representation of multiple parties and conflicts of … · representation of multiple parties and...

REPRESENTATION OF MULTIPLE PARTIES AND CONFLICTS OF INTEREST

Written by: JESS IRWIN

Presented by: JESS IRWIN

Herring & Irwin, L.L.P. 701 Brazos Street, Suite 500

Austin, Texas 78701

JAMES McCORMACK Tomblin Carnes McCormack, L.L.P.

7004 Bee Caves Road, Building 1, Suite 205 Austin, Texas 78746

State Bar of Texas 23RD ANNUAL ADVANCED ADMINISTRATIVE LAW COURSE

June 30 – July 1, 2011 Austin

CHAPTER 14

Jess M. Irwin III Herring & Irwin, L.L.P.

701 Brazos, Suite 500 Austin, Texas 78701

512/320-0665 www.herring-irwin.com

EMPLOYMENT & EXPERIENCE

• From September, 1997, to the present I have been a partner in Herring & Irwin, L.L.P. in Austin, Texas.

• Following graduation from law school in 1977, I served as briefing attorney for Justice Price Daniel of the Texas Supreme Court. From 1978 until 1983, I was an associate and later a shareholder in the San Antonio law firm of Sawtelle, Goode, Davidson & Troilo. In 1983, I returned to my native Austin and joined Small, Craig & Werkenthin. After fourteen years with Small, Craig & Werkenthin, I joined with Chuck Herring to form Herring & Irwin, L.L.P. in 1997.

• I currently represent clients in a wide variety of matters, including legal ethics, legal malpractice, Bar admission and attorney discipline issues. I have broad civil litigation experience. During my 33+ years of practice, I have handled personal injury cases on both sides of the docket, commercial litigation, contract claims, consumer litigation and contested administrative proceedings.

LICENSURE

• Texas Supreme Court in November of 1977. • Also licensed to practice in the United States District Courts for the Western, Southern, and

Northern Districts of Texas, and in the United States Court of Appeals for the Fifth Circuit.

EDUCATION

• BBA (Management) from the University of Texas in 1974. • J.D. from the University of Texas School of Law in 1977; member of Phi Delta Phi Legal

Fraternity.

MISCELLANEOUS

• Fellow of the Texas Bar Foundation. • “AV” rated by Martindale-Hubbell. • Member of the Austin Bar Association. • Member of the Texas Association of Defense Counsel.

JAMES M. McCORMACK Attorney and Counselor at Law

7004 Bee Caves Road, Building 1, Suite 205 Austin, Texas 78746

Office: 512-615-2408 Fax: 512-615-2420

Email: [email protected] EMPHASIZING LEGAL ETHICS AND LEGAL MALPRACTICE CONSULTATION Mr. McCormack is the former General Counsel and Chief Disciplinary Counsel of the State Bar of Texas (1991-1996) and a former Managing Attorney of the Civil Litigation Section of the Travis County Attorney's Office in Austin, Texas. As the State Bar's Chief Disciplinary Counsel, he served as the chief legal ethics enforcement officer for the attorney discipline system in Texas. He is a graduate of the University of Texas at Austin: BBA with Honors, l981; Doctor of Jurisprudence, 1984. Mr. McCormack also served as an adjunct professor of law at the University of Texas School of Law in Austin where he taught professional responsibility. He is a regular lecturer on legal ethics and malpractice issues. His article in the American Bar Association's Law Practice Management magazine entitled "Good Ethics, Smart Tactics" was named by the magazine as one of the top five articles of 1995. From 1998 to 2004, Mr. McCormack served as a member of the State Bar's Texas Disciplinary Rules of Professional Conduct Committee, which is charged with recommending amendments to the Texas ethics rules. He served as the Chairman of the Board of Trustees of the Texas Center for Legal Ethics and Professionalism (Chair-Elect, 2006-2007; Chairman 2007-2008; Immediate Past Chairman 2008-2009). Mr. McCormack's Austin-based practice emphasizes legal ethics and legal malpractice consultation as well as practice management services for law firms across Texas. Past consultations include conflicts of interest analysis, mass tort settlements, disqualification motions, lawyer advertising and solicitation questions, organizational ethics reviews, expert testimony, representation before the Texas Board of Law Examiners, and other professional responsibility and malpractice-related counsel. Martindale-Hubbell national legal directory peer-based rating: “AV” since 1994.

Representation of Multiple Parties and Conflicts of Interest Chapter 14

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TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................................................................ 1

II. THE RULES ................................................................................................................................................ 1 A. What rules apply?............................................................................................................................. 1 B. Disciplinary Rule 1.06-“Conflict of Interest: General Rule.” ............................................................. 2 C. Disciplinary Rule 1.07-“Conflict of Interest: Intermediary.” ............................................................. 4 D. Disciplinary Rule 1.08-“Conflict of Interest: Prohibited Transactions.”............................................. 4 E. Disciplinary Rule 1.09-“Conflict of Interest: Former Client.” ........................................................... 5 F. Disciplinary Rule 1.05-“Confidentiality of Information.”.................................................................. 6

III. FIDUCIARY DUTY .................................................................................................................................... 7

IV. POTENTIAL PROBLEM AREAS ............................................................................................................... 7 A. Adversity ......................................................................................................................................... 8

1. Strategy and Evidence ......................................................................................................... 8 2. Settlement ........................................................................................................................... 8

B. Lies .................................................................................................................................................. 8 C. An “Albatross” Client ...................................................................................................................... 9 D. Public Interest, Public Service; Politics............................................................................................. 9 E. The lawyer or law firm’s interests .................................................................................................... 9

V. THE UNINTENDED JOINT CLIENT.......................................................................................................... 9

VI. CONSEQUENCES ..................................................................................................................................... 10 A. Withdrawal .................................................................................................................................... 10 B. Disqualification from continuing to represent any of the joint clients .............................................. 10 C. Professional discipline .................................................................................................................... 11 D. Breach of fiduciary duty claim ....................................................................................................... 11

VII. AVOIDANCE AND CURATIVE ACTION ............................................................................................... 11 A. Avoidance ...................................................................................................................................... 11 B. Consent .......................................................................................................................................... 11 C. Warning ......................................................................................................................................... 12 D. Withdrawal .................................................................................................................................... 12

VIII. CONCLUSION .......................................................................................................................................... 13


REPRESENTATION OF MULTIPLE

PARTIES AND CONFLICTS OF

INTEREST

I. INTRODUCTION.

“The more the merrier.”1

Representing multiple parties in a single, contested mattercan offer potentially significant benefits. Often the mostimportant of those benefits is the cost savings thatmultiple representation frequently produces for the jointlyrepresented clients, when compared to the cost that eachclient would incur if independently represented. Costsavings are accomplished by eliminating duplication ofeffort and by the clients sharing expenses for services thatbenefit them jointly (e.g., expert witness fees, documentreproduction and organization costs, etc.). Multiplerepresentation also may offer significant strategic benefitsin some cases. Many times, clients (particularlysophisticated clients) are aware of those and possiblyother perceived benefits and initiate the request that anattorney agree to represent multiple parties. Obviously,multiple representation also can benefit the attorney,particularly when the attorney’s fee is contingent.

