E-Ethics Vol. I, No. IV (June, 2001)
(c) 2001 by David Hricik
www.Hricik.com

Joint Defense: Each client has his own lawyer.

Client A < ----------------- > Lawyer 1

Client B < ----------------- > Lawyer 2

Shared Counsel: One lawyer has multiple clients, since they share counsel:

(Client A & Client B) <----------------- > Lawyer 1

The basic conflict fact patterns are also pretty simple:

1. After the joint defense arrangement ends, a third party, "Client D," asks Lawyer 1 to sue L1's former client's co-defendant, B:

Client D < ----------------- > Lawyer 1

versus

"Client B"

(I put quotes around "Client B" since by definition B was not L1's client.)

2. In the midst of representing A in the joint defense arrangement, A and B become adverse to each other with respect to joint defense matters:

Client A < ----------------- > Lawyer 1

versus

Client B < ----------------- > Lawyer 2

With respect to the shared counsel arrangement, the fact pattern is simply whether the lawyer can be adverse to B in the same matter he once represented him in. The question e-ethics will address in the next issue is whether by contract -- by "prospective waiver" -- the lawyer can avoid the fact that he had personally represented both A and B. Can he be adverse to B in the same matter he represented it? Some say so.

Joint defense agreements are the subject of much litigation and some academic interest. There is a lengthy academic piece in a recent Duke Law Journal, that you can read by clicking here. William Freivogel's excellent site also has a discussion of these issues, available here. The ABA addressed some of these issues in Opinion 95-395, an opinion which has not been widely cited or followed.

II. Can You, or if not You, Someone Else in Your Firm Represent a Third-Party Adverse to Your Former Client's Co-Defendant in a Matter Related to the Joint Defense Representation?

Joint defense arrangements present unusual issues in disqualification proceedings. Foremost, each client has its own counsel because the interests of the group, though largely common, do differ. For example, it may be that each defendant has cross-claims against each other for contribution or indemnity.

Despite these circumstances, many courts find that lawyers who represent clients who have joint defense agreements (written or not) with co-defendants have "implied attorney-client relationships" with each co-defendant. As shown below, the Texas Supreme Court effectively treated former co-defendants as former clients for purposes of conflicts of interest. In terms used here, it treated a joint defense arrangement as a shared counsel arrangement. Other courts treat the matter more like one of contract, not attorney ethics, disqualifying the lawyer where the subsequent representation would violate the terms -- implied or express -- of any joint defense arrangement.

The two fact patterns that have arisen and which are diagramed above are receiving different treatment -- though one may wonder why. In the first fact pattern, the lawyer or his firm seeks to represent a third-party adverse to the former co-defendant. Thus, for example, after representing Company X which had a joint defense arrangement with Company Y, the lawyer may seek to represent a third party adverse to Company Y. The courts disagree as to whether the lawyer, and his firm, must treat former co-defendant Company Y as if it were a former client, and not just a party to whom the lawyer owes a contractual obligation of confidentiality.

In the second fact pattern, the co-defendants become adverse to each other in the matter in which the joint defense arrangement applies. Courts addressing the second fact pattern have reached results that are impossible to reconcile with each other -- and difficult to reconcile with the results reached by those courts addressing the first fact pattern. Some courts hold that the lawyer may not use information adversely to a co-defendant, holding that co-defendants are "implied clients," even though the lawyer did not represent and in fact, could not have represented the movant. Other courts permit the lawyer to be adverse to the co-defendant, but require that the information be kept confidential -- which may, or may not, be any different than the first approach.

A. Texas

Texas treats the co-defendant seeking to disqualify the lawyer as if it had been a co-client, rather than a co-defendant. See National Med. Enterprises v. Godbey,924 S.W.2d 123, 132 (Tex. 1996) (orig. proceeding). As a matter of full disclosure, I was heavily involved in helping Baker & Botts unsuccessfully avoid being disqualified in NME.

In NME, Baker & Botts had previously represented an employee of a company in connection with certain criminal investigations. The firm did not represent the company, and in fact a shared counsel arrangement could not have been used because the employer's interests differed from the employees.

