Legal Ethics Opinion No. 1454

Conflict of Interests; Multiple Clients; Confidences and Secrets


You have indicated that a financial institution was put into
receivership by federal agency A which is represented generally
with respect to this matter by law firm B.  With respect to one
loan in the financial institution's portfolio, law firm C was
asked by A to render an opinion as to whether A may foreclose
under a deed of trust and pursue guarantors when the sole act of
default was the non-payment of interest by borrowers.  The facts
you provide indicate that the non-payment in question was
occasioned by agency A's repudiation of the financial
institution's obligation to lend the interest amount to
borrowers.  You indicate that law firm C completed its work on
the opinion and rendered it to agency A in draft form without
signature, as requested by agency A.  Furthermore, you advise
that law firm C has heard nothing further from agency A as to the
opinion and is unsure if anything further will be heard from the
agency on that matter, but is also presently advising the same
agency on a matter unrelated to the financial institution in
question.  

Finally, you indicate that, subsequent to rendering the opinion,
law firm C is proffered representation of an
officer/director/shareholder (hereinafter "Executive") of the
financial institution in question pertaining to a subpoena ducestecum issued to the Executive from a federal grand jury which
seeks certain documents under his control, some of which may
relate to either the financial institution or to the Executive. 
Executive has not been identified as a target by any federal
agency, but he seeks law firm C's representation of the matter to
conclusion.

You have asked the committee to opine whether, under the facts of
the inquiry, it is proper for law firm C to undertake
representation of Executive and, if so, whether C is required to
obtain a waiver from either A or Executive, or both.

The appropriate and controlling disciplinary rules relative to
your inquiry are DR 5-l05(A) which requires a lawyer to decline
proffered 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; DR 5-l05(C) which permits the lawyer to cure the
conflict identified in DR 5-l05(A) if it is obvious that he can
adequately represent the interest of each [client] and if each
consents to the representation after full disclosure; DR 5-l05(D)
which precludes a lawyer who has represented a client in a matter
from thereafter representing another person in the same or
substantially related matter if the interest of that person is
adverse in any material respect unless the former client consents
after disclosure; DR 5-l05(E) which provides that no partner or
associate of a lawyer who has been disqualified because of a
multiple-client conflict may accept or continue such employment;
and DR 4-l0l(B) which prohibits a lawyer from knowingly revealing
a confidence or secret of his client and from using that
information to the disadvantage of the client or to the advantage
of himself or a third person.  

Further guidance is available through Ethical Considerations 5-l4
which cautions that problems regarding a lawyer's independent
professional judgment may arise when the lawyer is asked to
represent two or more clients who may have conflicting,
inconsistent, diverse, or otherwise discordant interests; and
5-l5 which exhorts the lawyer facing the possibility of impaired
independent judgment or divided loyalty to 

     resolve all doubts against the propriety of the
     [multiple] 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. 
     If a lawyer accepted such employment and the interestsdid become actually differing, he would have to
     withdraw from employment with likelihood of resultinghardship on the clients; and for this reason it is
     preferable that he refuse the employmentinitially...there are many instances in which a lawyer
     may properly serve multiple clients having potentially
     differing interests in matters not involving
     litigation...if [those] interests become differing,
     withdrawal is 
     less likely to have a disruptive effect upon the causes of
     his clients.   (emphasis added) 

The committee has previously opined that even with the multiple
clients' consent, it would be improper for a lawyer to continue
simultaneous multiple representation as it "would not be possible
for an attorney to adequately represent the interest of a client
when the attorney is defending a client in an action one day and
suing the same client the next day in a separate action brought
by an unrelated party".  See LEO #ll50; see also LEO #706
(indicating that, notwithstanding dissimilarity of the subject
matter, simultaneous representation of adverse clients creates a
presumption of adverse effect on the attorney's absolute duty of
loyalty; same opinion permits multiple representation with all
clients' consent, apparently rebutting the presumption) and LEO
#l408 (simultaneous representation of a bank's borrower and of
the commercial finance division of that same bank, in unrelated
litigation, would be improper).  

In the facts you present, the committee understands that,
although the representation as to the opinion rendered to agency
A may be concluded, law firm C continues to represent agency A in
a matter unrelated to the financial institution in question. 
Under those circumstances, the committee is of the opinion that,
there is no per se conflict prohibiting law firm C from
undertaking the representation of Executive.  Such representation
would be improper, however, if firm C had obtained secrets or
confidences from agency A during the rendering of the opinion or
during the present representation which is unrelated to the
opinion.  Furthermore, the representation also would be
potentially improper if it developed that the documents sought
under the federal grand jury subpoena duces tecum actually
related to either the opinion or the other matter on which law
firm C represents agency A.  

The committee is of the opinion that, even if no confidences or
secrets had been obtained, thus limiting any  conflict to that of
a potential nature, the consent (waiver of conflict) of both
agency A and Executive is required and would provide a cure,
permitting the present simultaneous representation.  However, the
committee cautions that any actual adversity maturing during the
course of the representation would necessitate law firm C's
withdrawal from representation of both Executive, in the grand
jury matter, and agency A, in the matter unrelated to the
financial institution in question, thus not permitting law firm C
to represent Executive to the conclusion of the matter before the
grand jury as he desires and in derogation of the exhortations of
EC 5-l5.  Under the mandates of DR 5-l05(E), any such withdrawal
would render representation of either or both parties by any of
the lawyers in law firm C to be improper.  

Committee Opinion
March 13, 1992