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Lawyers in the Middle: The Three-Way Tension Among Lawyers, Clients and Fee-Payers

I.    Introduction   

Clients count on their lawyers to be loyal.  A client has a right to expect that his lawyer will act with loyalty to the client’s interests, without questioning whether interests of another client (or the interests of the lawyer) are actually motivating the lawyer’s actions or advice.

A lawyer is sometimes thrust into situations which may cause a client to question the lawyer’s loyalty:

  • Lawyers commonly represent a person covered by a policy of insurance which pays for his defense.  Will the lawyer exercise independent professional judgment for the client-insured, or will the lawyer mold his defense to suit the requirements and demands of the insurer who is paying the legal fees, and presumably (or at least hopefully) will be the source of additional representation in the future?
  • Corporations and businesses are often sued along with an employee or officer of the corporation.  In those situations, the corporation paying the bill for representation of both defendants hopes for the economy of a single law firm to represent both.  The corporation also perhaps hopes to keep the individual defendant from turning “state’s evidence” – agreeing to testify on behalf of the plaintiff in exchange for a lenient settlement or outright dismissal.  This approach may also help to solidify a unitary defense strategy.  Will the individual constituent come to question whether the law firm is truly loyal to him, or has divided loyalties based on the corporate client also being the source of the fees and the potential source for future representations – and fees?
  • Minors sometimes find themselves in need of representation by counsel and, being unable to pay, count on their parents to provide funds for their defense.  Will the paying-parents believe that this buys them the right to have input into their child’s defense, or an avenue to discover privileged communications?
  • In a corporate setting, the same may be asked of corporate parents paying for the representation of a subsidiary company.  To which company will the lawyer be truly loyal?

In each of these situations, the lawyer is thrust into the middle of a potential conflict.  The lawyer owes a duty of loyalty, to represent the client with commitment, dedication and zeal.[1]  The lawyer also deserves to be paid for his services.  The Rules of Professional Conduct provide the framework for analysis of this tension, as well as mechanisms to resolve it.  The Comments to Rule 1.7 of the Kansas Rules of Professional Conduct (“KRPC”)[2] state the following with regard to loyalty:

Loyalty is an essential element in the lawyer’s relationship to the client . . .  As a general proposition, loyalty to a client prohibits undertaking representation directly adverse to that client without that client’s consent. . . . Loyalty to a client is also impaired when a lawyer cannot consider, recommend or carry out an appropriate course of action for the client because of the lawyer’s other responsibilities or interests.  The conflict in effect forecloses alternatives that would otherwise be available to the client. [[3]]

The Kansas Court of Appeals emphasized the essential nature of the duty of loyalty in Alexander v. Russo:

The relationship between an attorney and his client is one of the highest trust and confidence and, as long as that relationship or the influence of the relationship may exist, the attorney must observe the utmost good faith and candor and must not allow his private interests to conflict with those of his client. Cf. In re Estate of Seeger, 208 Kan. 151, 490 P.2d 407. [[4]]

The purpose of this article is to explore the applicable Rules, as well as the case law interpreting them, to discuss the particular aspects of “conflicts of interest” that may arise in these circumstances, and then to consider the various solutions available to the careful practitioner.

A.    Amended Kansas Rules of Professional Conduct – Effective July 1, 2007

The Model Rules of Professional Conduct underwent significant review by a special commission established by the American Bar Association at the end of the Twentieth Century.  The Commission on Evaluation of the Rules of Professional Conduct (“Ethics 2000 Commission”) was comprised of 13 members, assisted by 250 advisory councilors.  The Commission held meetings over 39 days in a 40-month period, and issued a comprehensive report in November 2000. [5]  That Report was then amended, updated and finally approved by the ABA House of Delegates at the February 2002 Mid-Year Meeting. [6]

The Kansas Bar Association then appointed a Commission in March 2002.  That Commission, comprised of lawyers from around the State, studied the ABA’s Ethics 2000 Report, and recommended the adoption of many of the changes proposed.  The KBA Ethics 2000 (“KBA/E2K”) Report was then submitted to the KBA Board of Governors in April 2004.  The KBA Board eventually approved the Report and submitted it to the Kansas Supreme Court with a recommendation that it be adopted.  The Supreme Court then published the KBA/E2K Report for public review and comment, [7] and the Court has now approved the Report in its entirety.  The new Rules are to become effective on July 1, 2007.  Since the new Rules have now been adopted, they are addressed in this article.

    A couple of key provisions in the new Rules are worth noting when discussing conflicts of interest.  The Rules reflect an emphasis on two concepts, “informed consent,” and “confirmed in writing.”  Under the Rules to be effective on July 1, 2007:

“Informed consent” denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.

. . .

“Confirmed in writing,” when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent. See paragraph (e) for the definition of “informed consent.” If it is not feasible to obtain or transmit the writing at the time the person gives informed consent, then the lawyer must obtain or transmit it within a reasonable time thereafter.

These terms resonate throughout the new Rules and are of particular relevance in the area of conflicts of interest.

    B.    Third Restatement of the Law Governing Lawyers

After “thirteen years of devoted effort,” [8] a distinguished and significant panel of legal scholars and practitioners completed the Restatement of the Law, Third, The Law Governing Lawyers (“Restatement”) in the year 2000.  This comprehensive work encompasses a wide variety of legal issues confronting lawyers, and attempts to encapsulate the “general law” as it relates to the subjects covered.

While one may believe (or hope) that a Restatement offers general law supported by a majority of the American jurisdictions, in fact it makes no such pretense.  As noted by Professor Charles Wolfram, Reporter for the Restatement, the Committee considered

that a substantive position in a Restatement is warranted as “restating” the law if it can be rested on the support of at least one decision in an American jurisdiction. The Institute has occasionally departed from even that minimalist support position, as it did in adopting its disclosure-to-save-life provision at the 1996 Annual Meeting. [[9]]

Moreover, the Restatement denies any attempt to state rules of ethics, which establish minimum standards for practice as a guide for attorney discipline. [10]  However, it is the “lawyer codes of ethics” – no matter how infirm – with which the lawyer must comply in order to maintain a license to practice his chosen and sworn profession.

Thus, the “Restatement” should be read within this context.

II.    Rule 1.7 – Conflicts with Current Clients

    A.     Current Version of KRPC

The principles governing conflicts of interest with a current client are found in Rule 1.7(a), which currently provides as follows:

    A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless

(1)     the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and

(2)     each client consents after consultation. [11]

Summarized, Rule 1.7(a) prohibits directly adverse representation unless there is actual and reasonable belief that the conflict will not cause an adverse effect on the relationship with either client, and both clients give knowing consent after consultation.

