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Ethics Opinion

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C-234

November, 1984

SYLLABUS

    Even though a lawyer is not representing the insurance company or its insured in the case at issue, it is improper for that lawyer simultaneously to represent a client in an automobile accident case against the insurance company defending the case when the lawyer represents that insurance company on a regular basis, i.e., represents the company in a substantial number of cases and derives a significant portion of the lawyer's income from representing the company. Furthermore, the lawyer may not act as "local counsel" or "co-counsel" in the case, since the lawyer is also disqualified from any indirect association with the case.

    References: MCPR Canons 4 and 5; MCPR DR 4-101(B), DR 5-101(A), DR 5-105(A), (B), (C) and (D); CI-304, CI-514, CI-619, CI-765.

TEXT

A lawyer represents an insurance company on a regular basis, deriving a significant portion of income from representing the company. The lawyer is retained by the insurance company to represent its insurers who are named as defendants in automobile accident cases. The lawyer, who continues to represent the insurance company and expects to provide services for it and its insureds in the future, is contacted by a potential plaintiff in an automobile accident case. The lawyer determines that the defendant driver is insured by the insurance company the lawyer represents.

The lawyer asks (a) whether the lawyer may represent the plaintiff; (b) whether the lawyer may counsel the plaintiff up to the time of filing a law suit, then act as "co-counsel" or "local counsel" during trial in order to be liaison between the plaintiff and the successor lawyer, receiving "blind copies" of all relevant pleadings and correspondence in the case.

The issue is the propriety of a lawyer simultaneously prosecuting and defending separate claims against the same insurance company. Resolution of the issue requires consideration of when a lawyer may prosecute an action against a present client. MCPR Canons 4 and 5 provide guidance. While not specifically included in the question presented, considerations governing prosecution of an action against a former client provide useful guidance concerning the issue under discussion.

MCPR DR 4-101 states in pertinent part:

    "(B)Except when permitted under DR 4-101(C), 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 for a third person unless the client consents after full disclosure."

MCPR DR 5-101 provides, as to refusal of employment by a lawyer, that:

    "(A) Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property, or personal interests."

MCPR DR 5-105 expands on DR 5-101, and provides that:

    "(A) A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will 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)."

CI-619 opined that a lawyer may not prosecute an action against a former client unless the following three conditions have been satisfied: (1) the lawyer's business relationship with the former client has ceased to exist, (2) the subject matter of the new action is not substantially related to the former action or relationship, and (3) the lawyer will not rely on confidential communication from the prior relationship in prosecuting the present action.

In this instance, even if the lawyer ceases to represent the insurance company there are serious ethical constraints in the lawyer's prosecution of the new action. First, the lawyer probably has detailed knowledge about the guidelines and procedures used by the insurance company in managing automobile accident cases. The knowledge the lawyer has gained regarding the insurance company's policies and habits is knowledge of "confidences" or "secrets," which are privileged communications under the lawyer-client relationship. See CI-619, supra, and CI-304. Use of such information would therefore be a violation of MCPR DR 4-101(B).

Second, the subject matter of the new action involves automobile accidents. While the lawyer apparently does not represent the company in the accident under discussion, the subject matter is related to the lawyer's prior representation of the company. In CI-644 this committee opined that a lawyer could ethically represent a client involved in a lawnmower accident against an insurance company represented by the lawyer's previous law firm. The committee emphasized that the lawyer had not been privy to confidential information of the company regarding lawnmower accidents. But since the subject matter in the contemplated representation here is the same as in past representation, there may be conflict of interest in the lawyer's prosecution of the new action against the company.

Third, because the lawyer continues to represent the insurance company, prosecution of the new action would be prohibited since the relationship with the company has not ceased. See CI-644 and CI-619.

Finally, it is difficult to imagine that the lawyer can zealously represent the new client without having terminated the relationship with the company. Indeed, these facts present a classic case of conflict of interest. Therefore prosecution of the new action would violate MCPR DR 5-101 and DR 5-105.

If the lawyer complies with the ethical considerations discussed, the lawyer could represent the plaintiff against the company if the lawyer makes full disclosure and receives consent of the plaintiff for the representation. MCPR DR 5-101. The lawyer should also give notice to the company of the representation. The appearance of impropriety may also be cured by obtaining the required consent. As a practical matter such consent should be in writing.

