Current Client Current - Part I Home/Table of ContentsCurrent Client - Part IINote
: due to the length of this page we have divided it into two parts, Part I (this page) and Part II (next page; click here). Part I discusses the basics of the current client rule with subcategories. Part II consists of cases that do not particularly illuminate the categories at Part I.
A law firm based in Chicago represents a corporate client (Client A) in one matter, a property tax appeal in San Diego, being handled by a partner in the firm's San Diego office. While that matter is pending, another client (Client B) asks a partner in the firm's Chicago office to bring a billion-dollar breach of contract suit against Client A. The alleged breach of contract has nothing whatsoever to do with the property tax matter in San Diego, and the corporate personnel involved are in different divisions and different cities. Can the law firm take on the breach of contract matter?
In all states, except Texas, the firm would need Client A's consent. Otherwise, the law firm is being asked to take on a matter directly adverse to a current client, which violates Model Rule 1.7(a)(1). This is also the rule in Canada, Canadian Nat'l Ry. Co. v. McKercher LLP, 2013 SCC 39 (S. Ct. Canada July 5, 2013) (recognized "professional litigant" exception); R. v. Neil
,  3 S.C.R. 631 (Can.); Lotech Med. Systems Ltd. v. Kinetic Concepts Inc.
, 2008 FC 1195 (Fed. Ct. Oct. 24, 2008); and Toyota Credit Canada Inc. v. Phantom Ind. Inc
., 2007 CanLII 23030 (Ont. Super. Ct. June 19, 2007) (following Neil). See also Restatement § 128(2). Comment  to ABA Model Rule 1.7 makes it explicit. The Texas exception
. Texas is the only state having a version of Model Rule 1.7 that permits a lawyer to be directly adverse to a current client on a matter unrelated to the representation. See
Texas Rule 1.06(b)(1). The Fifth Circuit has specifically rejected the Texas rule, In Re Dresser Industries, Inc
., 972 F.2d 540 (5th Cir. 1992). In In re Southwestern Bell Yellow Pages, Inc
., 141 S.W.3d 229 (Tex. App. 2004), the court applied the Texas rule and said no disqualification; however, the court also found that the lawyer in question had not gained information in the other matter to assist the lawyer in this matter. At D’Andrea v. Epstein, Becker, Green & Hall, P.C
., 2013 Tex. App. LEXIS 14961 (Tex. App. Dec. 12, 2013), the court held that a lawyer opposing a current client could be guilty of a breach of fiduciary duty even though the lawyer was in compliance with the unique Texas rule. Unclear ruling on Texas rule
, Schlumberger Tech. Corp. v. Baker Hughes, Inc
., No. H-12-3573 (S.D. Tex. May 31, 2015). Ohio. Carnegie Cos., Inc. v. Summit Props., Inc
., 2009 Ohio App. LEXIS 3973 (Ohio App. Sept. 9, 2009). This is a comprehensive discussion of current clients under the new Ohio Rules of Professional Conduct. It takes issue with several federal court decisions decided under Ohio’s former unique version of Model Code DR5-105, which were somewhat more lenient than the ruling in this case. In Carnegie Cos., Inc. v. Summit Props., Inc., 2012 Ohio App. LEXIS 1151 (Ohio App. March 28, 2012), the court upheld an award of $80,000 to the moving party for the opponent's bad faith refusal to withdraw in the face of the conflict.
N.Y. Op. 1008 (2014) is a clear exposition of current client vs. former client conflicts.
Daniel J. Bussel, No Conflict
, 25 Geo. J. Legal Ethics (2012) (at
SSRN, to be published). Professor Bussel contends that the American
current client rule should be changed in favor of a "substantial
relationship" test as applied in the former client rule. Whatever one
thinks of that conclusion, the article is a thorough and entertaining
history of the current rule. "No Harm, No Foul."
On occasion a court will allow a law firm to remain in a case where it was technically being adverse to a current client. Such a case is Elonex I.P. Holdings, Ltd. v. Apple Computer, Inc.
, 142 F. Supp. 2d 579 (D. Del. 2001) (although, also showing of a consent). More usually, this is where one representation had ended, was nearly "dead," was severely winding down, or was recently dead. See, for example, Bayshore Ford Truck Sales, Inc. v. Ford Motor Co
., 380 F.3d 1331 (11th Cir. 2004) (had conflict for brief time, then dropped one of the clients); Lanard Toys Ltd. v. Dolgencorp LLC
, 2016 WL 7326855 (M.D. Fla. Dec. 16, 2016) (overlap brief; no confidential information involved); Blankenchip v. CitiMortgage, Inc
., 2016 WL 6821867 (E.D. Cal. Nov. 18, 2016) (slight overlap "de minimis"); HLP Props., LLC v. Con. Ed. Co. of N.Y., Inc
., 2014 U.S. Dist.
LEXIS 147416 (S.D.N.Y. Oct. 16, 2014) (weighed harm, did not disqualify); Garland v. Ford Motor Co
., 2015 WL 1401030 (M.D. Tenn. March 26, 2015) (1.7 violation, but no harm); Boston Scientific Corp. v. Johnson & Johnson Inc
., 647 F. Supp. 2d 369 (D. Del. 2009) (firm had continuing current client conflict involving European matter but screen, etc.; same result, same parties, Wyeth v. Abbot Labs
., 692 F. Supp. 2d 453 (D.N.J. 2010)); Cliff Sales Co. v. Amer. Steamship Co
., 2007 U.S. Dist. LEXIS 74342 (N.D. Ohio Oct. 4, 2007) (overlapping conflict lasted only two months with no harm to client); LifeNet, Inc. v. Musculoskeletal Transplant Foundation
, 2007 U.S. Dist. LEXIS 29058 (E.D. Va. April 19, 2007) (one of the lawyers left the firm); Pfizer, Inc. v. Stryker Corp
., 256 F. Supp. 2d 224 (S.D.N.Y. 2003) (firm briefly represented the other side in two product liability cases, but then withdrew); End of Road Trust v. Terex Corp
., 2002 U.S. Dist. LEXIS 2586 (D. Del. 2002); Research Corp. Tech., Inc. v. Hewlett-Packard Co
., 936 F. Supp. 697 (D. Ariz. 1996); SWS Financial Fund A v. Salomon Bros., Inc
., 790 F. Supp. 1392 (N.D. Ill. 1992); Kaminski Bros., Inc. v. Detroit Diesel Allison, Div. of Gen. Motors Corp
., 638 F. Supp. 414 (M.D. Pa. 1985) (also a "hot potato" situation); Air Products & Chemicals, Inc. v. Airgas, Inc
., 2010 Del. Ch. LEXIS 35 (Ct. Ch. Del. March 5, 2010) (lawyers screened; matters not related; Cravath was the firm); Airgas, Inc. v. Cravath, Swaine & Moore LLP
, 2010 U.S. Dist. LEXIS 78162 (E.D. Pa. Aug. 3, 2010) (motion to dismiss damages case against Cravath denied); Goodman v. Goodman
, 2008 Mo. App. LEXIS 1375 (Mo. App. Oct. 7, 2008) (no showing the “fair or efficient administration of justice” was threatened); Reese v. Virginia Int'l Terminals
, 2012 U.S. Dist. LEXIS 109372 (E.D. Va. Aug. 2, 2012) (disqualification denied, but referred to discipline authority); Develop Don’t Destroy Brooklyn v. Empire State Development Corp
., 816 N.Y.S.2d 424 (N.Y. App. 2006); In Prudential Ins. Co. of America v. Anodyne, Inc
., 365 F. Supp. 2d 1232 (S.D. Fla. 2005), the court denied a motion to withdraw even though the moving law firm discovered that it was representing the other side on unrelated matters. The court relied heavily on SWS
, above as well as what is now § 11.21 of Hazard, Hodes & Jarvis. In Gen-Cor, LLC v. Buckeye Corrugated, Inc
., 111 F. Supp. 2d 1049 (S.D. Ind. 2000), the court found a current client conflict by virtue of a parent-subsidiary relationship, but rejected disqualification because the client would not be prejudiced by the conflict. In Atofina Chemicals, Inc. v. Jci Jones Chemicals, Inc
., 2002 U.S. Dist. LEXIS 13970 (E.D. Pa. July 10, 2002), the court held that because one of the representations was surely going to end, in any event, and to avoid prejudice to the client of the firm with the conflict, the court denied the motion. A variation on "no harm, no foul" is Stanton v. Northside Marina at Sesuit Harbor, Inc
., 2005 U.S. Dist. LEXIS 17942 (D. Mass. Aug. 18, 2005). It was not a disqualification case. An aggrieved litigant attempted to have a summary judgment hearing stayed because of a conflict. The court denied the stay because the litigant was not prejudiced by the conflict. In Hempstead Video, Inc. v. Village of Valley Stream
, 409 F.3d 127 (2d Cir. 2005), the court held that a law firm could be adverse to the current client of an of counsel where the firm could show that the of counsel has been screened from the firm's matter. In Board of Regents of the Univ. of Neb. v. BASF Corp
., 2006 U.S. Dist. LEXIS 58255 (D. Neb. Aug. 17, 2006), the court allowed a law firm to oppose a party, even though the law firm was representing that party in another case, not related to this case. There is too much to the case to repeat here, but if you want to be adverse to a current client, you should read it. In Doctor John's, Inc. v. City of Sioux City
, 2007 U.S. Dist. LEXIS 90 (N.D. Ia. Jan. 2, 2007), the court gave a law firm a pass even though for a short period of time it had a current-client conflict. In Abubakar v. County of Solano
, 2008 U.S. Dist. LEXIS 12173 (E.D. Cal. Feb. 4, 2008), lawyer interviewed opponents in one case while defending employer in another case; no disqualification. In Great American Ins. Co. v. General Contractors & Construction Mgm’t, Inc
., 2008 U.S. Dist. LEXIS 37015 (S.D. Fla. May 6, 2008), the court allowed a law firm to be adverse to a current client. In Victorinox AG v. The B&F System, Inc.