The justification for the Rule is that the lawyer needs to give advice, to negotiate, and to advocate, for the benefit of one client.  The lawyer’s thoughts and efforts, and the transaction itself, need to be free from being clouded by the interests of another client.  They need to proceed without the lawyer confronting a mental conflict of deciding whose interests to advocate, and without the specter of doubt on the part of either client as those whose interests are actually being served.

Usually, there is little doubt about whether the representation is directly adverse to the interest of another client.  In Petition of Hoang, [12] relying on Rules 1.7, 1.9, and 1.10, the Kansas Supreme Court upheld the disqualification of a public defender because the office of the public defender had previously represented a prosecution witness.  Any confidential information conveyed by this former client could be imputed to the challenged attorney.  The public defender therefore had a conflict of interest between his duty to represent his present client and his obligation to maintain the attorney-client privilege with regard to the former client.  While the court held that the former client could have been protected by restricting the scope of the public defender’s cross examination so as to avoid violating the attorney client privilege, such a restriction may have given the defendant a valid claim of ineffective assistance of counsel.[13]

In Chapman Engineers v. Natural Gas Sales Co., [14] one party moved under Rule 1.7(a) to disqualify opposing counsel on the ground that he was concurrently representing another party in a “substantially related” piece of litigation.  Following a hearing, the court rejected the motion, finding insufficient evidence to prove that the two parties represented by the challenged attorney had “directly adverse” interests. [15]  The court held that the possibility that adversity might arise was not enough to disqualify the attorney.  Rather, the party moving for disqualification must show a reasonable probability that such adversity would occur. [16]

The Rule requires the lawyer to have the actual and reasonable belief that the relationship with the other client will not be adversely affected.  This means that a reasonable third party, looking at the transaction or action taken by the lawyer, would conclude that the relationship with the other client would not be affected by the adverse representation. [17]  Such occurrences are rare .[18]

This is an objective standard.  As noted in the comment, one must view the situation through the eyes of a disinterested outsider.

[W]hen 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.[[19]]

This consultation should include a complete disclosure of the adverse nature of the representation, and an understanding that, despite the lawyer’s loyalty to the client in other matters, he is loyal only to the other client in the matter at hand. [20]

The definitions (“Terminology”) in the Model Rules detail the type of consultation which shall be provided, in order for the clients to give knowing consent:

 “Consult” or “Consultation” denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question.

While the information imparted will necessarily vary, depending on the situation, it is clear that the adverse representation must be disclosed, as well as the risks and advantages resulting from continued representation despite the conflict.  For example, in the case of In re Wilkinson, [21] the lawyer was held to have improperly represented a client in the sale of another client’s property without full disclosure, because he did not inform the client of his intention to satisfy his fee claim against the other client from the proceeds of the sale.

At a minimum, the clients must be informed of the adverse representation, and every effort must be made to foresee – and disclose – the various alternative results which may arise, and the impact of those results.  The more detailed information that is provided, the more likely it is that the consultation will be deemed adequate.  The “negative” factors could include the risk of presenting a “joint” position which is inconsistent with the “best” position for one or the other of the clients; the risk of “guilt by association” from one client to the other; and the possible absence of real independent judgment and advice from counsel.  The “positive” factors from joint representation could include the savings from sharing attorneys’ fees and expenses; the benefit of presenting a unified position, without cross-fire from a co-party; and the benefit of retaining the initial attorney of one’s choosing.

This disclosure may require the imparting of confidential information from the other client, in order to explain the possible adversity or the ramifications of various potential results in the matter.  In this situation, lawyers must be mindful of Rule 1.6, regarding confidentiality.  If the other client does not consent to the release of confidential information to the new client, then an adequate consultation cannot be concluded, and knowing consent cannot be obtained.  As noted in the official Comments:

[T]here may be circumstances where it is impossible to make the disclosure necessary to obtain consent.  For example, when the lawyer represents different clients in related matters and one of the clients refuses to consent to the disclosure necessary to permit the other client to make an informed decision, the lawyer cannot properly ask the latter to consent. [[22]

If knowing consent is given (and the lawyer actually and reasonably believes the adversity will not adversely affect the relationship with the client), the conflict may be waived. [23]  The consent must be knowingly given, [24] after full disclosure of all relevant facts. [25]

    B.    New Version of Rule 1.7

Effective July 1, 2007, Rule 1.7 will provide as follows:

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a substantial risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing. [[26]]

As noted earlier, the key concepts which appear anew in the 2007 version of the Rules are (a) informed consent, which must be (b) confirmed in writing.

The Ethics 2000 authors explain these concepts in the context of concurrent conficts in the Comments to Rule 1.7:

Informed Consent:

Informed consent requires that each affected client be aware of the relevant circumstances and of the material and reasonably foreseeable ways that the conflict could have adverse effects on the interests of that client.  See Rule 1.0(f) (informed consent).  The information required depends on the nature of the conflict and the nature of the risks involved.  When representation of multiple clients in a single matter is undertaken, the information must include the implications of the common representation, including possible effects on loyalty, confidentiality and the attorney-client privilege and the advantages and risks involved.  See Comments [30] and [31] (effect of common representation on confidentiality).

. . .

Confirmed in Writing:

Such a writing may consist of a document executed by the client or one that the lawyer promptly records and transmits to the client following an oral consent.  See Rule 1.0(b).  See also Rule 1.0(o) (writing includes electronic transmission).  If it is not feasible to obtain or transmit the writing at the time the client gives informed consent, then the lawyer must obtain or transmit it within a reasonable time thereafter.  See Rule 1.0(b).  The requirement of a writing does not supplant the need in most cases for the lawyer to talk with the client, to explain the risks and advantages, if any, of representation burdened with a conflict of interest, as well as reasonably available alternatives, and to afford the client a reasonable opportunity to consider the risks and alternatives and to raise questions and concerns.  Rather, the writing is required in order to impress upon clients the seriousness of the decision the client is being asked to make and to avoid disputes or ambiguities that might later occur in the absence of a writing. [[27]]

The new version of the Rules, then, focus more directly on the client giving a knowing waiver, armed with the relevant facts – and then having that disclosure and consent documented for the record.  This serves the dual purpose of providing evidence of the waiver after the fact (in the case of faded memories), but more importantly emphasizing to clients, before the fact, that the waiver is a serious matter, not to be given lightly, because it must be read and approved.

