Ethics Opinon 1976-10

August 4, 1976

SUBJECT: REQUEST FOR OPINION REGARDING REPRESENTATION OF POTENTIALLY CONFLICTING INTERESTS

I
QUESTIONS PRESENTED

A. Attorney for a firm represents Client A and files civil complaint alleging several causes of action, including fraud against several defendants including Individual B. Extensive discovery takes place including interrogatories, propounded and answered. The first suit ends prematurely by direction of Client A. Attorney and firm substitute into an ongoing lawsuit as attorney of record for Individual B. The second case alleges similar conduct by Client B. Is there an ethical conflict?

B. Same facts as cited above but now attorney for Client B seeks discovery from another Client C, one they represent in other unrelated areas on a regular basis. If Individual B prevails in his defense it will have serious economic consequences to Client C. Is there an ethical conflict?

II
SUMMARY

Answers: As to the question presented in Paragraph IA above, yes, if the acceptance of the subsequent employment would inherently tempt the attorney to reveal or improperly jeopardize the confidences of the former client. As to the question presented in Paragraph IB above, yes, if the client representation in unrelated areas on a regular basis would interfere with the undivided loyalty owed to the new client in the lawsuit.

III
STATUTES AND RULES OF PROFESSIONAL CONDUCT

California Business and Professions Code Section 6068(e) provides that it is the duty of an attorney to maintain inviolate the confidence, and at every peril to himself to preserve the secrets, of his client. Rule 4-101 of the Rules of Professional Conduct of the State Bar of California ("Rules") provides that a member of the State Bar shall not accept employment adverse to a client or former client, without the informed and written consent of the client or former client, relating to a matter in reference to which he has obtained confidential information by reason of or in the course of his employment by such client or former client.

Rule 5-102 provides as follow:

(A) A member of the State Bar shall not accept professional employment without first disclosing his relation, if any, with the adverse party, and his interest, if any, in the subject matter of the employment. A member of the State Bar who accepts employment under this rule shall first obtain the client's written consent to such employment.

(B) A member of the State Bar shall not represent conflicting interests, except with the written consent of all parties concerned."

IV
ABA CANONS AND DISCIPLINARY RULES

Effective January 1, 1970, the American Bar Association adopted the new Code of Professional Responsibility. The new Code contains nine canons and a series of disciplinary rules and ethical considerations relating thereto. Canon 4 provides, "A lawyer should preserve the confidences and secrets of a client". Disciplinary Rule DR 4-101 defines "confidence" as information protected by the attorney-client privilege under applicable law, and "secret" as other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client. DR 4-101(B) provides that 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 or other third person unless the client consents after full disclosure.

DR 4-101(C) provides for certain exceptions to the preservation of confidences and secrets of a client:

"A lawyer may reveal: (1) confidences or secrets with the consent of the client or clients affected, but only after a full disclosure to them; (2) confidences or secrets when permitted under Disciplinary Rules or required by law or court order; (3) the intention of his client to commit a crime if the information is necessary to prevent the crime; (4) confidences or secrets necessary to establish or collect his fee or to defend himself or his employees or associates against an accusation of wrongful conduct."

Ethical consideration EC 4-5, adopted by the ABA in connection with the adoption of the new Canons of Professional Ethics provides that a lawyer should not use information acquired in the course of the representation of a client to the disadvantage of the client.

Canon 5 provides that a lawyer should exercise independent professional judgment on behalf of a client. DR 5-105 addresses itself to the subject of refusing to accept or continue employment if the interests of another client may impair the independent professional judgment of a lawyer.

"(A) A lawyer shall decline proferred 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, except to the extent permitted under DR 5-105(C).

(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, 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 consents 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."

EC 5-14 provides:

"Maintaining the independence of professional judgment required of a lawyer precludes his acceptance or continuation of employment that will adversely affect his judgment on behalf of or dilute his loyalty to a client. This problem arises whenever a lawyer is asked to represent two or more clients who may have differing interests, whether such interests be conflicting, inconsistent, diverse, or otherwise discordant."

EC 5-15 provides, in part:

"If a lawyer is requested to undertake or to continue representaton of multiple clients having potentially differing interests, he must weigh carefully the possibility that his judgment may be impaired or his loyalty divided if he accepts or continues the employment. He should resolve all doubts against the propriety of the representation. A lawyer should never represent in litigation multiple clients with differing interests, and there are few situations in which he would be justified in representing in litigation multiple clients with potentially differing interests."

