Multiple Client Representation in Texas: Which Ethics Rule Applies?
by Prof. Fred C. Moss
You have been asked to represent Kompany and its CEO in a lawsuit. After speaking with the chair of Kompany’s board and the CEO, you sense that the board and the CEO have rather different ideas about how the suit should be handled. You would like to represent each of them, but do not want to get into the middle of a spat between co-clients. Can you? What decisions, what disclosures must you make; what waivers must you receive?
You turn to the Texas Disciplinary Rules of Professional Conduct for guidance. You read rule 1.06, the general conflict of interests rule. Then you notice rule 1.07, “Conflict of Interest: Intermediary.” Which rule applies? The question is important because rule 1.07 requires a great more “due diligence” than rule 1.06 before accepting the joint representation.
For example, after wading through rule 1.06 and its 18 comments, you appear to be required to:
1. Determine whether the two parties interests are “materially and directly adverse,” or reasonably may become so;
2. Reasonably believe neither client will be adversely affected by joint representation; and
3. Get consent from both clients after full disclosure of the existence, nature, implications, and possible advantages and disadvantages of joint representation, such as that you will have to withdraw from representing both clients if an irresolvable conflict arises, unless both consent to your continued representation of one.
However, according to rule 1.07, before you can be an “intermediary” between clients, you must:
1. Reasonably believe:
a. You can be impartial to both clients;
b. The matter can be resolved in both clients’ best interests;
c. Each client is able to make informed decisions; and
d. Neither client will suffer material prejudice if the intermediation is unsuccessful; and
2. Consult with each client on the “implications” of common representation, including:
a. Its limiting effect upon the lawyer-client privilege;
b. If an irresolvable conflict arises, you must withdraw from representing both clients unless both agree otherwise;
c. You must be impartial toward both clients, and as a result,
d. Each client will have to assume greater responsibility for making decisions than if separately represented; and
3. Get written consent from both.
You are puzzled. While you have been asked to represent the company and its CEO individually in a lawsuit, you foresee clearly that in the process you will have to intermediate some disagreements between the two. Which rule must you follow?
Guidance is provided by Texas Ethics Opinion 512 (58 Tex.B.J. 1147, June 1995). Opinion 512 interpreted the rules as covering two different species of multiple representation. Rule 1.06, it held, covers representation of multiple clients against a common adversary, as in a lawsuit or a business transaction. Rule 1.07, on the other hand, applies when two or more clients “seek to consummate a transaction or resolve a dispute among themselves.” Examples implicating rule 1.07 include assisting clients in forming or reorganizing a business, arranging a property distribution in settling an estate, or “mediating a dispute between clients.” Another example, found paradoxically in a comment to rule 1.06, is the preparation of wills for family members.
While Opinion 512’s interpretation is helpful, the distinction is not easily applied. Every joint representation may demand intermediation between the clients. Must a lawyer engage in rule 1.07’s expanded due diligence before undertaking every joint representation? Is it ever safe to undertake only rule 1.06’s limited due diligence?
It is clear rule 1.07 is intended to apply to intermediation between prospective co-clients and existing co-clients, and that for existing co-clients, rule 1.07’s greater due diligence is required only when a dispute arises. But, rule 1.07 requires consent to the intermediation to be in writing. (Rule 1.06 does not require written consents.) Must the lawyer present a written disclosure/waiver to disputing co-clients to sign after the lawyer has been representing them for years against a common foe? Is it only when a dispute arises that the lawyer must disclose that she must be impartial toward all and that they individually must assume greater decision-making responsibility? Is it only then that the lawyer must reveal that there is no lawyer-client privilege between co-clients and that the lawyer cannot keep one client’s secrets from the others?
Since this makes little practical sense, prudent lawyers should ignore the implications of Opinion 512 and follow the dictates of rule 1.07 before EVERY joint representation, whether it is against a common adversary, to mediate a dispute between clients, or both.
Fred Moss is Professor of Law (Emeritus) at S.M.U.’s Dedman School of Law, where he taught legal ethics. A member of the State Bar’s Committee on the Texas Disciplinary Rules of Professional Ethics, the views expressed are his alone. He can be reached at firstname.lastname@example.org.