, No. 13 Civ. 4534 (JSR) (S.D.N.Y. July 29, 2016), the court denied a motion to disqualify even though the law firm had a current client conflict for a year. In Fabick, Inc. v. FABCO Equip., Inc
., 2016 WL 5718252 (W.D. Wis. Sept. 30, 2016) the court allowed firm to remain but ordered a screen). Watch out, though
. In the following cases the law firm was suing a client in one case and representing it in another, but the conflict lasted for just a few months. Nevertheless, the court held the law firm should be disqualified in the surviving matter even though the other matter had ended: Rembrandt Technologies, LP v. Comcast Corp
., 2007 U.S. Dist. LEXIS 9027 (E.D. Tex. Feb. 8, 2007); Florida Ins. Guar. Ass’n., Inc. v. Carey Canada,
749 F. Supp. 255 (S.D. Fla. 1990); State Farm Mut. Auto. Ins. Co. v. Federal Ins. Co
., 86 Cal. Rptr. 2d 20 (Cal. App. 1999); and Kelly, Remmel & Zimmerman v. Walsh
, 2007 Me. Super. LEXIS 71 (Me. Super. Ct. April 13, 2007). Similar cases where the court could have said "no harm no foul" but didn't are Snapping Shoals Electric Membership Corp. v. RLI Ins. Corp
., 2006 U.S. Dist. LEXIS 45226 (N.D. Ga. July 5, 2006); Anderson v. Nassau County Dept. of Corrections
, 376 F. Supp. 2d 294 (E.D.N.Y. 2005); and Atlantic Pacific Home Loans, Inc. v. Superior Court
, 2006 Cal. App. Unpub. LEXIS 11228 (Cal. App. Dec. 13, 2006). Odd Sequence. In Friskit, Inc. v. RealNetworks, Inc
., 2007 U.S. Dist. LEXIS 51774 (N.D. Cal. July 5, 2007), the court denied a motion to disqualify where the movant was the second of the two clients to have retained law firm.
In Starwood Hotels & Resorts Worldwide, Inc. v. Aoki Corp
., 768 N.Y.S.2d 9 (N.Y. App. 2003), a law firm, because of a merger, wound up on both sides of a case for several months. A lawyer for one side left the firm, and the court allowed her and her new firm to keep the client. While she was with the former firm, the lawyers for each side were in different cities and had little contact. In a similar scenario the court in Laucella v. Ireland San Filippo, LLP
, 2006 Cal. App. Unpub. LEXIS 359 (Cal. App. Jan. 13, 2006) disqualified the law firm. Combustion Engineering Caribe, Inc. v. George P. Reintjes Co., Inc
., 298 F. Supp. 2d 215 (D.P.R. 2003). This is a suit involving a troubled construction project. The relevant entities in question are three subcontractors, Sub1, Sub2, and Sub3. Sub1 hired Sub2, and Sub2 hired Sub3. When things went badly, Sub1 sued Sub2 (this case). Sub3 is not a party in this case. When it came time for Sub1 to depose two employees of Sub3 (the non-party), one of Sub2’s lawyers, Duane Fox, announced that he would be representing not only Sub2 at the depositions, he would also be representing Sub3 and the two deponents, for purposes of the depositions. After the depositions Sub1 moved to disqualify Fox from representing Sub2, because it was a conflict to represent both Sub2 and Sub3. Sub2 first raised Sub1’s standing to make the motion. The court admitted that standing was an issue and noted authorities going both ways. Then, without expressly ruling on standing, the court went on to rule on the merits and denied the motion. The court acknowledged that there were disputes between Sub2 and Sub3, although, again, Sub3 had not been brought into the case. But, the court felt that as to the issues in this case, and as to discovery in this case, Sub2 and Sub3 had common interests. It was also important that Fox’s limited role in temporarily representing Sub3 in certain discovery activities diminished any chance that Sub3 would be prejudiced with respect to its dispute with Sub2.
In Sperr v. Gordon L. Seaman, Inc
., 727 N.Y.S.2d 456 (N.Y. App. June 18, 2001), a law firm defended Hicksville Cinemas in two personal injury actions, which have been settled. While those cases were pending, the law firm, in a third personal injury case involving the same property, filed a third-party action against Hicksville Cinemas on behalf of the defendant. The court affirmed the trial court's order disqualifying the law firm in the pending, third case. The court said in part:
This case involves a law firm which, even if for a relatively brief time, represented a client in one personal injury case while simultaneously opposing relief sought by that same client in a separate personal injury case involving the same premises. Thus, there is a more serious risk of an appearance of impropriety than in the case of a lawyer who later adopts a position which is adverse to that of a former client in a substantially related matter (see, Code of Professional Responsibility DR 5-108 [22 NYCRR 1200.27] . . . .
Possessing Confidences of Non-Clients
. Law Firm represents the underwriter in an IPO. Law Firm must conduct due diligence of the issuer, although Law Firm does not represent the issuer. Can Law Firm be directly adverse to the issuer if the new matter is somehow related to the information gathered in the earlier due diligence? Yes, according to HF Mgm’t. Services LLC v. Pistone
, 818 N.Y.S.2d 40 (N.Y. App. 2006). However, other New York cases hold that possessing confidences, validly obtained, of a non-client can prevent a law firm from being adverse to the non-client. Corpac v. Rubin & Rothman, LLC,
2013 U.S. Dist. LEXIS 9803 (E.D.N.Y. Jan. 24, 2013) (lawyer disqualified because he knew too much about the other lawyer from being co-counsel in similar cases); Blue Planet Software, Inc. v. Games Int’l.