Lawyers will need to be aware of these new concepts.  They will need to formulate more specific ways to explain conflicts, waivers and their effects, and to develop new forms of written disclosure and waiver.

    C.    Restatement

The Restatement is somewhat broader on the subject of conflicts with current clients.  Section 201 of the Restatement prohibits a lawyer from representing a client if the representation would involve a conflict of interest, and then provides:

A conflict of interest is involved if there is a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person. [[28]]

The Restatement then proceeds in subsequent sections to discuss conflicts in civil and criminal litigation, non-litigation matters, corporate representations, and government representations. [29]

Like the provisions of the new version of the Rules, supra, the Restatement also allows waiver of conflicts only upon “informed consent,” although the Restatement does not require such consent to be “confirmed in writing.”  Section 122(a) of the Restatement provides:

(a)  A lawyer may represent a client notwithstanding a conflict of interest prohibited by §121 if each affected client or former client gives informed consent to the lawyer’s representation.  Informed consent requires that the client or former client have reasonably adequate information about the material risks of such representation to that client or former client. [[30]]

According to the Restatement, the rules of professional responsibility are “intended to assure clients that a lawyer’s work will be characterized by loyalty, vigor, and confidentiality,” but the rules also allow a “waiver through informed consent by a client who elects less than the full measure of protection that the law otherwise provides.” [31]

III.    RULE 1.7(b) – Conflicts with Lawyer’s Own Interests

Even when the interests of two concurrent clients are allied, the risk of other conflicts arise, including conflicts with the lawyer’s own interests.

    A.    Current Version of KRPC

Rule 1.7(b) provides a similar proscription against representation of a client, even where the representation itself is not “directly adverse” to another concurrent or former client.  That Rule currently provides as follows:

(b)    A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or 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 consultation.  When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved. [[32]]

When a lawyer finds that the representation of a client brings him into conflict with his own interests, then the lawyer must examine the relationship and proceed with caution.  This could arise, for example, where the client wishes to pursue an entity in which the lawyer owns an interest; where the lawyer becomes aware of information from which he could profit personally; or where the client’s interest would be to prolong a case (e.g. to obtain more information), while the lawyer’s interest would be to conclude the matter quickly because he is representing the client on a fixed-fee basis.

    B.    New Version of KRPC

The comparable provision to Rule 1.7(b) in the new version of the Rules appears at Rule 1.7(a), where it includes in the definition of “concurrent conflict” as follows:

 (2) there is a substantial risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

The KBA/E2K Comments explain:

The lawyer’s own interests should not be permitted to have an adverse effect on representation of a client.  For example, 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.  Similarly, when a lawyer has discussions concerning possible employment with an opponent of the lawyer’s client, or with a law firm representing the opponent, such discussions could materially limit the lawyer’s representation of the client.  In addition, a lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed financial interest. [[33]]

Thus, when embarking on any representation, the lawyer must consider whether that representation will bring him into conflict with other clients, or with his own financial, personal, philosophical or religious beliefs.  Again, the client is entitled to representation by a lawyer generally free from such constraints.  At the least, the client is entitled to know of the conflict and should be given the opportunity to waive it – after consultation.

    C.    Restatement

The comparable principle in the Restatement is found at §125, which states:

Unless the affected client consents to the representation under the limitations and conditions provided in §122, [[34]] a lawyer may not represent a client if there is a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s financial or other personal interests. [[35]]

Not only are financial interests implicated, but also personal, philosophical, or religious interests and beliefs must be considered. [36]

IV.    Rule 1.9 – Conflicts with Former Clients

    A.    Current Version of KRPC

Conflicts with former clients are governed by Rule 1.9, which currently provides as follows:

A lawyer who has formerly represented a client in a matter shall not thereafter:

(a)    represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client consents after consultation; or

(b)    use information relating to the representation to the disadvantage of the former client except as Rule 1.6 would permit with respect to a client or when the information has become generally known. [[37]]

The Rule is based on the principle that the lawyer’s duties of loyalty and confidentiality survive the termination of the relationship.  A former client should be confident that, even after the lawyer-client relationship has been terminated, the lawyer will not take action against the former client in the same matter or a substantially related matter, and will not disclose client confidences which were imparted during the existence of the relationship.

In determining the existence of a conflict with a former client, the first inquiry is whether the new matter is the same as, or substantially related to, the matter handled for the former client. [38]  The     determination will be based on a factual inquiry.  Thus, representation against a former client in the same lawsuit or the same transaction would clearly be prohibited. [39]  Representation against a former client in a matter which could be deemed “substantially related” to the same lawsuit or transaction would also be prohibited (again, unless knowing consent is obtained from the former client). [40]

A lawyer should not be able to convert a “current client” into a “former client” by dropping the current client like a “hot potato” at the time the potential conflict arises. [41]  If there is a current client conflict, it must be dealt with under Rule 1.7, or avoided by not taking on the new client.

In City of Hutchinson v. Gilmore, [42] a lawyer appointed to represent a DUI defendant removed himself from the case (after meeting with the client) because his firm had been on the other side of litigation involving that defendant.  The defendant was then found guilty.  On appeal, that same lawyer was the new prosecutor, and the defendant moved to disqualify the lawyer under Rule 1.9(a), arguing that since the lawyer had first acted as defendant’s appointed counsel, he could not represent the city as prosecutor.  The lawyer and the client disagreed as to the substance of the matters discussed in their initial meeting.  The case thus involved the question of whether the prosecutor should be disqualified, and whether he received confidential information in connection with the prior representation.

Under K.S.A. 60-246(c)(1), a person becomes a client for purposes of privilege and confidentiality when that person contacts an attorney seeking legal advice.  If confidential or privileged information is exchanged, a conflict would arise if that attorney then switched sides, even if no actual employment resulted from the initial conference.  MRPC 1.9, 1.10.  [[43]]

The Court then remanded the case for a hearing to determine whether, in the initial conference, confidential information was imparted by the client. [44]

On the other hand, a formal termination of the relationship should not be necessary.  The court should consider the nature of the representation and the facts of the particular case in deciding whether the attorney-client relationship had actually been concluded.  Where there is evidence to indicate that the client no longer considered the law firm to represent him, or that the subject matter of the representation was concluded, then the client should be considered a “former” client, and not a “current” client. [45]

    B.    New Version of KRPC

The new version of Rule 1.9(b), effective July 1, 2007, states the same basic rule as the current Rule 1.9(b), but with additional detail:

(a)    A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

(b)    A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client

(1) whose interests are materially adverse to that person; and

(2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter;

Unless the former client gives informed consent, confirmed in writing.