Finally, Canon 9 provides, "A lawyer should avoid even the appearance of professional impropriety."

V
ANALYSIS

The questions presented do not set forth any underlying facts concerning the reason for the premature termination of the first suit at the instruction of Client A. It may be assumed, since no facts to the contrary are specified, that Client A has no further interest in the activities or affairs of new Client B. If such is the case, there is no breach of ethics in the attorney for Client A representing Client B.

It would seem, however, that one of the reasons for Client B's employment of the attorneys for Client "A" would be to utilize that firm's knowledge gained in the representation of Client A to defend the new client in the second case alleging similar conduct. The question therefore becomes whether in representing Client B the former attorney for Client A would be required in his representation to reveal or otherwise jeopardize the confidences of the former client.

The case of Goldstein v. Lees, 46 Cal.App.3d 614 (1975) exemplifies the seriousness of this consideration. In that case, a former attorney for a corporation rendered legal services on behalf of a minority shareholder and director in a proxy fight designed to gain control of the same corporation under circumstances where the former counsel held corporate confidences and secrets which were relevant to the proxy fight. The attorneys had sued the minority shareholder and director for money due for the reasonable value of their legal services. The Court held that such representation was improper and that a contract to provide such services was void for reasons of public policy.

The plaintiffs contended that the proxy fight itself was not adverse to the interests of the corporation. With this, the Court of Appeals agreed. However, the Court stated:

"The question is whether or not the employment of [the attorney] was adverse to the interests of the former client. Clearly, it was." 46 Cal.App.3d at 619.

The Court stated:

"Business and Professions Code section 6068, subdivision (e), states: 'It is the duty of an attorney: . . . [t]o maintain inviolate the confidence, and at every peril to himself to preserve the secrets, of his client.' In this instance, Kirshman attempted employment which surely at best must have tempted him to reveal or to improperly monopolize the confidences and secrets of his former client. As the Supreme Court recognized in Anderson v. Eaton, supra, (at p. 117), 'Conscience and good morals dictate that an attorney should not so conduct himself as to be open to the temptation of violating his obligation of fidelity and confidence.' Clearly, the acceptance of employment which threatens the revelation or improper monopolization of a former client's confidences is adverse to the interests of the former client. To be sure, rule 5 implies that an attorney may accept employment on a matter in reference to which he has before obtained confidential information, but nothing in rule 5 sanctions the acceptance of such employment when the representation of the interests of the new client inherently tempts the attorney to reveal or improperly monopolize the confidences of the old. Such a reading of rule 5 would conflict with the policies underlying section 6068, subdivision (e), of the Business and Professions Code; it would needlessly permit attorneys to create the appearance of impropriety. Nor would such an interpretation offer assistance to the new client. Clients are entitled to vigorous and determined representation by counsel. It is difficult to believe that a counsel who scrupulously attempts to avoid the revelation of former client confidences--i.e., who makes every effort to steer clear of the danger zone--can offer the kind of undivided loyalty that our legal system demands. Rule 5 operates to preclude any impediment to the fulfillment of an attorney's professional obligation to his client by proscribing any conflict of interest in his representation of past and present clients. 'It is better to remain on safe and secure professional ground, to the end that the ancient and honored profession of the law and its representatives may not be brought into dispute. Courts have consistently held the members of the profession to the strictest account in matters affecting the relation of attorney and client.' (Tomblin v. Hill, 206 Cal. 689, 694 [275 P. 941], quoting Addison v. Cope, 210 Mo.App. 569 [243 S.W. 212, 215].)" 46 Cal.App.3d at 619, 620.

It would seem that the attorneys in this case would be at best treading the same thin line that was condemned in the Goldstein case. While the appropriate consents might be obtained following the requirements of Business and Professions Code Section 6068(e), Rule 4-101 and Rule 5-102 of the Rules of Professional Conduct, such does not appear from the facts given in this case.

The second question, adding the complicated factor of the representation of Client C on a regular basis in other unrelated areas raises the problem of whether the attorney can offer the kind of undivided loyalty to Client B that is required. It would seem that the representation of both Clients B and C at the same time would involve the kind of steering between the Scylla and Charybdis that should best be avoided.

 

Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.