Ethics Opinon 1972-2
SUBJECT: CONFLICT OF INTEREST
An attorney represents an insurance carrier that handles insurance for law enforcement officers. Should that attorney undertake to represent people in criminal cases where the issue might arise whether the defendant has been mistreated by the police officer and whether the defendant should sue the police officer for false arrest after acquittal on the criminal charge?
If the attorney is acting under a general retainer to act for the insurance carrier in matters of that general nature, i.e., false arrest suits against police officers, the subsequent representation would be clearly improper. To the extent that the attorney's employment by the insurance carrier approaches such a situation the attorney would be advised against accepting such subsequent employment. The test is whether the attorney would be allowing himself to occupy a position where self-interest would tempt him to do less than his best for those who subsequently employed him.
Reference is made to Rules 5, 6 and 7 of the Rules of Professional Conduct of the State Bar of California:
"Rule 5. A member of the State Bar shall not accept employment adverse to a client or former client, without the consent of the client or former client, relating to a matter in reference to which he has obtained confidential information by reason of or in the course of his employment by such client or former client.
"Rule 6. A member of the State Bar shall not accept professional employment without first disclosing his relation, if any, with the adverse party, and his interest, if any, in the subject matter of the employment.
"Rule 7. A member of the State Bar shall not represent conflicting interests, except with the consent of all parties concerned."
Canon 6 of the Canons of Professional Ethics of the American Bar Association also applies (see Rule 1 of the Rules of Professional Conduct):
"6. Adverse Influences and Conflicting Interests.
"It is the duty of a lawyer at the time of retainer to disclose to the client all the circumstances of his relations to the parties, and any interest in or connection with the controversy, which might influence the client in the selection of counsel.
"It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts. Within the meaning of this Canon, a lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose."
"The obligation to represent the client with undivided fidelity and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed."
TREATISES AND OPINIONS
In analyzing the provisions for A.B.A. Canon 6, Drinker, in his treatise on Legal Ethics states:
"In observing the admonition of Canon 6 to avoid the representation of conflicting interests, the lawyer must have in mind not only the avoidance of a relation which will obviously and presently involve the duty to contend for one client what his duty to the other presently requires him to oppose, but also the probability or possibility that such a situation will develop. In such cases as will later be pointed out, even though the clients both consent to the assumption of the relation, the lawyer may eventually regret that he did not initially refuse to take the case . . . The temptation to get involved into an interesting, important or profitable case is always alluring, and the lawyer is very prone to rationalize himself into the belief that he will be able to steer safely between Scylla and Charybdis, when sober reflection or a discussion with his partners would bid him pause. Where there is any serious doubt, it should be resolved by declining the second retainer. He should avoid not only situations where a conflict of interest is actually presented, but also those in which a conflict is likely to develop." (Drinker, Legal Ethics, 104-105.)
Drinker also quotes Justice Story in Williams v. Reed, 3 Mason 405, 418 (1824) in this regard:
"When a client employs an attorney, he has a right to presume, if the latter be silent on the point, that he has no engagements which interfere, in any degree, with his exclusive devotion to the cause confided to him; that he has no interest, which may betray his judgment or endanger his fidelity."
A number of opinions of the Committee on Professional Ethics and Grievances of the American Bar Association involve questions arising out of insurance cases. See, for example, A.B.A. Opinion 222, 231, 247 and 282. These cases invariably involve the employment of the attorney by the insurance company to represent both the insurance company and another party, usually the assured. While the factual settings of these opinions are not strictly in point, certain principles contained therein are instructive.
In Opinion 231 for example, a lawyer was employed by the insurance carrier to defend the assured against civil liability arising out of the debt of a third person resulting from an automobile accident. The coroner was conducting an investigation to ascertain whether the death was caused by the criminal act of any party. The coroner was examining various witnesses behind closed doors out of the presence of counsel. The coroner advised the attorney that if the assured would appear and submit to questioning (again out of the presence of counsel), the probability was that the coroner would exonerate the assured. Otherwise, under the testimony so far given, he would be required to hold the assured criminally responsible which would subject him to prosecution in the Superior Court. The opinion found that there was present in this situation a possible conflict between the interests of the insurance company in defending the assured's civil liability, and the assured's interest in avoiding a criminal charge. The attorney should have explained the situation fully to the assured, advised him of the probable conflict of interest between him and the insurance company, and suggested that he secure the advice of other counsel who would have no temptation to give undue weight to the interest of the insurance company.
A.B.A. Opinion No. 247 involved an attorney employed by a liability insurance carrier to investigate the shooting of a patron at the assured's night club. The assured cooperated fully with the attorney in such investigation and the attorney informed the liability carrier that there was no liability under the landlord and tenant policy. The attorney then became the attorney for the patron in an action against the assured to establish statutory liability for injuries inflicted by intoxicated persons as the result of the sale of alcoholic liquors. (The assured was protected by a different policy of liability insurance from this hazard.)
The attorney used information obtained while making the investigation for the first liability carrier. The committee held that the attorney's conduct was improper. The attorney undertook to act as attorney for the first liability carrier and later for the patron and in doing so represented conflicting interests. This could be done only by express consent of all concerned given after a full disclosure of the facts. The committee doubted that the necessary disclosure could be made because loyalty to the insurance company would require the attorney to minimize such facts, whereas loyalty to the patron might dictate otherwise.