    (c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:

(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client or when the information has become generally known; or

(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client. [[46]

Note again the repeated requirement for “informed consent” to be “confirmed in writing.”

Of relevance to the present article is a comment regarding the representation of multiple parties who subsequently become adverse.

Nor could a lawyer who has represented multiple clients in a matter represent one of the clients against the others in the same or a substantially related matter after a dispute arose among the clients in that matter, unless all affected clients give informed consent. See Comment [9]. Current and former government lawyers must comply with this Rule to the extent required by Rule 1.11. [[47]]

Thus, when a lawyer has represented two or more parties in a matter, such as the employer and a supervisor defendant in a sexual harassment case, it will be difficult for the lawyer subsequently to terminate his representation of the supervisor and then take on the defense of the supervisor’s wrongful termination case, where the termination arose from disclosures made by the supervisor during the prior representation.

Another consideration under Rule 1.9 arises when lawyers move from firm to firm.

First, the client previously represented by the former firm must be reasonably assured that the principle of loyalty to the client is not compromised.  Second, the rule should not be so broadly cast as to preclude other persons from having reasonable choice of legal counsel.  Third, the rule should not unreasonably hamper lawyers from forming new associations and taking on new clients after having left a previous association.  . . . If the concept of imputation were applied with unqualified rigor, the result would be radical curtailment of the opportunity of lawyers to move from one practice setting to another and of the opportunity of clients to change counsel. [[48]]

Thus, Rules 1.9 and 1.10 will not prevent a firm from representing a client in matter which is the same or substantially related to one where a lateral lawyer’s former firm represented the adverse party, if the lawyer did not actually work on the matter himself and did not acquire material, confidential information about the matter.  Similarly, when a lawyer has left the firm, taking a client with him, the former firm may represent a party adverse to that former client, even if the matter is the same or substantially related to the matter on which the firm represented the former client if any lawyer remaining in the firm did not acquire material, confidential information relating to the representation. [49]

    C.    Restatement

The concept of conflicts with former clients is addressed in the Restatement at §132, which provides:

Unless both the affected present and former clients consent to the representation under the limitations and conditions provided in §122, a lawyer who has represented a client in a matter may not thereafter represent another client in the same or substantially related matter in which the interests of the former client are materially adverse.  The current matter is substantially related to the earlier matter if:

(1) the current matter involves the work the lawyer performed for the former client; or

(2) there is a substantial risk that representation of the present client will involve the use of information acquired in the course of representing the former client, unless that information has become generally known.[[50]]

According to the Restatement, this rule “accommodates four policies:”

    1.    The rule should deter the temptation to ignore continuing duties to former clients, including loyalty and confidentiality;

2.    The rule also should cause the lawyer to consider whether he can adequately and zealously represent the new client, bound as he is to honor obligations to the former client;

3.    Prospectively, the rule should deter lawyers representing current clients from laying a foundation for a subsequent adverse representation, when the “current” client becomes a “former” client.  This encourages strong and zealous representation of current clients.

4.    The rule does encourage representation of new clients, by prohibiting representation adverse to former clients only in limited circumstances, i.e. where the new representation relates substantially to the matter on which the lawyer represented the former client. [51]

V.    Compensation from Someone Else

V.    Compensation from Someone Else

    A.    Current Version of KRPC

The current version of Rule 1.8(f) provides as follows:

(f)  A lawyer shall not accept compensation for representing a client from one other than the client unless:

(1) the client consents after consultation;

(2) there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and

(3) information relating to the representation of a client is protected as required by Rule 1.6. [[52]]

Someone paying for the representation of another person may be motivated first by the desire the minimize the cost of the representation, while minimizing costs may not be in the best interest of the actual client.  Thus, the Kansas Supreme Court has held that one who represents defendants in a mortgage foreclosure action must diligently represent those clients and get the appropriate waivers after disclosure, while being paid by someone who had purchased the clients’ redemption rights. [53]

A related principle is found in the Comments to Rule 1.7(b), where it is recognized:

A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer’s duty of loyalty to the client.  See Rule 1.8(f).  For example, when an insurer and its insured have conflicting interests in a matter arising from a liability insurance agreement, and the insurer is required to provide special counsel for the insured, the arrangement should assure the special counsel’s professional independence.  So also, when a corporation and its directors or employees are involved in a controversy in which they have conflicting interests, the corporation may provide funds for separate legal representation of the directors or employees, if the clients consent after consultation and the arrangement ensures the lawyer’s professional independence. [[54]]

Thus, Rules 1.8(f) and 1.7(b) must be considered when taking on the representation of a party whose legal fees are being paid by another.

    B.    New Version of KRPC

The new version of Rule 1.8(f), effective July 1, 2007, is not significantly different from the current rule, just substituting “informed consent” for “consents after consultation.”

(f) A lawyer shall not accept compensation for representing a client from one other than the client unless:

(1) the client gives informed consent;

(2) there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; and

(3) information relating to representation of a client is protected as required by Rule 1.6. [[55]]

Note that this consent is not required to be “confirmed in writing.”  The KBA/E2K Comments recognize the conflict inherent in this situation, which frequently arises, but allows it to be accommodated by disclosure and consent.

Because third-party payers frequently have interests that differ from those of the client, including interests in minimizing the amount spent on the representation and in learning how the representation is progressing, lawyers are prohibited from accepting or continuing such representations unless the lawyer determines that there will be no interference with the lawyer’s independent professional judgment and there is informed consent from the client.  See also Rule 5.4(c) (prohibiting interference with a lawyer’s professional judgment by one who recommends, employs or pays the lawyer to render legal services for another). [[56]]

Thus, where someone else is “paying the bills,” the lawyer must ensure that the payer also is not “calling the shots” in the representation of the client.

    C.    Restatement

Section 134 of the Restatement takes a negative approach, but adds a whole new subsection:

(1) A lawyer may not represent a client if someone other than the client will wholly or partly compensate the lawyer for the representation, unless the client consents under the limitations and conditions provided in §122 and knows of the circumstances and conditions of the payment.

