Monthly Archives: April 2013

The Three Laws of Robotics: What Asimov Can Tell You About Ethical Lawyering

Isaac Asimov’s famous Three Laws of Robotics were featured in a number of his stories (for example, “Runaround”), his novels (“The Robots of Dawn” and “I, Robot” among others), and his “Foundation” series. They provide:

1. A robot may not injure a human being or, through inaction, allow a human being to come to harm.

2. A robot must obey the orders given to it by human beings, except where such orders would conflict with the First Law.

3. A robot must protect its own existence as long as such protection does not conflict with the First or Second Laws.

When your lawyer represents you, he or she is likewise bound by “laws,” generally, the Rules of Professional Responsibility. These Rules operate much like the First and Second Law of Robotics – but do not require that a lawyer sacrifice his or her own existence in the representation – unlike, say, a robot. In fact, RPC 1.16 specifically mandate that a lawyer shall withdraw if the representation will result in violation of the rules of professional conduct, if the lawyer’s mental or physical health materially impairs the ability to represent the client, or if the lawyer is discharged by the client.

If the client persists in fraudulent or criminal conduct or uses the lawyer’s services to perpetrate a crime or fraud, then withdrawal is appropriate. This is also true if the client insists upon taking action that the lawyer considers repugnant or with which the lawyer has a fundamental disagreement. To the extent possible, withdrawal should be accomplished so as to avoid material adverse effect on the interests of the client.

This is sort of like what I call the “Black Beauty” standard. You may recall the story of the horse, Black Beauty, who refuses to take his master across a washed out bridge despite being ordered to do so, saving the master’s life by disobeying. Lawyers – and robots – are also required to act so as to prevent their client from coming to harm. In other words, the First Law of Robotics (‘do not harm”) takes precedence over the Second Law (“obey”).

Lawyers, like good horses and robots, must exercise judgment to determine when obeying the client will hurt the client. The lawyer may refuse to perform such imprudent or repugnant acts based upon a fundamental disagreement. Clients should be glad of this constraint. Otherwise, they may find themselves in deep water like, for example, Black Beauty’s master had Black Beauty obeyed his improvident order to cross the washed out bridge!

I have had the chance to serve on the Rules of Professional Responsibility Committee of the Washington State Bar Association (WSBA), as special district counsel for the WSBA Office of Disciplinary Counsel, as a Hearing Officer on Disciplinary Matters and written and lectured on legal ethics. There is much to know and learn about ethical questions. A good place to start is understanding the interaction between the First and Second Law of Robotics.

A good lawyer, like a good horse (or even a good robot), should not blindly obey orders. Such orders cannot be complied with if they work as a fraud upon others, further a criminal enterprise, or even if they simply lead to a fundamental disagreement. The lawyer need not proceed with a representation that has been rendered unreasonably difficult by the client or which will result in an unreasonable financial burden on the lawyer. Most important, a lawyer is obliged to use his or her independent judgment to make sure that, within the bounds of the law, obeying the ciient’s orders will not harm the client. This requires the exercise of independent professional judgment and protects the client from rash, imprudent, or even criminal conduct.

A competent lawyer is one upon whom is reposed tremendous responsibility by the client, including the responsibility to say “No” when appropriate. A lawyer is more than a robot. But, as Isaac Asimov reminds us, even a robot sometimes has to say “No.”

Mandatory Arbitration in Washington

The default policy in American jurisprudence is the so-called “American Rule,” leaving legal fees to be borne by the party incurring the fees. This may be contrasted with British jurisprudence where fees are routinely shifted from the prevailing party against the non-prevailing party. The “American” system wins praise for its avoidance of the “chilling” effect that fee-shifting would have on innovative litigation (e.g. products liability claims, civil liberties actions, etc.) and for its protection of the rights of citizens arising in cases that simply cannot be vindicated without incurring fees that (absent fee-shifting) would vitiate any remedy by exceeding the amounts at issue.

Washington State, like most sister jurisdictions, follows the American Rule with the default being that attorneys’ fees are borne by the party that incurs them unless there are public policy reasons supporting fee-shifting. Such policies in Washington State include, for example, the Insurance Fair Conduct Act, RCW 48.30 et seq., which awards attorneys’ fees and costs of litigation to a prevailing insured who proves that they have been subjected to unfair practices; Federal civil rights (§1983) claims; actions under RCW 19.86 [Washington State Consumer Protection Act]; Domestic Relations Child Support (RCW 26.21.325); Wage Claims under RCW 49.46.090, and, of most importance here, appeals from arbitration awards under the Mandatory Arbitration Rules ( MAR). The statutory basis for fee-shifting in the MAR arises in the context of longstanding Washington State policy. Since 1979, counties in Washington State have had a local option to implement mandatory arbitration pursuant to RCW 7.06. It was introduced in King County with a jurisdictional limit of $10,000 in 1980, upped to $15,000 two years later, increased to $35,000 in 1989, and later to the current level of $50,000.