, 331 F. Supp. 2d 273 (S.D.N.Y. 2004); Felix v. Balkin
, 49 F. Supp. 2d 260 (S.D.N.Y. 1999); Marshall v. State of N.Y. Div. of State Police
, 952 F. Supp. 103 (N.D.N.Y. 1997); and Greene v. Greene
, 418 N.Y.S.2d 379 (N.Y. 1979). This appears to be the rule nationally, as evidenced by the following cases: Glueck v. Jonathan Logan, Inc
., 653 F.2d 746 (2d Cir. 1981); Trone v. Smith
, 621 F.2d 994 (9th Cir. 1980); Westinghouse Electric Co. v. Kerr-McGee Corp
., 580 F.2d 1311 (7th Cir.), cert. denied, 439 U.S. 955 (1978); Coburn v. DaimlerChrysler Services N.A. L.L.C
., 289 F. Supp. 2d 960 (N.D. Ill. 2003); Berry v. Saline Mem. Hosp
., 907 S.W.2d 736 (Ark. 1995); Acacia Patent Acquisition, LLC v. Superior Court, 2015 WL 851517 (Cal. App. Feb. 27, 2015); The Oaks Mgm’t Corp. v. Superior Court
, 145 Cal. App. 4th 453 (Cal. App. 2006) (no disqualification; distinguished Raley
, cited just below; court seemed influenced by fact that the non-client had produced more current information in this case); Englert v. Sierra Foothills Pub. Util. Dist
., 2006 Cal. App. Unpub. LEXIS 2961 (Cal. App. April 11, 2006) (recognized that such information is protected but held that the lawyer did not have the information; distinguished Raley
, which follows); William H. Raley Co. v. Sup. Ct
., 197 Cal. Rptr. 232 (1983) (partner served on board; lawyer could not be adverse because of the information available to board members); Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft
, 81 Cal. Rptr. 2d 425 (Cal. App. 1999) (court also found that the non-client subsidiary and the parent were one for conflicts purposes); Arkansas Valley State Bank v. Phillips
, 2007 Okla. LEXIS 109 (Okla. Oct. 16, 2007) (implied that lawyer would have been disqualified if he had actually received confidences); Nat. Med. Enterprises v. Godbey
, 924 S.W.2d 123 (Tex. 1996); In re Dalco
, 186 S.W.3d 660 (Tex. App. 2006); and RWR Management, Inc. v. Citizens Realty Co
., 135 P.3d 955 (Wash. App. 2006). Canada: see Miele v. Humber River Reg. Hosp
., 2007 CanLII 27757 (Ont. Super. Ct. July 13, 2007), leave to appeal to Divisional Court granted, 2007 CanLII 44820 (Super. Ct. of Ont. Oct. 25, 2007); Pilgrim v. Pilgrim
, 2008 NLTD 162 (CanLII) (S. Ct. Newfoundland & Labrador Oct. 21, 2008); and Stanley v. Advertising Directory Solutions Inc.
, 2007 BCSC 1125 (CanLII) (S. Ct. of Brit. Col. July 26, 2007). See Restatement § 121, illus. 10. The “joint defense” cases are in this mold. To see how, go to “Co-Counsel/Joint Defense Agreements” in this site. A law firm in this position should consider setting up a screen around the confidential information and the lawyers and staff who were privy to it. A helpful authority suggesting that entire law firms need not be disqualified is Restatement §132 cmt. g(ii). It says that where there is not an attorney-client relationship, the law of agency applies, and that law does not impute the knowledge of agents to others. Other helpful authorities are Restatement § 15 and Model Rule 1.18. Those provisions relate to information gathered from “prospective clients.” They provide that the lawyer is to keep the information confidential and not use it to the prospective client’s disadvantage. It is important to note that both provisions provide that a screen will prevent other lawyers in the firm from being disqualified. Thus, one could argue that a law firm obtaining non-client information while doing due diligence could also use a screen. There appears to be no logical difference between the two situations. To see other “prospective client” cases, go to “Initial Interview/Hearing too Much,” in this site. Similar Facts and Same Result as in HF Mgm't, Above. Strasbourger Person Tulcin Wolff Inc. v. Wiz Tech., Inc
., 82 Cal. Rptr. 2d 326 (Cal. App. 1999) (another underwriter-issuer case where the court ruled found no conflict) . Case Involving Confidences of Non-Client, but Court Unclear Whose Interests Were Important. Shire Laboratories Inc. v. Nostrum Pharmaceuticals, Inc
., 2006 U.S. Dist. LEXIS 51043 (D.N.J. July 25, 2006). Secondment of Firm Lawyer Need not Create Conflict.
N.Y. City Op. 2007-2 (undated).
N.Y. Op. 901 (December 2011) discusses the extent to which a lawyer may represent a corporation after having represented an officer of the corporation, and the extent to which a lawyer may represent both the corporation and the officer at the same time.What Is a "Current" Client?
When is a client a "current" client, as opposed to a "former" client? That is discussed at the section entitled "Former Client - the Substantial Relationship Test." To go there, click here
.What Is Direct Adversity?
Suing a current client is direct adversity. What about negotiating a major contract for one client when the opposite party to the contract is a current client of the firm on unrelated matters? That is probably direct adversity, but there are few cases or opinions on the subject. See the section of this publication entitled, "Commercial Negotiations."
What about suing a non-client where the outcome will have an adverse economic impact on another client who is not a party to the law suit. For example, can a law firm sue a person who is a guarantor on a note held by a current client where the maker of the note is in financial difficulty? There are few cases that address that issue. ABA Op. 95-390 (1995) contains an excellent discussion of direct adversity in the corporate family context. Also, see the section of this publication, entitled, "Corporate Families." ABA Op. 95-390 cites a case that is very similar to the guarantor situation, North Star Hotels Corp. v. Mid-City Hotel Associates
, 118 F.R.D. 109 (D. Minn. 1987). For a somewhat similar analysis in connection with a motion for summary judgment, see Victory Lane Productions, LLC v. Paul, Hastings, Jonofsky & Walker, LLP
, 409 F. Supp. 2d 773 (S.D. Miss. 2006).
The Standing Committee on Ethics and Professional Responsibility of the American Bar Association has provided valuable insight into what is “direct adversity” in two opinions. Formal Opinion 05-434, dated December 8, 2004, deals with a testator who asks a lawyer to draft a new will, the effect of which is to disinherit the testator’s son. The problem is the son is a client of the lawyer on matters unrelated to the testator’s estate. The court held that drafting the will is not direct adversity to the son, and the lawyer does not need the son’s consent to do the will. The Committee does point out scenarios under which the lawyer may not be able to do the will, which we will not elaborate on here. Anyone who has this situation should read Opinion 05-434. Formal Opinion 05-435, also dated December 8, 2004, deals with a lawyer who represents an insurance company as a named party in litigation. Now, in an unrelated matter, another client ("Client A") asks the lawyer to file a lawsuit against Defendant B. The problem is that Defendant B is insured by a policy issued by the lawyer’s insurance company client. The Committee opined that without more, pursuing the lawsuit against Defendant B is not direct adversity to the insurance company. As was the case in Opinion 05-434, the Committee discusses scenarios under which filing the suit may not be permissible. Stonebridge Cas. Ins. v. D.W. Van Dyke & Co., Inc
., No. 10-CV-81157 (S.D. Fla. Oct. 23, 2015) (same relationships as in ABA Op. 05-435 (Dec. 2004); followed opinion; held no direct adversity).
In Celgard, LLC v. LG Chem, LTD
, Nos. 2014-1675, -1733, -1806 (Fed. Cir. Dec. 10, 2014) and in Freedom Wireless, Inc. v. Boston Commc’ns Group, Inc
., 2006 WL 8071423 (Fed. Cir. Mar. 20, 2006) the court held that when a lawyer seeks to enjoin a seller from selling products to buyers, and the non-party buyers are clients of the lawyer on other matters, the lawyer is being directly adverse to the clients/non-parties/buyers.
