January 5, 2021: Many lawyers choose to moonlight not taking into account the possible ethical and liability traps. In this blog, we’ll go over the different types of possible traps moonlighting lawyers can fall into and how to avoid them using concrete examples and how firms should implement a moonlighting policy.
What do you get when you combine one part Bruce Willis with one part Cybill Shepherd and another part mid-1980s crime drama? Moonlighting. And what do you get when you combine moonlighting with the practice of law? If not handled appropriately, the answer is Nothing But Trouble (and we don’t mean the Demi Moore-Chevy Chase-John Candy film).
In Illinois, there is no per se prohibition against moonlighting as a lawyer. A lawyer may work in multiple law firms at once; likewise, a lawyer may work in one law firm while also operating as a solo practitioner. Although technically permissible from an ethical perspective, moonlighting lawyers can get caught in any one of a number of ethical and liability traps:
- Prohibited Moonlighting. Many law firms explicitly forbid attorney employees from practicing law outside of the firm. Other firms require any attorney who wishes to moonlight to notify the law firm before doing so. A lawyer’s failure to follow firm protocol will likely mean a prompt firing and could also result in a breach of fiduciary duty claim. It could even result in disciplinary action. See In re Mark Maciasz, M.R. 23960, 2006PR80 (Ill. 2010) (finding that attorney made misrepresentations in violation of Rule of Professional Conduct 8.4(a)(4) when he failed to disclose outside clients on conflicts form submitted to employer.)
- Breach of Fiduciary Duty. Lawyers—whether partners, associates or of counsel attorneys—owe a fiduciary duty of loyalty to the law firms for which they work. See Corroon & Black of Illinois, Inc. v. Magner, 145 Ill.App.3d 151 (1st Dist. 1986) (during employment, employee owes his employer a duty of loyalty that may be breached by actively competing with the employer during the employment term). This fiduciary duty can be breached by obtaining business opportunities (new clients/client matters) and using those opportunities for oneself, rather than giving the firm the option to take on the legal matter. If the law firm and moonlighting lawyer have not clearly documented their respective rights and obligations, breach of fiduciary duty claims could arise even where the law firm is aware of the lawyer’s “side hustle.”
- Criminal Charges. Lawyers who obtain income through the representation of clients outside of the firm or who use law-firm property when moonlighting could be accused of having stolen firm assets.
- Conflicts of Interest. Moonlighting lawyers run a significant risk of engaging in conflicted representation. Although law firms have institutionalized processes for identifying and addressing conflicts of interest, moonlighting lawyers are unlikely to follow the same formalized processes when working on their own or with a different firm. Even if the moonlighting lawyer checks for conflicts, the conflict check process is unlikely to take into account law firm clients of whom the moonlighting lawyer is unaware, resulting in an ineffective conflict check.
By representing clients outside of the law firm without informing the firm of the details of the engagement, the moonlighting lawyer puts the law firm at risk of engaging in conflicted representation. Pursuant to Rule of Professional Conduct 1.10, an individual lawyer’s conflicts are generally imputed to the rest of the law firm. As such, the moonlighting lawyer’s undisclosed representation of a client could cause the law firm to unknowingly engage in a conflict of interest, potentially resulting in disciplinary action, malpractice liability, disqualification, and disgorgement of fees. Problems could arise even if the moonlighting discloses the representation to the firm. For instance, a conflict based on the moonlighting lawyer’s representation of a client could disqualify the law firm from a valuable potential engagement.
- Uncovered Claims. Moonlighting also presents insurance coverage issues. Typically, a law firm’s professional liability policy will not cover the actions of a moonlighting lawyer. This situation not only presents a problem for the moonlighting lawyer, the law firm could be left defending against uncovered claims. A dissatisfied client of the moonlighting lawyer is likely to sue both the lawyer and the law firm, claiming to have believed that the lawyer was working for the law firm. In some circumstances, there will be some evidence supporting the client’s claim, such as an email sent by the lawyer to the client via the law firm’s server, a letter on law firm letterhead, a relationship between lawyer and client developed through the law firm, or the use of a legal form obtained from the law firm’s forms bank.
All law firms should have written moonlighting policies, which should be provided to every lawyer within the firm. If the law firm does not prohibit moonlighting, the law firm should require moonlighting lawyers to make formal disclosures to the firm, including the following: (1) Information relating to each engagement needed to be included in the firm’s conflict-check database; and (2) For each engagement, the moonlighting lawyer’s affirmation that the lawyer has entered into a written engagement agreement signed by the client and clearly explaining that the client has retained the lawyer, only, and not the law firm. The law firm could also require the moonlighting lawyer to obtain insurance coverage for the moonlighting venture, and it may even require the moonlighting lawyer to defend and indemnify the law firm for any claims arising from the moonlighting venture.
As discussed above, moonlighting can present significant risks to the lawyer, as well as the law firm. Any lawyer considering performing legal work outside of the firm should first discuss their moonlighting plans with law firm management.
Written by Jeremy N. Boeder of Tribler Orpett & Meyer, P.C.