While multiple representation can benefit the jointlyrepresented clients and their attorney, it also entails risksfor both. As we all know, a variety of conflict of interestissues can arise in the representation of a single client. Representing multiple clients in a matter createsopportunities for an even wider array of conflicts to arise.

Identifying, analyzing and dealing with conflicts ofinterest generally are fact specific processes, and theissues can be complex. It goes without saying that whenconflicts do arise in connection with a multiplerepresentation, those conflicts can lead to significantproblems for both the clients and their attorney.

The goal of this paper is to provide an overview ofthe Texas conflict of interest rules, identify some of thegeneral types of conflicts issues that lawyers mayencounter in the course of representing multiple clients,describe some of the steps that attorneys may considertaking to help reduce the prospect of a possible conflictmaturing into an actual conflict, or to deal with conflictsthat arise, and describe some of the consequences towhich conflicts of interest can expose the attorney.

II. THE RULES.

“Ignorance of the law is no excuse.”2

A. What rules apply?Obviously, the Texas Disciplinary Rules of

Professional Conduct (the “Disciplinary Rules”) applygenerally to the conduct of lawyers licensed by theSupreme Court of Texas. In fact, Disciplinary Rule8.05(a) provides that a Texas lawyer may be disciplinedin Texas for conduct in another jurisdiction if that conductis “professional misconduct” under Disciplinary Rule8.04. 3

The statement that the practice of law has becomeincreasingly regional and, often, national in scope forTexas lawyers certainly will not come as a revelation. Asa result of those phenomena, Texas lawyers frequentlypractice in courts or before government agencies or bodiesthat apply rules of attorney conduct or attorney discipline

The Yale Book of Quotations 616 (2006); Source: Pearl1

(circa 1380).

The Yale Book of Quotations 614 (2006); Source:2

Christopher St. Germaine, Dialogues in English (1530).

Disciplinary Rule 8.04(a) provides the following list of 123

“thou shalt nots”: “(1) violate these rules, knowingly assist orinduce another to do so, or do so through the acts of another,whether or not such violation occurred in the course of aclient-lawyer relationship; (2) commit a serious crime orcommit any other criminal act that reflects adversely on thelawyer's honesty, trustworthiness or fitness as a lawyer inother respects; (3) engage in conduct involving dishonesty,fraud, deceit or misrepresentation; (4) engage in conductconstituting obstruction of justice; (5) state or imply an abilityto influence improperly a government agency or official; (6)knowingly assist a judge or judicial officer in conduct that isa violation of applicable rules of judicial conduct or other law;(7) violate any disciplinary or disability order or judgment; (8)fail to timely furnish to the Chief Disciplinary Counsel's officeor a district grievance committee a response or otherinformation as required by the Texas Rules of DisciplinaryProcedure, unless he or she in good faith timely asserts aprivilege or other legal ground for failure to do so; (9) engagein conduct that constitutes barratry as defined by the law ofthis state; (10) fail to comply with section 13.01 of the TexasRules of Disciplinary Procedure relating to notification of anattorney's cessation of practice; (11) engage in the practice oflaw when the lawyer is on inactive status or when the lawyer'sright to practice has been suspended or terminated includingbut not limited to situations where a lawyer's right to practicehas been administratively suspended for failure to timely payrequired fees or assessments or for failure to comply withArticle XII of the State Bar Rules relating to MandatoryContinuing Legal Education; or (12) violate any other laws ofthis state relating to the professional conduct of lawyers andto the practice of law.”

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that differ--sometimes dramatically--from the DisciplinaryRules.

While the Disciplinary Rules apply generally toTexas lawyers, they may not be the only rules of ethics orattorney discipline to which Texas lawyers are subject. ATexas lawyer who also is admitted to practice in anotherjurisdiction very well may be subject to discipline in thatother jurisdiction for professional misconduct that occursin Texas or elsewhere under a provision in thatjurisdiction’s rules of ethics that is similar to DisciplinaryRule 8.05(a). In addition, a Texas lawyer who is admittedpro hac vice in a matter pending in another jurisdictiontypically is required to comply with the rules of ethics ofthat jurisdiction and to submit to professional disciplineby that jurisdiction as a part of the pro hac vice admissionprocess.

Many federal courts have adopted rules ofprofessional conduct and/or attorney discipline as part oftheir local rules. Unfortunately, the federal judicialsystem has not adopted a standard set of rules ofprofessional conduct or attorney discipline. In fact, therules adopted by the federal courts may vary substantiallyfrom district to district within a state, not to mention fromstate to state. Frequently, but not always, federal districtcourts adopt the rules of professional conduct of the statesin which they sit. Even when they do so, however, federalcourts sometimes also adopt other standards and/or rulesthat are to be applied or considered in conjunction withthe local state’s rules. Obviously, lawyers should check4

the local rules of each federal court in which they practiceto determine whether that court has adopted ethics rulesand, if so, whether those rules differ in any significantrespect from the Disciplinary Rules.

Attorneys who appear before administrative agenciesor bodies also should determine whether the entities beforewhich they practice have adopted their own rules ofprofessional conduct or attorney discipline. One exampleof the latter is found at 8 C.F.R. 1003.102. Thatprovision establishes the bases upon which the Board ofImmigration Appeals may discipline an immigrationpractitioner. Some, but not all, of the provisions in thatrule are similar to provisions commonly found in staterules of professional conduct.

The bottom line is that a Texas lawyer who practicesin federal court, or who is licensed in multiple states, orwho appears pro hac vice in another jurisdiction, or whopractices before a state or federal governmental agency orbody needs to make certain exactly what rules ofprofessional conduct and/or attorney discipline apply. Ifmore than one set of rules applies, the lawyer also mustdetermine whether the rules conflict and, if they do, howto resolve the conflicting requirements or prohibitions. Not checking, or assuming that other applicable rules arethe same as the Disciplinary Rules, or assuming thatcompliance with the Disciplinary Rules is sufficient,leaves the lawyer open to the consequences predicted bythe old saying about what happens when one “assumes.”

With that caveat, this paper focuses on theDisciplinary Rules and, specifically, the Texas conflict ofinterest rules.

B. Disciplinary Rule 1.06 - “Conflict of Interest:General Rule.” Disciplinary Rule 1.06 is the first in the sequence of

the Disciplinary Rules that governs conflicts of interest. It applies to and, unless otherwise permitted, prohibitslawyers from undertaking a representation that results inone or more of three categories of conflicts of interest.

Disciplinary Rule 1.06(a) establishes the rule’s onlyprohibition to which there is no possible exception: alawyer cannot represent opposing parties in the samelitigation. That prohibition seems obvious, but there havebeen instances in which lawyers from the same firm(usually a large, multi-city firm) have appeared, much totheir chagrin, for opposing parties in one case. Inaddition, lawyers occasionally still attempt to representboth spouses in a contested divorce.

