Ethical Issues for Landmen and In-House Lawyers

April 21, 2015

By: John M. Tanner

This paper is an adaptation of a presentation the author gave at the 46th Annual Houston Association of Professional Landmen Technical Workshop on April 21, 2015.

Introduction

Many Landmen are also licensed lawyers. The ethics required by each profession, however, may differ at times and require different conduct. What follows is a brief analysis of some situations that Landmen/Lawyers may routinely face in their jobs.

Ethical Framework

Ethical rules for landmen are set by the American Association of Professional Landmen (“AAPL”), the largest trade association of landmen in the country. The AAPL Code of Ethics (“Code”) itself is only two sections and runs a single page. The Code can be found here.

In addition to Ethics Rules, there are “Best Practices” for Landmen.

The AAPL wants to “police its own” so as to avoid the formal legal/regulatory supervision of land management, as is done in most other professions. The maximum punishment it can give is expulsion from AAPL. The AAPL is actively promoting itself so reputable organizations will not hire landmen that are not members.

Each state sets its own ethical rules for lawyers. The ABA Model Rules of Professional Conduct (“Rules”) can be found here.

Almost every state modifies the Rules when adopting them, and so anyone identifying an issue in this paper should refer to his or her own state’s rules of ethics. Typically, ethical rules for lawyers are enforced by the state’s judicial system. Penalties can include everything from private admonitions to being disbarred, and even jail time for the unlicensed practice of law.

Scenario #1—Duties to Opposing Party and Employer when Negotiating

Code §1 provides that it is the primary duty of a landman is to establish and maintain goodwill with the public. Best Practices 3, 4, & 5 require that the landman protect public from discredit or damage from fraud, misrepresentation, unethical practices, and treat all parties fairly. A lawyer’s general ethical requirement is to represent the client. Rule 1.6 generally prohibits a lawyer from disclosing information learned during representation without consent of the client.

Hypothetical #1

Landman/Lawyer is both a CPL and a licensed attorney. Company directs Landman/Lawyer to negotiate with land owner to obtain lease. Landman knows landowner is desperate and will agree to deal very favorable to company. Landman also knows other companies are interested in same property.

Can Landman “drive a hard bargain” with desperate landowner, and get better deal for company than nearby land owners are getting?

As a landman, probably not. If land owner later found out he was getting less than “going rate,” he would be upset. This would not be holding oil business in best light, which is primary ethical duty of Landman.

As a lawyer, though, Landman/Lawyer has to duty to represent company zealously and do what is best for it. Lawyer has to drive hard bargain, and cannot make soft deal without client consent.

Hypothetical #2

Same facts as #1. Can Landman/Lawyer state or imply Company is land owner’s only hope as part of the negotiation? As a landman, no. Clear ethical violation as dishonest conduct. As a lawyer, also no. Prohibition on deceitful conduct found in Rule 8.4.

Hypothetical #3

Same facts as #1. Land owner is a very poor negotiator, and says without prompting that “I am in desperate straits and I know that the Company is my only hope.” Can Landman/Lawyer keep mouth shut? Can Landman/Lawyer correct land owner?

A landman would have to tell owner there may be others interested under the Code. Again, if it later came out that Landman/Lawyer knew this but did not say anything, it would undermine public confidence in the profession.

As a lawyer, Landman/Lawyer likely cannot disabuse land owner of the landowner’s own mistake unless the lawyer has consent from the client. The lawyer is likely not engaging in deceitful conduct by simply not speaking under these circumstances, and thus if the lawyer were to speak and correct the landowner, the lawyer would not be doing what is best for the client.

Scenario #2—Duty of Loyalty

Code §2 “Landman shall not betray an employer’s trust.” This means a landman cannot work for himself or for second company in same geographic area as first company within a reasonable time, even if first company fired him. Per AAPL Ethics Board, this is one of the most common ethical complaint against landmen.

Rule 1.6—a lawyer shall not use information learned during representation to the disadvantage of former client. Note that this is much broader than the “confidences and secrets” term in the former ABA Code of Professional Responsibility.

Lawyer Rule 1.9—a lawyer shall not work for a client adverse to the interests of a former client in violation of 1.6.

