August 19, 1983
It is improper for a lawyer to represent a client against a former client where the claim involves the same subject matter for which the lawyer was formerly employed.
References: CI-250; ABA Informal Opinion 1322.
A lawyer represents a plaintiff whereby the plaintiff claims an interest in real estate purchased by the plaintiff and defendant. When the home was purchased both parties agreed that they would own the home together. At the closing the deed was transferred to the defendant alone. The parties have now gone their separate ways and he claims a one-half interest in the home.
The plaintiff brought his girlfriend into the lawyer's office for a conference as to how to handle the home she lived in prior to the purchase of the new home in question, the new home being the subject of the litigation. For tax purposes the lawyer recommended that she lease the home to him for the same amount owing on the mortgage payments and he in turn would re-lease the property to her and any profits received would be income to him and not to her. She could not show an income for it would jeopardize her Social Security widow benefits. This arrangement also made it easier for the couple to purchase the new home.
Now, litigation exists [as] to the ownership interests in the new home purchased by the parties. The lawyer's client is suing for that interest.
"Defendant's attorney claims a conflict of interest exists as between myself and his client (the defendant) in that I am her attorney and I cannot sue her because of that status and therefore should disqualify myself."
CI-250 states that there is no ethical prohibition against representing a client against a former client provided business relations have ceased between the lawyer and the former client, except that it would be improper for the lawyer to represent a client against a former client if the claim involves the same subject matter for which the lawyer was formerly retained or if the lawyer obtained factual information on which to proceed in the present case.
Also pertinent is ABA Informal Opinion 1322 that states in part:
"As used in the Disciplinary Rules of the Code of Professional Responsibility, "differing interests" are defined as including "every interest that will adversely affect either the judgment or the loyalty of a lawyer to a client, whether it be a conflicting, inconsistent, diverse or other interest."
DR 5-105(A) provides:
"A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client twill be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C)."
DR 5-105(C) permits a lawyer to represent "multiple clients" under certain circumstances, with the consent of both clients, but the exception is not applicable to the facts here.
The duty of loyalty owed by a lawyer to his client with respect to matters as to which the lawyer acted as counsel survive the formal conclusion of the lawyer-client relationship to the extent that, having represented a party to a transaction, a lawyer may not thereafter represent the other party in an action against his former client arising out of or closely related to the transaction. Such conduct would involve the lawyer in the representation of interests directly in conflict with those of the first client for whom he acted as counsel and to whom he still owes a duty of loyalty as to the transaction now being challenged. Informal Opinion 1157; See also Cord v Smith (9th Cir. 1964) 338 F.2d 516.
Therefore, it would be improper for a lawyer to represent a client against a former client where the claim involves the same subject matter for which the lawyer was formerly employed. It seems clear from the facts that you established a relationship of attorney-client with the present defendant involving the purchase of the real estate.