Ethics Opinion

Summary: Absent special circumstances, a law firm is not precluded from handling bond work for the State Treasurer because it represents private parties in dealings with other state agencies.

Facts: Law Firm represents a number of companies which do business with various state agencies. Law Firm inquires whether work as bond counsel for the State Treasurer would result in the Commonwealth as a whole becoming Law Firm's client and would hence lead to the Firm's disqualification under DR 5-105 from representing its present clients in their dealings with other state agencies.

Discussion: SJC Rule 3:07, DR 5-105 prohibits a lawyer from representing clients with differing interests, except to the extent permitted by DR 5-105(C). In applying this rule, the Supreme Judicial Court has indicated that a parent corporation and its wholly owned subsidiaries should normally be treated as a single client. The McCourt Company Inc. v. FPC Properties, Inc., 386 Mass. 145, 146 (1982).
In analyzing conflicts of interest between agencies of municipal government, however, we have concluded that the Supreme Judicial Court would not follow the McCourt rule, but would consider conflicts on a case-by-case basis. In Opinion 88-1, for example, we advised that representation of a school board did not create an attorney-client relationship with the town as a whole and did not of itself disqualify a lawyer from representing private clients who were adverse to the town in criminal proceedings.
We have also concluded that, in certain limited circumstances, a lawyer may represent and be adverse to the same municipal agency. For example, in Opinion No. 89-2, we advised that a town counsel could represent the selectmen in an action by the town planning board challenging the selectmen's grant of a special permit, even though town counsel periodically advised the planning board about other issues. In Opinion 94-2, we went a step further and concluded that a town counsel, acting at the direction of the selectmen, could bring suit against a town agency to obtain a declaratory judgment concerning expenditures proposed by the agency, even though town counsel was then representing the agency before the Appeals Court on an unrelated matter.
We believe that the same case-by-case approach should be followed at the state level. The hallmark of relations between a private corporation and its subsidiaries is a "complete unity of interest." Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771 (1984). Thus in many cases it makes sense to treat parent and subsidiary as a single client for conflict of interest purposes. The roles of state agencies, by contrast, are often defined in detail by statute and regulation, and an agency can sometimes function independently of other agencies within the same branch of government in carrying out its legally assigned tasks. This independence occasionally leads to lawsuits between agencies which are nominally part of the same local or state government, a situation virtually unheard of in the private sector. See, for example, Secretary of Administration and Finance v. Attorney General, 367 Mass. 154 (1975); Board of Public Works of Wellesley v. Board of Selectmen of Wellesley, 377 Mass. 621 (1979).
In addition, we are concerned that an overly rigid reading of DR 5-105 would make it difficult for government agencies to obtain good counsel, particularly in areas requiring special expertise. As we observed in Opinion 88-1:
A mechanical reading of the rules that precluded, at least prima facie, the representation of any part of a municipal government when a firm is currently appearing adversely to any other part of that government would prevent most firms from ever representing government and would prevent government from obtaining needed counsel.
We therefore conclude that representation of one state agency does not of itself disqualify a law firm from appearing adversely to another state agency.
Even though bond work for the Treasurer would not generally disqualify Law Firm from representing private parties who have business with the Commonwealth, disqualification may be required in particular cases. For example, the subject matter of an engagement for a private party may be so closely related to Law Firm's work for the State Treasurer that DR 5-105 would apply. Or the State Treasurer may provide the Law Firm with confidential information which is sufficiently relevant to a proposed representation of a private party that disqualification is required to effectuate the purposes of DR 4-101. Opinion No. 88-1 gave a specific example pertinent to the facts of that inquiry: although the lawyer in that case was not generally disqualified from representing private parties who were adverse to the town, he was disqualified from representing persons charged with damaging school property. Case law provides other examples where disqualification may be required. Pinshaw v. MDC, 402 Mass. 687, 700-01 (1988); Filippone v. Mayor of Newton, 392 Mass. 622, 630-31 (1984).