Year 1991 Ethics Opinions
THE ASSOCIATION OF
THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION 1991-1
COMMITTEE ON PROFESSIONAL AND JUDICIAL
ETHICS
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April 30, 1991
ACTION: Formal Opinion
OPINION:
This Opinion addresses whether and
under what circumstances a lawyer has a duty to disclose to a
current or prospective client that the lawyer is seeking or is
considering whether to accept future employment with a person or
entity having interests that are adverse to the interests of that
current or prospective client.
Disciplinary Rule ("DR")
5-101(A) of the Lawyer's Code of Professional Responsibility
("the Code") provides that, except with the consent of
the client after full disclosure, a lawyer must decline proffered
employment if the exercise of the lawyer's independent
professional judgment on behalf of that client "will be or
reasonably may be affected by the lawyer's own financial,
business, property, or personal interests". n1 For the
reasons set forth below, the Committee concludes that when a
lawyer's interest in obtaining specific future employment is
sufficiently focused and concrete, it is a cognizable
"financial, business, property, or personal interest [
]" under the Code, and where the potential future employer
is a party or counsel for a party having interests adverse to the
interests of the lawyer's client that are the subject of the
prospective representation, the interest in that future
employment is one that "will" or "reasonably
may" affect the lawyer's exercise of independent
professional judgment on behalf of the client.
n1 "DR 5-101 Refusing
Employment When the Interests of the Lawyer May Impair
Independent Professional Judgment.
A. Except with the consent of the
client after full disclosure, a lawyer shall not accept
employment if the exercise of professional judgment on behalf of
the client will be or reasonably may be affected by the lawyer's
own financial, business, property, or personal interests."
Although DR 5-101(A) expressly
addresses only the decision to undertake to represent a client,
the Committee further concludes that the policies and ethical
considerations embodied in the rule apply similarly where the
lawyer's conflicting employment interest arises after the
representation of the client by the lawyer has commenced. In such
case, we conclude that the lawyer must either disclose the
interest and seek the client's consent to continue the
representation, withdraw from the representation if that can be
done without prejudice to the client, or postpone the pursuit of
the conflicting employment opportunity until the completion of
the existing representation.
We believe that a lawyer's
interest in prospective future employment often will have become
sufficiently focused and concrete to constitute an
"interest" under DR 5-101(A) (i) where the lawyer has
made affirmative application for a new position or (ii) where the
lawyer is in fact actively considering whether to pursue such a
position in light of an expression of interest by the prospective
employer. At a minimum, we believe that the disclosure
obligations under DR 5-101(A) will arise in all circumstances no
later than when an offer of conflicting employment has been
extended to the lawyer and has not been promptly declined.
Finally, the policies and ethical
considerations discussed herein generally apply not only in the
context of litigation or formal adversarial proceedings but also
in any legal representation where there is professional
interaction between lawyers whose clients have differing and
adverse interests. Thus, the Committee notes that the discussion
of the application of DR 5-101(A), as set forth herein, should
not be viewed as limited to the representation of a client in
litigation. It should extend to any lawyer who is to have
substantial, personal involvement in the representation of or
otherwise to be in a position to exercise or to influence the
exercise of professional judgment on behalf of a client
regardless of the context.
I.
Employment prospects and
opportunities are clearly matters of financial and personal
interest to most lawyers. n2 The question is whether specific
employment prospects with a party or counsel to a party with
interests adverse to those of a client of the lawyer
"will" or "reasonably may" affect the
lawyer's exercise of professional judgment on behalf of that
client.
n2 This Opinion arose from our
consideration of situations where a lawyer contemplates
"changing jobs", e.g., moving from one law firm to
another, from private practice to a corporate or governmental
position or from private defense work to a prosecutor's office.
The discussion proceeds generally with that context in mind.
However, the considerations, analyses, and conclusions can also
be applied to a private practitioner's consideration of
prospective future retention to represent a party in another
matter.