However, there was a joint defense agreement with it. 924 S.W.2d at 125. That agreement noted that the employee's lawyer did not represent the corporation, and emphasized that their interests could become adverse, in which case the attorney could use information against the company. Id.. The firm withdrew from representing the employee for reasons unrelated to the subsequent conflict.

Later, the firm represented third-parties in a suit against the corporation -- the former co-defendant. The lawyer who had personally represented the employee was "screened off" from the suit adverse to the corporation. The district court denied the corporation's motion to disqualify largely relying upon two facts. First, the fact that the corporation had specifically agreed that Baker Botts had not represented it as a client, and, second, the fact that none of the lawyers who were adverse to the corporation knew its confidences. It was undisputed that no lawyer adverse to the corporation knew anything that the corporation had disclosed as part of the joint defense arrangement. 924 S.W.2d at 148.

The Supreme Court reversed. It generally reasoned backwards and in a fashion that causes most ethicists to scratch their heads. It first concluded that, had the lawyer personally represented the corporation, then neither he nor Baker Botts could be adverse to it now. Then, it asked whether the fact that no lawyer who possessed its confidences was adverse to it changed that answer. It concluded that it did not, reasoning that the non-client's information was imputed to all members of the firm. 924 S.W.2d at 132.

In this regard, the Texas Supreme Court relied upon the disciplinary rules to impute the former co-defendant corporation's information to every lawyer in the firm -- even though the firm had never represented it as a client. 924 S.W.2d at 131-32. In so reasoning, the court stated that it could "perceive no reason why the presumption should not apply." Id.

There are several arguments to be made, as the dissent attempted to do, 924 S.W.2d at 137, that imputation of confidences of a co-defendant was unwarranted. I have collected and expanded upon the reasons why I believe the court's approach is wrong. You can read them by clicking here. The NME case will probably not be the last word on this issue in Texas.

So, in Texas state courts, former co-defendants are treated as former clients for purposes of conflicts of interest and imputation of knowledge. What one lawyer may not do, none can, and proof that confidential information of the former co-defendant has been sequestered from the firm will do no good.

B. Fifth Circuit and Other Jurisdictions.

The Fifth Circuit refused to treat former co-defendants precisely as former clients in Wilson P. Abraham Constr. Corp. v. Armco Steel Corp., 559 F.2d 250 (5th Cir. 1977) (per curiam), op. on remand, 1979-1 Trade Cas. (CCH) Para. 62,569 (E.D. La. March 28, 1979). The Fifth Circuit refused to allow the movant to rely upon any of the presumptions that clients usually get in disqualification proceedings. In that case, both the Fifth Circuit and the district court on remand refused to presume that the lawyer who had actually represented the movant's former co-defendant knew relevant confidential information. Indeed, the district court's ultimate denial of the disqualification motion was based upon its finding that confidential information had, in fact, not been imparted.

The general reason for refusing to allow non-clients access to these powerful presumptions was explained by the Fifth Circuit in a different context:

To allow an unauthorized surrogate to champion the rights of the former client would allow that surrogate to use the conflict rules for his own purposes where genuine conflict might not really exist. It would place in the hands of the unauthorized surrogate powerful presumptions which are inappropriate in his hands.

In re Yarn Processing Patent Validity Litig.,530 F.2d 83, 88 (5th Cir. 1976). The Fifth Circuit used the term "unauthorized" because the ABA Model Code did not "authorize" non-clients to rely on its protections. The Fifth Circuit refused to permit allow a nonclient to take advantage of presumptions -- powers -- authorized only in favor of clients.

The Fifth Circuit thus analyzes the issue more as one of contract and the duty of confidentiality. Nonclients, by definition, may not rely upon rules imputing knowledge among members of a firm because those rules apply to clients, only. ABA Opinion 95-395 appears to take this same approach. See id. note 3.

So, in state court in Texas, every lawyer in a firm is irrebuttably presumed to be disqualified from being adverse to a former co-defendant of a client, while in federal court only those lawyers who have actual knowledge of the non-clients confidences will be disqualified.

