August 7, 1992
A lawyer who has unknowingly undertaken representation of a client directly adverse to a client represented by another member of the lawyer's firm, which representation a disinterested lawyer could not reasonably believe would not adversely affect the relationship with the firm's other client, must immediately withdraw from the representation once the conflict is discovered.
A lawyer may not avoid withdrawal from the representation by attempting to screen the lawyer colleague from the conflicting representation matter.
A lawyer may not avoid or delay withdrawal from the representation, or if the matter is before a tribunal may not avoid or delay seeking permission for withdrawal, on grounds that the client is unable to find substitute counsel.
A lawyer may not avoid withdrawal from the representation even if one of the conflicting matters is subsequently concluded.
References: MRPC 1.0(b), 1.7(a), 1.9(a) and (c), 1.10(b), 1.11(a), 1.16(c); R-4; RI-46, RI-66, RI-80, RI-97; CI-1140; Dewey v. R. J. Reynolds Tobacco Co, 536 A2d 243 (1988); Harte Biltmore Ltd v. First Pennsylvania Bank, 655 F Supp 419 (DC SFla 1987); Picker International Inc v. Varian Associates Inc, 869 F2d 578 (CA FC 1989); Ransberg Corp v. Champion Spark Plug Co, 648 F Supp 1040, 1044 (DC NIll 1986); Strategem Development Corp v. Heron International NV, 756 F Supp 789 (DC SNY 1991); Truck Insurance Exchange v. Fireman's Fund Insurance Co, 8 Cal Rptr 2d 228 (Cal Ct App 1992).
In 1990, a lawyer defended a corporate client in a law suit brought by a former employee for wrongful termination. In August of 1991, another member of the law firm began representing a plaintiff against the same corporate client in the damages portion of a civil suit after appeal. The law firm became aware of the conflict in November, 1991. At that time the law firm requested the corporate client to consent to the second representation. When the corporate client refused, the law firm agreed to withdraw from the damage suit. In December, 1991, the court entered a Stipulation and Order extending discovery in the damages case, after being advised that the law firm had a conflict which precluded the law firm's continued representation of the damages client and to allow the client to secure new counsel. In April, 1992, the law firm again requested the corporate client to waive the conflict, as a settlement had been reached in the prior litigation. The corporate client again refused and requested the law firm to file a motion to withdraw. The law firm refused and the corporate client filed a motion to disqualify the law firm based on the ethical questions.
The presiding judge in the damages action asks whether the law firm may represent a client in a matter in which the client's interests are substantially adverse to the interests of a second client at the inception of the representation, but by the time the issue of disqualification for the conflict of interest is presented to the court for decision the representation of the second client is concluded, and where the lawyer for the law firm handling the new matter is adequately screened.
MRPC 1.7 states:
"(a) A lawyer shall not represent a client if the representation will be directly adverse to another client, unless:
"(1) the lawyer reasonably believes the representation will not adversely affect the other client; and
"(2) each client consents after consultation."
The representation of the client in the damages case was directly adverse to the corporate client which the firm represented in the employment litigation. MRPC 1.7 prohibits the representation of the client in the damages case unless a disinterested lawyer would reasonably believe the representation would not adversely affect the relationship with the corporate client, and both clients consent.
Under these facts, a disinterested lawyer could not reasonably believe that representing the client in the damages case against the corporate client would not adversely affect the lawyer's relationship with the corporate client. We have noted in prior opinions that when a disinterested lawyer cannot reasonably believe that the representation of the former or initial client would not adversely affect the relationship with the corporate client and MRPC 1.7(a)(1) cannot be satisfied, client consent does not cure the conflict. See, for example, RI-66, RI-80.
Even if MRPC 1.7(a)(1) were satisfied, MRPC 1.7(a)(2) requires that both clients consent to the adverse representation. Since the conflict was not discovered at the time the adverse representation was undertaken, clearly neither client consented. Thus the lawyer could not ethically undertake the representation. We assume that the damages client subsequently agreed to the representation, since counsel has now asked to proceed in the matter despite the original conflict. The corporate client, however, refused to consent on two separate occasions. Therefore, none of the conditions of MRPC 1.7(a) have been met.
