April 2, 1986
A lawyer may not file suit against a former client where the subject matter of the representation is substantially related to that of the former representation, where the same insurance company represents the former client in the proposed litigation as it did in the previous litigation, and where the lawyer's firm is currently defending several insureds for the insurance company.
References: MCPR DR 4-101, DR 5-101; Op 7; CI-2, CI-250, CI-435, CI-486, CI-541, CI-619, CI-873, CI-876; GAC Commercial Corp v. Mahoney Typographers Inc, 66 Mich App 186 (1975).
A lawyer proposes to represent a client in an action against a manufacturer for injuries sustained while using the manufacturer's playground equipment. The law firm previously defended the manufacturer in a claim for personal injuries arising out of the use of different playground equipment. The former litigation was closed when a settlement was reached approximately four years ago.
The insurance company representing the manufacturer at this time had retained the law firm to defend the manufacturer in the previous litigation. The lawyer's firm has also been retained as defense counsel by the same insurance company to represent other clients in unrelated cases. Two of these cases are still pending within the law firm.
The lawyer asks whether it is ethical to undertake the prospective representation.
A lawyer's representation against a former client has been addressed by this committee on several occasions. The general rule established is, that before a lawyer may bring an action against a former client, all business relations must cease, the representation must not involve substantially the same subject matter, and the information upon which the lawyer proceeds must not involve reliance upon confidential communications or secrets imparted to the lawyer by the former client. Op 7; CI-2, CI-250, CI-435, CI-486, CI-541, and CI-873. The facts of an individual case must determine whether representation is appropriate.
In this inquiry, the issue centers on whether the subject matter is substantially related and whether any confidential communications or secrets acquired from the former client may be relied upon by the lawyer. Substantially related factual issues as well as legal issues will preclude a lawyer's representation against a former client. CI-873. The basis for this requirement stems from MCPR DR 4-101(B) which states:
"A lawyer shall not knowingly:
"(1) Reveal a confidence or secret of his client.
"(2) Use a confidence or secret of his client to the disadvantage of the client.
"(3) Use a confidence or secret of his client for the advantage of himself or of a third person, unless the client consents after full disclosure."
MCPR DR 4-101(A) defines secrets and confidences to encompass any information acquired during the former representation:
"Confidence" refers to information protected by the attorney-client privilege under applicable law, and "secret" refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would likely to be detrimental to the client."
In the present case, not only the factual issues, but the legal issues, may be substantially related to the former litigation. If the former subject matter is in any way relevant to the present case, the former client must consent before representation is continued. MCPR DR 4-101(B)(3); CI-486.
Even if it is claimed that the factual issues are different, the information gained in the course of the former representation as well as the representation of the other clients of the insurer could be used against the interest of the former client. The lawyer may have gained access to intangible information from the very nature of the lawyer-client privilege. Knowledge as to the administrative and financial affairs of the former client may be helpful in effectuating settlement or recovery. See CI-873, CI-619.
Similarly, knowledge as to the insurance company itself may be detrimental to the former client. In Michigan, the insurance company is not considered the client subject to the lawyer-client privilege. CI-876. However, information, for instance, negotiation techniques, may have been gained while working with the insurer, either in the former litigation or the other cases existing in the firm, which may be considered secrets.
The lawyer must consider whether independent professional judgment on behalf of the prospective client may be impaired. Under MCPR Canon 5, a lawyer must not accept employment unless with consent of the former client, where independent professional judgment on behalf of the new client may be affected by the lawyer's own financial, business, property or personal interests. MCPR DR 5-101(A); DR 5-105(B). In this case, the lawyer's law firm continues to represent and, in all likelihood, to be compensated by the insurance company. In representing the new client, the lawyer may be pitting the prospective client's interests against the business received through the insurance company.
Even though the former client was represented by another lawyer in the same law firm, the firm and all the members of the firm will be barred from accepting any employment that one member of the firm is prohibited from taking. ABA Op 33, 3/3/31; MCPR DR 5-105(D); GAC Commercial Corp. v. Mahoney Typographers, Inc., 66 Mich App 186 (1975). The danger of inadvertent disclosures of confidences or secrets is inherent in the everyday interchange of ideas among law firms.
In summary, the lawyer is prohibited from representing the prospective client. The subject matter, including the legal issues, may be substantially related. Secrets or confidential information divulged or acquired in previous litigation may be revealed or used to the disadvantage of the former client. Since the former client apparently refuses to consent to the representation, the lawyer should withdraw from representation of the injured party.