Other jurisdictions take varying approaches. However, like Texas state courts, many do analyze the issue in terms of ethics, not contract. For example, in Fred Webber, Inc. v. Shell Oil Co., 566 F.2d 602 (8th Cir. 1977), cert. denied, 436 U.S. 905 (1978), overruled on other grounds, 612 F.2d 377 (8th Cir. 1980), the Eighth Circuit affirmed denial of a motion to disqualify brought by a co-defendant of a former client. That court explained:

Would a member of the public, or of the bar, see an "impropriety" in the mere presentation of C against B by a lawyer who had represented B's co-defendant in a related prior suit? We think not . . . . To hold that every representation against a former client's co-defendant in a related matter raises an appearance of impropriety would unnecessarily restrict the choice of counsel available to litigants . . . .

566 F.2d at 609. See also Associated Wholesale Grocers, Inc. v. Americold Corp., 975 P.2d 231 (Kan. 1999); IMC Global, Inc. v. Moffett (In re IMC Global, Inc.), 1998 Del. Ch. LEXIS 224 (Del. Ch. 1998); GTE North, Inc. v. Apache Products Co., 914 F. Supp. 1575 (N.D. Ill. 1996).

III. Can You Continue to Represent Your Client When Adversity Develops Between it and a Co-Defendant?

Does a lawyer who represents a client with a co-defendant also represent the "co-defendant?" Courts have sometimes concluded that lawyers representing a client who has joint defense obligations have "implied attorney client" relationships with the other co-defendants, but rejected the full implications of that conclusion. For example, the lawyers in the Florida decision, next discussed, were held not disqualified from being adverse to the co-defendant, but were required to keep information disclosed by the co-defendant confidential. But, lawyers in the Ninth Circuit cannot use information disclosed by a co-defendant against it during the suit, and in fact the obligation to keep the information confidential may create a disqualifying conflict of interest.

A. Old Tampa Bay Enterp., Inc. v. General Elec. Co., 745 So.2d 517 (Ct. App. Fla. 1999).

In this case, defendants that began united against the plaintiff became adverse. When one defendant announced that it would support the plaintiff's position at trial and seek to blame a particular co-defendant, that co-defendant moved to disqualify the attorney, arguing that by attending joint defense meetings, he had been privy to joint defense confidences which he was now in position to use adversely to the co-defendant.

While the appellate court found disqualification unwarranted, it did so expressly to achieve the result:

Assuming there was a joint defense agreement entered into between the parties' counsel by conduct or otherwise, the trial court improperly disqualified OTB's attorney from representing his client in order to prevent disclosure by that party of alleged protected information.... In the case of a joint defense agreement where there are not only defenses common to the defendants but also adverse issues between the defendants, and the agreement is silent as to attorney disqualifications, it is inappropriate to disqualify one of the defense attorneys because he or she is planning on asserting one or more of the defenses adverse to another defendant. The parties are aware of the adverse positions they have taken. If one "joint defense" defendant's attorney must be disqualified because of the assertion of inimical positions, then the attorney for the other "joint defense" defendant who asserts inimical positions must also be disqualified. That is a garden path down which we certainly should avoid hiking.

The appropriate action under the circumstances is to enter an order directing all parties to the joint defense agreement to maintain any and all confidences gained through the agreement regarding those defenses held in common. We therefore quash the order of disqualification and remand for proceedings consistent with this opinion.

Id.

B. U.S. v. Henke, 222 F.3d 633 (9th Cir. 2000).

In Henkethe Ninth Circuit disqualified a lawyer in a criminal matter. Prior to the trial that resulted in the defendants' convictions, the defendants had participated in a joint defense arrangement. Prior to trial, one of the defendants accepted a plea agreement and promised to testify for the government. One of the remaining defendant's lawyers then moved for a mistrial, recognizing that he could not cross-examine the defendant who had pled out as to discrepancies in his testimony, since he knew of the discrepancies only because of information disclosed in joint defense meetings. 222 F.3d at 637.

The district court denied the motion to withdraw and for mistrial, reasoning that since the lawyer could not use the information gained in joint defense meetings against the settling defendant, a new lawyer would not know the information and so likewise could not use it, and so the lawyer's client was no worse off than he would have been with new counsel. At trial, the defendant who pled out testified, and no defense lawyer conducted cross-examination. Id.

