I want to quickly discuss an ethics opinion out of New York state. No, not that one. I’m not going to delve into the brouhaha over the one from March 2016 that only got publicity in August 2016 that involves saying it is ethical for a firm to charge clients for work performed by unpaid interns as long as it is all disclosed to the client.
Not going to delve into it to discuss it because of course it is ethical as long as the amount that is being charged isn’t so high as to be unreasonable under RPC 1.5. After all, say a firm fires an associate for cause and doesn’t ever end up paying the associate any of the last month of their salary. Does that mean the firm can’t bill the clients for which that associate worked at the agreed upon hourly rates for that same time period? Of course not.
Whether it is moral or right to take on unpaid interns and then bill clients for the time those unpaid interns spend on client matters is another question altogether, and it is also an interesting federal labor law question but., in my opinion, it isn’t a very difficult legal ethics question. It is an ethics question that I can understand why someone would ask for guidance because doing it might make a lawyer feel queasy, but it isn’t all that difficult an ethics question in the end.
That is not at all true about the New York state ethics opinion I do want to discuss, NYSBA Op. 1103 from July 2016 that answered the following inquiry:
May a lawyer undertake to represent a client, Corporation B, in litigation with Corporation X, where it is in the economic interest of a former client, Corporation A, for Corporation B to lose the litigation?
Seriously? There are some truly difficult conflicts questions that lawyers have to navigate, but this one ought not make it into a top 50 list. And, the reason the answer is easy isn’t at all counter-intuitive, so why ask? If this kind of thing were even a close call, then there would be no difference in treatment under the ethics rules between clients and former clients.
The more fleshed out facts that the opinion leads off with are as follows:
Corporation A and Corporation B are competitors. They are engaged in the same industry, in the same geographic area, providing similar services to the same customer base. The inquirer previously represented Corporation A in a matter than has been concluded (“Matter 1”). The inquirer now proposes to represent Corporation B in litigation with Corporation X (“Matter 2”). The inquirer states, and we assume for purposes of this opinion, that Matter 1 and Matter 2 are not factually related. However, if Corporation B is unsuccessful in this suit, it might be forced to cease operations, which would benefit Corporation A.
In case the point passes by in quick reading, here is a less generic version of the same inquiry with a fun, familiar fictional scenario. (At least fun for me.)
Mr. Plow and Plow King both provide snow removal services to the town of Springfield. Lionel Hutz represented Mr. Plow in the past in connection with a piece of employment litigation. (Maybe a former employee, Bart, sued Mr. Plow for failing to pay him overtime and Mr. Plow defended by explaining that you can’t employ children and, therefore, it would be illegal to pay him.) That matter concluded and Hutz no longer represents Mr. Plow. Now Hutz is being asked to represent Plow King in connection with litigation being brought by Moe’s Tavern. Moe’s Tavern contends that Plow King failed to properly remove snow from their parking lot and the result was that Nick Riviera crashed his car into the building wiping out the taps at Moe’s Tavern for a month and is suing Plow King for $2 million dollars. If Plow King loses the suit, it likely will go bankrupt and go out of business.
So the question would be whether, since Mr. Plow would love it for Plow King to go out of business, does that mean that it would be unethical for Hutz to represent Plow King? This again falls into that category for me of — how did anyone decide that this was a question that needed to be asked?
Of course it wouldn’t be unethical for Hutz to take on the Plow King representation. Mr. Plow is just a former client. It wouldn’t even truly be ethically prohibited if Mr. Plow were still a current client. Might be a representation his firm wouldn’t undertake for business reasons, but it wouldn’t be an ethical issue in terms of an RPC 1.7 conflict. So when Mr. Plow is but a former client, this isn’t something that ought to take more than five seconds of analysis in terms of working through RPC 1.9 to get to the right result.
Thankfully the opinion gets the analysis on this issue absolutely correct. It makes the point that — perhaps in other circumstances would be crucial to get right, that “market rivalry” doesn’t rise to the level of causing a matter for a new client to be considered materially adverse to a former client. But it also drives home the other overriding point – when we’re talking about a former client after all — that makes this such an unnecessarily posed question in the first place. The scenario being inquired about isn’t one where the two matters are at all the same or substantially related, so it wouldn’t be precluded by RPC 1.9 even if it did involve doing something “materially adverse” to the former client.
So, in the end, it is a fine opinion as far as the analysis goes, it is just a bit silly that this kind of question was posed at all. But, it did give me the chance to write a little Simpsons fan fiction so… a festive Labor Day to all.
2 replies on “Another for the annals of ethics opinions of questionable origin”
The more interesting question is what if A was still a client on unrelated matters.
Yes, sir. FWIW, the NYSBA did weigh in on that in this opinion saying:
Even if Corporations A and B were both current clients of the inquirer, their economic competition would not prohibit the inquirer from representing both of them. As Comment  to Rule 1.7 explains, with respect to simultaneous representation of two clients:
[S]imultaneous representation in unrelated matters of clients whose interests are only economically adverse, such as representation of competing economic enterprises in unrelated litigation, does not ordinarily constitute a conflict of interest and thus may not require consent of the respective clients. [Emphasis added.]
See also, Charles W. Wolfram, Competitor and Other “Finite Pie” Conflicts, 36 Hofstra L. Rev. 539, 550-55 (2007) (discussing cases in which lawyers represent economic competitors). Since a lawyer may simultaneously represent current clients who are economic competitors, then a fortiori a lawyer may represent a client whose interests are contrary to the interests of a former client who competes economically with the current client.
But, given that you are the conflicts guru, what say you?