If a case is filed in King County, Washington or most Washington counties, arbitration is mandatory for cases involving the award of damages under $50,000. This affords the litigants a quick, inexpensive alternative to a jury trial. The right to jury trial is, of course, preserved by the right of appeal. Appeals, however, are discouraged by the existence of a “fee-shifting” provision. If the appealing party fails to improve his or her position from the arbitration award, the appealing party must bear the other side’s litigation costs – including legal fees.

I have had the privilege to be an early advocate and supporter of Mandatory Arbitration and served as a member of the Bench-Bar Task Force on Mandatory Arbitration. In my article in the Washington State Bar News, October 1996: How Much Justice Can We Afford?: The Argument for Mandatory Arbitration, I noted that by 1989, half of all civil, nondomestic cases went to arbitration and 97% were resolved without a trial de novo in superior court. As I noted there:

Initial objectives emphasized reducing court congestion and costs. Yet society most benefits from reductions in time to disposition, reduced litigation costs and increased access to justice. Prompt resolution of disputes has incalculable benefits, not the least of which is the liberation of productive energies otherwise engaged. Reduced litigation expenses and the resultant increase in justice move us closer to the attainment of essential social goals. Institutional savings are secondary. Nonetheless, it should be noted that mandatory arbitration spares judges prehearing motions for cases quickly diverted into the arbitration track. ….Regarding civil cases resolved more than 150 days after filing … only 3.6% of those in the arbitration track went on to a trial de novo, as opposed to 6.6% of the non-arbitrated cases.”

Access to justice requires fee-shifting in the context of mandatory arbitration cases. Such cases, as in the instant matter, cannot be undertaken by counsel at all unless the promise of simple, cost-effective (economical) adjudication held forth by mandatory arbitration is fulfilled. If the party against whom judgment has been rendered in arbitration is free to appeal without consequence, the purposes of mandatory arbitration are thwarted. Once the losing party at the arbitration appeals, the parties entering arbitration with the promise of prompt and cost-effective resolution find that the MAR process has not only failed to fulfill its promise, but actually worsened their position: the case now has to be tried twice: once in arbitration and a second time at trial. Without consequences to the appealing party, incentives to enter MAR in the first instance would evaporate, cases in MAR would return to the trial docket and superior courts would be flooded with cases that could not be handled cost-effectively. Ultimately, such cases would be without remedy. A whole class of litigants would be deprived access to justice.

The architects of the MAR were well aware of this practical challenge: disincentives to appeals had to be built into the system to deter those who would use litigation costs to foist settlements upon the financially weaker party independent of considerations of merit. The principal deterrence to frivolous appeals for trials de novo in superior court is the fee-shifting of post-award fees. Additional disincentives were considered, including shifting pre-award fees and expert witness costs. This latter is a fee-shifting stratagem employed in the Insurance Fair Conduct Act.

GR [General Rule] 16 states the purpose underlying the MAR:

Purpose. The purpose of mandatory arbitration of civil actions under RCW 7.06 as implemented by the Mandatory Arbitration Rules is to provide a simplified and economical procedure for obtaining the prompt and equitable resolution of disputes involving claims of fifty thousand dollars ($50,000.00) or less. The Mandatory Arbitration Rules as supplemented by these local rules are not designed to address every question which may arise during the arbitration process, and the rules give considerable discretion to the arbitrator. The arbitrator should not hesitate to exercise that discretion. Arbitration hearings should be informal and expeditious, consistent with the purpose of the statutes and rules.

MAR 7.3 gives effect to this purpose using mandatory “shall” language respecting fee and cost-shifting:

The court shall assess costs and reasonable attorney fees against a party who appeals the award and fails to improve the party’s position on the trial de novo. The court may assess costs and reasonable attorney fees against a party who voluntarily withdraws a request for a trial de novo. “Costs” means those costs provided for by statute or court rule. Only those costs and reasonable attorney fees incurred after a request for a trial de novo is filed may be assessed under this rule.

Court decisions have been unwavering in their support of mandatory arbitration as a means of combatting congestion and delays in the courts and to discourage meritless appeals. See, e.g., Nevers v. Fireside, Inc., 133 Wn.2d 804, 815, 947 P.2d 721(1997); Wiley v. Rehak, 143 Wn.2d 339, 348, 20 P.3d 404 (2001). Hutson v. Rehrig Intern., Inc., 119 Wash. App. 332, 334, 80 P.3d 615, 616 (2003). (at 334: “The purpose of the mandatory arbitration scheme is to ease court congestion and discourage meritless claims. Perkins Coie v. Williams, 84 Wash. App. 733, 737, 929 P.2d 1215 (1997);” at FN1: “The court shall assess costs and reasonable attorney fees against a party who appeals the award and fails to improve the party’s position on the trial de novo ….” MAR 7.3.) The courts have zealously guarded against interpretations of the rules that would undermine full recovery by the prevailing party for costs and fees against those parties who initiated appeals, yet failed to improve their position. It should be noted that under the MARs (Mandatory Arbitration Rules), the prevailing party is permitted to “lower the bar” by which improvement of his or her position is measured by use of an “offer of compromise.” For example, if the arbitration award is, say, $35,000, the prevailing party may offer to compromise and accept $25,000 (or any number less than the award). If the non-prevailing party fails to accept the offer (even though less than the award(!)), the prevailing party will need only to improve its position above $25,000 in order to be entitled to its award of fees. This means that by obstinately refusing to accept the offer of compromise, the appealing party is now exposed to the risk of being made to pay substantial attorneys’ fees – often in excess of the amounts at issue. On the other hand, the prevailing party is at risk: they must do better than their offer or not only get a lesser verdict from a jury, but bear all of their own costs and expenses, substantially eliminating any meaningful recovery.