Phila. Op. 2009-7 (2009). Law Firm is representing Developer and is seeking governmental approvals for a development. Another client of Law Firm (“Client 2”), on other things, is actively opposing the development. This opinion provides that Law Firm has a direct adversity conflict and suggests ways it might be cured (Client 2’s consent, etc.). The opinion holds that Law Firm cannot cure the conflict by dropping Client 2 on the other matters because of the “hot potato” rule. It also holds that the “thrust upon” exception will not work because Law Firm, when it undertook to represent Developer at the outset, should have known that other clients might come out of the woodwork to oppose the project.
In In re Ralph Roberts Realty, LLC, 2013 Bankr. LEXIS 1003 (E.D. Mich. March 18, 2013), a bankruptcy judge held that being adverse to a corporation of which a current client is 100% owner is being directly adverse to the current client. GATX/Airlog Co. v. Evergreen Int'l. Airlines, Inc
., 8 F. Supp. 2d 1182 (N.D. Cal. 1998) furnishes another twist on direct adversity. The owner of several 747 passenger airplanes sued a company that allegedly did faulty work in converting them to freight airplanes. The defendant's law firm also represented a major bank on a variety of matters. Well into the 747 litigation, the parties realized that the bank was an owner of one of the airplanes that had been converted, although the bank had not yet filed its own suit. The bank moved to intervene in the original suit to have the law firm disqualified. The court granted the motion, saying it should have been clear early on that the law firm's actions were adverse to its bank client - even though the bank had not yet filed an action. The law firm's status later became moot, and the Ninth Circuit ordered the disqualification order vacated, at 192 F.3d 1304 (9th Cir. 1999).
In Harvey E. Morse, P.A. v. Clark
, 890 So. 2d 496 (Fla. App. 2004), the court held that the law firm representing a trust, which was trying to deplete a decedent’s estate in favor of the trust, was directly adverse to the heirs of the estate. Because one of the heirs (actually, an assignee of several heirs) was a current client of the firm on unrelated matters, the court held the firm had a direct adversity conflict. What About Referring other Party to Lawyer
. D.C. Op. 326 (Dec. 2004). The D.C. Bar Ethics Committee opined that a lawyer with a conflict may refer the non-client to another lawyer. The Committee relied principally upon D.C.’s version of Model Rule 4.3. Compare Flatt v. Superior Court
, 885 P.2d 950 (Cal. 1994), in which the court held that a lawyer did not have a duty to advise a declined client about the statute of limitations if doing so would disadvantage an existing client. "Potential" vs. "Actual" Conflicts
. In most contexts and in most jurisdictions lawyers are disqualified for having "actual" rather than "potential" conflicts. See, for example Shaffer v. Farm Fresh, Inc
., 966 F.2d 142 (4th Cir. 1992); Guillen v. City of Chicago
, 956 F. Supp. 1416 (N.D. Ill. 1997); Chapman Engineers, Inc. v. Natural Gas Sales Co.
, 766 F. Supp. 949 (D. Kan. 1991); In re Possession & Control of Commissioner of Banks
, 764 N.E.2d 66 (Ill. App. 2001); and Bottoms v. Stapleton
, 706 N.W.2d 411 (Ia. 2005). However, California Rule 3-310(C)(1) says a lawyer may not represent interests that "potentially" conflict, without consents. In Havasu Lakeshore Invs., LLC v. Fleming, 2013 Cal. App. Unpub. LEXIS 3746 (Cal. App. May 28, 2013), and Glahn & Hirschfield v. Taylor
, 2004 Cal. App. Unpub. LEXIS 3249 (Cal. App. April 7, 2004), the court described how California courts define "potential" (a situation that is "reasonably likely" to lead to an actual conflict). Another case discussing these distinctions is Maali v. Abtahi
, 2008 Cal. App. Unpub. LEXIS 454 (Cal. App. Jan. 16, 2008). "Potential conflict" is also used in bankruptcy cases. To read about those go to "Bankruptcy" at this site. The distinction is also made in the criminal cases. To read about them, go to "Criminal Practice." In In re GFI Commercial Mort. LLP, 2013 U.S. Dist. LEXIS 124077 (N.D. Cal. Aug. 29, 2013), the court discussed "potential conflicts" in the context of both Rule 3-310(C)(1) and bankruptcy. E.D.N.Y. Attempt to Distinguish "Actual" vs. "Potential" Conflict. Norton v. Town of Islip
, 2006 U.S. Dist. LEXIS 60459 (E.D.N.Y. Aug. 23, 2006) Oregon's "Actual" Conflict vs. "Likely" Conflict Rule. In re Lawrence
, 98 P.3d 366 (Ore. 2004). Patent Opinions
. Va. Op. No. 1774 (Feb. 13, 2003). A law firm is asked by client A to render a validity opinion on a patent owned by B. B is a patent client of the firm, but on other types of products. The Virginia committee opined that to render the opinion is direct adversity under Va. Rule 1.7(a), and that the firm can only do so with the consent of A and B. More recently, a court made a similar holding regarding a non-infringement opinion, Andrew Corp. v. Beverly Mfg. Co
., 415 F. Supp. 2d 919 (N.D. Ill. 2006). That is the first court opinion so holding, of which we are aware. Also, see Samuel C. Miller, Ethical Considerations in Rendering Patent Opinions and the Impact of Knorr, Echostar and Andrew
, 88 J. Pat. & Trademark Off. Soc’y 1091 (Dec. 2006). In Phila. Op. 2012-11 (January 2013) the committee found direct adversity where a law firm was asked to write a non-infringement letter to another client. Bond Lawyer Conflicts
. Iowa Op. 06-03 (November 6, 2006). This opinion softens Iowa’s position on conflicts for municipal bond lawyers. It provides that a law firm may represent an issuer when it is already representing the underwriter in other, unrelated, transactions, provided waivers are obtained, and the parties signing the waivers are sophisticated. Earlier Iowa Op. 95-20 (February 22, 1996), would have prevented such a waiver and would have barred a law firm from representing an issuer where the firm represents the underwriter currently, or had represented the underwriter in the past. Banks/Trust Departments
. May a lawyer doing lending work for a bank oppose the bank it its capacity as a fiduciary? There is little judicial guidance. For a full discussion of this, go to "Banks/Trust Departments" by clicking here. Zero Sum Games
. May a law firm assist one client in seeking a broadcast license in competition with another client? May a law firm assist one client in collecting a debt, where another client is also a creditor of the same debtor, and the amount of money available is not enough to satisfy both. We discuss these issues and provides cases and opinions on them at a section entitled "Zero Sum Games." To go there, click here. "Nominal" Clients
. In the following cases the court held that the lawyer's representation of one of the clients was only nominal, so the lawyer could be adverse to that "client:" Commercial Union Ins. Co v. Marco Int'l. Corp
., 75 F. Supp. 2d 108 (S.D.N.Y. 1999); Guzewicz v. Eberle
, 953 F. Supp. 108 (E.D.Pa. 1997); and In re Dooley
, 599 N.W.2d 619 (N.D. 1999). In American Special Risk Ins. Co. v. Delta America Re Ins. Co
., 634 F. Supp. 112 (S.D.N.Y. 1986), the court allowed a law firm to stay in a matter using the “nominal client” rubric; however, the law firm was doing real work for the client, and the client was “nominal” in the matter where the law firm was adverse to it. "Vicarious Clients." Atrotos Shipping Co., S.A. v. The Swedish Club
, 2002 U.S. Dist. LEXIS 9018 (S.D.N.Y. May 20, 2002). A ship owner is suing its "Freight, Demurrage, and Defense" insurance carrier, The Swedish Club ("TSC"). TSC usually appoints law firms to represent ship owners, all correspondence is between the law firm and TSC, and TSC pays the law firm's fees. The law firm for the plaintiff is also representing TSC in other shipping losses. TSC moved to disqualify the law firm in this case, because of these other matters. The law firm responded that it was really representing the insured in the other cases and that TSC was merely a "vicarious" client. The court disagreed and disqualified the law firm. Third-Party Actions. Richmond American Homes of Northern California, Inc. v. Air Design, Inc.