Paragraph “b” of Disciplinary Rule 1.06 identifiestwo additional situations in which a lawyer is notpermitted to represent a client. Those two categories ofprohibited representations are:

• when the representation “involves asubstantially related matter in which thatperson’s interests are materially and directly

For example, Rule AT-2(a) of the Local Court Rules for the4

Eastern District of Texas provides:

The standards of professional conductadopted as part of the Rules Governing theState Bar of Texas shall serve as a guideg overn in g th e obl iga t ion s a n dresponsibilities of all attorneys appearing inthis court. It is recognized, however, that noset of rules may be framed which willparticularize all the duties of the attorney inthe varying phases of litigation or in all therelations of professional life. Therefore, theattorney practicing in this court should befamiliar with the duties and obligationsimposed upon members of this bar by theTexas Disciplinary Rules of ProfessionalConduct, court decisions, statutes, and theusages customs and practices of this bar. (Emphasis added.)

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adverse to the interest of another client of the5

lawyer or the lawyer’s firm;” and• when the representation “reasonably appears to

be or become adversely limited by the lawyer’sor law firm’s responsibilities to another clientor to a third person or by the lawyer’s or lawfirm’s own interests.”

Those two prohibitions, however, are subject to the“consent” exception that is found in paragraph “c” of therule. Paragraph “c” establishes two specific requirementsthat must be satisfied to convert a representation that isotherwise prohibited by paragraph “b” to a permissiblerepresentation.

First, the lawyer must reasonably believe that therepresentation of each client will not be materiallyaffected. Comment 7 to the rule provides that “when a

disinterested lawyer would conclude that the client should

not agree to the representation under the circumstances,

the lawyer involved should not ask for such agreement or

provide representation on the basis of the client's

consent.” In other words, if the lawyer does not have or

when a disinterested lawyer could not reasonably form the

belief that a client will not be materially affected by

consenting to the representation, then the representation is

prohibited and the lawyer may not even ask the affected

client(s) to consent. Stated differently, in that situation,

the conflict of interest is “non-consentable.”

If the lawyer reasonably believes that the

representation of each client will not be materially

affected, then the second requirement is that each affected

or potentially affected client must consent to the

representation after “full disclosure” of the “existence,

nature, implications, and possible adverse consequences

of the common representation and the advantages

involved, if any.” Disciplinary Rule 1.06(c)(2).

The Rule does not require that a client’s consent be

in writing. Comment 8 to Disciplinary Rule 1.06 advises,

however, that “it would be prudent for the lawyer to

provide potential dual clients with at least a written

summary of the considerations disclosed.” Obviously,

having a written consent signed by the client(s) in question

or, at the very least, a written confirmation of the client’s

consent that the lawyer contemporaneously sends to the

client could significantly reduce the potential for a

“swearing match” concerning whether the client(s)

consented if a conflict issue develops later.

A multiple representation that begins without a

conflict, later may develop into a conflict. If the lawyer

advises her/his clients in a multiple representation of that

possibility early, her/his job in dealing with a conflict

situation may be somewhat less difficult. The best

practice is to disclose to the client at or prior to the

inception of the representation, in as much detail as is

reasonably possible at that time, that there is a possibility

that conflicts could arise in the future and to obtain each

of the clients’ consent to the multiple representation with

knowledge of that possibility.

One logical way to make such a disclosure and

document each client’s consent is to include the disclosure

and consent in the engagement agreement. Obviously, in

many cases a lawyer will not be able to make a full

disclosure with respect to future conflicts at the inception

of the representation that will be sufficient to satisfy the

requirements of Disciplinary Rule 1.06(c). That is

because the lawyer probably will not be able to predict the

nature of the specific conflict that ultimately arises, much

less identify and disclose all of the “implications, and

possible adverse consequences of the common

representation” in light of the actual, future conflict.

Accordingly, a general consent obtained at the

inception of the representation probably will not be

sufficient to satisfy Disciplinary Rule 1.06(c) in many

cases. Therefore, if a conflict later arises, there is a

substantial prospect that the lawyer will be required to

obtain a new consent in light of the specifics of the actual

conflict in order to continue the representation.

Nonetheless, the lawyer can inform the clients at the

inception of the representation of the terms of Disciplinary

Rule 1.06(b) & (c); the then foreseeable, possible, adverse

consequences of the joint representation (e.g., that a

conflict might require the lawyer to withdraw from

representing one or all of the clients, with potentially

resulting delays and additional costs as new lawyers get

up to speed); and the then foreseeable, possible

advantages of the joint representation (e.g., anticipated

Comment 6 to Rule 1.06 instructs that a representation is5

“directly adverse” in this context if “the lawyer's independentjudgment on behalf of a client or the lawyer's ability orwillingness to consider, recommend or carry out a course ofaction will be or is reasonably likely to be adversely affectedby the lawyer's representation of, or responsibilities to, theother client. The dual representation also is directly adverse ifthe lawyer reasonably appears to be called upon to espouseadverse positions in the same matter or a related matter.”

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cost savings and, if applicable, strategic advantages of the

joint representation).

While Disciplinary Rule 1.06 arguably is the most

significant of the Texas conflicts rules in terms of

conflicts issues that arise or may arise in connection with

a multiple representation, it certainly is far from the only

relevant rule.

C. Disciplinary Rule 1.07 - “Conflict of Interest:

Intermediary.”

Disciplinary Rule 1.07(a) generally prohibits lawyers

from acting as an intermediary between clients. A lawyer

“acts as intermediary” if she/he “represents two or more

parties with potentially conflicting interests.” The Texas6

Supreme Court Professional Ethics Committee further

explained the meaning of acting as intermediary in its

Opinion No. 500 (December 1995). In that opinion, the

Committee wrote that “to avoid an interpretation under

which Rule 1.07 would supplant Rule 1.06 in all conflict

situations, Rule 1.07 must be interpreted to mean that a

lawyer is acting as an intermediary only when the lawyer

is representing in the same matter two clients with

potentially conflicting interests who seek to consummate

a transaction or resolve a dispute between or among

themselves.”

The prohibition of acting as intermediary applies

unless three conditions are satisfied. The first condition7

requires the lawyer to consult with each of the clients

about the implications of the common representation,

including the advantages and risks involved, and the effect

on the attorney-client privileges, and obtain each client's

written consent to the common representation. Second,8

the lawyer must reasonably believe that the matter at issue

can be resolved without the necessity of litigation and on

terms compatible with the clients' best interests; that each

client will be able to make adequately informed decisions

in the matter; and that there is little risk of material

prejudice to the interests of any of the clients if the

contemplated resolution is unsuccessful. Third, the9

lawyer must reasonably believe that she/he can undertake

the common representation impartially and without

improper effect on her/his other responsibilities to any of

the clients. 10

Assuming that those three conditions are satisfied

and, therefore, the representation is permissible, Rule 1.07

imposes two additional requirements. First, the lawyer is

required to consult with each of the clients concerning the

decision(s) to be made and the considerations that are

relevant to making them, so as to make certain that each

client can make an adequately informed decision about the

matter. Second, if one of the clients requests that the11

lawyer withdraw, or if one of the three required conditions

listed in paragraph “a” of the rule ceases to exist, then the

lawyer must withdraw. After such withdrawal the lawyer

may not continue to represent any of the clients in the

matter that was the subject of the intermediation.12

D. Disciplinary Rule 1.08 - “Conflict of Interest:

Prohibited Transactions.”