There are several types of
situations where at least an apparent conflict between the
lawyer's personal interest in potential future employment and the
interest of his or her client could arise. For example, where the
outcome of the matter is of importance to the potential future
employer, the lawyer could be tempted to act or to appear to act
so as to benefit the future employer rather than the client in
the course of the representation as a means of attempting to
secure the future position. A conflict could also arise where the
outcome of the matter could have a significant future effect on
the perceived advantages of or benefits to be derived from the
prospective future employment. Such effect could be of direct
financial significance to the lawyer if the future employment
were to occur and would, thereby, give the lawyer a potential
personal stake in the outcome of the current matter in which he
or she represents the party with interests adverse to those of
the potential future employer. In short, protection of the
interests of the lawyer's current client could be in conflict
with the likelihood that the lawyer will get the future
employment or with the potential benefits to the lawyer from the
future employment or both.
A third, and probably more common,
situation is where the lawyer perceives that his or her actions
in the representation of the client may have some impact on the
potential employer's view of the lawyer's abilities. The lawyer,
conscious of the potential for evaluation, may be more
aggressive, litigious or argumentative, on the one hand, or more
passive, cooperative or forthcoming, on the other, than he or she
otherwise might be. Similarly, the lawyer may respond to the
circumstance of confronting a potential future employer by being
more reserved or, alternatively, more gregarious; by being more
cooperative or, alternatively, more combative. In all such
events, the conscious or unconscious deviation in behavior could
be to the detriment of the client. Moreover, it would be the
direct result of the employment interest.
DR 5-101(A) does not require a
showing that the lawyer's exercise of professional judgment will
be affected; it requires only that the judgment "reasonably
may be". The Committee concludes, in light of the examples
set out above, that future employment interests "reasonably
may" affect a lawyer's professional judgment. n3
n3 We also believe that the
conclusions herein are strongly buttressed by the Canon 9
directive to avoid even the appearance of professional
impropriety. It is not unlikely that at least some clients would
be distressed to discover that shortly after the completion of
the representation of the client, the client's lawyer took a job
with the other side. The concern would be even greater if it were
known or believed that negotiation over such employment had
occurred undisclosed to the client during the course of the
representation. Such consequences would clearly tend to undermine
confidence in the profession and in the legal system. Conversely,
our belief that at least some clients would want to and feel
entitled to know about the lawyer's conflicting employment
prospects lends support to our conclusion that the conflicting
employment prospects "reasonably may" affect a lawyer's
exercise of professional judgment.
II.
There is only limited precedent
addressing when prospective employment can or will constitute the
type of "interest" contemplated by DR 5-101(A).
Nevertheless, the precedent we have located is consistent with
the conclusions we express herein. n4
n4 We note that DR 5-101(A) does
not specifically refer to an interest in future employment. The
Code, however, does cite future employment as a possible
disqualifying interest of the lawyer in the section regulating
government lawyers. DR 9-101(B) states:
"Except as law may otherwise
expressly permit: . . . 3. A lawyer serving as a public officer
shall not: . . . b. Negotiate for private employment with any
person who is involved as a party or as attorney for a party in a
matter in which the lawyer is participating personally and
substantially."
The inclusion of this section in
the Code indicates that the drafters were concerned that
prospective employment of a government lawyer may affect the
independent judgment of the lawyer and, thereby, affect the
lawyer's fair representation of the client. Thus, it is possible
to formulate an argument, by negative inference, that the
drafters did not consider an interest in prospective employment
to be a concern for non-government lawyers. We reject that
argument. Instead, we believe that DR 9-101(B) gives further
support to our position here by explicitly recognizing the
potential ethical significance of future employment prospects.
See also Restatement of the Law Governing Lawyers 3206, comment
d, illustration 6 (Tent. Draft, No. 3, April 10, 1990); Model
Rules of Professional Conduct, Rule 1.12(b) (judicial clerk must
disclose to judge negotiations for employment with a party or
attorney involved in a matter in which clerk is participating
"personally and substantially").
