Legal Ethics Opinion No. 1419
Conflict of Interest--Former Client--Corporate Representation:
Former In-House Assistant General Counsel's Adverse
Representation of Potential Client Over the Objection of Former
Corporate Subsidiary Client
You have indicated that a corporation, through subsidiary
companies, conducts business involving the mining, processing and
selling of coal. You further indicate that, from l978 to l985,
the corporation employed a Virginia attorney as [in-house]
assistant general counsel whose duties included advising the
corporation and its subsidiaries on contracts and other
commercial transactions, oil and gas matters, and coal leases.
You advise that, as part of his duties with the corporation, the
attorney in question advised one of the subsidiary companies
concerning a lease on several thousand acres of coal lands, which
lease runs until all minable and merchantable coal has been
removed. Furthermore, you indicate that the lease obligates the
subsidiary/lessee to pay a production royalty on each ton of coal
mined and a minimum royalty regardless of the actual amount of
coal mined. The hypothetical facts you have provided indicate
that, during the course of his employment, in order to advise the
subsidiary, the attorney reviewed the subsidiary's vault file,
containing confidential memoranda and other important papers;
offered a written opinion as to the operation of the minimum
royalty provision in the lease; and received a copy of a legal
memorandum prepared by his fellow in-house counsel analyzing
other provisions of the lease.
You advise the committee that, after leaving the employ of the
corporation, the in-house assistant general counsel is
subsequently engaging in private practice and is presently
representing the lessor in regard to a dispute which has arisen
as to the lease described above, which lease was in existence
during the entire time of the attorney's employment with the
subsidiary. On behalf of the lessor, the attorney is presently
asserting claims that the subsidiary's practices and lack of
diligence, some of which occurred during the attorney's
employment with the corporation, resulted in substantial loss to
the lessor.
Finally, you indicate that the corporation and its subsidiary
object to the attorney's present representation of their lessor
against them in this matter, but the attorney indicates that he
has "no independent recollection" of reviewing the lease or vault
file while employed by the corporation.
You have asked the committee to opine whether, under the
hypothetical facts of the inquiry, it is proper for the former
in-house assistant general counsel to continue to represent the
lessor against his former client over his former client's
objections.
The appropriate and controlling disciplinary rules relative to
your inquiry are DR 5-l05(D) which prohibits a lawyer from
representing a new client materially adverse to a former client
in the same or substantially related matter unless the former
client consents after [full] disclosure; and DR 4-l0l(B) which
prohibits a lawyer from knowingly revealing a confidence or
secret of his client and from using a confidence or secret of his
client to the disadvantage of the client or to the advantage of
himself or a third person.
Although the committee has previously opined, in general, that
the mere fact that a lawyer has formerly represented a client,
who is now the adverse party in a suit brought by the lawyer on
behalf of another client, is not sufficient to warrant per sedisqualification of the lawyer on ethical grounds, the committee
has more specifically opined that such disqualification should
turn on both (a) whether the issue is substantially related to
the attorney's prior employment and (b) whether the attorney is
in possession of secrets and confidences of the former client.
See LEOs #44l, 672, 933, 7l8.
The committee recognizes that you have indicated that the
attorney in question disputes having received any secret or
confidential information while in the employ of the corporate
subsidiary. You do not indicate, however, that any dispute
exists as to the relatedness of the matters, since apparently the
dating of the lease falls within the period of the attorney's
employment with the corporate subsidiary. Cf. Wisconsin Formal
Op. E-87-3 (April l5, l987). The committee believes that the
resolution of either or both such disputes would require a
factual determination employing whatever tests and assigning
whatever burden of proof the appropriate factfinder chooses to
adopt. See, e.g., T.C. Theatre Corp. v. Warner Bros. Pictures,
Inc., ll3 F.Supp 265 (S.D. N.Y. l953); Duncan v. Merrill Lynch,
Pierce, Fenner & Smith, 646 F.2d l020 (5th Cir.), cert. denied,
454 U.S. 895 (l98l). Thus, the resolution of any dispute as to
either of the two issues, i.e., the substantial relatedness of
the matters or the attorney's possession of the former client's
secrets and confidences, requires a factual determination which
is beyond the purview of the committee.
The committee is cognizant that the facts you present indicate
both that there is a substantial relationship between the former
corporate representation and the matter now in dispute, and that
the former in-house assistant general counsel was privy to the
corporate subsidiary's confidences and secrets. Assuming the
facts you have presented, regardless of the attorney's lack of
any independent recollection, and without presuming to make a
factual determination as to any dispute regarding those facts,
the committee is of the opinion that it would be improper for the
former in-house assistant general counsel to subsequently
represent the lessor in the claims you have described, without
the consent of the corporate subsidiary as required under both DR
5-l05(D) and DR 4-l0l(B).
Committee Opinion
June 25, 1991
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