RI-248
December 20, 1995
SYLLABUS
A lawyer who has formerly represented a client in a joint representation to settle a claim by a third party, may represent the other client from that joint representation, or another person, in relation to the same property, in which that person's interests are materially adverse to the interests of the former client, provided that (a) the former client consents after consultation, or (b) the matter is not the same or substantially related to the former representation and protected information regarding the former client is not used or revealed.
References: MRPC 1.6, 1.7(b), 1.9.
TEXT
After a divorce (in which the lawyer did not represent either spouse), a lawyer jointly represented the divorced couple as codefendants in a post-judgment proceeding upon a previous action against them by a third party for tort damages, including a settlement plan to preclude a de facto forfeiture of real estate now titled to the ex-wife. As part of this settlement plan, the ex-husband divested retirement plan assets and incurred tax liabilities in order to fund part of the settlement. Prior to this engagement, the lawyer had also represented the ex-wife in land contract forfeiture proceedings, regarding unrelated real estate.
After negotiating the settlement in relation to the third party judgment, the ex-wife failed to pay legal fees due to the lawyer, and all legal services to her were discontinued. The ex-husband now wishes to proceed with a potential equity claim against the ex-wife's real estate which was, in effect, saved by the contribution of the husband's retirement plan assets, claiming that this prior contribution constitutes an enforceable interest in that real estate.
The lawyer asks whether the husband's representation may be undertaken.
MRPC 1.9(a) and (c) state:
"(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client consents after consultation.
". . .
"(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
"(1) use information relating to the representation to the disadvantage of the former client except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client, or when the information has become generally known; or
"(2) reveal information relating to the representation except as Rule 1.6 or Rule 3.3 would permit or require with respect to a client."
The gist of this rule is that, even after a lawyer's representation of a client ceases, the lawyer may not, without the consent of the former client, represent another client in the same or a substantially related matter in which the new client's interests are materially adverse to those of the former client. Even if the matters are neither related nor adverse, nevertheless the lawyer may still be prevented from undertaking representation if "confidences or secrets" of a former client would be revealed, or used to the disadvantage of the former client, unless the former client consents after consultation.
1. Will the interests of the "new client" be materially adverse to those of a "former client"?
Lawyers represent clients, not property. The fact that the former representation concerned the same property against which an equity interest may now be asserted, is not controlling. In this inquiry there was an attorney-client relationship with the ex-wife. There is also no doubt that in the prospective representation the interest of the ex-husband will be materially adverse to those of the former client ex-wife. It makes no difference that legal services were terminated because of the former client's failure to pay reasonable fees due to the lawyer. The protection of MRPC 1.9 are triggered by the existence of the former attorney-client relationship, whether or not the client paid the fees due for the work performed in that relationship.
2. Does the prospective representation concern the same or a substantially related matter?
The "substantial relationship" test was first fashioned by courts, and then codified into ABA Model Rule 1.9(a), from which MRPC 1.9 was adopted. In deciding whether a "substantial relationship" exists, the scope and subject matter of the former and present representations must be examined. Some cases use a "transactional analysis," which holds that a conflict exists if the prior representation and the subsequent representation involved even interconnected (but not the same) events which could reveal a pattern of client conduct; this is done on the theory that relevant confidences could have been acquired by the lawyer in question. See, for example, Analytica Inc v. NDP Research Inc, 708 F2d 1263 (CA7 1983). Other cases use a narrower "issues analysis," finding a "substantial relationship" only when the issues involved in the two cases or transactions are identical or virtually so. See, for example, Lawyer Disciplinary Board v. Printz, 452 SE2d 720 (W Va 1994). Michigan has not taken a specific position as to which analysis should be used.
Under the transactional analysis, there would probably be a substantial relationship between the two representations, since the claims asserted by the ex-husband arise directly out of the settlement negotiated as part of the previous joint representation of him and the former client/ex-wife. Under the issues analysis, the question is more difficult, since it does not appear that the contribution issue was ever raised in the former joint representation.
3. Will protected information obtained from or about the former client be revealed, or used in the prospective representation to the disadvantage of the former client?
MRPC 1.6(b) prohibits the disclosure of a client's confidences or secrets, even after the termination of the lawyer-client relationship. In accord, Murphy v. Riggs, 238 Mich 151; 213 NW 110 (1927). MRPC 1.9(c)(1) also prohibits the "use" of such information to the disadvantage of a former client. Absent a specific waiver, the fact that the same information was also made known to another joint client, in the course of a joint representation by the same lawyer, does not operate to negate this prohibition, which is designed to protect the former client. An exception to this prohibition exists regarding information "generally or publicly known" about a former client, regardless of a lack of client consent. See MRPC 1.9(c)(1). In contrast, the "public information" exception does not apply regarding a present client. See MRPC 1.8(b). Therefore, if non-public protected information regarding a former client is likely to be revealed, or used adversely in the prospective representation, then then MRPC 1.9(c) is triggered.
Under MRPC 1.7(b), if the lawyer knows information from the prior representation which is relevant to the subsequent representation, and if the lawyer's failure to use the information for the benefit of the subsequent client materially limits the lawyer's ability to provide the most competent and diligent representation, a disinterested lawyer could not reasonably believe that the representation would not be adversely affected, and the lawyer would not be able to undertake the subsequent client's case. See MRPC 1.7(b)(1).
Here, the prospective representation will certainly involve the lawyer's discussions with the prior joint clients, as the settlement plan was negotiated and eventually funded. The prospective representation will also directly concern the ex-husband's funding of that settlement, which would likely have involved discussions between the joint clients and the lawyer on that topic. For purposes of MRPC 1.9, it is irrelevant that the joint clients were privy to these discussions and to the "protected information." So long as the same information is non-public, it continues as "protected information" as to both of the former joint clients, even if one of them is no longer represented by the same lawyer. Based on the facts presented, it thus appears likely that protected information of the former client will be revealed, or used adversely to the former client, thus triggering MRPC 1.9(c), absent a waiver by the former client.
4. Is there an effective waiver of the conflict by the former client?
The disqualification and the prohibition on use of information imposed by MRPC 1.9 are safeguards for the benefit of the former client, and thus may be waived. The former client thus gives consent to the otherwise improper representation, provided that the consent is given "after consultation," which requires specific discussion with the client of the implications, advantages and risks of the waiver. MRPC 1.2, 1.4. The purpose is to give the former client information reasonably sufficient to permit appreciation of the significance of the matter in question. See the Comments to MRPC 1.0 and 1.7.
Depending upon the sophistication, experience and other legal resources of the former client, circumstances could recommend that the former client retain independent counsel before acting on the waiver request. Although not required by ethics rules, it is also highly recommended that such a waiver be documented in writing.