A.B.A. Opinion 112 involves facts somewhat closer in point. Here the attorney represented an insurance company in numerous and continuous Workmen's Compensation cases. The company was sued by a former general agent in the same city where the attorney practiced, and the attorney sought to accept a retainer from the general agent to try the case against the insurance company, which case concerned matters arising between the company and the general agent while the attorney had been employed by the insurance company. The committee held that the fact that the insurance company expressed no objection to the attorney representing the agent does not vitiate the problem. The committee stated that the attorney cannot safely foretell at the outset what his duty to the general agent might require him to say or do in respect to the conduct of the insurance company toward the general agent, and he should not go into the contest handicapped in any way which might even subconsciously interfere with that perfect freedom of conduct which his duty to the new client would require him to exercise. The committee, therefore, advised against the attorney accepting such employment from the general agent.
The case of Dettamanti v. Lompock Union School District, 143 Cal.App.2d 715 (1956) is nearly in point. There an eight year old minor was injured after being directed by the school bus driver to cross the intersection unescorted. Her guardian ad litem consulted an attorney who was coincidentally a deputy district attorney for the county in which the school district was located; that office would have the responsibility of defending the school district if a negligence action were brought on behalf of said minor. The attorney undertook to represent the minor in an action against the driver of the automobile which struck her, but did not advise the guardian ad litem of the possibility of a cause of action against the school district and, of course, filed no claim. The action against the other driver was settled by the attorney, other counsel was secured by the guardian ad litem and a late claim was filed with the governing body of the district.
The trial court sustained the district's demurrer to the complaint without leave to amend and the District Court of Appeal reversed. The district argued that, until suit had been filed, neither the District Attorney nor his deputies represented it and, therefore, the acts or omissions of the attorney were not those of the district. The court disposed of that argument in the following language:
"We think this line of argument is entirely too narrow and we cannot adopt it. The relation of the District Attorney to his school district and an accused officer is akin to that of a private attorney who is acting under a general retainer to act for his client in matters of a designated class. (Emphasis added.)
"The District Attorney has a duty to represent the district in personal injury damage suits filed against it and, unless he is excused, to represent an accused officer. He has no right to refuse to act. It seems to us unreasonable to argue that his duty begins when suit is filed and that up to that time he may act freely in the private employment of one who has a real or potential damage claim against the district and its officer and that in so acting the district or the officer has no claim upon his loyalty as their attorney. Attorney Grossman had a duty to advise Dettamanti (guardian ad litem) as to plaintiff's legal rights. This included a duty to weigh the facts with respect to the conduct of Anderson (bus driver) in order to determine whether there was any substantial basis for a claim of negligence on his part in the performance of his duties for the district. In accepting employment by Dettamanti, he placed himself in the impossible position of having two masters with conflicting interests. Dettamanti was in his hands. He could not advise Dettamanti that plaintiff had a substantial or a possible claim against the school district or Anderson nor could he advise him that plaintiff had none. There was no escape from the duty to weigh the facts with respect to possible liability of the defendants, and that fact alone rendered it impossible for the deputy to give any advice in the matter or to act as plaintiff's attorney. It was his plain duty to refuse to act and to advise Dettamanti to seek other counsel . . ." 143 Cal.App.2d 715, 722.
The import of the foregoing opinions points out the particular problem involved in the case under consideration, i.e., can the attorney in undertaking to represent the defendant in a criminal case give his undivided support and loyalty to that client?
The nature of the attorney's employment by the insurance carrier is not set forth. Should the attorney be acting under a general retainer to act for the insurance carrier in matters of that particular class (suits against police officers for false arrest), however the subsequent representation of defendants in criminal actions where the facts indicate the defendant might have such a cause of action would be improper. The parties could not consent to such representation because a public agency would be necessarily involved and consent is ineffective in the case of public officers and agencies. (See A.B.A. Opinions 16, 34, 77 and 142).
The extent that the nature of the attorney's employment by the insurance carrier is less that the "attorney who is acting under a general retainer to act for his client in matters of a designated class", the impropriety in accepting the subsequent employment becomes less clear; to the extent that some such relationship does exist, the attorney would be "advised against accepting such subsequent employment" much as in the case of A.B.A. Opinion No. 112. If, in fact, there is no conflict or potential conflict (for example if the attorney does not and has never represented the responsible governing body and has no reason to expect that such a defense would be tendered to him) the problem, of course, does not exist.
In the final analysis, the question is whether the attorney is allowing himself to occupy a position where self-interest tempts him to do less than his best for his subsequent client. (See for example A.B.A. Opinion No. 132). If such is the case, the proffered representation should be declined.
This opinion is advisory only. It is not binding upon the State Bar, the Board of Governors, its agents or employees.
EDITOR'S NOTE: The Committee reviewed this opinion in July 1976 and determined that the conclusion is still valid, but that effective 1/1/75 the California Rules require that the client's consent be in writing. California Rule 5 is now Rule 4-101 and Rules 6 and 7 are 5-102. The subject matter of Canon 6 of the old Canons is now found in Canon 5 of the A.B.A. Code of Professional Responsibility.
Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.