When may a lawyer represent one former client against another former client, when the lawyer previously represented the parties as joint clients? The issue arises most often when the first representation is of spouses (H and W), on estate planning or business matters, and the second representation is in a family law proceeding.
Rule 1.9(b) prohibits such representations if the second matter, for H, is both “substantially related” to the H and W matter and adverse to W. Comment 3 defines “substantially related” narrowly, to mean either “the same” matter or a matter in which confidential information is at risk. As explained below, the Office of Lawyers Professional Responsibility (OLPR) has twice taken inconsistent positions on these issues. In a 2016 public discipline case, In re Kraus, OLPR took a position that is directly at odds with OLPR’s standard advisory opinion.
Two hypotheticals
Two hypotheticals will introduce the subject.
First, suppose a lawyer, Lee, represents both Dale Driver and Dale’s passenger Pat in personal injury claims against Dilbert, a second driver. Discovery reveals that Pat has a meritorious claim against Dale, for negligent driving.
Lee must terminate at least one representation, due to conflicts. Lee’s representation of Pat is materially limited unless Lee can sue Dale. But Lee cannot concurrently represent Dale and sue Dale, even with consents. Rule 1.7(a)(1) and (b)(3).
May Lee terminate representation of Dale, and then sue Dale on Pat’s behalf? Because Pat v. Dale and Dilbert will be the “same matter” as Pat and Dale v. Dilbert, Rule 1.9 prohibits such representation, unless Dale consents. In addition, switching sides in the same matter can have catastrophic malpractice results. Gillespie v. Klun, 406 N.W.2d 547 (Minn. Ct. App. 1987) (Awarding actual, punitive and mental distress damages).
Second, suppose instead that in 2013 Lee jointly represented spouses, Hal and Wendy, in their estate planning. As is common, Lee, Hal and Wendy shared all information. Rule 1.7 cmt. 31. In 2017, Hal asks Lee to represent him in divorcing Wendy. A divorce is not the “same matter” as estate planning. Is the divorce “substantially related” to the estate planning? At first, it may appear that the matters are “substantially related” because they involve overlapping estates. However, “no” is the correct answer.
“Substantially related” defined
If “substantially related” were not a defined term, the two Hal and Wendy matters could be regarded as substantially related. For many years, advisory opinions, disqualifications and disciplines all would have regarded the two representations as substantially related. In these cases, confidentiality was important, but it was also held, “The presence or absence of ‘confidentiality’ is not dispositive on the issue of disqualification.” Prod. Credit Ass’n of Mankato v. Buckentin, 410 N.W.2d 820, 822 n.4 (Minn. 1987). Protection of confidential information was primary, but the former client’s reasonable expectations of loyalty were also protected.
In 2005, however, the Rule 1.9 comments were amended. Confidentiality became the dispositive issue when the matters were related but not the same. Protection of loyalty was narrowed to representations that were “the same.”
Since 2005, “substantially related” representations are either “the same” representations, or representations that create “a substantial risk that confidential factual information . . . [from] the prior representation would materially advance the client’s position in the subsequent matter.” Rule 1.9 cmt. 3. Comment 3 also states, “Information that has been disclosed … to other parties adverse to the former client ordinarily will not be disqualifying.” Because information in the first representation was shared by Hal and Wendy, it was disclosed and is not disqualifying. In short, since 2005, a lawyer is not disqualified from representing one prior joint client adversely to another prior joint client, unless the two representations are the same.
Bigger pictures
One rationale for Comment 3 is pragmatic. Suppose Hal retains Newby as his divorce lawyer. Newby will have access to all the information Lee would have had. Hal has rights to obtain Lee’s estate planning file and to share that file with Newby. Disqualifying Lee from the divorce will not protect Wendy’s information.
A good lawyer might well decline the divorce representation, based on personal loyalty standards that are higher than those of Comment 3. But if a lawyer represented one of the joint clients in many matters, and the other in only one, loyalty might be thought to weigh in favor of the new representation, against a former client. A careful lawyer might also decline to sue a former client due to risk factors, e.g. the lawyer might become a witness, or might be sued for malpractice in the first representation.