Disciplinary Rule 1.08 identifies eight types of

dealings between a lawyer and a client that are prohibited,subject to the exceptions stated in the rule. At least13

three, and perhaps more, of those types of dealings maybe relevant from time to time to a given multiple

representation. Paragraph “a” prohibits business transactions with

a client, although paragraph “j” clarifies that the

Disciplinary Rule 1.07(d).6

Disciplinary Rule 1.07(a)(1 - 3). 7

Disciplinary Rule 1.07(a)(1).8



Disciplinary Rule 1.07(b). 11

Disciplinary Rule 1.07(c). 12

Those eight categories of dealings are: (1) business13

transactions with a client, (2) preparing an instrument bywhich the client makes a substantial gift to the lawyer, (3)making or negotiating prior to the conclusion of therepresentation an agreement that gives the lawyer literary ormedia rights, (4) financial assistance to a client in pending orcontemplated litigation or administrative proceedings, (5)accepting compensation for representing the client fromsomeone other than the client, (6) an aggregate settlement or,in a criminal case, an aggregated agreement to plead “guilty”or “nolo,” (7) an agreement prospectively limiting thelawyer’s liability for malpractice or settling a claim with aclient who is not represented by another attorney, and (8)acquiring a proprietary interest in the cause of action orsubject matter of litigation that the lawyer is handling for aclient.

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prohibition does not apply to transactions for products or

services that the client generally markets to others. Inorder for an otherwise prohibited business transaction

between lawyer and client to be proper (1) the transactionand terms on which the lawyer acquires the interest in

question must be fair and reasonable to the client anddisclosed to the client in a manner that the client can

reasonably understand; (2) the client must be given a14

reasonable opportunity prior to entering into the

transaction to seek the advice of an independentattorney; and (3) the client must consent in writing to15

the transaction. 16

Paragraph “e” provides that a lawyer shall not accept

compensation for representing a client from anyone otherthan that client, unless three conditions are satisfied.

Those three conditions are that: (1) the client consents,17

(2) the payment arrangement does not interfere with the

lawyer’s exercise of independent professional judgment onbehalf of the client or with the attorney client

relationship, and (3) the lawyer protects the client’s18

confidential information as required by Disciplinary Rule

1.05. 19

Although aggregate settlements probably are a much

more relevant topic in civil litigation than in theadministrative practice, Disciplinary Rule 1.08(f)

deserves a mention. That rule prohibits a lawyer frommaking an “aggregate settlement” (and from making an

aggregated agreement to plead “guilty” or “nolo” in acriminal case) of the claims asserted by or against

multiple clients, unless each client consents afterconsultation.

The Disciplinary Rules do not define whatconstitutes an “aggregate settlement.” The American Bar

Association Model Rules of Professional Conduct (the

“ABA Model Rules”) also prohibit lawyers from making

aggregate settlements unless certain conditions are met. 20

Like the Disciplinary Rules, the ABA Model Rules do not

define an “aggregate settlement.”

ABA Formal Ethics Opinion No. 06-438 (February

2006), however, explained the nature of an aggregate

settlement in the following terms:

An aggregate settlement or aggregated

agreement occurs when two or more clients who

are represented by the same lawyer together

resolve their claims or defenses or pleas. It is

not necessary that all of the lawyer's clients

facing criminal charges, having claims against

the same parties, or having defenses against the

same claims, participate in the matter's

resolution for it to be an aggregate settlement or

aggregated agreement. The rule applies when

any two or more clients consent to have their

matters resolved together.

The consultation required by Disciplinary Rule 1.08(f) in

connection with an aggregate settlement must include the

nature and existence of all of the claims involved and the

nature and extent of each person’s participation in the

settlement.

Violating the aggregate settlement rule can have

calamitous consequences. One Texas court of appeals

has held that a violation of Disciplinary Rule 1.08(f) can

result in the aggregate settlement agreement being

voided. In addition, entering into an improper aggregate21

settlement exposes the lawyer to a breach of fiduciary

duty claim, which can result, among other things, in fee

forfeiture.22

E. Disciplinary Rule 1.09 - “Conflict of Interest:

Former Client.”

In the absence of prior consent, Disciplinary Rule

1.09(a)(1 - 3) prohibit a lawyer who personally has

formerly represented a client in a matter from later

representing another person in a matter adverse to the

former client: (1) in which the other person questions the

validity of the lawyer's services or work product for the

former client; (2) if the representation in reasonable




Disciplinary Rule 1.08(e)(1).17



ABA Model Rule 1.8(g).20

Quintero v. Jim Walter Homes, Inc., 709 S.W.2d 225 (Tex.21

App.–Corpus Christi 1985, writ ref’d n..r.e.).

See, e.g., Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999). 22

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probability will involve a violation of the confidentiality

requirements imposed by Disciplinary Rule 1.05; or (3) if

it is the same or a substantially related matter.

The rule does not define “substantially related

matter.” Comment 4B to the rule, however, advises that

the term “primarily involves situations where a lawyer

could have acquired confidential information concerning

a prior client that could be used either to that prior client's

disadvantage or for the advantage of the lawyer's current

client or some other person.”

A representation otherwise prohibited by

Disciplinary Rule 1.09 probably may be undertaken if the

client(s) and former client(s) give consent. The elements23

of effective consent in the context of a former client

conflict are essentially the same as the elements of consent

under Disciplinary Rule 1.06(c), although comment 10

states that the relevant circumstances that should be

disclosed include “the lawyer’s past or intended role on

behalf of each client, as appropriate.”

F. Disciplinary Rule 1.05 - “Confidentiality of

Information.”

“Three may keep a secret if two of them are

dead.”24

Disciplinary Rule 1.05 is not a conflict of interest rule,

but as the foregoing discussion of the conflict rules

demonstrates, it plays a significant role in those rules. In

fact, as shown above, the reasonable probability that a

representation will result in a violation of Disciplinary

Rule 1.05 is one of the bases for a “former client”

conflict. Disciplinary Rule 1.09(a)(2).

Subject to certain permissive exceptions enumerated

in paragraphs “c” and “d” and a mandatory exception25 26

in paragraph “e,” Disciplinary Rule 1.05(b) prohibits27

lawyers from knowingly disclosing or using confidential

information in four ways. Paragraph (b)(1) prohibits

lawyers from disclosing “confidential information” to

anyone the client has instructed is not to receive such

information and to anyone else, other than the client, the

client’s representatives or the lawyers and employees of

As stated in Comment 10 to Disciplinary Rule 1.09:23

This Rule is primarily for the protection ofclients and its protections can be waived bythem. A waiver is effective only if there isconsent after disclosure of the relevantcircumstances, including the lawyer’s pastor intended role on behalf of each client, asappropriate. See Comments 7 and 8 to Rule1.06.

