Summary: It is not unethical for a legal services organization and a member of its board of directors to be on opposite sides of a litigated matter when both parties consent after full disclosure. This opinion does not consider the situation which arises when one party does not consent. Normally the board member should not be the lawyer selected by his or her firm to litigate against the program client and in such situations the board member should be screened off by the law firm from all contact with the matter.
Facts: A legal services organization, which is funded by the Legal Services Corporation and state, local, and foundation sources, represents indigent clients in civil matters. Is board of directors is composed of 18 members appointed by various bar associations and community organizations, as specified in its bylaws. Eleven directors are lawyers, as mandated by federal law. 42 U.S.C. S 2996(c) (1976). The board's function, as required by federal regulation, is to "establish and enforce broad policies governing the operation of a recipient, but (it) shall not interfere with any attorneys professional responsibilities to clients." 45 C.F.R. S 1607.4. The oard members do not discuss pending cases with the staff or the executive director and have no access to the organization's case files. Currently, with informed consent of both parties, it will represent a client when an opposing party is represented by a member of the board of directors or that member's partner or associate. It has asked for an opinion with respect to the ethical constraints that exist in this situation.
Discussion: This issue is one of the most difficult and important problems currently facing many legal services organizations. We have recently issued an opinion advising that there is no conflict of interest when the directors of a legal services organization that acts solely as a referring agency are on opposite sides of a referred matter. MBA Opinion 79-5. Our rationale in that case was that the inquirers never became "clients" of the referring organization. The present inquiry goes beyond that case. Here, the legal services organization is representing clients.
The crucial provisions of the Disciplinary Rules are as follows:
DR 5-101(A) Except with the consent of his client after full disclosure, a lawyer ought not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property or personal interests.
DR 5-105(A) A lawyer shall decline proffered employment if the exercise of his independent professional judgment on behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve him in representing differing interests, except to the extent permitted under DR 5-105(C).
DR 5-105(C) In the situations covered by DR 5-105(A) and (B), a lawyer may represent multiple clients if it is obvious that he
can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.
DR 5-105(D) If a lawyer is required to decline employment or to withdraw from employment under a Disciplinary Rule, no partner or associate or any other lawyer affiliated with him or his firm may accept or continue such employment.
The ethics committees and courts which have addressed this problem have reached different results. The New York and New Jersey state committees have advised that under no circumstances may the legal services organization and the law firm of one of its directors be on opposite sides of a litigated matter. New York State Bar Assoc. Opinion No. 489; New Jersey State Bar Assoc. Opinion No. 218, 94 N.J.L.J. 801 (1979). The Florida committee, on the other hand, has advised that with consent of both parties, and with the separation of the board from the attorney-client relationship between the staff and the client, the legal services organization and one of its directors' law firm may be on opposite sides of the same litigation. Florida Bar Opinion No. 69-24, 44 Fla. B.J. 407 (1970). Accord, ABA Informal Opinion No. 1395. The Boston Bar Association has also issued an opinion that permits different branches of the same legal services office to represent indigent clients in the same matter under certain conditions, BBA Opinion No. 76-2. The Idaho Committee has agreed and added that one of the lawyers may be a director of the organization and the other a staff member. Maru, Digest of Bar Association Ethics Opinions P 8280 (Supp. 1975) (hereinafter Maru), reprinted in 18 Advocate 9 (1975); Contra, North Carolina State Bar Opinion No. 805, digested in Maru P 9556 (Supp. 1975). See also Estep v Johnson, 383 F. Supp. 1323 (D. Conn. 19 74) .
Most of these opinions treat the issues solely as involving representation of conflicting interests under DR 5-105 and pay no attention to the more general DR 5-101(A). It is crucial to determine which section is applicable. Client consent will cure the problems concerning DR 5-101(A), but there is an additional objective requirement set forth in DR 5-105(C). Disciplinary Rule 5-105, however, does not easily fit this situation. Examination of its wording indicates that it is addressed to the situation where a lawyer has one client and is considering taking on another. That is the meaning of requiring a lawyer to decline "proffered employment" if the exercise of his independent professional judgment on behalf of a "client" is likely to be affected. "Proffered employment" relates to a new client, whereas "a client" apparently refers to an existing client. When a new client comes to a legal services organization, one of whose directors represents the opposing party, it requires an expansive reading of DR 5-105 to say that the director's client is "a client" of the legal services organization. Likewise, when a client comes to the director, it requires an expansive reading to say that the legal organization's client is "a client" of the director.
A major issue presented by this inquiry is whether DR 5-105 should be read in that fashion. That question involves an examination of the relationship of the board of directors of the legal services organization to the client representation function of the organization. The board of directors is required by law to establish broad policies governing operation of the program, but not to "interfere with any attorney's professional responsibilities to clients." 45 C.F.R. S1607.4. Board members do not discuss pending cases with the staff or the executive director, and have no access to the organization's case files. See ABA Opinion 334 (1974), modifying ABA Opinion 324 (1970), which discusses the relevant ethical principles in great detail.