(2)  A lawyer’s professional conduct on behalf of a client may be directed by someone other than the client if:

(a) the direction does not interfere with the lawyer’s independence of professional judgment;

(b) the direction is reasonable in scope and character, such as by reflecting obligations borne by the person directing the lawyer; and

(c) the client consents to the direction under the limitations and conditions provided in §122. [[57]]

This rule recognizes the risks inherent in a situation where some other than the client pays the lawyer to represent the client, but allows it only upon informed consent.

    VI.    Insurer Paying for Insured

Much has been written on the subject of the “tripartite” relationship among insurer, insured and defense counsel.  “There is a large amount of commentary” about this issue. [58]

A majority of jurisdictions limit or prohibit lawyers representing insureds from complying with insurers’ directives about case management, practice, and billing.  See In re Rules of Prof’l Conduct & Insurer Imposed Billing Rules and Procedures, 2 P.3d 806 (Mont. 2000)(insurers’ contractual requirement of prior approval regarding billing and practice rules for defense counsel appointed to represent insureds violates several rules violates several rules of professional conduct, including Rule 1.8, because of fundamental interference with defense lawyer’s duty to exercise independent judgment and to give undivided loyalty to insureds). [[59]]

The ABA Standing Committee on Ethics and Professional Responsibility has addressed this issue in detail in its Formal Opinion 01-421.  Summarized, this opinion holds:

[W]e conclude that lawyers representing insured clients must not permit the client’s insurance company to require compliance with litigation management guidelines the lawyer reasonably believes will compromise materially the lawyer’s professional judgment or result in his inability to provide competent representation to the insured. [[60]

The Opinion goes on to specify that the lawyer must not release confidential client information to an adjuster or auditor without consent of the client, including in the billing statements submitted to the insurer for payment. [61] 

Rather than devote substantial space to this issue, when others have done so in a deeper and more meaningful manner, it is sufficient to recognize the conflict inherent in this situation.  With the advent of “informed consent” which must be “confirmed in writing,” lawyers would be well-advised to develop forms of engagement letter which document and confirm the lawyers’ independence, and the client’s consent to the relationship.

A suggested form of such a letter is included as Appendix A to this article.

VII.    Employer Paying for Employee

Another frequent circumstance encountered by defense lawyers arises where an employer and its employee, such as a supervisor or manager, are jointly sued in the same case.  Under those circumstances, the employer may feel compelled to pay for the defense of the supervisor or manager, perhaps even to avoid the individual defendant allowing a default to be taken against him.

Employers in employment lawsuits are often responsible and liable, as a matter of law, for the discriminatory or other wrongful acts of their employees, if those acts relate to or arise from the terms and conditions of employment. [62]  Therefore, employers often find it expedient and beneficial to provide their employee co-defendants with a defense.  If the employer and the employee believe, after consultation, that their interests will not be adversely affected, and if they provide knowing consent, then the joint representation is appropriate. [63]

In Shadid v. Jackson, [64] plaintiffs sued the city and several of its police officers, claiming brutal treatment.  The court found that joint representation of the city and the police officers by the same lawyer created a conflict of interest, because of the potential for conflicting loyalties.  The court, while acknowledging that a common defense created no conflict, went on to hold that the common defense might change during the course of the case – such as a situation where the city came to believe that the police officers did, in fact, act in an inappropriate manner towards the plaintiffs. [65]  This disqualified counsel from representing the individual defendants.

In Dunton v. Suffolk, [66] the county attorney jointly represented the county a police officer.  The County asserted the defense that the police officer was not acting within the scope of his employment when he (allegedly) assaulted the plaintiff.  Of course, this detracted somewhat from the police officer’s defense of good faith immunity. [67]  This irreconcilable (and non-waivable) conflict created an untenable situation for the police officer, and represented a conflict of interest, disqualifying the lawyer. [68]

In a New York case, it was the individual employee defendants who brought a motion to disqualify their own counsel, and to compel their employer to engage independent counsel to represent them.  In England v. Town of Clarkstown, [69] the employees (police officers) were being represented by the attorney who was also representing the Town – the officers’ employer.  The conflict of interest was no technicality: the hired counsel failed to provide zealous representation to the individual defendants, and even failed to communicate with them adequately.

First, the action/inaction of the attorney currently representing the police officers and the Town is troubling.  Counsel never advised these officers of the potential conflicts that could exist between the Town and its employees in a civil rights action.   Nor did he inform the defendants that they could be held individually liable and that they were being sued individually for punitive damages.   Furthermore, counsel has not been cooperative in providing the defendant police officers with copies of pleadings and motion papers which are germane to the Court’s inquiry herein. [[70]]

Because of a statute requiring the Town to provide independent counsel to its employees when sued, the Court ordered disqualification of the attorney in representing the individual defendants, and ordered the engagement of independent counsel. [71]

Where the lawyers represented both the employer and the employees, an irreconcilable conflict of interest was found to exist in the West Virginia case of State ex rel. Morgan Stanley & Co. v. Macqueen, [72] where defendants brought a writ of prohibition against the trial judge, to compel him to disqualify of plaintiffs’ counsel in the underlying case.

The plaintiff in the underlying case (the State of West Virginia) sued several brokers for conspiring with State employees to violate state securities laws.  Meanwhile, the lawyers for the State were providing counsel and representation to those very State employees accused of being co-conspirators.  The broker defendants claimed a conflict of interest.  The trial judge refused to disqualify the State’s counsel, and the brokers appealed.

On appeal, the Court – citing Rules 1.7 and 1.13, MRPC – held that the plaintiffs’ counsel had an irreconcilable conflict of interest, and ordered disqualification.

Although the State does not name the seven Staff members as actual defendants in the underlying litigation, the pleadings, as framed at the time this case was argued, do potentially implicate these individuals with the alleged wrongdoing in connection with the investment losses at issue.  That implication, in and of itself, is sufficient to raise the necessary element of adverse interests.  The allegations against the Staff, although asserted collectively rather than individually, nonetheless create potential adverse interests between the State and those individual Staff members, which in turn further create a potential, if not actual, conflict of interest. [[73]]

When the employer is a public entity, this problem is compounded because of restraints against the public entity giving “informed consent” on behalf of the public that the entity represents.  In Macqueen, the Court held that the State is incapable of giving its consent to a conflict of interest.