, 2002 Cal. App. Unpub. LEXIS 6948 (Cal. App. July 25, 2002). A sued B. B filed a third-party action against C. C moved to disqualify A’s lawyer because that lawyer had previously represented C on substantially related matters. A claimed that A was not suing C, so there was no adversity. The Appellate Court disagreed noting that third-party defendants can defend against a third-party complaint by attempting to prove the defendant had no liability to the plaintiff. The court held that is being directly adverse to the former client. (While this is not a current client conflict, the same analysis regarding third-party complaints should apply to current clients.) Another third-party action in which the court held that a lawyer could not represent both the plaintiff and the third-party defendants is Pressman-Gutman Co., Inc. v. First Union National Bank
, 459 F.3d 383 (E.D. Pa. 2004). The court disqualified the law firm from representing the third-party defendants. And, upon reconsideration, the court ordered the law firm out of the case entirely, Pressman-Gutman Co., Inc. v. First Union National Bank
, 2004 U.S. Dist. LEXIS 23991 (E.D. Pa. Nov. 30, 2004). The Third Circuit denied mandamus at Pressman-Gutman Co., Inc. v. First Nat. Bank
, 459 F.3d 383 (3d Cir. 2006) . In In re Methyl Tertiary Butyl Ether Products Liab. Litig
., 438 F. Supp. 2d 305 (S.D.N.Y. 2006), a law firm started out representing plaintiffs and a third-party defendant. When challenged, it withdrew from representing the latter. In Liberty Mut. Fire Ins. Co. v. Ravannack
, 2006 U.S. Dist. LEXIS 50252 (E.D. La. July 21, 2006), the court allowed a lawyer to represent both a plaintiff and a third-party defendant (with a waiver) without discussing the conflict and the ability of the parties to understand it. Same, in Hall Dickler Kent Goldstein & Wood, LLP v. McCormick
, 930 N.Y.S.2d 195 (N.Y. App. 2007). In Decker v. Nagel Rice LLC
, 2010 U.S. Dist. LEXIS 26530 (S.D.N.Y. March 22, 2010), the court ruled that a lawyer could not represent the plaintiff and be a third-party defendant. In Rothberg v. Phil’s Main Roofing, LLC
, 2016 WL 2344882 (S.D.N.Y. May 2, 2016), the court allowed the plaintiff's lawyer to represent the third-party defendant because an earlier agreement between them caused their interests to be aligned. Lawyer as Third-Party Defendant. Front, Inc. v. Khalil,
2013 N.Y. App. Div. LEXIS 956 (N.Y. App. Div. Feb. 14, 2013).
Plaintiff sued several defendants alleging wrongful use Plaintiff's
business secrets. One defendant filed a third-party action against
Plaintiff's law firm. In this opinion the court held that the law firm
could represent the plaintiff even though a third-party defendant. The
court also seemed to say that the law firm's conduct (writing several
letters) was not actionable, but does not seem to definitively dismiss
it. Twist on Third-Party Actions. Assa Co. v. Codotrans, Inc.,
2014 U.S. Dist. LEXIS 54177 (S.D. Fla. April 18, 2014). Owner committed
its property to the care of Warehouse. Owner was a named insured under a
“Floating Cargo Policy” (insurance) issued by InsCo. Warehouse lost
Owner’s property. InsCo paid Owner $1,000,000 and, represented by Law
Firm, filed this subrogation action against Warehouse. Warehouse filed a
third-party action against Owner. Law Firm appeared for Owner. Because
Law Firm was attempting to represent both the plaintiff and third-party
defendant, Warehouse moved to disqualify Law Firm. In this opinion the
magistrate judge denied the motion. The court noted that InsCo had
agreed that if there were any recovery under the third-party claim, it
would reduce its claim against Warehouse by that much. Owner’s counsel
conceded that Law Firm would not be opposing either InsCo or owner in
this case. Another Twist on Third-Party Actions. Dawe v. Gordon,
2012 NSSC 403 (CanLII) (N.S. Sup. Ct. Nov. 20, 2012). Law Firm
represented Purchaser in land deal. Later, Purchaser, represented by
Law Firm, brought a misrepresentation action against Sellers. When
Sellers sought to bring a third-party action against Law Firm, Purchaser
retained another lawyer. Law Firm consented to the third-party action,
but moved to sever the third-party action from the misrepresentation
case. In this opinion the court, finding that Law Firm would have a
conflict defending itself in the third-party action, granted the motion
to sever. Yet, Another Twist on Third-Party Actions. Little Rest Twelve, Inc. v. Zajic, 2014
N.Y. Misc. LEXIS 5404 (N.Y. Sup. Ct. Dec. 8, 2014). This is a food
fight over the failure of the Buddha Bar restaurant in New York City.
The owners sued certain defendants for mismanagement and related wrongs.
Lawyer represents the plaintiff. The defendants filed a third-party
complaint against Lawyer’s partners. The court raised this possible
conflict of interest on its own motion. In this opinion the court said
this would constitute an unwaivable conflict for Lawyer. However, the
court granted the partners’s motion to dismiss the third-party
complaint, thus allowing Lawyer to remain in the case. Attempt to Apply "Substantial Relationship" Test to Current Client Situation. And, Much More. Reed v. Hoosier Health Systems, Inc
., 825 N.E.2d 408 (Ind. App. 2005). The lawyers representing the plaintiff in this corporate dispute are in a law firm that represents the defendants in medical malpractice suits. The trial court granted the defendants’ motion to disqualify plaintiff’s lawyers, and in this opinion the appellate court affirmed. The plaintiff bravely attempted to get the court to apply the “substantially related” test even though the conflict is a current one under Indiana’s version of Model Rule 1.7(a)(1). The court did not buy that one. The law firm also offered to withdraw from the malpractice cases. The court did not buy that one either, citing the “hot potato” cases. Last, the plaintiff tried to argue that defendants weren’t really clients of the firm in the malpractice cases because of the nature of their relationship to their malpractice carrier. This argument was based upon the fact that the insurance company appointed defendants’ law firm and had complete control of the defense, and only the insurance company had exposure. That argument also failed. . . . Relying on Hoosier. Folsom v. Menard, Inc
., 2011 U.S. Dist. LEXIS 40406 (S.D. Ind. April 13, 2011). The court held that a law firm could not cure a current conflict by dropping just one party. Strother v. 3464920 Canada Inc
., 2007 SCC 24 (Can). Lawyer did tax shelter work for Client No. 1 for several years and through 1997. The law changed in 1997, and Lawyer advised Client No. 1 that it could do no further tax shelter deals of the sort it had been doing. Lawyer’s law firm (“Law Firm”) continued to do other work for Client No. 1 through 1998 and into 1999. In early 1998 Lawyer began representing Client No. 2, and, through a loophole in Canadian tax law, Lawyer did a number of tax shelter deals for Client No. 2, similar to those Lawyer had done for Client No. 1. Further, Lawyer had an agreement that Client No. 2 would share its profits with Lawyer. When Client No. 1 learned of Lawyer‘s work for Client No. 2, it sued Lawyer and Law Firm for breach of fiduciary duty for failure to advise Client No. 1 of the loophole opportunities. The key issue was whether Lawyer had an obligation in 1998 to advise Client No. 1 of the loophole. As of 1998 Law Firm had no written engagement letter with Client No. 1. The B.C. trial court held that Lawyer and Law Firm had no duty to advise Client No. 1 of the loophole. The B.C. Court of Appeal disagreed and reversed. In this opinion the Supreme Court of Canada, in a 5-4 opinion affirmed the Court of Appeal on the issue of liability of Lawyer. The Supreme Court ruled that Law Firm had no liability for breach of fiduciary liability but might be vicariously liable under the Canadian Partnership Act. According to press accounts the Supreme Court’s ruling on damages reduced Lawyer’s exposure from upwards of $40 million to about $1 million.
