You have asked for this Committee's opinion regarding your firm's (the "Firm") continued ability to represent a client in light of a possible conflict of interest.
According to the facts conveyed to the Committee, an attorney ("Attorney No.1") in your Firm has, for more than three years, defended a client, (the "Corporation") in a lawsuit commenced by a former employee of that Corporation. The lawsuit arises out of a written contract of employment involving the Corporation's acquisition of an existing New Jersey real estate sales office. The Corporation operates a number of real estate sales branch offices. Each branch operates largely independent of the other. The suit for which Attorney No. 1 is representing the Corporation involved one of the Corporation's New Jersey branch offices. The discovery in that case has been completed and the matter is now ready for trial.
When that lawsuit was instituted, Attorney No.1 was a member of another firm but subsequently departed and was admitted as a member of your Firm.
On January 1, 1993, the Firm admitted another attorney ("Attorney No.2") who for several years has been representing a would-be home seller ("Seller") who had engaged the Corporation to sell his house. However, that engagement was with one of the Corporation's Philadelphia branch office which had no direct relationship with the New Jersey branch office involved in the above-described employment matter. The suit involves allegations that the Corporation's sales agent, without authority of the client of Attorney No. 2, initiated a modification to the written agreement of sale with the result that the sale did not close and the Seller sustained substantial financial losses relating to the decreased sales price among other things.
During a routine office conference, Attorney No.1 and Attorney No.2, now members of the Firm, discovered this potential conflict. Attorney No. 1 immediately advised the sole shareholder of the Corporation of the facts and requested the Corporation obtain new counsel. That has not been accomplished. As of this date you have not obtained the consent of the Corporation to continue to represent the Seller in his suit against the Corporation. Attorney No. 2 advised the Seller of the foregoing facts and the Seller waived, in writing, any conflict which might exist. He declined to engage new counsel and if permitted, wishes that Attorney No.2 remain as his attorney.
You have also related that there has been no communication of confidential matters between Attorney No.1 and Attorney No.2.
This discussion is not intended to comment upon past conduct but addresses only the inquiry raised concerning the propriety of the Firm continuing its representation of one or both of these clients (With regard to past conduct, your attention is directed to Rule 1.10(b) and the imputed disqualification absent "screening and notice." See also SK Handtool Con,. v. Dresser Industries Inc., Ill App. Ct., 1st Dist. No.1-91-1403, 4/19/93.) . The facts set forth in your inquiry require compliance with Rule 1.10 of the Rules of Professional Conduct. Rule 1.10 provides that:
(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any of them practicing alone would be prohibited from doing so by Rules 1.7, 1.8(c), 1.9or2.2.
(b) When a lawyer becomes associated with a firm, the firm may not knowingly represent a person in the same or a substantially related matter in which that lawyer, or a firm with which the lawyer was associated, had previously represented a client whose interests are materially adverse to that person and about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(b) that is material to the matter unless:
(1) the disqualified lawyer is screened from any participation in the matter and is apportioned no part of the fee therefrom; and
(2) written notice is promptly given to the appropriate client to enable it to ascertain compliance with the provisions of this rule.
Rule 1.10(a) makes Rules 1.7, 1.8(c), 1.9 and 2.2 applicable to each of the lawyers within a firm. Because at the time of your inquiry you continue to represent both the Corporation and the Seller, Rule 1.7 of the Rules of Professional Conduct is triggered. Rule 1.7 provides:
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:
(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
(2) each client consents after consultation.
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interest, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after full disclosure and consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
Under the facts in your inquiry, the Corporation and Seller are directly adverse. Therefore, Rule 1.7(a) precludes the Firm's continued representation of the Corporation and the Seller unless you believe that the representation will not adversely affect the Firm's relationships with the clients and both clients consent after consultation. The Firm's efforts to jettison its representation of the Corporation strongly implies that continued representation would adversely affect the attorney client relationship. Moreover, while you have failed to describe the substance of your consultation mandated by Rule 1.7(a)(2) with the Corporation, it is clear you have not obtained the consent of the Corporation to your continued representation of Seller. Thus your representation of these clients is prohibited.
For these same reasons, Rule 1.7(b) also precludes the representation of either party.
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