In New York City Opinion 79-37,
the Committee concluded that DR 5-101(A), reinforced by Canon 9,
prohibited continued representation of a client by a law student
absent disclosure and informed consent, if that student has
accepted an offer of post-graduation employment with the
prosecutor's office handling that case against the student's
client. New York City Opinion 79-37 (February 11, 1980). n5 As
discussed above, we find no distinction, material to the concerns
of DR 5-101(A), between the acceptance of an offer and either the
serious consideration of an offer that has been made or the
active pursuit of an offer of employment.
n5 Although the Code is addressed
to "lawyers" (that is, persons who have been admitted
to the Bar), its provisions apply to law students who are
functioning as lawyers in clinical education programs, in many
instances under the authority of Appellate Division practice
orders or other court rules. See Opinion 79-37. In addition, the
Code's provisions clearly are binding on members of a law school
clinical faculty, whose supervisory responsibility over
practicing law students is codified as an ethical obligation in
DR 1-104(A). Similar considerations would apply with respect to
law students engaged in part-time employment under the
supervision of a practicing lawyer.
The Legal Ethics Committee of the
District of Columbia Bar recently addressed the situation of a
lawyer involved in criminal defense work applying for a position
with the United States Attorney's Office and concluded that DR
5-101(A) requires full disclosure and the informed consent of the
lawyer's clients who are being prosecuted by that Office no later
than when the lawyer takes the first active step toward seeking
such new employment. Legal Ethics Committee, District of Columbia
Bar, Opinion 210, at 9 (April 17, 1990).
Similarly, a 1990 San Diego Bar
Association opinion concluded that while the California ethics
rules do not compel the lawyer to reveal to the client that he
was hired by opposing party's counsel to act as an expert
witness, the lawyer's duty of loyalty may nevertheless require
such disclosure if the lawyer's personal financial interests in
serving as an expert witness may affect representation of the
client. The opinion explained, by way of example, that if a
lawyer had acted as an expert witness for a law firm in the past
with some expectation of similar employment in the future, then
there would be more likelihood that the lawyer's own financial
interests might affect the lawyer's actions in representing the
client. San Diego Opinion 1989-4 (June 5, 1990).
Finally, we note that the
Committee on Professional Ethics of the New York State Bar
Association, relying in part on DR 5-101(A), concluded that a
lawyer could not properly undertake the representation of another
lawyer who is counsel for an adverse party in a pending lawsuit
without at least full disclosure and the consent of the first
lawyer's client in that pending lawsuit. N.Y. State 579 (March
20, 1987).
III.
A serious issue arises as to when,
in the process of looking for and deciding to accept new
employment, the lawyer's interest in such employment becomes
sufficiently concrete and serious to require disclosure under DR
5-101(A). The Committee is quite aware of the desirability of a
"bright-line" rule that would be easy to apply and
would provide unambiguous guidance. However, we have concluded
that no such "bright-line" test can adequately
accommodate the variety of circumstances in which the issues
addressed herein might arise.
Nevertheless, the Committee
believes that disclosure would be required under DR 5-101(A) in
any case no later than when an offer of conflicting employment is
extended to the lawyer, which offer is not promptly declined.
Therefore, disclosure would always be necessary at least where an
offer of future employment is outstanding and being considered
(or has been accepted). This rule, however, is not sufficient.
Although disclosure at the point an offer is extended would
protect against certain of the types of conflicts identified
above; it is not sufficient as to others. In particular, it does
not deal at all with the potential conflicting influences that
may arise in connection with the process of securing the offer of
employment. Therefore, the Committee notes that, in many cases,
the disclosure obligations under DR 5-101(A) may arise as soon as
the lawyer either (i) has taken clear affirmative steps to seek
to obtain specific conflicting employment (e.g., applied for such
a position) or (ii) is seriously considering the pursuit of such
employment in response to some expression of interest by the
potential employer. Both situations can raise the ethical
problems identified above. We are not prepared, however, to opine
that in all cases the obligation to decline proffered
representation or make disclosure will arise at these earlier
identified points in the process. n6
n6 For example, the Committee
recognizes that law students may send resumes to a large number
of possible employers, participate in informational activities
such as "job fairs," or attend numerous campus
"interviews". None of these activities would generally
represent an expression of serious interest in any particular
employer or position. Thus, we would not consider such actions to
reflect a "focused and concrete interest" that could
give a rise to a conflict. The same type of reasoning would apply
generally where, for example, a lawyer consults a legal
recruiting firm or sends out form letters or resumes to many
prospective employers.
