Inquiry
A law firm whose attorneys are subject to the Rules of the District
of Columbia Bar and a current client
of that firm (“Client A”) jointly have requested an opinion
from this Committee as to whether the law
firm may, consistent with DC Rule of Professional Conduct 1.7, continue
to represent other clients of
the firm whose interests have become adverse to Client A. Since 1993,
the law firm has represented
Client A as a defendant in a class action ERISA lawsuit filed in
federal district court. Discovery in the
ERISA lawsuit has been concluded, and if the lawsuit is not resolved
through pending motions for
summary judgment, the case is ready for trial.
In 1996, Client B retained
the law firm to represent it on a regulatory issue involving access
to certain
facilities in its industry (“Competitive Access issue”).
The law firm has represented Client B on this issue in seven distinct
proceedings, including a federal district
court lawsuit and a subsequent appeal, an
FCC complaint proceeding, an FCC declaratory ruling proceeding, and
several different FCC
application proceedings. Some of these representations are still
ongoing. In 1997, Client C retained
the law firm to provide advice and legal services on another related
but different access issue (“Direct
Access issue”),1 and the law firm has represented Client C
in three FCC proceedings involving this
issue, including an ongoing FCC Notice of Proposed Rulemaking.
The law firm and Client A agree that there is no substantial relationship
between the ERISA litigation in
which the law firm represents Client A and the Competitive Access
or Direct Access proceedings in
which the law firm represents Client B or Client C. In 1998, Client
A announced its intent to acquire a
company that had been and continues to be adverse to Client B in
the Competitive Access issue
proceedings and to Client C in the Direct Access issue proceedings.
Client A’s merger is still pending
and is subject to various regulatory approvals, including FCC approval.
Upon
learning of the merger, the law firm sought to obtain conflict of
interest waivers so that it could
continue to represent Clients B and C in matters involving Competitive
Access and Direct Access
issues where, following the merger, Client A would be directly adverse
to Clients B and C.2 The
law firm also sought a waiver to represent Clients B and C in the
FCC
proceeding reviewing Client A’s
acquisition. Client B and Client C each agreed to provide the necessary
conflict of interest waiver, but
Client A refused to do so, consenting only to the law firm’s
continuing general representation of Clients
B and C on matters in which there was no direct adversity.
Disagreeing
with Client A’s position, the law firm filed comments
on behalf of Clients B and C in the
FCC proceeding reviewing Client A’s acquisition. While neither
Client B nor Client C opposed FCC
approval of Client A’s merger, they both requested that the
merger be conditioned in a manner that
would effectively produce the relief they had been seeking in the
various Competitive Access and
Direct Access proceedings. Client A viewed these comments as adverse
to its interests because in its
view the relief requested would substantially impair the value of
the company that it sought to acquire.
Client A believes that the law firm should withdraw from its representation
of Clients B and C in
connection with the FCC proceeding reviewing Client A’s merger.
It asserts that it would be
inappropriate under DC Rule 1.16(b) for the law firm to withdraw
from its representation of Client A in
the ERISA litigation. The law firm asserts that its continued representation
of Clients A, B and C is
permissible under the “thrust upon” provision of Rule
1.7(d) because there is no substantial relationship
between the ERISA litigation in which it represents Client A and
the FCC proceedings regarding Client
A’s acquisition in which it represents Clients B and C. Alternatively,
the law firm suggests that if
withdrawal is necessary, the law firm should withdraw from the ERISA
litigation because Client A
created the conflict by its proposed merger and Clients B and C have
attempted to resolve the situation
by giving their consent to the multiple representation.
The law firm in fact offered to withdraw from representing Client
A in the ERISA litigation and to
compensate Client A for possible costs associated with retention
of new counsel in that matter. When
Client A rejected this proposal, asserting that withdrawal given
the advanced stage of the ERISA
litigation would be prejudicial, the law firm and Client A jointly
filed this inquiry.
Discussion
This inquiry involves interpreting the scope of the “thrust
upon” exception
provided by DC Rule 1.7(d)
to the general prohibition against simultaneously representing two
clients whose interests are directly
adverse. This provision is a relatively new addition to the D.C.