S.C. Op. 05-14 (2005). Lawyer may not represent mortgagor in foreclosure proceeding when the mortgagee is a client in other foreclosure proceedings without a waiver from the mortgagee. Odd California Case. Cal West Nurseries, Inc. v. Superior Court
, 29 Cal. Rptr. 3d 170 (Cal. App. 2005). Where Lawyer's Two Current Clients Are Adverse in Proceeding, in which the Lawyer Is not Involved, Lawyer Does not Have a Current Client Conflict. Fremont Indem. Co. v. Fremont Gen. Corp
., 49 Cal. Rptr. 3d 82 (Cal. App. 2006). Patent Matter. Enzo Biochem, Inc. v. Applera Corp
., 468 F. Supp. 2d 359 (D. Conn. 2007) . In this case Enzo has sued Applera for patent infringement. In another case Enzo has sued Amersham for infringement of the same patents. Amersham is a subsidiary of GE. Law Firm represents Enzo in this case (the Applera case). Another firm represents Enzo in the Amersham case. Law Firm represents GE in other intellectual property matters. For that reason GE intervened in this case to move to disqualify Law Firm. In this opinion the court denied the motion. There was some evidence that Law Firm communicated with the law firm representing Enzo in the Amersham case in order to present consistent claims construction positions. However, Law Firm has committed not to participate in any appeals of the claims construction rulings. The court added:
[W]hile the construction of Enzo's patents applicable to the infringement claims brought against two separate accused infringers, Amersham and Applera, implicates pretrial Markman overlap, the trials of how those constructions apply to the respective accused products or conduct are wholly separate. GE has not claimed that any of its witnesses in Amersham will be cross-examined by [Law Firm] in Applera, as contemplated as demonstrating direct adversity under Rule 1.7(a)(1).
More on Patents. Maling v. Finnegan, Henderson, Farrow, Garrett & Dunner, LLP
, 2015 WL 9307162 (Mass. Dec. 23, 2015). In dismissing a case against a law firm, the court held that “simultaneous representation by a law firm in the prosecution of patents for two clients competing in the same technology area for similar inventions is not a per se” conflict. Lawyer for Personal Representative Is not Lawyer for the Estate or Beneficiaries. In re Estate of Buoni
, 2006 Cal. App. Unpub. LEXIS 9368 (Cal. App. Oct. 20, 2006) (one lawyer allowed to represent the person who was administrator and creditor of estate); In re Est. of Deigh
, 2006 Wash. App. LEXIS 2160 (Wash. App. Oct. 2, 2006). Secondment
. N.Y. City Op. 2007-2 (undated). Here is the Committee's digest:
A law firm may second a lawyer to a host organization without subjecting the law firm to the imputation of conflicts under DR 5-105(D) if, during the secondment, the lawyer does not remain “associated” with the firm. The seconded lawyer will not remain associated with the firm if any ongoing relationship between them is narrowly limited, and if the lawyer is securely and effectively screened from the confidences and secrets of the firm’s clients. Both during the secondment and afterward, the seconded lawyer and his or her employer should be mindful of the lawyer’s former-client conflicts under DR 5-108.
Representing Client and Having Simultaneous Fee Dispute
. L.A. County Op. 521 (2007). This opinion discusses the extent to which a lawyer may continue to represent a client in the face of a disagreement over fees. Threats by Client to Sue for Malpractice Grounds for Withdrawal. Moore v. United States
, 2008 U.S. Dist. LEXIS 34741 (E.D. Cal. April 28, 2008). Plaintiffs in this case threatened to sue their law firm for malpractice. In this opinion the court ruled that the threat created a conflict of interest and ruled that the law firm’s motion to withdraw should be granted. Commercial Development Co. v. Abitibi-Consolidated Inc
., 2007 U.S. Dist. LEXIS 86147 (W.D. Wash. Nov. 15, 2007). This is a suit for specific performance of a real estate sales contract, among other things. A realtor (“Realtor“), affiliated with the real estate agency (“Agency”) representing the seller, successfully moved to intervene to defend her conduct, which appeared to be put in issue by the plaintiffs. Realtor then moved to disqualify the plaintiffs’ law firm (“Law Firm”) because Law Firm represents Realtor and has represented Realtor on matters substantially related to this matter. In this opinion the court granted the motion. The court plowed no new ground, here, and the analysis was very fact-intensive. Law Firm’s relationship with Realtor came about through Law Firm’s representation of Agency, for which Realtor was an independent contractor. Realtor paid a portion of Law Firm’s fees pursuant to her contract with Agency. A partner at Law Firm (“Lawyer”) had counseled with Realtor on issues similar to those in this case.
Ore. Op. 2009-182 (Oct. 2009). In this opinion the Committee held that the filing of a Bar complaint by a client does not necessarily require the lawyer to withdraw from an ongoing representation that is the subject of the Bar complaint.If You "Have to Ask," Rule 1.7(a)(2) Is Almost Certainly Involved -
A Comparison with Rule 1.7(a)(1)
Rule 1.7(a)(2) may be involved where there is no direct adversity against a current client. It applies if the representation of a client "may be materially limited" by the lawyer's responsibility to someone else or by the lawyer's own interests. If the answer is "maybe," then the lawyer must be satisfied that "the representation will not be adversely affected," (1.7[b]) and the client consents (1.7[b]).
Take the guarantor situation mentioned above. Notwithstanding the North Star case, which the drafters of ABA Op. 95-390 believe stretches the meaning of direct adversity under Rule 1.7(a)(1), an analysis of Rule 1.7(a)(2) would still be required. That is, would the lawyer's loyalty to the payee of the note cause the lawyer to do less than a perfect job in going after, and possibly bankrupting, the guarantor. Stated another way, if you are concerned about whether 1.7(a)(1) applies, and you decide that it does not, you are almost certainly going to have to go through the 1.7(a)(2) analysis. Mother Can Be Son's Lawyer with Son's Waiver. Douglass v. Valteau
, 2005 U.S. Dist. 11993 (E.D. La. June 9, 2005). Daughter Can Represent Mother in Family Leave Medical Act. Mezu v. Morgan State U
., 2010 U.S. Dist. LEXIS 113817 (D. Md. Oct. 22, 2010). Malpractice Plaintiffs' Model Rule 1.7(a)(2) Argument not Successful. Spears v. Overbey
, 2006 U.S. App. LEXIS 5426 (6th Cir. March 2, 2006). Sands v. Menard, Inc
., 787 N.W.2d 384 (Wis. 2010). According to an arbitration panel, on the evening of March 14, 2006, Dawn Sands, the general counsel of Menard's, the building materials chain, was sitting at her desk preparing for a meeting. John Menard, the company founder, entered her office and said; "Pick your shit up; I want your ass out of here. You've got five minutes." (Thus, setting a new standard for civility in terminating a general counsel.) Sands brought an arbitration, and the panel awarded her almost $1.8 million in damages and ordered her reinstated. The trial court ordered that the award be enforced. The appellate court affirmed. In a 4-3 decision (this opinion) the Wisconsin Supreme Court reversed the reinstatement and remanded to the trial court to consider "front pay" damages in lieu of reinstatement. The existing $1.8 million award was not disturbed. The majority ruled that, given the degree of animosity between the parties, Sands could not possibly comply with her ethical obligations if she were to return to the company. The majority cited only Wisconsin Rule 1.7(a)(2), the material limitation provision. The vigorous dissent, arguing for reinstatement, centered primarily upon the need for preserving the integrity of arbitration awards. However, it contains one of the lengthier discussions of the material limitation provision of Rule 1.7 that we have seen. Suing Current Client for Fees. In re Simon
, 2011 N.J. LEXIS 641 (June 9, 2011). In this opinion the New Jersey Supreme Court upheld a reprimand of a lawyer who had sued a current client for fees. It was a murder case, from which the lawyer was trying to withdraw. The trial court had denied the lawyer leave to withdraw. After the suit for fees was filed, the court granted the lawyer leave to withdraw. The court held that the suit for fees under these circumstances was a violation of New Jersey Rule 1.7(a)(2), the material limitation rule. In re Bruzga
, 2011 N.H. LEXIS 64 (N.H. May 12, 2011). Lawyer advised Client on whether Client could remove funds from a "special needs trust" set up under Medicaid laws. After Client paid the funds to himself and his sister, Medicaid investigators began an investigation of Client, the sister, and Lawyer as to whether the funds should have been paid to the government. Lawyer continued to advise Client as to the investigation. Ultimately, the government ordered Client and his sister to disgorge the funds. A bar prosecution began against Lawyer. In this opinion the court considered whether Lawyer violated New Hampshire's version of MR 1.7(a)(2) (the material limitation provision - - designated "1.7(b)" in New Hampshire), because Lawyer represented Client while they were both being investigated. The court ruled that Lawyer did violate that rule (among others). The court suspended Lawyer for six months. Lawyer had been disciplined on three prior occasions, two of them resulting in suspensions of one year and six months, respectively. Lawyer argues that his client and not lawyer liable for sanctions, making lawyer subject to further sanctions
. Wade v. Soo Line R.R. Corp
., 500 F.3d 559 (7th Cir. 2007). Coe v. Northern Pipe Products, Inc
., 589 F. Supp. 2d 1055 (N.D. Ia. 2008). This is an employment discrimination case. Disqualification was not an issue. Nevertheless, when discussing the difference between a "mixed motives" claim and a "but for" claim, the court made the following interesting observation:
Indeed, this court has often wondered if plaintiffs' lawyers explain these realities to plaintiffs and let them decide whether to pursue a "but for" or "mixed motive" claim or both. If an attorney does not make such a full disclosure that allows the plaintiff personally to decide which claim or claims to pursue, this court suggests that there may be a conflict of interest between the lawyer and the client. After all, there are some cases in which it is to the plaintiff's lawyer's advantage to pursue a "mixed motives" claim, which would provide compensation to the lawyer, but it would not be to the plaintiff's advantage to do so, because the plaintiff might recover nothing, and vice versa.