[T]he State is incapable of granting its consent. . . . The rationale underlying this rule is quite simple:  “It is essential that the public have absolute confidence in the integrity and impartiality of our system of justice.”  . . .  Given the obvious public interest inherent in the State’s pursuit of its claim for investment losses, the State cannot consent to a dual representation which involves such adversity of interests as to raise even the appearance of such impropriety.   See also Guthrie Aircraft, Inc. v. Genesee County, N.Y., 597 F.Supp. 1097, 1098 (W.D. N.Y. 1984) (“[A] municipality may not consent to adverse representation, since the public interest is involved”);  In re A. and B., 44 N.J. 331, 209 A.2d 101, 102-103 (1965) (“Dual representation is particularly troublesome where one of the clients is a governmental body.   So, an attorney may not represent both a governmental body and a private client merely because disclosure was made and they are agreeable that he represent both interests.”). [[74]]

In the context of a criminal case, where the employer pays for the representation of the employee, the influence exerted by the employer-payer may raise a question of whether the due process rights of the individual employee-defendant were violated by the arrangement.  In Wood v. State of Georgia, [75] the United States Supreme Court remanded for further inquiry and decision, a case where the employee defendant was not paying for his defense in the criminal case, but rather, his defense was being paid by his employer, a co-defendant. [76]

Courts and commentators have recognized the inherent dangers that arise when a criminal defendant is represented by a lawyer hired and paid by a third party, particularly when the third party is the operator of the alleged criminal enterprise.  One risk is that the lawyer will prevent his client from obtaining leniency by preventing the client from offering testimony against his former employer or from taking other actions contrary to the employer’s interest.  Another kind of risk is present where, as here, the party paying the fees may have had a long-range interest in establishing a legal precedent and could do so only if the interests of the defendants themselves were sacrificed. [[77]]

Again, the lawyer will be well-advised to obtain “informed consent” from the client, and to have this informed consent “confirmed in writing.”  A suggested form of letter on this issue appears as Appendix B to this article.

VIII.    Parent Paying for Minor

A third, and perhaps less frequent situation, arises when a minor finds himself in trouble and without funds, thereby counting on a parent or guardian to provide the funds for a defense.  Oftimes, the paying parent feels entitled to have input into the defense or even to be granted access to confidential and privileged communications. [78]  In People v. White, [79] the Michigan Court of Appeals held that a lawyer was ineffective in representing a minor client, since he was more concerned with the wishes of the client’s father, who hired him, than with the best interests of the son/client, concerning the desirability of psychiatric examination.

Because the lawyer will be paid by someone other than the client, informed consent should be obtained and confirmed in writing.  A suggested form of letter on this issue appears as Appendix C to this article.

IX.    Screening

The Kansas Supreme Court has consistently rejected the concept of a screen, Chinese Wall, or wall of insulation to avoid the harsh impact of disqualification in the event of a conflict. [80]  However, the concept of screening remains a viable option for lawyers leaving governmental practice or judgeships.  Rule 1.12 has permitted screening since at least 1999.

And the Kansas Supreme Court has now approved screening in certain circumstances as it relates to prospective clients, by adopting new Rule 1.18 as part of the Ethics 2000 package.

Because of the depth of this subject, more will have to be written elsewhere on the subject of screening under Rules 1.10 and 1.18, and what constitutes a viable and enforceable screen.

X.    Conclusion

Representing multiple clients in a single matter often makes a lot of sense.  There are common interests which can best be represented by a single counsel or firm.  There are common theories, strategies, and tactics which can be pursued by a single spokesperson.  There are economies of scale which will allow the clients to be represented fully, which financial constraints might not otherwise permit.

However, there are also risks involved in the representation of multiple clients in a single matter, not the least of which are inherent conflicts of interest attendant to one person paying for the representation of another.

Therefore, the attorney should be mindful of the ethical rules applicable to the situation, and where it is appropriate to continue with the representation, provide the necessary full disclosure, and obtain knowing, written consent.

J. Nick Badgerow is the partner-in-charge of the Overland Park, Kansas office of Spencer Fane Britt & Browne LLP, where he practices as a trial lawyer, in the areas of employment, construction, professional responsibility, and general business litigation.  Nick is an honors graduate of The Principia College in Elsah, Illinois, and he is a graduate of the University of Missouri – Kansas City School of Law.  Nick is a member of the Kansas Judicial Council, and Chairman of the Council’s Civil Code Committee; Member of the Kansas State Board of Discipline for Attorneys; chairman of the KBA Ethics Advisory Opinion Committee; chairman of the KBA Ethics 2000 Commission; and chairman of the Johnson County Bar Association Ethics and Grievance Committee.  Nick has presented more than 170 seminars and published 30 articles, mainly on the issues of professional responsibility and legal ethics.

 