The single most important disincentive for the filing of ill-considered demands for trial de novo is the accountability that the appealing party who fails to improve his or her position has for the attorneys’ fees incurred by the prevailing party. It is, after all, wholly the responsibility of the appealing party that costs and fees were incurred post-award, to say nothing of the inconvenience to the parties and the burden to the system. The award of post-award fees to the prevailing party against the appealing party who fails to improve his or her position has two salutary impacts: it deters de novo appeals that tend to increase cost congestion and it compensates plaintiff’s counsel for the efforts undertaken, thereby enhancing access to judgment. The application of a multiplier (twice the fees actually incurred, for instance) is warranted in recognition of the risk of the undertaking, the fact that pre-award fees are not compensated, and to encourage representation of a class of litigants, which, but for fee-shifting, would often be unable to obtain counsel.

Mandatory arbitration is so important to maintaining a functioning civil justice system and the ability to obtain justice for the significant cases in the range below $50,000 that courts should seriously consider awarding attorneys’ fees with a “multiplier” of 2.0 to provide disincentives for appeals from arbitration awards. This is particularly true in cases involving insurance companies, which, as professional litigants, employ the costs and delays in the civil justice to extract settlements in the small, but signficant, case and pursue unsuccessful appeals, burdening both the injured party, their own insured, and the court system.

How Insurance Companies Balanced Their Books on the Backs of the Injured.

Insurers are professional litigants and economically “rational” actors, whose tactics have been informed by the experience in tens of thousands of cases. They know how to make a profit. Their plan: collect premiums and then deny responsibility, delay payouts, and defend liability actions to keep from paying them out – regardless of the merits. One method that is slightly less attractive for them in Washington State than it used to be: filing frivolous appeals to stretch out the case.

When I served in the Washington State Senate, my first bill addressed frivolous appeals where low interest rates pending appeal encouraged the filing of appeals to courts of appeal without regard to merit. Eight years before, the insurance companies had gotten passed into law a reduced interest rate on tort claims (claims such as personal injury, wrongful death, automobile collision, premises liability, etc.) The insurance companies got the rate on tort judgments against them cut from 12% to two points above treasury bills or 2%! Aside from the tort claims that the insurance companies had targeted, the interest rate on most other judgments remained 12% in Washington State.

The idea of the 12% rate in the past had been to encourage liable parties to pay their judgments! What sense did it make for the negligent party to have a reduced interest rate that would run while it appealed first to the Washington State Court of Appeals and then to the Washington State Supreme Court? It was a windfall for the guilty. Keep in mind, if the appeal has merit and the judgment is reversed, then the insurance company doesn’t have to pay any interest – after all, in such a case, the judgment, together with interest upon it, had been set aside! The only one who benefited from the low interest rate were insurance companies representing wrongdoers who had lost at trial, lost on appeal, and lost on any further appeal. Those were the parties that would benefit on a low rate on judgments.

Imagine this situation: you or a family member are seriously injured, struggling with unemployment, struggling to pay medical bills and get the care you need. The insurance company, in the meantime, is dragging out the process. While the injured person and his or her family may be forced to borrow from family members or use credit at exorbitant interest to survive, insurers were enjoying low interest rates of 2%, while they invested the money they should have paid out to the injured party and profited by getting investment returns at much higher percentages. The innocent, injured person (who had won at trial (!)) was made into the unwilling banker of the insurance company! In political-speak, I called this: “Balancing their books on the backs of quadriplegics!”
I knew this was wrong.

It was an open secret that insurance companies couldn’t “afford” not to file an appeal. The judgment against them would be running at 2% interest while they were investing in, say, mortgages paying 5% or more. Why would they pay? More than that, they would be able to negotiate discounts on what they owed by the threat of dragging things out. Outrageous!

The bill I prime sponsored, initially denominated the “Appellate Congestion Reduction Act,” was signed into law in 2010 (SB 6764) and raised such rates to two points over prime (about 5.25%). Rational economic actors and professional litigants, insurance companies among them, are highly sensitive to the incentives/disincentives built into the architecture of the justice system. But now, at least they have one less way they can profit by delay and frivolous appeals.