Rules of Professional Conduct and
consequently has been the subject of only limited interpretation
by this Committee. Nor does it appear
that this issue has been addressed by other jurisdictions.
As a starting
point, it is useful to identify the specific conflicts of interests
presented here. Assuming
Client A’s pending merger is successfully concluded, Client
A will step into the shoes of the acquired
firm and become directly adverse to Clients B and C in the Direct
Access and Competitive Access
proceedings. This will trigger a conflict of interest under DC Rule
1.7(b)(1), which prohibits
representation of a client with respect to a matter that:
[I]nvolves a specific party or parties, and the position
to be taken by that client in that matter is
adverse to a position taken or to be taken by another client in the
same matter, even though that client is unrepresented or represented
by a
different law firm.
Similarly, the law firm’s representation of Clients B and C
in the FCC proceeding reviewing Client A’s
pending merger also raises a conflict under Rule 1.7(b)(1) since
the conditions to merger approval
sought on behalf of Clients B and C are directly adverse to interests
of Client A in unconditional
approval of its merger.
Rule 1.7(d) provides an exception to the general
prohibition of Rule 1.7 by addressing the situation in
which a law firm is already representing two clients in unrelated
matters and some direct adversity
between the clients develops or becomes apparent for the first time.
Rule 1.7(d) provides:
If a conflict not reasonably foreseeable at the outset of a representation
arises under paragraph
(b)(1) after the representation commences, and is not waived under
paragraph (c), a lawyer
need not withdraw from any representation unless the conflict also
arises under paragraphs
(b)(2), (b)(3), or (b)(4).
As noted, two separate conflicts involving the application of Rule
1.7(d) are presented by the inquiry
here—(1) the representation of Clients B and C with respect
to ongoing proceedings involving the
Competitive Access and Direct Access issues in which Client A, following
its acquisition, will be
adverse to Clients B and C and (2) the representation of Clients
B and C in the FCC proceeding
reviewing Client A’s proposed merger, where Clients B and C
wish to raise arguments and seek relief
similar to that sought in other proceedings involving the Competitive
Access and Direct Access issues
but adverse to Client A’s interest.
3
The application of Rule
1.7(d) to the first situation—adversity arising from Client
A’s
merger, which gives it for the first time an interest in ongoing
proceedings in
which the law firm has been representing
Clients B and C—is straightforward. The law firm’s representation
of Clients B and C in ongoing
proceedings involving Competitive Access or Direct Access issues
is precisely the situation that Rule
1.7(d) sought to address. There is no question that the law firm
had been representing Clients B and C
in the particular matter in which the conflict has arisen. The conflict
was not reasonably foreseeable.
4 At the time the law firm initiated its representations of Clients
B and C in these proceedings, the other
firm client, Client A, had no interest in the Direct Access or Competitive
Access issues. Client A’s
interest arose only after the representations of Clients B and C
commenced, and although a waiver was
sought, the conflict was not waived under Rule 1.7(c) by all clients.
In
such a situation, Rule 1.7(d) provides that a law firm need not withdraw
from any representation
unless the conflict also arises under Rules 1.7(b)(2), (b)(3), or
(b)(4), which does not appear to be the
case here. Thus, after seeking, but failing to obtain Client A’s
consent, the law firm is permitted under
Rule 1.7(d) to continue representing Client A in the ERISA litigation
and to continue representing
Clients B and C in the ongoing Competitive Access and Direct Access
proceedings, subject, of course,
to the right of any client to terminate the firm’s representation.
A
more difficult issue is posed by the law firm’s representation
of Clients B and C in the FCC proceeding reviewing Client A’s
proposed merger. The law firm asserts that its ongoing
representations of Client B and Client C in various proceedings relating
to the Competitive Access and
Direct Access issues constitute, for each client, a single and continuing
representation in pursuit of a sole
objective—success for that client with respect to a specific access
right. According to the law firm, the
FCC proceeding reviewing Client A’s merger is part of this
continuing representation because it permits
a federal regulatory agency to consider the Competitive Access and
Direct Access issues and offers an
additional opportunity to obtain the relief Clients B and C seek.
The law firm therefore urges that its
efforts on behalf of Clients B and C respectively constitute a single
ongoing “representation,” comprised
of a series of efforts to pursue a single objective in multiple forums,
that should be viewed as a single
and identifiable “matter.”