The Yale Book of Quotations 620 (2006); Source: Benjamin24

Franklin, Poor Richard’s Almanack, July 1735.

Pursuant to paragraph “c,” a lawyer may reveal25

“confidential information”: when the lawyer has beenexpressly authorized to do so in order to carry out therepresentation; when the client consents after consultation; tothe client, the client's representatives, or the members,associates, and employees of the lawyer's firm, except whenotherwise instructed by the client; when the lawyer has reasonto believe it is necessary to do so in order to comply with acourt order, a Texas Disciplinary Rules of ProfessionalConduct, or other law; to the extent reasonably necessary toenforce a claim or establish a defense on behalf of the lawyerin a controversy between the lawyer and the client; to establisha defense to a criminal charge, civil claim or disciplinarycomplaint against the lawyer or the lawyer's associates basedupon conduct involving the client or the representation of theclient; when the lawyer has reason to believe it is necessary todo so in order to prevent the client from committing acriminal or fraudulent act; and to the extent revelationreasonably appears necessary to rectify the consequences of aclient's criminal or fraudulent act in the commission of whichthe lawyer's services had been used.

Pursuant to paragraph “d,” a lawyer may reveal26

“unprivileged client information”: (1) when impliedlyauthorized to do so in order to carry out the representation.;and (2) when the lawyer has reason to believe it is necessaryto do so in order to: (i) carry out the representation effectively;(ii) defend the lawyer or the lawyer's employees or associatesagainst a claim of wrongful conduct; (iii) respond toallegations in any proceeding concerning the lawyer'srepresentation of the client; or (iv) prove the services renderedto a client, or the reasonable value thereof, or both, in anaction against another person or organization responsible forthe payment of the fee for services rendered to the client.

Paragraph “e,” provides that “[w]hen a lawyer has27

confidential information clearly establishing that a client islikely to commit a criminal or fraudulent act that is likely toresult in death or substantial bodily harm to a person, thelawyer shall reveal confidential information to the extentrevelation reasonably appears necessary to prevent the clientfrom committing the criminal or fraudulent act.” In thosecircumstance, a lawyer is required to reveal confidentialinformation “to the extent revelation reasonably appearsnecessary to prevent the client from committing the criminalor fraudulent act.”

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the lawyer’s firm. Paragraph (b)(2) prohibits lawyers

from using a client’s confidential information to the

disadvantage of the client, without the client’s consent.

Paragraph (b)(3) prohibits lawyers from using

confidential information of a former client to the former

client’s disadvantage after the representation ends, unless

the former client consents or the information has become

generally known. Paragraph (b)(4) prohibits lawyers

from using a client’s privileged information for the

lawyer’s or a third party’s advantage, unless the client

consents.

The rule recognizes two types of “confidential

information”: “privileged information” and “unprivileged

client information.” “Privileged information” consists of

information and communications that are protected by the

attorney-client privilege pursuant to Texas Rule of

Evidence 503 or that privilege as developed pursuant to

Federal Rule of Evidence 501. “Unprivileged client

information” is “all information relating to a client or

furnished by the client, other than privileged information,

acquired by the lawyer during the course of or by reason

of the representation of the client.”

Obviously, in most representations there will be little,

if any, information that an attorney will learn that will not

at least constitute “unprivileged client information.” In

fact, even the name of a lawyer’s client can be

confidential information that Disciplinary Rule 1.05(b)

prohibits the lawyer from disclosing. See, Supreme Court

of Texas Professional Ethics Committee Opinion No. 532

(“Even the name of a lawyer's client can be confidential

information protected by Rule 1. 05. See Texas

Professional Ethics Opinion No. 479 (August 1991).”);

Supreme Court of Texas Professional Ethics Committee

Opinion No. 479 (March 1993).

The name of another client may be “confidential

information” and the details of another client’s case

almost certainly are “confidential information.” Under

those circumstances, how does a lawyer make the “full

disclosure” required in order to obtain a client’s or

prospective client’s informed consent to a joint

representation without violating Disciplinary Rule

1.05(b)(1)? The answer is that the lawyer must be careful

and obtain the consent of the other client(s)/prospective

client(s) to the lawyer disclosing to the other

client(s)/prospective client(s) information that is sufficient

to satisfy Disciplinary Rule 1.06(c). In fact, comment 7

to Disciplinary Rule 1.06 advises that “when the lawyerrepresents different clients in related matters and one ofthe clients refuses to consent to the disclosure necessaryto permit the other client to make an informed decision,the lawyer cannot properly ask the latter to consent.”

III. FIDUCIARY DUTY.

“Virtue is its own reward.”28

It is very well established that lawyers owe their clientscertain fiduciary duties and that, as a fiduciary, anattorney is obligated to render a full and fair disclosure offacts material to a client’s representation. Willis v.Maverick, 760 S.W.2d 642, 645 (Tex 1988). In HooverSlovacek, LLP v. Walton, 206 S.W.3d 557, 560-61 (Tex.2006), the Texas Supreme Court described lawyers’fiduciary duties to their clients as follows:

In Texas, we hold attorneys to the higheststandards of ethical conduct in their dealingswith their clients. The duty is highest when theattorney contracts with his or her client orotherwise takes a position adverse to his or herclient's interests. As Justice Cardozo observed,“[a fiduciary] is held to something stricter thanthe morals of the marketplace. Not honestyalone, but the punctilio of an honor the mostsensitive, is then the standard of behavior.”Accordingly, a lawyer must conduct his or herbusiness with inveterate honesty and loyalty,always keeping the client's best interest in mind.

Obviously, the fiduciary duties that lawyers owe theirclients are stringent. Those fiduciary duties are relevantto the consideration of conflict of interest issues that canarise in the course of representing multiple parties. Undertaking a representation that is prohibited by theconflict of interest rules or continuing a representationafter a conflict develops without obtaining, if permissible,the affected clients’ informed consent, can form the basisfor a breach of fiduciary duty claim.

IV. POTENTIAL PROBLEM AREAS.

“There’s many a slip ‘twixt the cup and thelip.”29

The Yale Book of Quotations 621 (2006); Source: Thomas28

Browne, Religio Medici (1642).

The Yale Book of Quotations 616 (2006); Source: R.H.29

Barham, Ingoldsby Legends (1840).

7


It is not possible to compile a finite list of the types andsources of conflicts of interest that can arise when alawyer represents multiple clients in a matter. Therelationships, facts and circumstances that may give riseto a conflict in that context are as varied as the universeof clients and the legal issues that concern them. Thereare, however, several types of situations andcircumstances that result in conflicts with somefrequency.