Hypothetical #4

Landman/Lawyer works for Company 1, and while doing so identifies several prospective properties. Landman/Lawyer is fired from Company 1. Can Landman/Lawyer go to work for Company 2, working in same geographic area?

As a landman, no. This is the most crucial ethical duty of landmen. The idea that a landman would not use information previously learned is so unlikely that it is ignored as possibility, and just going to work for another company in the same geographic region is considered an ethical violation unless a reasonable amount of time has passed.

As a lawyer, the Landman/Lawyer can go to work for Company #2, but may well be disqualified from doing any legal work for it.

Hypothetical #5

Same facts as Hypothetical #4, except Landman/Lawyer goes out on her own rather than going to work for Company 2. Okay?

As landman, no. This is considered self-dealing, and is the biggest area of ethical complaints against landmen, i.e., self-dealing by using information gained while employed for someone else.

As a lawyer, maybe. If Company 1 had decided not to pursue certain properties, Lawyer could probably pursue them on her own as this would not be using information to “disadvantage” of former client. But a lawyer cannot scoop up properties Company 1 was considering.

Scenario #3—Advertising One’s Qualifications

Hypothetical #6

Non AAPL Landman/Lawyer holds self out as “CPL.” Is this ethically okay? As Landman, no. AAPL holds trademark on “CPL” and “RPL” and several other terms. Using them without being in AAPL is improper. This is another big area of ethical complaints against Landmen. AAPL members have an obligation to report improper use of those terms.

As lawyer? Also not okay. Rule 8.4 prohibits engaging in conduct involving dishonesty or deceit.

Hypothetical #7

Landman has J.D. and is licensed in another state, but is unlicensed in state where working. He holds himself out as lawyer. Ethical violation?

As a landman, yes. This is dishonest and would violate Code §1.

As a lawyer, also yes. This would be a violation of the equivalent of Rule 8.4 in whatever state he is licensed in.

Scenario #4—Dealing with Client

Hypothetical #8

Landman/Lawyer works 3 hours and bills client for all day. Ethical violation?

As a landman, yes. Violation of Code §1 and Best Practices 3, 4, and 6. Per the AAPL ethics committee, this is another common ethical complaint against landmen.

As Lawyer, also yes. Violation of Rule 8.4. Overbilling is also a common ethical complaint against lawyers.

Hypothetical #9

Landman/Lawyer works for two different clients on same matter for four hours. Bills both for four hours. Ethical violation?

As lawyer, yes. Cannot bill two clients for same work (although one could bill each client for two hours).

As a landman, trick question: this scenario should not be able to arise under the Code, as landman cannot work for two principals in the same area.

Hypothetical #10

Landman/Lawyer learns of business opportunity while working. Landman/Lawyer believes opportunity has value. Prospective buyers need more capital, and Landman/Lawyer has some cash. Landman/Lawyer offers to pony up some capital. Ethical violation?

As a landman, likely. Best Practice # 10 prohibits a landman from being involved as a professional in “property or transaction” in which she has an actual or contemplated interest unless fully disclosed to all affected parties.

As a lawyer, even more likely. Rule 1.8 prohibits lawyer getting involved in business transactions with clients without jumping through many hoops. Most importantly, lawyer must advise client in writing to consult with another lawyer before the deal can be finalized, and give the client time to do so.

Scenario #5—Private Dealings

Hypothetical #11

Landman/Lawyer is in nasty romantic break-up. Posts “revenge porn” on web to spite ex-significant other. Ethical violation?

As a landman, yes. AAPL requires ethical standards even in non-landman related conduct. (This is, in fact, based on a real AAPL ethics case.)

As lawyer, maybe. If Lawyer has committed crime, then this would also be an ethical violation. But if not a crime in the jurisdiction where it is done, it is not clear that it would be an ethical violation.

Conclusion

One who is both a licensed lawyer and a CPL or RPL needs to be aware of the ethical requirements of both professions. Sometimes they will not be the same. The conflicts described above can best be resolved by the simple act of getting client consent to whatever seems to the best course of action.

This Article is published for general information, not to provide specific legal advice.  The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2015 Fairfield and Woods, P.C., ALL RIGHTS RESERVED.