5 Thus,
for purposes of Rule 1.7(d), it views the “outset of a representation”
5
here as the first action taken on behalf of Client B or Client C
with respect to their particular access
issue, and the subsequent initiation of additional discrete proceedings
involving that access issue does
not give rise to a new representation.
Client A urges a narrower view
of the phrase “outset of a representation” as
used in Rule 1.7(d). It
views the FCC merger proceeding as a new representation on which
the law firm’s ability to represent
Clients B and C was precluded by their adversity with Client A. According
to Client A, the fact that
the Competitive Access and Direct Access arguments that the law firm
may have advanced on behalf of
Clients B and C in prior FCC or federal court proceedings also could
be raised in the FCC merger
proceeding does not make the FCC merger proceeding part of an ongoing
representation that falls
within Rule 1.7(d)’s narrow exception.
In determining the scope
of Rule 1.7(d), the meaning of the phrase “outset
of a representation” is
critical. Unlike “matter,” the term “representation” is
not defined anywhere in the DC Rules of
Professional Conduct. The phrase “outset of a representation” was
considered previously by this
Committee in Opinion 272, dealing with so-called “Hot Potato” conflicts,
where we concluded:
While it would not be unreasonable to interpret the phrase “outset
of a representation” to mean
the client’s initial retention of the lawyer on any matter,
it is clear from the context of Rule
1.7(d) that the drafters had in mind the outset of representation
in a discrete matter in which the
unforeseen conflict arises. The narrow exception to Rule 1.7(b) carved
out by the new
subsection (d) addresses the situation in which one client potentially
has the power to disable
the law firm from its ongoing representation of another client in
a particular matter already in
progress, simply by intervening in the proceeding with separate counsel. . . . It would be a
considerable step beyond this narrow class of “thrust upon” conflicts
to extend Rule 1.7(d) to
situations where . . . there is a current general “representation” of
a client but the matter in
which adversity develops has not yet begun.
The factual situation considered
in Opinion 272 was distinct from the inquiry here. A law firm had
represented Client X for a considerable period of time with respect
to matters regulated by a specific
regulatory agency (“Agency A”). The law firm had successfully
represented Client X in a concluded,
non-adversarial matter before Agency A and thereafter matters regulated
by Agency A. The firm also
was representing Client Y on unrelated contract matters when Client
Y (represented by separate counsel) initiated an adversarial action
against
Client X before
Agency A. Client Y refused to consent
to the law firm’s representation of Client X in that action.
The
Committee refused to apply Rule 1.7(d) to the situation presented
in Opinion 272, concluding that
“
there was not a discrete matter in existence prior to the time Client
[Y] initiated the proceeding against
Client [X]” and that the adversarial proceeding before Agency
A constituted a new matter.6 While
Opinion 272 makes clear that the “thrust upon” exception
of Rule 1.7(d) does not extend to situations
where there is a general representation of a client “but the
matter in which adversity develops has not
yet begun,” it does not shed further light on the key phrases
on which it relies, including “discrete
matter” and “particular matter already in progress.”
In
the factual situation considered in Opinion 272, there was no ongoing
representation in a particular
matter, no existing adversity, nor even any identifiable opposing
party. It is therefore necessary to
consider how Rule 1.7(d) should be applied in the more complicated
situation presented here, where
there is an ongoing representation on a discrete legal issue with
identifiable opposing parties that may be
raised in multiple proceedings (possibly in more than one forum)
and that, depending on one’s
perspective, can be characterized as one representation or multiple
representations.
It is a reality of modern legal practice that
the same issues involving
the same parties, common facts,
similar arguments and legal theories, opposition from the same interests,
and seeking identical relief may
be asserted (simultaneously or serially) in multiple proceedings.
In litigation matters, there may be
multiple iterations of the same claim brought in multiple proceedings;
in regulatory practice, it is common
to have multiple appeals from a single regulatory decision. When
a successful removal petition results in
the transfer of a lawsuit from state to federal court, there have
been two discrete proceedings with
different case numbers and before different judges, but is hard to
view this as giving rise to two separate
representations.