A. AdversityJoint clients may start out on the same page, with the

same goals. Due to changes of heart, changes in an entityclient’s management, changes in an entity client’sownership or changes in any number of othercircumstances or factors, a client’s goals may changeduring the course of a representation. If that happens, theonce aligned joint clients may become “adverse,” with theresult that the lawyer is confronted by a conflict.

As noted previously, being “directly adverse” in theconflict of interest context does not mean that the jointclients must be in the posture of asserting claims againstone another. Comment 3 to Disciplinary Rule 1.0630

advises that “[a]n impermissible conflict may exist ordevelop by reason of substantial discrepancy in theparties' testimony, incompatibility in positions in relationto an opposing party or the fact that there aresubstantially different possibilities of settlement of theclaims or liabilities in question.” 1. Strategy and Evidence.

Clients may strongly differ in complete good faithwith respect to case strategy, witnesses to use at trial, howto respond to discovery or any number of other issues. There also are occasions when joint clients will disagreein their respective testimony with respect to a particularcritical fact(s). As recognized in comment 3 toDisciplinary Rule 1.06, disagreements of these sorts candevelop into a conflict.

2. Settlement. Joint clients can and often do disagree concerning

whether to settle a dispute, the terms on which settlementwould be acceptable, and/or the way in which the benefitsobtained (or burdens assumed) pursuant to a settlementshould be allocated among them. The Texas SupremeCourt Professional Ethics Committee considered in itsOpinion No. 500 (April 1995), among other issues,whether a lawyer could represent two people injured in avehicle accident if it becomes clear that the defendant has

a limited amount of funds available to pay a settlement oran adverse judgment. The Committee noted that while co-plaintiffs, technically, are not opposing parties, Comment2 to Disciplinary Rule 1.06 states that the “term‘opposing parties' as used in this Rule contemplates asituation where a judgment favorable to one of the partieswill directly impact unfavorably upon the other party.” Based on that proposition, the Committee concluded thatunder the facts at issue, the more funds one party wouldreceive from a limited amount of available funds, the lessthe other party would receive. Therefore, there was aprospect that the representation of each client would bematerially affected. The Committee further concludedthat “if a disinterested lawyer would conclude that theclient should not agree to the representation under thecircumstances, the lawyer involved should not ask forsuch an agreement or provide representation on the basisof the client's consent.” That is, the conflict would be“non-consentable.” The Committee’s conclusion was thatunder the limited scope of the question posed “it would bea violation of Rule 1.06 to represent two or more personsinjured in a single accident caused by a third person, whenit becomes clear that the third person has a limited amountof funds to pay a possible judgment or settlement (e.g.insurance policy limits substantially less than the likelyverdict range).”

While Professional Ethics Committee Opinion 500may not translate directly to the majority of the mattersthat lawyers handle in the administrative law practice, itslogic certainly could apply.

B. Lies.Unfortunately, a joint client may lie to further her/his

own interests or to protect or assist another joint client. If the attorney learns of the lie (whether on his/her own, orbecause one of the clients volunteers that information tothe lawyer), the lawyer obviously will be placed in adifficult position. The lawyer cannot present testimonythat she/he knows to be false; that, of course, is expresslyforbidden by Disciplinary Rule 3.03(a)(5).

If the lawyer learns of the lie from another client thelawyer represents separately, then the issues can becomeeven more complicated. In that situation, the lawyer owesa duty of confidentiality to the client who has told thelawyer about the lie. As discussed previously, the lawyercannot present testimony that she/he knows to be false andwill have a duty to urge the client for whose benefit thefalse information would be presented not to use the falseevidence and not to testify falsely. See, Comment 5 to

See footnote 5, above.30

8


Disciplinary Rule 3.03. 31

Further, a lawyer who learns that she/he haspresented false, material evidence has certainresponsibilities to take curative action pursuant toDisciplinary Rule 3.03(b). That curative action mayinclude disclosure to the tribunal.

The disclosure of the lie could and probably wouldhave a significant, adverse impact, of course, on the clienttelling the lie and any other client who is in a position tobenefit from the lie. This situation creates issuesconcerning consulting with the clients, and doing sowithout violating the attorney’s obligations to maintain theconfidentiality of all “confidential information,” as thatterm is defined in Disciplinary Rule 1.05.

C. An “Albatross” client.Sometimes a client in a joint representation turns out

to be an “albatross.” She/he may have a criminalconviction that will be admissible for impeachmentpurposes pursuant to Texas Rule of Evidence 609 orsome other problematic personal “baggage” that is or maybe admissible. Or, a client may get caught in a lie inher/his deposition. Or, a client may have an uncannyknack for making mistakes in testimony or saying just thewrong thing at just the wrong time. As we all know, thosesorts of problems/blunders can have a significant, adverseeffect on a case. If those adverse effects damage theoverall prospects for success, disputes can arise amongthe joint clients or it simply may be the case that thelawyer recognizes that the other clients have asignificantly better prospect for success if their case is nottainted by a joint representation that includes the problemclient. D. Public Interest; Public Service; Politics.

A joint client may engage in public interest, publicservice or political activities that are problematic for

another joint client or that the other client believessomehow harm the prospects for obtaining a successfulresolution of the matter. Although it involved a claimagainst an attorney and the attorney’s firm rather than adispute among joint clients, the facts in Joe v. Two ThirtyNine Joint Venture, 145 S.W.3d 150 (Tex. 2004) help to illustrate this type of potential conflict problem.

Mr. Joe was a lawyer with Jenkens & Gilchrist andalso was a member of the Irving City Council. In hiscapacity as a member of the city council, Mr. Joe voted infavor of an ordinance that adversely affected a Jenkens &Gilchrist client. The client, in turn, filed suit against Mr.Joe and Jenkens & Gilchrist alleging causes of actionbased on, among other things, breach of fiduciary duty.

Mr. Joe and the firm prevailed, but not until theyreached the Texas Supreme Court. The Supreme Courtbased its decision, in part, on the conclusion that, even ifpresumed to be an impermissible conflict, Mr. Joe’sactions as a member of the city council were “legitimatelegislative functions” for which he and the firm wereimmune.

Similar to the situation in Joe, one joint client mayengage in public interest or political activities that anotherjoint client(s) believes are harmful to the joint clients’ability to accomplish the goal of the representation. Thattype of situation could lead to a strong disagreementamong the jointly represented clients and place the lawyerin a conflict position. E. The lawyer or law firm’s interests.

The interests of the lawyer or the lawyer’s firm alsocan cause a real or perceived conflict problem when thoseinterests diverge from the client’s(s’) interests. That typeof conflict issue can arise, for example, if one of the jointclients is a particularly significant client for the lawyer orfirm and the other jointly represented clients perceive thatthe lawyer or firm is favoring that client in the way inwhich the case is being prepared, presented or the termson which a possible resolution is being negotiated.

