doing good by doing well’ is not a fantasy, at least in the world of big law.

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