[1]“A lawyer should act with commitment and dedication to the interests of the client and with zeal in advocacy upon the client’s behalf.”  Rule 1.3, KRPC, Official Comments.
[2] Kansas Rules of Professional Conduct (“KRPC”), found at Rule 226, Rules of the Kansas Supreme Court.  Formerly known as the “Model Rules of Professional Conduct” or “MRPC,” in Kansas the name of the rules was changed by amendments adopted on March 11, 1999 to the “Kansas Rules of Professional Conduct.”
[3]Official Comment, Rule 1.7, KRPC, emphasis added.
[4]Alexander v. Russo, 1 Kan. App. 2d 546, 554, 571 P.2d 350 (1977).
[5]Report of the Commission on Evaluation of the Rules of Professional Conduct, ABA Center for Professional Responsibility, November 2000 (hereinafter “Ethics 2000 Report”).  The report is available on-line at http://www.abanet.org/cpr.
[6] ABA Center for Professional Responsibility, http://www.abanet.org/cpr/e2k/home.html
[7] Kansas Bar Association website, http://www.ksbar.org/ethics2000.html
[8] Restatement of the Law Governing Lawyers, Third, ALI/ABA (2000), Foreword, p. xxii.
[9] Wolfram, Bismarck’s Sausages and the Ali’s Restatements, found at http://www.hofstra.edu/Academics/Law/law_lawrev_wolfram.cfm#Ref7 citing Wolfram, Legal Ethics and the Restatement Process – The Sometimes Uncomfortable Fit, 46 Okla. L. Rev. 13, 17 (1993).
[10] Restatement, § 1, Reporter’s Note, note to “comment b.”
[11] Rule 1.7(a), KRPC (emphasis added).
[12] Petition of Hoang, 245 Kan. 560, 781 P.2d 731 (1989).
[13]245 Kan. at 569.
[14] Chapman Engineers, Inc. v. Natural Gas Sales Co., Inc., 766 F. Supp. 949 (D. Kan. 1991).
[15]For example, see, State v. Swoyer, 228 Kan. 799, 619 P.2d 1166 (1980) (lawyer cannot represent corporation regarding termination of its business affairs while also representing an employee claiming wages from that same corporation).
[16] The court also rejected the request for disqualification on the grounds that the two parties represented by the challenged attorney would be “adequately represented” despite his presence, and that the clients gave informed consent, displaying a “reasonable understanding of the legal ramifications” of proceeding.  Chapman Engineers, 766 F. Supp. at 956 and 957.
[17] In re Glenn, 238 Kan. 625, 712 P.2d 1278 (1979) (where two parties made assignment agreement, lawyer could not represent both parties because the relationship would be adversely affected).
[18]Beliief that the relationship would not be adversely affected is reasonable, for example, where the lawyer takes action against a corporation or other client which employs numerous lawyers in various disciplines, and does not retain a single lawyer or a small group of lawyers for all of its work.
[19] Rule 1.7, KRPC, Official Comment.
[20] Of course, if the relationship later is affected, the client is free to change counsel and to seek another attorney.
[21] In re Wilkinson, 242 Kan. 133, 744 P.2d 1214 (1987).
[22] Rule 1.7, Official Comment.
[23]In Re Seeger’s Estate, 208 Kan. 151, 490 P.2d 407 (1971); Matter of Baby H., 12 Kan. App. 2d 223, 739 P.2d 1 (1987).
[24]Shongutsie v. State, 827 P.2d 361 (Wyo. 1992).
[25]Turner v. Gilbreath, 3 Kan. App. 2d 613, 599 P.2d 323 (1979).
[26] Ethics 2000 Report, published by Kansas Supreme Court at http://www.kscourts.org/attydisc/ KRPCproposed.rtf .
[27] Rule 1.7, KRPC, Ethics 2000 Report, found at  http://www.kscourts.org/attydisc/KRPC proposed.rtf
[28] Restatement of the Law Governing Lawyers, Third, ABA (2000)(“Restatement”), Section 201.  The Restatement can be found in Morgan and Rotunda, 2000 Selected Standards on Professional Responsibility, Foundation Press (2000).
[29] Restatement, §§ 209, 210, 211, 212, and 214, respectively.
[30] Restatement, § 122.
[31]Restatement, § 122, Comment b., Rationale.
[32] Rule 1.7(b), KRPC (emphasis added).
[33] Rule 1.7, Comment, Ethics 2000 Report, published by Kansas Supreme Court at http://www.kscourts.org/attydisc/ KRPCproposed.rtf
[34] § 122 of the Restatement defines the terms and conditions of “informed consent to the lawyer’s representation.”
[35] Restatement, § 125.
[36] Id. at Illustration No. 7.
[37]Rule 1.9, KRPC (emphasis added).
[38] KBA Ethics Opinion 92-16 (if the new matter is not the same as or substantially related to the former matter and if confidential information will not be used, then continued representation in the new matter is permissible).  See also KBA Ethics Opinion 89-4 (representation of new client in negotiation to reduce unpaid hospital bill is permitted by lawyer who formerly represented hospital in malpractice action).
[39] KBA Ethics Opinion 90-2 (where the prior representation was in the same or a substantially related matter, disqualification would be required); KBA Ethics Opinion 92-16 (where the prior matter was not substantially related to the new matter, disqualification would not be required).
[40]Note here that consent is only required from the former, and not from the new, client.  On the other hand, in the situation of a conflict with a current client, consent must be obtained from both clients.  See Rule 1.7.
[41] Truck Insurance Exchange v. Fireman’s Fund Ins. Co., 6 Cal. Rptr. 2d 228 (Cal. App. 1992); Stratagem Development Corp. v. Heron Int’l, 756 F. Supp. 789 (S.D.N.Y. 1991).
[42] City of Hutchinson v. Gilmore, 16 Kan. App. 2d 646, 827 P.2d 784 (1992).
[43]16 Kan. App. 2d at 649 (emphasis in original).
[44] 16 Kan. App. 2d at 650.  For a new development on the issue of conversations with “prospective” clients, see Ethics 2000, Rule 1.18 (Kansas Ethics 2000, Rule 1.17).  http://www.kscourts.org/attydisc/KRPC proposed.rtf
[45] Barragree v. Tri-County Elec. Co-op., Inc., 263 Kan. 446, 457, 950 P.2d 1351 (1997) (reversing disqualification).
[46] Rule 1.9, Ethics 2000 Report, published by Kansas Supreme Court at http://www.kscourts.org/ attydisc/KRPCproposed.rtf
[47] Id. at Comment 1.
[48] Rule 1.9, Ethics 2000 Report, published by Kansas Supreme Court at http://www.kscourts.org/ attydisc/KRPCproposed.rtfSee also Rule 1.10, KRPC and the Kansas Ethics 2000 Report.
[49] Pacific Employers Insurance Company v. P.B. Hoidale Co., Inc., 789 F. Supp. 1112 (D. Kan. 1992); Exterior Systems, Inc. v. Noble Composites, Inc., 210 F. Supp. 2d 1062 (N.D. Ind. 2002).
[50]Restatement § 132.
[51] Restatement § 132, Comment b.
[52] Rule 1.8(f), KRPC.
[53] In re Geeding, 270 Kan. 139, 12 P.3d 396 (2000).
[54] Rule 1.7, KRPC, Official Comment.
[55]Rule 1.8(f), Kansas Ethics 2000 Report, published by Kansas Supreme Court at http://www.kscourts. org/attydisc/KRPCproposed.rtf.
[56] Rule 1.8(f), Comment 11, Ethics 2000 Report, published by Kansas Supreme Court at http://www.kscourts. org/attydisc/KRPCproposed.rtf.
[57] Restatement § 134.
[58]ABA, Annotated Model Rules of Professional Conduct, Fifth Edition (2002), p. 159, citing numerous journal articles.
[59] Id. at 158, and citing ethics opinions from 28 different states to the same effect.
[60] ABA Standing Committee on Ethics and Professional Responsibility, Formal Opinion 01-421 (February 16, 2001) available online at http://www.abanet.org/cpr/pubs/fo01-421.html
[61]Id.
[62] Miller v. Maxwell’s Int’l, Inc.,991 F.2d 583, 587-88 (9th Cir. 1993), cert denied, 510 U.S. 1109 (1994); Levendos v. Stern Entertainment, Inc., 909 F.2d 747, 751 (9th Cir. 1993).
[63] Lee v. Hutson, 600 F.Supp. 957, 959 (N.D. Ga. 1984).
[64] Shadid v. Jackson, 521 F. Supp. 87 (E.D. Tex. 1981).
[65] Id. at 89.
[66] Dunton v. Suffolk County, State of N.Y., 729 F.2d 903 (2d Cir. N.Y. 1984), modified 748 F.2d 69 (2d Cir. N.Y. 1984).
[67]Id. at 907.
[68] Id. at 909.
[69] England v. Town of Clarkstown, 166 Misc. 2d 834, 634 N.Y.S.2d 958 (N.Y.Supp. 1995).
[70] 634 N.Y.S.2d at 960.
[71] Id. at 960.
[72] State ex rel. Morgan Stanley & Co. v. Macqueen, 187 W.Va. 97, 416 S.E.2d 55, 60 USLW 2762 (1992).
[73] 416 S.E.2d at 60.
[74] Id.
[75] Wood v. State of Georgia, 450 U.S. 261, 101 S.Ct. 1097, 67 L.Ed.2d 220 (1981).
[76] 450 U.S. at 267.
[77] Id. at 270-71 (footnotes omitted).
[78] Note the reminders of the Rule 1.6 duty of confidentiality in Rules 1.8(f) and 1.9, KRPC.  This is maintained in the KBA/E2K version of the Rules.
[79] People v. White, 338 N.W.2d 556 (Mich. App. 1983).
[80] Parker v. Volkswagenwerk Aktengesellschaft, 245 Kan. 580, 781 P.2d 1099 (1989); Lansing-Delaware Water Dist. v. Oak Lane Park, Inc., 248 Kan. 563, 808 P.2d 1369 (1991); Zimmerman v. Mahaska Pepsi-Cola Bottling Co., 270 Kan. 810, 19 P.3d 784 (2001).