V. THE UNINTENDED JOINT CLIENT.

“Things are not always what they seem.”32

It is more than a mild understatement to say that notknowing who you represent is a source of potentialproblems. Obviously, when you sign-up a client orclients, you know who those clients are. But, it isn’talways as simple as looking at the engagement agreement

Comment 5 reads:31

On occasion a lawyer may be asked to placeinto evidence testimony or other materialthat the lawyer knows to be false. Initiallyin such situations, a lawyer should urge theclient or other person involved to not offerfalse or fabricated evidence. However,whether such evidence is provided by theclient or by another person, the lawyer mustrefuse to offer it, regardless of the client'swishes. As to a lawyer's right to refuse tooffer testimony or other evidence that thelawyer believes is false, see paragraph 15 ofthis Comment.

The Yale Book of Quotations 620 (2006), Source: Saturday32

Evening Post, 19 Feb. 1876.

9


to see who you represent. One type of representation in which the issue can

become murky is when lawyers represent entities. Obviously, organizations can act only throughpeople–their “constituents.” Disciplinary Rule 1.12(a)makes clear that “[a] lawyer employed or retained by anorganization represents the entity.” Despite thatseemingly “bright-line” statement, an attorney-clientrelationship can arise with an organizational client’sconstituents without a formal agreement. An agreementto form an attorney-client relationship, in fact, may beimplied from the parties’ conduct. Perez v. Kirk &Carrigan, 822 S.W.2d 261, 265 (Tex. App. - - CorpusChristi 1991, writ den.). The attorney-client relationship“does not depend upon the payment of a fee, but mayexist as a result of rendering services gratuitously.” Id.

Moreover, “unintentional” attorney-clientrelationships are not confined to situations involving aconstituent of an entity client. “For example, an attorney-client relationship may arise by implication if the lawyerknows a person reasonably expects him to provide legalservices but does nothing to correct thatmisapprehension.” Valls v. Johanson & Fairless, L.L.P.,314 S.W.3d 624, 634 (Tex. App. –Houston [14 ] 2010,th

no petition).

VI. CONSEQUENCES.

“A fool and his money are soon parted.”33

There are a variety of consequences that a conflict ofinterest in a joint representation can produce. Most are,in one way or another, not pleasant for the lawyer and, ifapplicable, the lawyers with whom the conflicted lawyerpractices.34

A. Withdrawal.If a lawyer undertakes a multiple representation

when there is either a non-consentable conflict or aconflict to which the affected clients have not effectivelyconsented, then the lawyer is required to promptlywithdraw to the extent that doing so is necessary for anyremaining representation not to be in violation of therules. Disciplinary Rule 1.06(e). Likewise, if a lawyer

properly accepts a multiple representation, but a conflictdevelops and that conflict is non-consentable or one ormore of the clients refuses to consent, then the lawyer isrequired to promptly withdraw to the extent that doing sois necessary for any remaining representation not to be inviolation of the rules. Id.

Withdrawal, of course, means that at least one, andmaybe more, of the formerly, jointly represented clientswill be required to hire new lawyers, may have to pay feescharged by the new lawyer to get up to speed on thematter, and may incur a (perhaps significant) delay in theresolution of their matter that they deem to be materiallyharmful. Those impacts can lead to fee disputes andclaims for damages.

B. Disqualification from continuing to represent anyof the joint clients.If conflicts arise, they may be such that the lawyer

concludes that she/he has no alternative to withdrawingfrom the representation of all of the jointly representedclients. Even if a lawyer concludes that she/he is notprecluded from continuing the representation as to somesubset of the original clients, however, if the lawyer doesnot obtain consent from all of the formerly, jointlyrepresented clients to continue the representation, she/hemay face a motion to disqualify.

The Texas Supreme Court has established exactingstandards for disqualifying attorneys from participating incivil litigation. The Court has recognized thatdisqualification is “a severe remedy” that can result “inimmediate and palpable harm, disrupt trial courtproceedings, and deprive a party of the right to havecounsel of choice.” In re Nitla S.A. de C.V., 92 S.W.3d419, 422 (Tex. 2002); Spears v. Fourth Court ofAppeals, 797 S.W.2d 654, 656 (Tex. 1990). Thus, a trialcourt considering a motion to disqualify “must strictlyadhere to an exacting standard to discourage a party fromusing the motion as a dilatory trial tactic.” In re Nitla, 92S.W.3d at 422; see Spears, 797 S.W.2d at 656.

While the standards applicable to a motion todisqualify counsel are exacting, they certainly can besatisfied. A lawyer who attempts to continue to representone or more former joint clients after being terminated byor withdrawing from the representation of another jointclient(s) may well be the subject of a motion to disqualifypursuant to Disciplinary Rule 1.09 filed by the formerjoint client. Motions to disqualify are similar in manyways to a non-jury trial, and the costs and delay incurredin litigating the disqualification issue can be substantial.

The Yale Book of Quotations 612 (2006); Source: John33

Bridges, Defence of the Government (1587).

Disciplinary Rules 1.06(f), 1.07(e), 1.08(i) and 1.09(b) & (c)34

deal with the imputation to lawyers associated with theconflicted lawyer of the conflicts governed by the respectiverules. A detailed discussion of the imputation of conflicts isbeyond the scope of this paper.

10


C. Professional discipline.Accepting or continuing a multiple representation

when the representation involves either a non-consentableconflict or a consentable conflict to which the affectedclients have not consented can form the basis for attorneydiscipline. The same is true, of course, with respect torepresentations prohibited by Disciplinary Rules 1.07 and1.09, conflicts based on specific dealings between lawyerand client prohibited by Disciplinary Rule 1.08, and thedisclosure of confidential information prohibited byDisciplinary Rule 1.05.

D. Breach of fiduciary Duty Claim.A breach of fiduciary duty cause of action can be a

vehicle for recovering damages. In addition, the TexasSupreme Court recognized in Burrow v. Arce, 997S.W.2d 229, 240 (Tex. 1999) that even when there areno actual damages, in appropriate cases a successfulplaintiff/former client may obtain fee forfeiture/feedisgorgement. The non-exclusive elements of the feeforfeiture claim recognized in Arce are: the gravity andtiming of the violation, its wilfulness, its effect on thevalue of the lawyer's work for the client, any otherthreatened or actual harm to the client, the adequacy ofother remedies and the public interest in maintaining theintegrity of attorney-client relationships. Id at 241-45.

As noted previously, accepting or continuing arepresentation in violation of Disciplinary Rules 1.06,35

1.07 or 1.09 participating in a transaction prohibited byRule 1.08, or disclosing confidential information in36

violation of Disciplinary Rule 1.05 all are potential basesfor a breach of fiduciary duty based fee forfeiture claim.

VII. AVOIDANCE AND CURATIVE ACTION.A. Avoidance

“Don’t bite off more than you can chew.”37

Obviously, avoiding conflicts of interest in multiplerepresentation cases provides the best protection. Otherthan simply not accepting multiple clients in a matter,however, it frequently will not be possible to foresee andattempt in advance to deal with all potential conflicts thatmight arise. Attorneys representing multiple clients in amatter must be constantly alert for possible conflicts,maintain communication with the clients and deal withpotential conflict issues promptly and decisively.

