CI-1104
July 26, 1985
SYLLABUS
A lawyer acting as trust counsel and being familiar with alleged improper investments for which that trust is now being sued, has the duty to disclose to all of the trustees the lawyer's potential liability as third party defendant after having been placed on notice by a lawyer who represents only some of the trustees. The lawyer should advise all of the trustees of all relevant facts and because of the irreconcilable conflicts between his own interests and theirs as his clients, he should withdraw.
References: MCPR DR 2-110(B)(2), DR 4-101, DR 5-101(A).
TEXT
A lawyer serves as trust counsel to a jointly trusted Taft Hartley Pension Plan, whose pension board consists of both union trustees and employer trustees. Counsel for the employer trustees in a federal lawsuit has put the lawyer on notice of a possible third party claim against the lawyer and the lawyer's firm by the trustees, and counsel has proposed (1) a forbearance wherein the lawyer and the lawyer's firm will waive the statute of limitations and counsel will forebear presently adding them as third party defendants; (2) that the lawyer should not discuss these concepts with the trustees; and (3) that the lawyer continue to act as trust counsel.
The lawyer asks (a) whether he has a duty to disclose to the trustees, all or any of them, the forbearance agreement suggestion; (b) whether the lawyer is prohibited from notifying all the trustees as to these suggestions of the counsel who represents only the employer trustees; and (c) whether the lawyer must channel communications regarding this matter only through that counsel representing such employer trustees?
The questions as posed assume a continuing representation by the lawyer and the lawyer's firm as trust counsel. Assuming that such were to continue , it would appear that full knowledge of pertinent factors should always be made known to the client. There would be or might be a benefit to the lawyer should a forbearance agreement be signed and no suit instituted against the lawyer. MCPR DR 5-101(A) states:
"Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgement on behalf of his client will be or reasonably may be affected by his own financial, business, property or personal interest."
As a forbearance agreement may well affect the lawyer's financial or business interest, full disclosure of all activities should be made to all trustees. It is improper to withhold any communication relevant to the representation from the clients.
If the lawyer were to continue to attend trustee meetings, overhear conversations, and acting as counsel make recommendations and engage in like activities, the lawyer would then become privy to confidences, information, and the various secrets of the trustee clients. In event of lawsuit against the lawyer, the lawyer might be required in defending the lawyer's interests or pursuant to court order to make disclosure of confidences thus acquired. While generally such confidences could be utilized within the Canon provisions, the lawyer in this instance would have acquired such information knowing that they could be utilized in defense. See DR 4-101. Moreover, it would obviously be quite difficult for the lawyer to properly represent the client if during certain discussions relative to the client's past activities or future anticipated conduct the alwyer could impart suggestions to the trustees thus influencing the trust, when such suggestions might also benefit the lawyer's potential liability.
Since it appears that continued employment of the lawyer and the lawyer's firm may well result in violations of disciplinary rules, it would be earnestly suggested that the lawyer forewith withdraw. See DR 2-110(B)(2).