IV.
Where applicable, DR 5-101(A)
requires disclosure of the conflicting interests to the client,
and the client's consent to the representation notwithstanding
that interest. This requirement involves full disclosure of all
relevant facts, thereby resulting in an informed and knowing
consent by the client. As stated by the Committee in Opinion
79-37:
"[T]he consent required by DR
5-101(A) must be an informed consent, made by the client after
full disclosure of all relevant facts, including the availability
of other counsel as an alternative to continued representation. .
. . In this regard we note that special care must be taken in
attempting to obtain the consent of indigent persons to avoid
possible overreaching and to ensure that adequate disclosures of
all relevant facts is made." New York City Opinion 79-37,
supra.
In this context, we note that full
disclosure may require some explanation to the client of the
expected process of application (e.g., that the lawyer may engage
in personal interviews with the adverse entity) and its timing,
as well as the fact that the future employment is being sought or
may occur.
V.
Generally, disclosure and consent
will fully satisfy DR 5-101(A). However, we add a caveat and
caution.
Canon 5 of the Code and its
ethical considerations stress the lawyer's duty of undivided
loyalty to the client. Canon 5 instructs a lawyer to exercise
independent professional judgment on behalf of the client, while
EC 5-1 and EC 5-2 advise the lawyer against allowing anything to
compromise or influence that judgment, against accepting
employment where such undivided loyalty will be affected and
against acquiring any interest or position that would diminish
that loyalty once representation has commenced. These Ethical
Considerations read as follows:
"EC 5-1 The professional
judgment of a lawyer should be exercised, within the bounds of
the law, solely for the benefit of the client and free of
compromising influences and loyalties. Neither the lawyer's
personal interests, the interests of other clients, nor the
desires of third persons should be permitted to dilute the
lawyer's loyalty to the client.
"EC 5-2 A lawyer should not
accept proffered employment if the lawyer's personal interests or
desires will, or there is reasonable probability that they will,
affect adversely the advice to be given or services to be
rendered the prospective client. After accepting employment, a
lawyer carefully should refrain from acquiring a property right
or assuming a position that would tend to make his or her
judgment less protective of the interests of the client."
Thus, in the context of future
employment interests being addressed herein, if the lawyer in
fact concludes subjectively that the conflict will interfere with
his or her exercise of independent professional judgment or
compromise his or her duty of loyalty, then the lawyer should
decline the proposed representation of the client (regardless of
whether the client is willing to consent to such representation).
We note that the analogous
provision of the Model Rules, Model Rule 1.7(b), also expounds
the principle of loyalty, stating:
"A lawyer shall not represent
a client if the representation of that client may be materially
limited by the lawyer's responsibilities to another client or to
a third person, or by the lawyer's own interests, unless:
(1) the lawyer reasonably believes
the representation will not be adversely affected; and
(2) the client consents after
consultation. When representation of multiple clients in a single
matter is undertaken, the consultation shall include explanation
of the implications of the common representation and the
advantages and risks involved." n7
n7 The legislative history of
Model Rule 1.7(b) also illustrates the precept of Model Rule
1.7(b), asserting that loyalty to the client is essential and
that the lawyer's own interests should not be permitted to have
an adverse effect on the lawyer's representation of the client,
nor should a lawyer allow related business interests to affect
representation.
Under the Model Rules, the lawyer
must "reasonably" believe that representation will not
be adversely affected by the personal interest. This requirement
exists independent of and in addition to the client's consent. We
would observe that this requirement is consistent with the
pronouncement of EC 5-2; although, it is not explicitly contained
in DR 5-101(A).
We believe that these
considerations underscore the importance that the disclosure be
full and detailed so that the consent, if obtained, will be
informed and knowing.
VI.