Shanley v. Cadle Co
., 2010 U.S. Dist. LEXIS 131560 (D. Mass. Dec. 3, 2010). Lawyer appeared for several plaintiffs in this litigation. The defendant is Cadle Co. Lawyer, in other venues, is engaged in a bitter personal battle with Cadle Co. Among other things, Cadle Co. obtained a defamation judgment of $250,000 against Lawyer. In this brief opinion the court expressed serious concern about Lawyer's ability to adequately represent the plaintiffs in these cases, citing the material limitation provision in Massachusetts' version of MR 1.7. The court ordered Lawyer and Lawyer's co-counsel to file affidavits explaining how Lawyer's personal battles with Cadle Co. will not jeopardize Lawyer's performance in these cases. Stay tuned. Negotiating Lawyer's Fee with Settlement Amount. Martin v. Huddle House, Inc
., 2011 U.S. Dist. LEXIS 13670 (N.D. Ga. Feb. 11, 2011). In this opinion the court refused to approve the settlement of FLSA claims because the plaintiffs' lawyer negotiated the settlement amounts and his fees "simultaneously." The court scheduled a hearing to deal with "this potential ethical violation." Valley/50th Ave. LLC v. Morse and Bratt, P.S.C
., 2011 Wash. App. LEXIS 1286 (Wash. App. June 1, 2011). Without more, the taking of a security interest from a client does not constitute a “material limitation” under Washington’s version of MR 1.7(a)(2). O'Malley v. Novoselsky
, 2011 U.S. Dist. LEXIS 66406 (N.D. Ill. June 14, 2011). Lawyer is a defendant in two consolidated lawsuits. One suit is by a former client ("FC"), who is claiming return of $160,000 in fees. The other suit is by a lawyer formerly employed by Lawyer ("FE"). FE is claiming that he is entitled to 1/3 of FC's $160,000, pursuant to an employment agreement between FE and Lawyer, because FE had referred FC to Lawyer. FC and FE are represented by the same lawyer ("Gentleman"). FC is also represented by Johnson. The court held, among other things, that pursuant to the Northern District's version of Model Rule 1.7(a)(2), any belief by Gentleman and Johnson that they could adequately represent both FC and FE would be unreasonable. In re Rubio
, 2011 Colo. App. LEXIS 1400 (Col. App. Aug. 18, 2011). Post dissolution proceeding. W gave her law firm a retainer. H sought to garnish the unearned portion of the retainer from W's law firm and moved to disqualify the law firm. The trial court disqualified the law firm. In this opinion the appellate court reversed. The court said that, as things stood, both W and the law firm sought the same relief and had no conflict. W had also waived any conflict.
N.Y. Op. 865 (May 10, 2011). Here is the committee's conclusion:
In light of Estate of Schneider v. Finmann, [15 N.Y.3d 306 (2010)], a lawyer who prepared an estate plan for a client may agree to act as counsel to the executor after the client’s death as long as the lawyer does not perceive a colorable claim for legal malpractice before or during the representation of the executor. However, if the lawyer does perceive a colorable claim for legal malpractice before or during the representation, then the conflict is nonconsentable and the lawyer (and all other lawyers associated with his firm) must decline or withdraw from the representation and the lawyer must inform the executor of the facts giving rise to the claim.
Cross-Examining Employee of Client. Lewis v. State,
2011 Ga. App. LEXIS 939 (Ga. App. Oct. 28, 2011). In this criminal
case Defendant is charged with defrauding School District, of which
Defendant was Superintendent. Law Firm is defending Defendant. The
prosecution listed a number of witnesses, one of whom is an employee
("Employee") of Company, a construction firm that did work for School
District. Law Firm represents Company on matters unrelated to this
case, or to School District. Law Firm had no prior relationship with
Employee. The prosecution moved to disqualify Law Firm in this case,
because Law Firm would have to cross examine an employee of Law Firm's
client, Company. The trial court granted the motion. In this opinion
the appellate court reversed. First, the court held that Company and
Employee were not one for conflicts purposes. Second, the appellate
court did not buy the trial court's theory that Law Firm would be
limited in its cross examination of Employee by its fealty to Company.
The court held that the prosecution had not shown the court enough
information about Employee or her importance to Company to establish
that Law Firm would, in fact, be so limited. Both Company and Defendant
had waived the conflict. CSX Transp., Inc. v. Gilkison,
2011 U.S. Dist. LEXIS 130118 (N.D. W. Va. Nov. 9, 2011). Law Firm
represented a number of plaintiffs against Railroad in asbestos cases.
In this case Railroad is suing Law Firm for fraud arising out of the
asbestos cases. In this opinion the court ruled that West Virginia's
version of MR Rule 4.2 does not prohibit Railroad's lawyers from
contacting Law Firm's former clients, but does prohibit Railroad from
contacting Law Firm's current clients. The court also ruled that Law
Firm could not represent former clients when they are deposed in this
case because of the material-limitation provision of West Virginia's
version of MR 1.7(a)(2).
Gatlage v. Winters & Yonkers, P.S.C.
, 2012 U.S. Dist. LEXIS
149655 (W.D. Ken. Dec. 29, 2011). Lawyer was an associate at Law Firm,
which was a plaintiffs' personal injury firm. Lawyer was encouraged to
send all clients to Doctor Co. When he refused to do so, he was
terminated. Lawyer brought this action for wrongful termination. In
this opinion the court granted a motion to dismiss. The court did not
specify a rule by number but, evidently, Lawyer is claiming that the
referral arrangement, allegedly a two-way one, violated Kentucky's
version of M.R. 1.7(a)(2). The court said that what Lawyer described
was "not a pretty business," but that the law afforded Lawyer no relief. Gerber v. Riordan
, 2012 U.S. Dist. LEXIS 11411 (N.D. Ohio Jan.