Comment 3 has become essential for disqualification, as well as discipline, standards. The Minnesota Supreme Court has stated that although the comments “ordinarily are not binding on us,” Comment 3 is to be considered “for guidance.” State of Minnesota v. 3M Company, 845 N.W.2d 808, 821 n. 3 (Minn. 2014). In 3M, the lower court committed reversible error by failing to consider whether application of Comment 3 to disclosure issues meant that 3M had no protectable confidentiality rights.
OLPR’S positions since 2005.
How has OLPR applied Rule 1.9 to former joint representations?
Approximately 10 years ago, the author represented two respondent attorneys who did what Lee did, i.e. spousal joint estate planning, following by family law representations adverse to a former client. In both cases, OLPR dismissed complaints by a spouse. One dismissal focused on lack of risk for misuse of confidential information. The other dismissal memorandum cited Comment 3, using a rationale similar to that given above — due to prior joint representation, there was no risk to confidential information. Since 2005, OLPR has routinely given advisory opinions to inquiring lawyers that are based on Comment 3 and are consistent with these dismissals. OLPR has, however, twice taken inconsistent positions.
The first inconsistency was in an OLPR article that considered a lawyer who represented estate planning clients jointly, and then represented one client against the other. “The attorney correctly determined in this unique instance that the proposed new representation was not substantially related to the prior representation and that she did not have a conflict of interest under Rule 1.9, MRPC. That is more often not true when an attorney has previously performed estate-planning work for both husband and wife and now desires to represent one of the clients against the other in a divorce action.” Martin A. Cole, Summary of Admonitions, Bench & B. of Minn., Feb. 2010.
The position that the lawyer did not have a conflict is, however, not “unique.” It is the position OLPR routinely takes in rendering advisory opinions. The article does not attempt to explain the inexplicable — why Rule 1.9 would be violated “more often” than not when a joint estate planning representation of spouses is followed by a representation of one spouse against the other in marriage dissolution.
OLPR’s second inconsistency involves one count of a public discipline. In re Kraus, File No. A16-0688 (Minn. Sept. 14, 2016).
OLPR issued Charges of Unprofessional Conduct against a lawyer, Kraus. One charge alleged the same type of estate planning / divorce representations that was the subject of the above dismissals and of OLPR advisory opinions. Kraus contested the charges, before a lawyers board panel. OLPR filed a brief, arguing violation of Rule 1.9.
OLPR argued, “respondent used his knowledge of [the wife] and the prior representation to [the wife’s] disadvantage.” But Comment 3 permits such use, when the information is known to the husband from the prior joint representation. OLPR has stated that the comments provide safe harbors, “[T]he comments generally will reflect the OLPR’s interpretation and enforcement position.” Timothy M. Burke, Comparing Services Can be Dicey, Minn. Law., July 3, 2006.
OLPR also argued, “Although both representations dealt with the distribution of the couples [sic] assets, respondent failed to recognize the conflict of interest.” OLPR implied a meaning of “substantially related” — overlapping subject matter — that would not be unreasonable if there were no definition in Comment 3. But Comment 3 specifically defines “substantial relationship,” and the definition is at odds with OLPR’s implied definition.
Kraus did not argue to the panel as experienced ethics counsel would have – that Comment 3 provided a safe harbor. The panel authorized a public Petition for Disciplinary Action. OLPR and Kraus filed a stipulation by which Kraus admitted the facts and rule violations alleged in the petition. The Supreme Court approved the stipulation and reprimanded Kraus. Fortunately, the court generally does not appear to regard disciplines entered pursuant to stipulations as being precedent for the development of the law.
A good lawyer’s instincts, habits and expectations will usually lead to correct applications of the Rules of Professional Conduct. In some cases, however, technical knowledge is necessary. One such instance is the more restricted meaning of “substantial relationship,” found in application of the 2005 amendment of Rule 1.9, comment 3, to prior joint representations.
--
Originally posted as an article in the January 19, 2017 Minnesota Lawyer under the title, “When Joint Clients Split – What’s a Lawyer to Do.”