B. Consent.

“Hope for the best and prepare for the worst.”38

As discussed above, Disciplinary Rule 1.06(c) details theelements of consent to a current client conflict of interestand effectively governs consent to a former client conflictpursuant to Disciplinary Rule 1.09. Obviously, if aconflict develops during a representation, the lawyer mustevaluate whether the conflict is “consentable,” and if it is,take steps to obtain consent from all affectedclients/former clients in conformance with the rules,including, of course, Disciplinary Rule 1.05. If theconflict is not consentable, then there will be noalternative to withdrawing from one or more of therepresentations.

Also as discussed previously, at the inception ofevery multiple representation a lawyer should disclose tothe clients the potential for conflicts and, to the extentpossible, the other information specified in DisciplinaryRule 1.06(c)(2). In addition, some states require thatlawyers disclose and even if not required, it is a very goodidea to disclose to the prospective, joint clients the factthat there will be no attorney-client privilege that protectstheir individual communications with the attorney in anylater action between the joint clients. See Texas Rule ofEvidence 503(d)(5). 39

See, e.g., Deutsch v. Hoover, Bax & Slovacek, L.L.P., 9735

S.W.3d 179, 190-91 (Tex. App.–Houston [14 Dist] 2003, noth

pet.)(concluding that the trial court erred by granting adirected verdict as to plaintiff’s breach of fiduciary duty

claims based on defendant’s failure to disclose and counsel

plaintiff about conflicts of interest; its failure to withdraw

from representing plaintiff in light of the conflicts; and its

failure to advise plaintiff to retain separate counsel because of

the conflicts.)

See, e.g., Sealed Party v. Sealed Party, 2006WL120773236

(SD Tex. 2006) (concluding that an attorney breached hisfiduciary duty by disclosing confidential information in apress release).

The Yale Book of Quotations 608 (2006); Source: the N.Y.37

Times, 22 May 1895.

The Yale Book of Quotations 614 (2006); Source: Roger38

l’Estrange, Seneca’s Morals (1702).

Rule of Evidence 503(d)(5) provides:39

There is no privilege under this rule: . . . (5)Joint clients. As to a communication

11


Another term that can be included in an engagementagreement that may help avoid later problems is aprovision by which each of the jointly represented clientsagrees that during the course of the representation thelawyer will be free to disclose to the other jointlyrepresented client(s) whatever one of the jointlyrepresented clients tells the lawyer. That type ofprovision can help avoid or provide at least someprotection in circumstances where one jointly representedclient later tells the lawyer something that is or may besignificant to another jointly represented client, butdoesn’t want the lawyer to disclose the information to theother client(s). Those situations create great tensionbetween the lawyer’s confidentiality obligations and her/his obligation to keepeach of the jointly represented clients reasonably informedof significant developments in the case. 40

In addition, in appropriate cases it may be possibleto include in the engagement agreement a provision thatmay be effective to allow the lawyer to continuerepresenting some, but not all, of the joint clients in thematter if she/he is required to withdraw from representingother of the joint clients. The facts that were consideredin Supreme Court of Texas Professional EthicsCommittee Opinion No. 487 (March 1994) involved alawyer’s representation of an employer and employee inlitigation. The agreement signed by the clients in thatmatter included the following provision:

It is understood that the remote possibility of afuture conflict of interest does exist. Law firmmay discover confidential information abouteither X [the employer] or Y [the employee]that may damage X's relationship with Y,thereby causing a conflict of interest. In theevent such information is discovered, suchinformation is to be revealed to both X and Y assoon as the conflict is recognized. Both X andY understand the revelation of such informationmay result in Y's termination or a cause ofaction by X against Y. Law firm will notsubsequently represent either X or Y in any suitagainst the other unless and until consent isobtained from both parties. Law firm may

continue to represent X in the present litigationeven though that representation may adverselyaffect Y.”

The problem that the quoted portion of the agreementanticipated came to pass.

One of the issues addressed in Opinion 487 waswhether the law firm could withdraw from representingthe employee, but continue to represent the employer. TheCommittee concluded that it would not be improper forthe law firm to withdraw from representing the employeeand continue representing the employer “[i]f the law firmfully advised the employer and employee of theimplications, any potential disadvantage or adverseconsequences to the dual representation, and theconsequences of the disclosure of confidential informationbefore the agreement was executed.”

Opinion 487 offers hope that a provision of that typemight be effective and enforceable in certaincircumstances, but it is far from certain that that would bethe case or exactly what facts must exist and be proven tomake such agreements enforceable.

C. Warning.Attorneys may be required to take the possibly

uncomfortable step of warning a client’s constituent or athird party that the lawyer does not represent that personor entity in order to avoid the informal creation of anattorney-client relationship. Sometimes referred to as“Mirandizing” such persons, the obvious preventative stepis to make clear (and, preferably, document that you havedone so) that you don’t represent a person with whom youare dealing and who you believe may be laboring underthe mistaken impression (or might later claim to have beenlaboring under that impression) that you also representhim/her.41

D. Withdrawal.As discussed previously, withdrawal from

representing one or more of the joint clients will becomenecessary if an actual conflict develops and the lawyercannot ask for or one or more of the clients refuses to give

relevant to a matter of common interestbetween or among two or more clients if thecommunication was made by any of them toa lawyer retained or consulted in common,when offered in an action between oramong any of the clients.

See Disciplinary Rule 1.03.40

See, e.g., Disciplinary Rule 4.03, which provides:41

In dealing on behalf of a client with aperson who is not represented by counsel, alawyer shall not state or imply that thelawyer is disinterested. When the lawyerknows or reasonably should know that theunrepresented person misunderstands thelawyer's role in the matter, the lawyer shallmake reasonable efforts to correct themisunderstanding.

12


consent. A lawyer’s withdrawal is governed byDisciplinary Rule 1.15 and, if applicable, by the TexasRules of Civil Procedure and/or other applicableprocedural rules.

VIII. CONCLUSION.Representing multiple clients in a contested

matter often makes a great deal of sense, both practicallyand strategically. Unfortunately, the conflicts of interestthat can arise in a multiple representation are many andvaried. Dealing with the possibility of conflicts in amultiple representation setting requires careful analysis atthe inception of the representation and ongoing attentionand sensitivity to situations that could become conflictproblems throughout the representation.42

“It will all come out in the wash.”43

The EthicsHelpline (1-800-532-3947) is a service offered by42

the Chief Disciplinary Counsel’s Office. Texas lawyers maycontact the EthicsHelpline for assistance in analyzing legalethics questions. Information concerning the EthicsHelplinei s a v a i l a b l e a t :www.texasbar.com/Content/NavigationMenu/ForLawyers/GrievanceInfoandEthicsHelpline/default.htm.

The Yale Book of Quotations 621 (2006); Source: N.Y.43

Times, 25 May 1896.

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