On appeal, the Ninth Circuit held that the "implied attorney-client relationship" running among each counsel and client to a joint defense arrangement created obligations of confidentiality that precluded the lawyers from using information against the co-defendant who had pled out. The court reasoned:

Here, what [the settling defendant] allegedly said in confidence during pre-trial joint defense meetings about the defendants' presence at a critical meeting... was claimed to be at odds with his trial testimony for the government. This evidence put the two defense attorneys in a difficult position. Had they pursued the material discrepancy in some other way, a discrepancy they learned about in confidence, they could have been charged with using it against their one-time client, [the settling defendant]. In fact, [the settling defendant's lawyers] had threatened [the other defense counsel] with legal action if they failed to protect [his] confidences.

* * *

Nothing in our holding today is intended to suggest... that joint defense meetings are in and of themselves disqualifying. We stress that it was defense counsel in this case that timely moved for disqualification.... There may be cases in which defense counsel's possession of information about a former co-defendant/government witness learned through joint defense meetings will not impair defense counsel's ability to represent the defendant or breach the duty of confidentiality to the former co-defendant. Here, however, counsel told the district court that this was not a situation where they could avoid reliance on the privileged information and still fully uphold their ethical duty to represent their clients. There is nothing in this record to suggest that the attorneys were doing anything other than attempting to adhere to their ethical duties as lawyers.

Id.

IV. Thoughts and Comments: What You Can Do About It.

Can the Florida case and Ninth Circuit decisions be reconciled? There may be less to reconcile than appears at first blush. The Florida court held that, while the lawyer was not disqualified, he had to maintain the confidentiality of all information disclosed during joint defense sessions that related to joint defenses. On remand, therefore, the lawyer in that case needed to determine whether that obligation of confidentiality interfered with his ability to represent the client -- which is the issue the Henke lawyers squarely faced.

It is my opinion that much of the confusion in this area comes from courts' efforts to apply labels, rather than engage in careful analysis, in deciding these issues. Specifically, in many joint defense cases, the courts feel compelled to decide whether the lawyer for one defendant has an "implied attorney-client relationship" with the others. In my view, a court that later implies an attorney-client relationship between a lawyer and a former client's co-defendant is engaging in the wrong analysis and relying upon the wrong legal principles. A lawyer who did not represent a co-defendant should not be treated as if he had -- especially, but not only, where he could not have done so because the defendants had conflicting interests.

At the same time, however, one aspect of a joint defense arrangement is the obligation of confidentiality that courts can and should enforce. The fact that a lawyer had not represented a co-defendant of a former client does not mean that the court is without power to disqualify or enjoin a later adverse representation by that lawyer. The disciplinary rules and the invocation of "attorney-client relationships" are not the way to do it, however. Instead, the former co-defendant should be required to rely upon the common law, contract, and principles of agency -- all of which can and should be subject to the contractual modification and limitations set forth in the joint defense agreement.

Some jurisdictions do give greater weight to the actual terms of the joint defense agreement and the fact that there was not, and perhaps could not have been, an attorney-client relationship between the lawyer and the co-defendant. Those courts will consider cases like Henke but will likely give more weight to the precise agreement at issue. Consequently, lawyers should re-examine their joint defense agreements.

The first thing lawyers should do about joint defense agreements is not leave them unwritten. Every written joint defense agreement should specify that only the lawyer(s) who personally represented the client, or who actually learn the co-defendant's information, are disqualified from later representing third parties adverse to the co-defendant, but that imputed disqualification does not apply. Finally, written joint defense agreements should make it clear that even the lawyer representing the client will use information disclosed by a co-defendant adverse to the co-defendant during the litigation.

I welcome your thoughts.

E-Ethics is a free monthly e-mail based newsletter concerning ethical issues in the practice of law, ranging from conflicts of interest, to in-house counsel licensing requirements, to the ethics issues created by the use of high-technology. Links to numerous sites relating to those topics, as well as other discussions, can be found on Hricik.com. Obviously, as is the case with any legal question, the matters discussed in E-Ethics are time-sensitive and subject to change. No one should rely on E-Ethics in place of actual legal advice addressed to a specific set of known facts.

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