But the issue here is whether the lawyer may represent the insurance company in automobile accident cases when written consent of the plaintiff is obtained. While the ethical considerations addressed above are applicable to this discussion, there are also additional factors to consider. MCPR DR 5-105(B) and (C) address the issue of multiple representation as follows:

    "(B) A lawyer shall not continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, or if it would be likely to involve him in representing differing interest, except to the extent permitted under DR 5-105(C).

    "(C) In the situations covered by DR 5-105(A) and (B), a lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consent to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each."

It is difficult to imagine how the lawyer can avoid a conflict of interest when representing two clients with adverse interests. Furthermore, obtaining consent to represent both will not remove the prohibition against representing clients with potential adverse interests. The Annotated Code of Professional Responsibility published by the American Bar Foundation (1979), p. 244 addresses this issue as follows:

    "Whatever the nature of the client's "consent," some interpretations of DR 5-105(C) by courts and by the ABA Committee hold that client consent is not an absolute guarantee that conflict-ridden representation is removed from the purview of DR 5-105(A) and (B). When a conflict of interest between clients is so patent that a direct clash emerges, the court may hold consent to be irrelevant. See Kelly v. Greason, 23 NY2d 368, 244 NE2d 456, 462 (1968) (no effective consent could be given where an attorney was dually employed as adjuster for insurance company and as attorney for claimants against insurance company) . . . ."

Prior decisions of this committee are consistent with this position.

In CI-514 the Committee opined that "an attorney may not represent one client on a claim against another client in litigation . . . ." Furthermore, the committee stated:

    "In this situation of simultaneous representation of two clients with conflicting or differing interests, the code does not allow you to continue the multiple employment if it will adversely effect your independent professional judgment on behalf of either client. DR 5-105(B). You should resolve all doubts against the propriety of such joint representation, particularly where one client opposes another in litigation. See EC 5-15."

CI-765 stated:

    ". . . a firm may not accept any action against a person whom they are presently representing even though there is no relationship between the two cases. Grievance Comm v. Rattner, 152 Comm 59, 65; 203 A2d 82 (1964). [Notations interpreting DR 5-105(A) and (B) of the ABA Model Code of Professional Responsibility]"

Therefore, representation of the plaintiff against the insurance company represented on a regular basis by the plaintiff's lawyer presents a clear case of conflict of interest under MCPR DR 5-105(B) and (C), and the conflict is "patent." Consent of the new client will not allow the lawyer to engage in the contemplated dual representation.

However, if the lawyer receives only a small number of cases from the insurance company, i.e., does not represent the company on a regular basis, the conflict can be presumed to be of a de minimis nature. The lawyer could then represent the plaintiff after full disclosure of the relationship with the insurance company to the plaintiff, if the plaintiff consents and notice of the representation is given to the company.

May the lawyer act as "of counsel," "local counsel" or "co-counsel" in the case? MCPR DR 5-105(D) provides the answer:

    "If a lawyer is required to decline employment or to withdraw from employment under a Disciplinary Rule, no partner, or associate, or any other lawyer affiliated with him or his firm, may accept or continue such employment."

The Annotated Code, pp. 246-247, addresses the issue as follows:

    "Although the provision in DR 5-105(D) requires vicarious disqualification with regard to any Disciplinary Rule, the purpose of the provision in Canon 5 is to prevent the circumvention of the rules of the Canon through the actions of partners, associates, or affiliates. Partner, associates, or affiliated lawyers include lawyers who are 'Of Counsel' (Informal Opinion 1315, January 9, 1975)."

Further, the lawyer may not represent the new client as an of counsel, or co-counsel or local counsel if the lawyer is disqualified from directly representing the new client. See CI-644.

In conclusion, the lawyer may encounter serious ethical problems if the lawyer attempts to represent the plaintiff after terminating the relationship with the insurance company. The lawyer may not represent the plaintiff on a claim involving an automobile accident while simultaneously representing the insurance company in other cases, notwithstanding the fact that the lawyer does not represent the insurance company in the plaintiff's case.

 
     

 

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