by Josh Sandler
The phone rings. On the other end is your client, a general counsel you previously impressed by resolving several business litigation issues for his company, NewCo. Although normally calm and relatively low-key, you note an almost immediate tone of anxiety in his voice. He proceeds to tell you that NewCo has just been enjoined by way of a temporary restraining order by OldCo, NewCo’s chief competitor.
Why is OldCo suing NewCo? Because NewCo just hired Jeff, OldCo’s all-star sales associate, and OldCo is asserting that both NewCo and Jeff conspired to misappropriate OldCo’s trade secrets and breach Jeff’s employment agreement, which includes promises by Jeff not to solicit any of OldCo’s former or current clients should Jeff go to work someplace else. To make matters worse, NewCo has been served with OldCo’s expedited discovery and responses are due in a few days.
Your client naturally wants to move quickly and wants to schedule a conference call this afternoon with your client, Jeff, and some other key players with NewCo. You are immediately thrust into an ethical and litigation strategy situation that requires quick thinking. The gating issue is whether you will be representing both NewCo and Jeff.
I have been retained in situations such as the above on numerous occasions and I have seen legal representation effectuated in a variety of ways: the company and the new hire may use the same attorney, without issue, to defend the suit; the company and the new hire may utilize separate counsel from the beginning; or the company and the new hire may use the same attorney until a conflict arises.
The last scenario is a terrible result for the client as it forces one or more clients to incur additional costs to obtain new counsel. Further, the time it takes new counsel to get up to speed in the litigation is a clear setback. And in a case like NewCo’s, a setback of that magnitude could be detrimental due to the expedited nature of the discovery and motion practice. Likewise, a conflict of interest that arises during the joint representation of two clients can be terrible for the attorney. Remember, an attorney cannot be adverse to a former client on the same or substantially related matter. Tex. Disciplinary R. Prof’l Conduct 1.09; see also Tex. Disciplinary R. Prof’l Conduct 1.05.
In the event a conflict arises during litigation, many attorneys mistakenly believe that a simple waiver from the clients pursuant to Rule 1.06 of the Disciplinary Rules will suffice. However, the commentary to Rule 1.06 indicates that a client’s consent to a conflict of interest is improper if a “disinterested lawyer would conclude that the client should not agree to the representation under the circumstances.” Tex. Disciplinary R. Prof’l Conduct 1.06 cmt. 7.
Thus, a conflict of interest that arises in the midst of the attorney’s joint representation might ultimately preclude that attorney from representing anyone in the matter. It could also open the door to potential malpractice claims against that attorney for not properly advising the clients about the risks of conflicts of interest that may arise during the joint representation.
Accordingly, in my view, the safest approach for proceeding in the case of OldCo v. Jeff and NewCo is for you, the attorney, to immediately help Jeff obtain separate counsel—one that will cooperate with you. It is simply not worth risking your ability to represent any of the clients due to a conflict of interest that develops during the joint representation.
Furthermore, many of the advantages that flow from joint representation (e.g., controlling the defendants’ factual narrative and keeping litigation costs down) can be achieved with a good joint defense agreement where defense counsel can communicate with each other to further the interests of their respective clients, combine resources and reduce the duplication of legal work, control information flow, and present a coordinated and united defense front. Moreover, under the allied litigant doctrine, communications are generally protected under Texas Rule of Evidence 503(b)(1)(C). In re XL Specialty Ins. Co., 373 S.W.3d 46, 51-53 (Tex. 2012).
Therefore, before you attend that afternoon emergency telephone conference with your clients (and Jeff), try to get Jeff an attorney who can move quickly and attend the telephone conference as well. Otherwise, remove Jeff from the equation until he can get lawyered up. Your continued representation of your client may very well depend upon it!
Josh Sandler is a Partner at Lynn Pinker Cox & Hurst LLP. He can be reached at email@example.com.