The court in Estep v. Johnson examined the relationship between a board member and the staff to determine whether it was comparable to the relationship among members of a law firm. This was in the course of the court's discussion of the effect of the board member's responsibilities on the independent professional judgment of staff. We believe that the court's conclusions are also relevant to a determination whether the director's clients should be imputed to the legal services organization and its clients to the director. We agree with the court in Estep that the responsibility of the board for broad policy formulation does not create the working relationship that characterizes a law firm. This is because of the prohibition against interference by the board with the professional responsibility of the staff to client, the lack of access by the board to case files, and the absence of discussion of pending cases. We also agree with the court in Estep that the mere possibility that the board might find it necessary to conduct an inquiry about a particular case ought not to lead to disqualification.
We conclude that in situations where the board of directors is effectively screened off from the professional relationship between staff and client and there is (1) no participation by the director in the particular case, (2) no infringement of the professional independence of the staff attorney, and (3) no disclosure of confidences either by or to the director with respect to the particular case, then the "clients" of the director ought not to be imputed to the legal service organization and the clients of the organization ought not to be imputed to the director. In that event, DR 5-105 is not applicable to this situation, because there is no representation of multiple clients.
We are influenced in this conclusion by public policy considerations similar to those that have influenced courts and other ethics committees interpreting DR 5-105, particularly in the context of an assertion that a former government attorney personally disqualified from representing a position adverse to the government disqualifies his or her whole law firm from such representation. These courts and ethics committees have interpreted DR 5-105 not to require such a result when the former government attorney is screened off, physically and financially, from any contact with the matter. (In addition, the government's consent is occasionally required.) In so doing, notice has been taken of the important public policy consideration of not discouraging lawyers from entering government service by adopting so severe a disqualification rule that would make it difficult for government lawyers to secure non-government employment. ABA Opinion 342 (1975); Association of the Bar of the City of New York, Opinion No. 889, Armstrong v. McAlpin, 461 F. Supp. 622 (S.D.N.Y. 1978); Kesselhaut v. United States, 555 F.2d 791 (Ct. Claims 1977). See Board of Governors, D.C. Bar, Proposed Amendments to Disciplinary Rules Implementing Canon 9, 1 Legal Times of Washington 18 (Feb. 12, 1979). We believe it is equally important to encourage lawyers to serve as directors of legal services and other pro bono organizations. We see no reason for us to strain to include the situation presented to us within the most stringent sections of the Disciplinary Rules included under Canon 5.
That conclusion, however, does not end the inquiry. Disciplinary Rule 5-101 (A) states that, except with consent of the client after full disclosure, a lawyer shall not accept employment if his independent professional judgment will be affected by his own "financial, business, property, or personal interests." Even though screened off from all contact with the particular case, the board member still has long term authority over the salary and promotion of the staff attorney. As the court in Estep noted, it is one thing to assure a client that no disclosures of confidences have occurred. "It is quite another to assure [a client] that the future course of her representation by a staff attorney might not in some subtle way be influenced by the board member status of her adversaries' lawyer." 383 F. Supp. at 1326. Likewise, in particular cases, there may be a whole network of relationships between a director and the staff of a legal services organization that would give some pause to the director's client that was on the other side of the case from the organization. Disciplinary Rule 5-101(A) deals with this problem. It permits the client to consent to the representation after full disclosure has been made of the nature of the influences that may potentially affect the lawyer's independent judgment. It is up to the lawyer, in situations such as this, to make certain that the disclosure is "full" and understood. Once that is accomplished, it is up to the client to choose.
We have confined ourselves in this opinion to the situations disclosed by the inquiry, those where the parties consent. We do not address the situation where a party does not consent.
Addendum to Opinion
After the opinion in this case was approved by the Committee on Professional Ethics, but before approval by the Board of Delegates of the Massachusetts Bar Association, the ABA's Committee on Ethics and Professional Responsibility issued ABA Opinion No. 345. This opinion dealt with the precise situation we have considered in this inquiry and reached a conclusion similar to that of this committee. Following an invitation by the Board of Delegates, the Committee on Professional Ethics reconsidered its opinion to take account of the ABA Committee's opinion. We note that ABA Opinion No. 345 states that DR 5-105 does not apply in cases such as this because a "lawyer-Board member does not have a lawyer-client relationship with the Program client." We believe that the reasoning of our opinion supports the same conclusion.
The ABA Committee's opinion discusses situations in which independent representation may not be afforded, or may not be perceived by the client to be afforded, because a board member and the legal services organization are on opposite sides of a case. The opinion suggests ways for lawyers to minimize the possibility of such situations. We think that the cautions suggested by the ABA's Committee are sound. Normally the board member should not be the lawyer selected by his or her firm to litigate against the program client and, in such situations, the board members should be screened off by the law firm from all contact with the matter.
Permission to publish granted by the Board of Delegates, 1979. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.