Petition of Youngblood

• Decision Date: 16 February 1995
• Docket Number: F-132
• Citation: 63 USLW 2575,895 S.W.2d 322
• Parties: In re Petition of Elaine M. YOUNGBLOOD, M. Linda Hughes, Thomas O.H. Smith, Jr., Raymond D. Lackey, Patrick J. McHale, Kimberly K. Whaley, Wayne Taylor, R. Kreis White, Paul L. Burson, John B. Allyn, Jerry M. Martin, Robert L. Farnette, Ernest E. Baker, Carol A. Beeler, and Dennis E. Blevins, to review and set aside formal ethics opinion 93-of the Board of Professional Responsibility: To stay the effectiveness of that opinion pending a final decision by the Court; and to adopt modifications or additions to Rule 8 of the Rules of this Court to address specifically the practices of staff counsel of liability insurance companies.
• Court: Tennessee Supreme Court

Page 322

895 S.W.2d 322

63 USLW 2575

In re Petition of Elaine M. YOUNGBLOOD, M. Linda Hughes,

Thomas O.H. Smith, Jr., Raymond D. Lackey, Patrick J.

McHale, Kimberly K. Whaley, Wayne Taylor, R. Kreis White,

Paul L. Burson, John B. Allyn, Jerry M. Martin, Robert L.

Farnette, Ernest E. Baker, Carol A. Beeler, and Dennis E.

Blevins, to review and set aside formal ethics opinion

93-F-132 of the Board of Professional Responsibility: To

stay the effectiveness of that opinion pending a final

decision by the Court; and to adopt modifications or

additions to Rule 8 of the Rules of this Court to address

specifically the practices of staff counsel of liability

insurance companies.

Supreme Court of Tennessee,

at Nashville.

Feb. 16, 1995.

REID, Justice.

Petitioners seek review and vacation of Formal Ethics Opinion 93-F-132 issued by the Board of Professional Responsibility and the adoption of amendments to the Code of Professional Responsibility. ¹ The Board has responded to the petition with an answer and briefs. The Court also has considered amicus briefs and proposed findings of fact and conclusions of law submitted by the amici curiae. ²

In response to an inquiry regarding the ethical propriety of a lawyer employee of a liability insurance company representing that company's insureds, an ethics committee of the Board of Professional Responsibility issued formal opinion 93-F-132, in which the Board found:

1. It is improper for in-house attorney employees of an insurance company to represent individual insureds in legal matters arising under that company's policy.

2. Such an arrangement constitutes a lay corporation practicing law.

3. The holding out of an in-house attorney employee as a separate and independent law firm constitutes an unethical and deceptive practice.

Petitioners are employees of various liability insurance companies doing business in Tennessee, who, pursuant to their employment, represent their employers' insureds according to the terms of the insurance policies issued to the insureds. Petitioners contend that the Board's construction of the disciplinary rules set forth in the formal ethics opinion is subject to review by this Court, that the determinations made in the opinion are not required or permitted by the rules, and that the opinion should be declared invalid.

The Board of Professional Responsibility insists that the opinion accurately resolves the ethical issues presented and asks the Court to sustain the validity of the opinion.

In response to the Board's suggestion that a special master be appointed to make findings of fact, the Court has concluded that a special master could not develop determinative findings of fact sufficient to support a holding more instructive than the Court's review of the three findings made in the formal ethics opinion under review. Consequently, that motion is denied.

Pursuant to the Court's request, some of the amici curiae filed copies of their policies and procedures for providing legal counsel for their insureds. The Court makes no finding with regard to those policies and procedures.

The Court finds that the issues presented are properly before the Court for resolution and that the formal ethics opinion should be modified as set forth below.

1.

The Court first addresses the assertion set forth in the amicus brief filed by the Chattanooga Bar Association, that this Court does not have jurisdiction to review a formal ethics opinion issued by the Board of Professional Responsibility.

This Court's authority to consider the validity of formal ethics opinions is implicit in its rules and prior decisions. Rule 9 provides for the establishment and operation of the Board, which, as indicated by its full name, the Board of Professional Responsibility of the Supreme Court of Tennessee, is an agency of this Court. Tenn.R.Sup.Ct. 9, § 5. The responsibilities of the Board include the duty to "issue and publish Formal Ethics Opinions on proper professional conduct...." Tenn.R.Sup.Ct. 9, § 26.4(a). Jurisdiction to review these ethics opinions is grounded in the Court's inherent power to review the actions of its boards, commissions, and other agencies. In Belmont v. Board of Law Examiners, the Court reviewed the action taken by another of its agencies, the Board of Law Examiners. With regard to its authority, the Court stated,

Prior to discussing the constitutional question herein involved, we must make it clear that the petition to review the action of the Board of Law Examiners in denying petitioner's request to take the examination for the fifth time is properly before this Court. We reach the foregoing conclusion because this Court has the inherent power to prescribe and administer rules pertaining to the licensing and admission of attorneys and as a necessary corollary thereto, no other court in Tennessee can construe or determine the applicability of a rule used to implement that power. It results, therefore, if this Court has the inherent and original power to prescribe the rules, then this Court has the original power to review the action of the Board of Law Examiners in interpreting and applying them.