If “representation” were defined
simply by the existence of multiple proceedings with each new
proceeding viewed as a separate “discrete matter,” Rule
1.7(d) would have a relatively narrow
application and, in the absence of conflict waivers, there might
be numerous situations in which a client
would be precluded from representation by counsel of its choice.
Treating each proceeding as a
separate matter (and thus new representation) could allow an opponent
to disrupt a law firm’s ongoing
representation of a client for strategic purposes merely by initiating
a separate proceeding that continues
an existing controversy in a new forum. If existing counsel were
unable under Rule 1.7(d) to represent
its client in that newly initiated proceeding, the client would face
the unenviable choice between retaining
multiple counsel (incurring the costs and coordination problems of
doing so) or replacing its original
counsel due to a conflict associated with a specific aspect of the
overall dispute.
Yet a more expansive reading of the term “representation”—one
that concludes that so long as some issues, parties, underlying claims or defenses
are the same there
is a single “representation”—has the
potential for turning the narrow exception of Rule 1.7(d) into a
broader opportunity for law firms to
undertake representation adverse to existing clients. It is easy
to conceive of how Rule 1.7(d) might be
abused by asserting some tortured linkage to an ongoing representation.
Moreover, interpreting Rule 1.7(d) to extend to multiple proceedings
makes it inevitable that difficult questions of application will
arise. What decree of commonality is required to link various discrete
proceedings into a single matter.
For example, does the fact that a law firm is the regular counsel
for a client with respect to a particular
type of lawsuit permit the firm to represent that client if any new
lawsuit of that type is brought by
another firm client?
It is probably impossible to state a single rule
that addresses all situations in which “thrust upon
conflicts” claims are raised. However, we believe that for
purposes of applying Rule 1.7(d), the
concept of “representation” contains enough flexibility
to extend beyond a single discrete proceeding to
multiple proceedings that raise a particular identifiable issue or
issues and involve common facts, legal
theories, claims, defenses and parties.7 For purposes of Rule 1.7(d),
the “onset
of representation” will be deemed to occur when the law firm first begins to provide legal
services that involve the same facts,
legal theories, claims, defenses and parties. If the conflict of
interest was not reasonably foreseeable at
that point, the law firm can continue its representation without
client consent even if a conflict with
another firm client is triggered by a subsequent legal proceeding.
We
believe this approach is consistent with our prior holding in Opinion
272. There, the primary (and,
indeed, the sole) linkage between the discrete proceedings was that
they involved the same
administrative agency before which the law firm had long represented
the client. There was no
adversity until the firm’s other client initiated the proceeding
that was the source of the conflict. Thus, it
was not possible to find a single representation for purposes of
Rule 1.7(d). There were no common
facts, issues, or adverse interests.
Applying this analysis to the
inquiry here, we find that the law firm’s
representation of Clients B and C
on Competitive Access and Direct Access issues encompasses all proceedings—existing
and future—in which these issues are legitimately raised
and in which the same parties, legal theories, claims and
defenses are present. It includes the FCC proceeding reviewing Client
A’s
proposed acquisition,
where the FCC can condition the merger approval in a way that would
achieve Client B’s and Client
C’s Competitive Access and Direct Access relief.8 Thus,
even in the absence of consent from Client A, the law firm can continue to represent Client A in the ERISA litigation
and Clients B and C in the
Competitive Access and Direct Access proceedings.9
We caution that the underlying commonality of
facts, issues and parties required to find a single
“
representation” must be objectively verifiable. Efforts to abuse
Rule 1.7(d) by artificially interjecting
specious issues or claims into a proceeding in order to claim a preexisting
representation will not be
sufficient to overcome general client conflict principles contained
in our Rules.
Conclusion
For the reasons discussed above, we believe that the “thrust
upon” conflict
provision of Rule 1.7(d)
extends to the representation of a client with respect to an identifiable
set of legal issues involving
common facts, legal theories, claims, defenses and parties. Notwithstanding
the fact that additional
discrete proceedings raising those issues are subsequently initiated
by another client of the law firm, the
law firm may rely on Rule 1.7(d) to continue to represent both clients
even in the absence of client consent.
Inquiry No. 99-1-2
Adopted: June 15, 1999