31, 2012). A difficult plaintiff made a number of negative comments
about his lawyers ("Lawyers") in certain pleadings. Lawyers moved to
withdraw. In this opinion the magistrate judge granted the motion,
saying that withdrawal was justified under Ohio Rule 1.7(a)(2), the
material limitation rule. In re Clauson,
2012 N.H. LEXIS 124 (N.H. Sept. 18, 2012). Disciplinary case against
Lawyer. H was charged with assaulting W. As a condition of bail H was
ordered to have no contact with W. After Lawyer agreed to represent H
in the criminal case, Lawyer appeared for H and W at a hearing on a
motion to lift the no-contact condition of bail, so H could move home. W
changed her mind about the charges against H, and the case was put over
one year to see if H could rehabilitate. After the case was put over,
New Hampshire Bar authorities found Lawyer guilty of violating New
Hampshire's version of Rule 1.7(a)(2) (the "material limitation" rule)
in representing both H and W. In this opinion the supreme court agreed
that Lawyer had violated Rule 1.7(a)(2). We will not discuss the
court's reasoning in detail, but will note that the court outlined ways
in which Lawyer's ability to represent H was, or could be, limited by
his representation of W and vice versa.
Cherdak v. Koko FitClub, LLC, 2014 U.S. Dist. LEXIS 101809 (D.
Mass. July 25, 2014). Patent infringement case brought by Plaintiff.
Defendants are represented by Lawyers. In another, earlier case (“The
Other Case”) Lawyers defended, on behalf of parties not in this case,
another patent infringement case brought by Plaintiff. Pursuant to a
mediation agreement in The Other Case, the parties signed a
confidentiality agreement, providing that certain information revealed
in the mediation could not be used at trial. Based upon that
confidentiality agreement, Plaintiff moved to disqualify Lawyers in this
case, pursuant to Massachusetts’ version of MR 1.7(a)(2) (the material
limitation provision). In this opinion the court denied the motion, in
part because Plaintiff was not specific about what information was
involved, or how Lawyers would be hampered in this case. [Note:
Plaintiff seemed to be saying that Defendants would be disadvantaged by
Lawyers’ inability to use information learned in The Other Case. This is
an odd claim for one party to make about another party’s lawyer. The
court did not address this oddity specifically, but implied that
recognition by noting that Plaintiff could always sue Lawyers for breach
of contract if they did use Plaintiff’s confidential information from
The Other Case.]
Client threats. Cahill v. Donahoe
2014 U.S. Dist. LEXIS 92354 (W.D.N.Y. July 3, 2014). Plaintiff wrote a
letter to her lawyer saying “If you don’t get off your butt, . . .”
“Your license and your wallet are at stake.” The lawyer moved to
withdraw, over the objection of Plaintiff. In this opinion the
magistrate judge, noting that not every grievance creates a “per se
conflict,” granted the motion given the particular circumstances of this
case. Representing New Plaintiffs Against Same Defendant in Similar Cases
. In Verizon W. Va., Inc. v. Hon. James Matish, 2013 W. Va. LEXIS 193 (W. Va. March 7, 2013), the court held that doing so is not a violation of West Virginia's version of MR 1.7(a)(2).
Wixom v. Wixom
, 2014 Wash. App. LEXIS 1963 (Wash. App. Aug. 12,
2014). Bitter and protracted custody dispute. At a hearing H and his
lawyer (“Lawyer”) took ridiculous positions. The trial court imposed
monetary sanctions of some $55,000 jointly against H and Lawyer. In his
appellant’s brief on behalf of H and himself Lawyer took the position
that the sanctions should apply only against H. Applying Washington’s
version of Model Rules 1.7(a)(1), 1.7(a)(2), and 1.9(a), the appellate
court, sua sponte
, disqualified Lawyer from representing H and
limited Lawyer’s ability to represent himself. The court ruled that if
Lawyer were to persist in trying to shift all the sanctions to H, Lawyer
must do so with another lawyer. U.S. v. Northrop Grumman Corp
., 2015 WL 3504525 (S.D. Miss. June
3, 2015). Hurricane Katrina damaged Corp’s property. Corp. had an
insurance policy with InsCo. Katrina-related disputes between Corp and
InsCo were in arbitration, and Lawyer represented InsCo in that
proceeding. Lawyer is also the relator in this qui tam case against
Corp. Lawyer is claiming that the U.S. government should never have paid
money to Corp. for Katrina damage. Corp. moved to disqualify Lawyer as
relator in this case. In opinion the court granted the motion. The court
found that Lawyer and committed several acts of misconduct. An
important basis for the ruling is that simultaneously defending InsCo in
the arbitration and bringing this qui tam action was a violation of the
material limitation provision of Rule 1.7. The court found that InsCo
had not consented to the conflict and further found that the False
Claims Act does not preempt state ethics rules. The court also found
that lawyers acting as relators in qui tam cases are bound by lawyer
ethics rules. Lanza v. Carbone
, 2015 WL 4096986 (N.Y. App. Div. July 8, 2015).
This is a suit by W against H to enforce a marital separation agreement.
H defends, in part, by asserting that the lawyer who represented him in
negotiating the agreement had a conflict of interest. The alleged
conflict included the fact that the lawyer had earlier represented W in a
visa application, and that, after execution the separation agreement, W
had referred business to the lawyer. In this opinion the court, without
citing a rule or other authority, held that those facts did not “rise
to the level of a conflict of interest.”
In Chism v. Tri-State Constr., Inc
., 2016 WL 2643355 (Wash. App. May 9, 2016), the court held that the material limitation provision in Rule 1.7(a)(2) was not implicated when an in-house lawyer is negotiating a bonus agreement with his employer. Franson v. Honolulu
2017 WL 372976 (D. Haw. Jan. 25, 2017). Two plaintiffs, represented by
Lawyer, sued City, the City PD, police officers, and police chief for
unlawful assault. When a judge raised the issue of Lawyer also
representing the chief in another, unrelated case, Lawyer filed an
amended complaint in this case omitting the chief as a defendant. City
moved to disqualify Lawyer. In this opinion the court granted the
motion. The court relied on
Rule 1.7(a)(2) (material limitation) because the chief had supervisory
authority over the other defendants and might also be a witness.
Although the plaintiffs signed conflict waivers, the court said, in
effect, that the waivers could not have been knowing. In re Burrows
, 2017 WL 1031454 (Tex. App. March 17, 2017).
Divorce case. The trial court appointed Lawyer A as “amicus attorney” to
look out after the interests of a child of the marriage. In this
mandamus proceeding H, relying upon Texas’ version of MR 1.7(a)(2),
seeks disqualification of Lawyer A because of her close personal
relationship with W’s lawyer (“Lawyer W”). In this brief, but
fact-intensive, analysis of the relationship between A and W, the court
held that, notwithstanding some showing of closeness, the trial court
was within its discretion in allowing A to continue.
D.C. Op. 367 (July 2014). Lawyer A represents X
against Y. Lawyer B represents Y. Under what circumstances can Lawyer A
negotiate with B or Y for employment. This lengthy opinion takes a stab
at it discussing the application of no fewer than nine provisions of
the D.C. Rules, including D.C. Rule 1.7(b)(4) (D.C.’s version of MR
1.7(a)(2) [material limitation]).
. See §§ 121, 125, and 128. Treatise
. Hazard, Hodes, & Jarvis §§ 11.2-11.5. Law Reviews
. David Hricik, How Things Snowball: the Ethical Responsibilities and Liability Risks Arising from Representing a Single Client in Multiple Patent-Related Representations,
18 Geo. J. Legal Ethics 421 (2005) ; Thomas D. Morgan, Suing a Current Client
, 9 Geo. J. Legal Ethics 1157 (1996). Excellent article in the ABA/BNA Lawyers' Manual
. Lawyer’s Own Business or Financial Interests May Prevent Representation
, 32 Law. Man. Prof. Conduct 123 (Feb. 2016). Comprehensive and valuable treatment.
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