Having failed to detect the conflict before undertaking the adverse representation, could the lawyer belatedly cure the conflict? We are told that the lawyer for the corporate client was "screened" from participation in the damages action. This is irrelevant. Screening is allowed under ethics rules in only two circumstances: MRPC 1.10(b) allows screening to avoid imputed disqualification of a firm in certain instances when a new lawyer joins the firm and MRPC 1.11(a) allows screening when a lawyer moves to and from public office and private practice. The rules allow screening in no other circumstances. Even if screening were considered a "cure" of the law firm's failure to detect the adverse relationship between its existing clients, the screening in this instance could not have been timely implemented, since the law firm represented both clients from August through November without being aware of the conflict. Screening not timely implemented is ineffective. R-4.
The law firm argues that since time has removed the conflict, i.e., the employment litigation is settled, no further impediment to representation in the damages case exists. This argument misses the rationale underlying the prohibited representation.
First, it is still improper for the law firm to have undertaken the conflicting representation; the conclusion of the conflicting matter does not remove the ethical violation. Nor is the law firm excused from complying with ethical duties under the guise that the client cannot find substitute counsel; a situation resulting from a violation of ethics rules cannot be used to justify future conduct. If the law firm had promptly detected the conflict of interest and had never agreed to the representation, the client would be in the same position of seeking other counsel.
Second, courts that have considered the issue have held that a law firm will not be allowed to drop a client in order to shift resolution of the conflicts question from Rule 1.7 dealing with current clients, to the more lenient standard in Rule 1.9 dealing with former clients. See, Picker International Inc v. Varian Associates Inc, 869 F2d 578 (CA FC 1989); Strategem Development Corp v. Heron International NV, 756 F Supp 789 (DC SNY 1991); Harte Biltmore Ltd v. First Pennsylvania Bank, 655 F Supp 419 (DC SFla 1987); Truck Insurance Exchange v. Fireman's Fund Insurance Co, 8 Cal Rptr 2d 228 (Cal Ct App 1992). "To hold otherwise would allow such unethical behavior to continue unrestricted because a law firm could always convert a present client into a former client merely by seeking to withdraw after suing a present client." Ransberg Corp v. Champion Spark Plug Co, 648 F Supp 1040, 1044 (DC NIll 1986).
Third, when a conflict arises after representation has been undertaken, or, as in this case, the pre-existing conflict is discovered after representation has been undertaken, the lawyer must withdraw and in some situations must withdraw from representing both clients. In this case the law firm took no definitive action to extricate itself from the impermissible conflict from November, 1991, when the conflict was discovered, to April, 1992, when one representation was concluded. Even if the damages client was unable to find substitute counsel, there is no evidence that the law firm sought to ameliorate the conflict by withdrawing from the employment litigation. Thus for several months after discovering the impermissible conflict, the law firm continued to act for both clients.
Fourth, in representing the corporate client in the employment litigation the law firm obtained information protected by MRPC 1.6 which is relevant to the damages case; if there had not been a possibility that relevant information would be forthcoming, the law firm would not have recognized a need to establish screening. MRPC 1.9(c) states in part:
"(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation.
". . .
"(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
"(1) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client, or when the information has become generally known; or
"(2) reveal information relating to the representation except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client."
MRPC 1.9(c) prohibits the use or revelation of information concerning the corporate client which is protected by MRPC 1.6. The lawyer's duties of loyalty, communication and confidentiality are the underpinnings of conflict of interest prohibitions. When client interests are directly adverse, doing the best possible job for one will virtually ensure a less than equal performance on behalf of the other. When client interests are adverse, the opportunities to put to use information pertaining to one client for the benefit of another multiply, and conversely, efforts to protect confidences of one client will result in less than adequate communication with, or less than whole-hearted dedication to the interests of, another client. If the information is relevant to the damages case, then the two representations are "substantially related," and MRPC 1.9(a) prohibits the representation. RI-46; CI-1140; Dewey v. R. J. Reynolds Tobacco Co, 536 A2d 243 (1988).
We note that violations of ethics rules are within the jurisdiction of the Attorney Grievance Commission and do not give rise to a cause of action for enforcement of the rules, MRPC 1.0(b). We also note that whether a lawyer may withdraw from a matter pending before a tribunal is a question for the adjudicator, MRPC 1.16(c); RI-97.