Jan. 20, 2021 – In representing a client, can a lawyer threaten criminal prosecution to gain an advantage in a civil matter?

Question

I represent a business owner who discovered that one of the business’s managers had been stealing money from the business for some time, and the evidence is incontrovertible.

Of course, the manager will be fired, but my client wants me to tell the manager that they must repay the stolen money within the next 90 days, or we will refer the matter to the local prosecutor’s office.

I told my client that I could not threaten the manager with criminal prosecution because it would violate a disciplinary rule, but later one of my partners thought that it would be okay to proceed as my client asks.

Can I threaten the manager with criminal prosecution to incentivize the manager to repay the money?

Answer

The former SCR 20:3.10, which prohibited threatening criminal prosecution solely to gain an advantage in a civil matter, was repealed by the Wisconsin Supreme Court in 2007.

The fact that the rule was repealed not long ago partly explains why some lawyers continue to believe such an explicit prohibition still exists in the disciplinary rules.

Therefore, threatening to report the manager to the prosecutor’s office would not, by itself, violate a disciplinary rule. That does not mean, however, that the disciplinary rules no longer have any bearing on this issue.

In fact, a lawyer representing a client in a civil matter must carefully consider several disciplinary rules before threatening to refer an opposing party to a prosecutor’s office.

These rules are discussed in the newly released Wisconsin Formal Ethics Opinion EF-21-01.

Is the lawyer’s belief that criminal conduct has occurred well founded in fact and law?

SCR 20:3.1(a) states:

(a) In representing a client, a lawyer shall not:

(1) knowingly advance a claim or defense that is unwarranted under existing law, except that the lawyer may advance such claim or defense if it can be supported by good faith argument for an extension, modification or reversal of existing law;

(am) A lawyer providing limited scope representation pursuant to SCR 20:1.2(c) may rely on the otherwise self-represented person’s representation of facts, unless the lawyer has reason to believe that such representations are false, or materially insufficient, in which instance the lawyer shall make an independent reasonable inquiry into the facts.

(2) knowingly advance a factual position unless there is a basis for doing so that is not frivolous; or

(3) file a suit, assert a position, conduct a defense, delay a trial or take other action on behalf of the client when the lawyer knows or when it is obvious that such an action would serve merely to harass or maliciously injure another.

This rule requires that the lawyer have a well-founded basis in fact and law for any assertion of criminal conduct of another, and the lawyer must be able to articulate the law the lawyer believes to have been violated and the facts that support such a violation.

Are the lawyer’s statements about the criminality of the conduct in question and the intention to report the conduct if concessions are not made in good faith?

SCR 20:4.1(a) states:

(a) In the course of representing a client a lawyer shall not knowingly:

(1) make a false statement of a material fact or law to a 3rd person;

A lawyer who informs a third person that their conduct violates criminal law knowing that the statement is not correct, or who falsely informs a third person that their conduct will be reported to the authorities when there is no intent to do, so violates SCR 20:4.1(a).

Is the asserted criminal conduct related to the client’s civil claim and is the threat of reporting legitimately related to the client’s lawful objectives in the civil matter?

SCR 20:4.4(a) states:

In representing a client, a lawyer shall not use means that have no substantial purpose other than to embarrass, delay, or burden a 3rd person, or use methods of obtaining evidence that violate the legal rights of such a person.

Accordingly, a lawyer who makes a claim of criminal conduct merely to harass another violates SCR 20:4.4(a).

Related to the requirements of SCR 20:4.4(a) is the necessity that the asserted criminal conduct be related to the civil matter in which the lawyer represents the client. This was discussed in ABA Formal Opinion 92-363:

While the Model Rules contain no provision expressly requiring that the criminal offense be related to the civil action, it is only in this circumstance that a lawyer can defend against charges of compounding a crime (or similar crimes). A relatedness requirement avoids exposure to the charge of compounding, which would violate Rule 8.4(b)'s prohibition against ‘criminal act[s] that reflect adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects.’ It also tends to ensure that negotiations will be focused on the true value of the civil claim, which presumably includes any criminal liability arising from the same facts or transaction, and discourages exploitation of extraneous matters that have nothing to do with evaluating that claim. Introducing into civil negotiations an unrelated criminal issue solely to gain leverage in settling a civil claim furthers no legitimate interest of the justice system, and tends to prejudice its administration. See Rule 8.4(c).

The committee agrees with this analysis. Moreover, the lawyer who threatens to report criminal conduct of an opponent unrelated to the matter may be subject to the claim that the threat has no “substantial purpose other than to embarrass, delay or burden,” and therefore violates SCR 20:4.4(a).

The lawyer must be careful to avoid stating or implying an ability to improperly influence the criminal process.

SCR 20:8.4(d) states that it is professional misconduct for a lawyer to “state or imply an ability to influence improperly a government agency or official or to achieve results by means that violate the Rules of Professional Conduct or other law.”

This provision underscores the importance of the lawyer carefully choosing her words, and documenting them, when raising the issue of whether criminal conduct may be involved or reported in connection with a civil matter. The lawyer may, if based on a good faith examination of the facts and law, inform a person that their conduct constitutes a crime, or that the lawyer intends to report the conduct to authorities. However, the lawyer may not inform a person that she will commence a criminal action, because that authority exclusively rests with the district attorney.

The lawyer must exercise care to ensure that the lawyer does not, for example, imply that the lawyer’s relationship with a prosecutor will ensure criminal charges are brought. This is particularly important with dealing with an unrepresented person.

Finally, as part of negotiations, the lawyer may not promise that her client will not cooperate with a lawful investigation of possible criminal conduct should one occur, although, as noted below, negotiations may include an agreement to not report the conduct (footnotes omitted)

Circumstances Matter

On the facts of the question, provided the lawyer does not make any false statements to the manager or imply an ability to improperly influence the prosecutor, the threat of criminal prosecution does not violate any disciplinary rules.

While using the threat of criminal prosecution to gain an advantage in a civil matter may be permissible in certain circumstances, using the threat of referring another lawyer to the disciplinary authority to gain an advantage in a matter is never appropriate:

SCR 20:1.8(h)(3) prohibits lawyers from making ‘an agreement that limits a person’s right to report the lawyer’s conduct to disciplinary authorities.’ Moreover, every lawyer has a mandatory duty to ‘cooperate with the office of lawyer regulation in the investigation, prosecution and disposition of grievances.’ Thus, offering or making any agreement that purports to limit any person’s right to report a lawyer to the disciplinary authorities, such as an agreement to refrain from reporting misconduct if certain demands are met, is itself misconduct (footnotes omitted).

Lawyers should consult the opinion for further discussion and analysis of both of these issues.

Look for more opinions in the coming year from the State Bar’s Standing Committee on Professional Ethics.