RI-95
August 15, 1991
SYLLABUS
A lawyer who previously represented two corporations in litigation matters may not subsequently represent a corporate officer in matters adverse to the corporations if the subject matter of the prospective representation is the same or substantially related to the subject matter of the previous representation, unless the corporations consent after consultation.
The subject matter of the prospective representation is substantially related to the subject matter of the prior representation if the factual or legal issues overlap or if there is a likelihood that confidential information obtained in the former representation will have relevance to the subsequent representation. In the case of doubt, and absent consent, a lawyer should decline the representation.
References: MRPC 1.9(a), (b) and (c), 1.13(a); RI-46; General Electric Co. v. Valeron, Inc., 608 F2d 265 (CA 6 1979), cert den 445 US 930.
TEXT
A lawyer previously represented two corporations owned by members of the same family in litigation matters brought against the corporations by labor unions and subcontractors. In the course of these representations, the lawyer had contact with various family members who served as corporate officers. These litigation matters have apparently been concluded.
A dispute has now arisen between members of the family over a certain real estate transaction undertaken by one of the family members, and as to the value of benefits payable upon termination of a pension plan to that same family member. This family member has asked the lawyer to represent the family member in potential litigation in which the two corporations and other family members may be adverse parties. The lawyer does not believe the subject matter of the potential litigation would be substantially related to the subject matter of the litigation in which the lawyer previously represented the two corporations. The lawyer further believes that neither the lawyer nor the lawyer's associates obtained any information in their prior representations of the two corporations that would be used in the new potential litigation.
The lawyer asks whether it is ethical for the lawyer to represent the family member in the potential litigation adverse to the two corporations and the other family members.
MRPC 1.9 states:
"(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.
"(b) Unless the former client consents after consultation, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated has previously represented a client
"(1) whose interests are materially adverse to that person, and
"(2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter.
"(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."
This rule recognizes that a lawyer retains certain duties to a client, even after the professional relationship has ended. See RI-46. At the same time, because of the termination of the prior relationship, the rules provided are not as stringent as those that would pertain in the case of a current client. See MRPC 1.7. MRPC 1.9 does not provide a blanket prohibition on the representation of a client against a former client, but does impose restraints keyed to the protection of information that may have been gained during representation of the former client. Thus, the representation would be barred (absent consent) in cases where the lawyer had represented the former client on the same, or on a substantially related matter, and in any event serves to protect information about the former client gained in the course of the representation.
With respect to the present inquiry, the prospective representation as to which the family member seeks to retain the lawyer would appear to be adverse to the two corporations previously represented by the lawyer, and to certain individual family members. If the lawyer did not previously represent these potentially adverse individual family members, there would be no conflict which would prevent the lawyer from accepting the representation as against these individual family members. This is so even though these family members may have been officers of the corporation which the lawyer did previously represent. "A lawyer employed or retained to represent an organization represents the organization as distinct from its directors, officers, employees, members, shareholders, or other constituents." MRPC 1.13(a).
With respect to the two corporations previously represented by the lawyer, and assuming on the basis of the facts provided that the potential litigation would be materially adverse to the interests of the two corporations, MRPC 1.9 provides that representation against these corporations is not allowed if the lawyer represented the former client in the same, or a substantially related matter, and the former client does not consent after consultation.
The first issue is whether the prospective representation involves the same subject matter as the previous representation, or a substantially related subject matter. The subject matter of the prospective representation is not "the same" as that involved in the previous representation. The question then becomes whether the prospective representation, involving real estate matters and benefits payable to an officer of the corporations upon termination of a pension plan, are "substantially related" to the prior matters, concerning claims by labor unions and subcontractors for monies allegedly due for employee benefits and breach of contract, respectively.
In RI-46, it was held that a subsequent matter is substantially related to the subject matter of a former representation if the factual or legal issues overlap or if there is a likelihood that confidential information obtained in the former representation will have relevance to the subsequent representation. In the case of doubt, and absent the consent of the former client, a lawyer should decline the representation. See General Electric Co. v. Valeron, Inc., 608 F2d 265 (CA 6, 1979), cert den 445 US 930.
In this inquiry the former representation of the two corporations consisted of litigation concerning employee benefits and alleged breaches of contract. On the facts presented, these do not appear to involve a substantially related subject matter. If, however, in the prior representation of the two corporations on the employee benefits issue the lawyer became privy to information about the pension plan, then the lawyer has gained information which may be relevant to the prospective litigation. Or, for example, if the lawyer learned about corporate policies regarding the fulfillment of corporate obligations in the course of the prior representations that might have relevance to the prospective representation, the matters would be considered substantially related.
Without reviewing these matters in detail, this Subcommittee is not in a position to render a definite opinion on the question of substantial relationship. The Subcommittee is not a fact-finding body and lacks the investigative authority necessary to determine the exact nature of the former representations and their relationship, if any, to the prospective representations. The inquirer is urged to carefully analyze the prospective representation under the guidelines set out above in determining whether to accept the new representation. In the case of doubt, the representation should be declined.
In conclusion, two final points should be made. First, if the lawyer concludes that the prior and prospective representations do involve the same or a substantially similar subject matter, or if the lawyer is in doubt on this question, the new representation can still be undertaken under MRPC 1.9 if the former client consents after consultation. Second, if the lawyer concludes that the prospective representation is permissible under MRPC 1.9, or if the former client consents after consultation, the lawyer must remain cognizant of the requirements of MRPC 1.9(c), and take the steps necessary to protect against impermissible use or disclosure of protected information.