Although DR 5-101(A) addresses
expressly only the decision whether to accept employment to
represent a client, other provisions of the Code make it clear
that the policies and ethical considerations of Canon 5 -- the
duty of loyalty to and the obligation to exercise
"independent" professional judgment, untainted by
conflicting personal or professional interests, on behalf of the
client -- extend throughout the representation. See, e.g., EC
5-1, EC 5-2, DR 5-102(A), DR 5-104(A) and DR 5-105(B). Therefore,
the Committee concludes that where the representation has already
commenced, a lawyer for whom an interest in future conflicting
employment arises should disclose the interest to the client and
obtain the client's consent or either postpone seeking such new
employment until the representation is completed, n8 or withdraw
from the representation, if withdrawal can be accomplished
without prejudice to the client (see DR 7-101(A), DR 2-110(A) and
(C)). If the lawyer concludes that the conflicting interest will
interfere with his or her exercise of independent professional
judgment, then disclosure and consent will not be adequate.
n8 EC 5-2 advises that a lawyer
"carefully should refrain from acquiring a property right .
. . that would tend to make his or her judgment less protective
of the interests of the client". The Committee does not
consider an application for a job to be such a "property
right", but the acceptance of an offered employment position
would, in our judgment, come within that language.
VII.
We have addressed this Opinion to
the obligations of the lawyer who is seeking other employment,
and we do not undertake to discuss in the abstract the various
related issues that may arise in different situations with
respect to the obligations of other, associated lawyers.
Nevertheless, we note that under the Code, certain conflicts,
including a conflict under DR 5-101(A), will be imputed to other
lawyers "associated" with the directly affected lawyer
in "a law firm". Specifically, DR 5-101(D) provides:
"While lawyers are associated in a law firm, none of them
shall knowingly accept or continue employment when any one of
them practicing alone would be prohibited from doing so under DR
5-101(A) . . ., except as otherwise provided therein."
("Law Firm" is defined quite broadly in the Code to
include a legal department and a legal services organization, as
well as a law partnership or professional legal corporation. See
"Definitions" section of Code.) This provision is a new
addition to the Code, being part of the Amendments effective
September 1, 1990. As such, there are few examples of its
application and little reported analysis. See, e.g., New York
State Bar Association, Opinion 615 (Jan. 29, 1991).
While we do not here opine on the
application of DR 5-105(D) to any particular set of facts, it is
apparent to the Committee that the imputation of conflicting
interests of the type discussed herein to other associated
lawyers could have results that would appear to be extreme or
could be very disruptive in the context of practices we believe
to be common and widespread at least within larger professional
organizations, including private firms, governmental agencies and
legal service organizations. Therefore, this Committee seriously
questions the wisdom and suitability of including DR 5-101(A) as
a type of conflict that is automatically imputed to other
associated lawyers under DR 5-105(D).
First, DR 5-101(A) concerns the
individual lawyer's "own financial, business, property or
personal interests". If such an interest of one lawyer in a
particular case does not also give rise to such a conflicting
interest for an associated lawyer (e.g., because of the lawyers'
shared financial interests, or the first lawyer's influence over
the second lawyer), it is not obvious that it ought to be imputed
to the associated lawyer. Of course, if it does constitute such
an interest of the second lawyer under DR 5-101(A), then
imputation pursuant to DR 5-105(D) is unnecessary.
Second, the possibility of
undesirable consequences within "law firms", as broadly
defined, from the imputation of conflicts personal to one lawyer
to all other lawyers could tempt ethics committees or courts to
construe the types of personal interests covered by DR 5-101(A)
more narrowly than this Committee believes to be appropriate,
when viewed in terms of the requirements of DR 5-101(A) alone. We
believe that there are personal, individual interests that raise
conflicts for the particular lawyer if he or she were to
represent a client in a specific matter -- and which, therefore,
should be disclosed if the lawyer is to be personally involved in
the representation -- but that do not raise any tangible ethical
concerns where the representation will be undertaken by an
associated lawyer with no personal involvement by the lawyer with
the personal conflict. In such cases, this Committee is of the
opinion that the proper and preferable result would be a
limitation of the imputation of the conflict to other lawyers and
not the determination that the personal interest may be ignored
even by the lawyer with the interest (thereby, presumably reading
that type of personal interest out of DR 5-101(A)).
Therefore, this Committee invites
the examination by other ethics committees and consideration by
the Appellate Division of whether the DR 5-101(A) should be
eliminated from the list in DR 5-105(D) of conflicts that are to
be automatically attributed to associated lawyers.