Belmont v. Board of Law Examiners, 511 S.W.2d 461, 462 (Tenn.1974). See also, Petition of Tenn. Bar Ass'n, 539 S.W.2d 805, 810 (Tenn.1976) (Harbison, J., concurring) ("[T]his Court has long had and has exercised the role of prescribing and seeking to enforce and uphold the standards of professional responsibility in this State."). In State v. Jones, 726 S.W.2d 515, 520 (Tenn.1987), the Court reviewed and vacated an ethics opinion as being "an overbroad interpretation of the Code." This power to review is inherent in the grant from the sovereign to the Court, and the Court reaffirms its original and exclusive authority to formulate and enforce rules governing the practice of law. That authority includes the review of formal ethics opinions issued by the Board.

2.

The Chattanooga Bar Association also raises a closely related issue, the standing of the petitioners to file an original petition in this Court. That amicus argues that the only procedure whereby the issues presented can be adjudicated is for disciplinary proceedings to be brought against persons who violate the provisions of the opinion.

The petitioners are entitled to file the petition seeking redress of an alleged wrong. Article I, Section 17 of the Constitution of Tennessee provides that, "all courts shall be open; and every man, for an injury done him in his lands, goods, person or reputation, shall have remedy by due course of law...." See MARTA v. Metro. Gov't of Nashville, 842 S.W.2d 611, 615 (Tenn.App.1992) (to "establish standing, a party must demonstrate (1) that it sustained a distinct and palpable injury, (2) that the injury was caused by the challenged conduct, and (3) that the injury is apt to be redressed by a remedy that the court is prepared to give. Allen v. Wright, 468 U.S. 737, 752, 104 S.Ct. 3315, 3325, 82 L.Ed.2d 556 (1984)."). In this case, the formal ethics opinion finds that petitioners' employment constitutes unethical conduct for which they are at risk of being sanctioned and, therefore, effectively prohibits their continued employment. No other authority may revise the rules of the Court; consequently, under these circumstances, the petitioners have standing to file an original petition in this Court seeking review of the opinion.

The Rhode Island Supreme Court reached the same conclusion in a similar case. In In Re: Ethics Advisory Panel Opinion, 554 A.2d 1033 (R.I.1989), the court considered a petition filed by several members of the bar seeking the court's review of an ethics advisory opinion. In that case, the petitioning attorneys sought review from the Supreme Court because the ethics opinion raised "serious ethical concerns regarding a practice that had become standard and customary, that practice being the routine requesting and rendering of validity and enforceability opinion letters on behalf of clients." Id. at 1033-1034. Since new rules of professional conduct had been adopted after the rendering of the opinion, the court determined that the issue was moot. With regard to the issue of the propriety of the court's reviewing the ethics opinion, the court, however, stated:

This court must restate what the advisory panel sets forth in each of its opinions, that is, that the Ethics Advisory Panel's advice is only protective in nature. There is no requirement that an inquiring attorney abide by a panel opinion, but if the attorney does abide by it, he or she would be fully protected from any charge of impropriety. The opinions are purely advisory. Consequently it would only be in the rarest of circumstances that this court would respond to a request that we review one of the panel's opinions.

Our response in this situation is prompted to some degree by the importance many members of the bar give to the panel's opinions. The opinion in question appeared to raise serious ethical questions about the actions of many members of the bar who are called upon in their practice to issue and request third-party-opinion letters on behalf of their clients--a matter of practice that has become standard procedure not only in Rhode Island but, as far as we can determine, throughout the country as well.

Id. at 1034.

However, the Court's authority to entertain the petition is not dependent upon the extent to which petitioners have suffered injury or are placed at risk by the action of the Board. The Court may in its discretion, upon application or upon its own initiative, consider the amendment, revision, or repeal of its rules and any interpretation or application thereof by its agencies. Central to the issues presented here is the duty to defend the insured assumed by a liability insurance carrier. As stated in 1A Rowland H. Long, The Law of Liability Insurance § 5.01 (1992):

The duty of an insurer to defend a claim brought against its insured under the terms of a...