PHILADELPHIA BAR ASSOCIATION

PROFESSIONAL GUIDANCE COMMITTEE

Opinion 98-16
(October 1998)

Facts

The Inquirer is an attorney in a two-person law firm. Several years ago, Inquirer's firm represented Client A and his wife (the "clients"), in various lawsuits arising from a motor vehicle accident.

Client A received injuries in the motor vehicle accident and was treated for these injuries by physicians of a medical group (hereinafter referred to as "MG"). After A's treatment with MG commenced, a representative of MG requested a letter of protection from Inquirer's firm. A letter of protection, signed on behalf of Inquirer by his secretary, was sent to MG by Inquirer's firm. No copy of this letter was maintained in Inquirer's file. Based on the facts given to the Committee, it appears that the clients were not aware of either the request for a letter of protection or that such a letter had been sent out.

The Inquirer's firm eventually achieved a large settlement for the clients. At the time of the distribution of the settlement proceeds, the clients instructed Inquirer's firm that no distribution was to be made to MG because the clients had a pending medical malpractice claim against MG. Inquirer's firm did not distribute any of the settlement proceeds to MG, nor did Inquirer's firm hold in escrow the amount claimed by MG. Instead, all remaining settlement proceeds were distributed to the clients.

MG has now instituted a lawsuit against Inquirer, his law firm and the clients for breach of contract. MG has further sued Inquirer and his law firm for conversion and punitive damages.

Inquirer asks the Guidance Committee for an opinion as to whether, based on the above facts, he and his firm can represent the clients in the suit filed by MG.

Opinion

It is the opinion of the Committee that neither Inquirer nor his law firm can represent the clients in the suit brought by MG because of a direct and substantial conflict of interest between the Inquirer and his law firm and the clients.

Analysis

First, the Committee believes that it would be helpful to clear up an apparent misconception upon which the Inquirer appears to base his request. Inquirer implies in his request that any conflict of interest between his law firm and the clients would not be substantial because he believes MG has no independent claim against him or his law firm and that the clients would have to indemnify Inquirer or his law firm for any liability finding against them. This is not true.

As set forth in the Appellate opinion in Dahar v. Grzandziel, 599 A.2d 217 (Pa. Super. 1991), Inquirer and his law firm may have independent liability to MG for the failure to pay MG the amount due from the settlement proceeds or escrow the amounts in dispute pursuant to Rule 1.15 of the Pennsylvania Rules of Professional Conduct. Moreover, the clients do not necessarily have any duty to indemnify Inquirer or his law firm for any such finding of independent liability. Any such claim of indemnity would be dependent on various factual issues; the same factual issues which would be at issue in MG's suit against the clients and Inquirer and his firm. Thus, contrary to Inquirer's implication otherwise, there is a substantial and direct conflict of interest between Inquirer and his law firm, on the one hand, and the clients on the other.

The applicable rule is Rule 1.7 of the Pennsylvania Rules of Professional Conduct which deals with conflicts of interest. Rule 1.7(b) of the Pennsylvania Rules of Professional Conduct states:

(b) a lawyer shall not represent a client if the representation of that client may be materially limited 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 full disclosure and consultation.

Thus, Rule 1.7(b) allows the client to consent to representation which raises a potential conflict of interest upon full disclosure and consultation when the attorney reasonably believes that the representation will not be materially limited in any way by his own interests.

However, in certain situations it is not reasonable for an attorney to believe that the representation will not be materially affected by his own interests. The Committee believes that the situation presented by the Inquirer falls into this category. As the comment to Rule 1.7 notes, when a disinterested lawyer would conclude that the client should not agree to the representation under the circumstances, the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client's consent.

The clients and the Inquirer and his firm have directly adverse interests. For instance, while the Inquirer's law firm, in an attempt to escape a liability finding against them, would argue that a fact finder should find that it sent the letter of protection to MG solely as agent for the clients, the clients would argue for the exact opposite finding. Given this directly adverse interest, the Committee believes that it would be impossible for either Inquirer or his firm to competently and completely represent the clients' interest. See also Comment to Rule 1.7 (if the probity of a lawyer's own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client detached advice).

Thus, it is the opinion of the Committee that, under Rule 1.7(b), Inquirer and his law firm cannot represent the clients in the suit filed by MG. Moreover, the Committee would like to further note that, unless the Inquirer complies with Rule 1.8 and the client is given the opportunity to receive the advice of independent counsel, it is improper for Inquirer, or his firm, to seek, or even to discuss, any potential agreement to indemnify with the clients.

Caveat: The foregoing opinion is advisory only and is based on the facts as set forth above. The opinion is not binding on the Disciplinary Board of the Supreme Court of Pennsylvania or any court. It carries only such weight as an appropriate reviewing authority may choose to give it.

   

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.