 


APPENDIX A

INSURED CLIENT – INSURER PAYING

WAIVER OF CONFLICTS OF INTEREST
JOSEPH INSURED

ADDRESS

KANSAS INSURANCE COMPANY

ADDRESS

Re: SUSAN PLAINTIFF v. JOSEPH INSURED

Ladies and Gentlemen:

This law firm has been retained to represent JOSEPH INSURED, who is a defendant in the above-referenced case which is pending in the District Court Any County, Kansas.  We understand that our fees are to be paid by KANSAS INSURANCE COMPANY.

At this time, there does not appear to be a conflict of interest between JOSEPH INSURED and KANSAS INSURANCE COMPANY.  However, because KANSAS INSURANCE COMPANY has agreed to pay the costs of this defense, including our attorneys’ fees, it must be understood among us that our client is JOSEPH INSURED, and that our actions and decisions have to be taken on the basis of our independent advice and consultation with JOSEPH INSURED.  In the event of any dispute between KANSAS INSURANCE COMPANY and JOSEPH INSURED, including a dispute regarding the existence, nature or extent of coverage, LAW FIRM will not advise nor represent either party.

It is agreed that, although KANSAS INSURANCE COMPANY has agreed to pay for the defense of JOSEPH INSURED by LAW FIRM in the lawsuit, KANSAS INSURANCE COMPANY will not direct or control the representation of JOSEPH INSURED, and will not interfere with the independence of judgment which must be exercised by LAW FIRM in the representation of JOSEPH INSURED.  Moreover, while we have received and acknowledged the instructions to outside counsel submitted by KANSAS INSURANCE COMPANY, LAW FIRM will not be able to comply with any requests for reports or information, nor take any actions or limit its defense of JOSEPH INSURED, which are contrary to LAW FIRM’s obligation of independent advice and representation of JOSEPH INSURED.  Further, no confidential information between JOSEPH INSURED and LAW FIRM may be shared with KANSAS INSURANCE COMPANY, in deference to the attorney-client relationship and the obligation of confidentiality imposed upon all lawyers, without waiver and consent by JOSEPH INSURED.  To the extent the terms of this engagement conflict in any manner with engagements, policies, instructions, rules, or directives of KANSAS INSURANCE COMPANY, this engagement letter must prevail, because of ethical rules and requirements imposed on LAW FIRM by the applicable rules of professional responsibility.

If each of you agrees with this manner of proceeding, please indicate your approval below and return one copy of this letter, with your signature, to the undersigned.  Please call me if you have any questions or comments.

Sincerely,

JAMES LAWYER

After consultation, including the opportunity to consult with independent counsel, I believe that the relationship between me and LAW FIRM will not be adversely affected by the potential conflict described above, and I consent to the representation under the terms listed above, and I hereby waive any conflict of interest on the part of LAW FIRM.

________________________________

JOSEPH INSURED

After consultation, including the opportunity to consult with independent counsel, KANSAS INSURANCE COMPANY believes that the relationship between it and LAW FIRM will not be adversely affected by the potential conflict described above, and I consent to the representation under the terms listed above, and KANSAS INSURANCE COMPANY hereby waives any conflict of interest on the part of LAW FIRM.

KANSAS INSURANCE COMPANY

BY______________________________

Title_____________________________


APPENDIX B

CORPORATE EMPLOYER AND INDIVIDUAL EMPLOYEE

WAIVER OF CONFLICTS OF INTEREST

ABC CORPORATION

ADDRESS

MR. ROBERT SUPERVISOR

ADDRESS

Re: SUSAN PLAINTIFF v. ABC CORPORATION AND ROBERT SUPERVISOR

Ladies and Gentlemen:

This law firm has been retained to represent each of you, who are defendants in the above-referenced case which is pending in the District Court Any County, Kansas.  We understand that you both agree to the joint representation.

    At this time, there does not appear to be a conflict of interest between ABC CORPORATION and ROBERT SUPERVISOR as defendants in the case.  Your interests appear to be allied, and a common defense you both appears to be the most efficient and cost-effective way to proceed.  At some point, however, it may appear that the interests of the corporation and the individual defendant become divergent.  This disparity in interests may arise by the presentation of evidence or testimony in the case – about which we are presently unaware – which demonstrate that the interests of the corporation and the individual defendant are no longer allied.  For example, the evidence could indicate that MR. SUPERVISOR acted in a manner which conflicted with the policies and procedures established by ABC CORPORATION, or that there is some credence to the claims asserted by the plaintiff (which up until now has been denied by you both).  If that should occur, the need for separate counsel may arise.  By that time, ABC CORPORATION may have invested significantly in the defense of this case by LAW FIRM, and a change of counsel would be detrimental to both of the parties.

The benefits of a joint defense include the value of combined resources; a common defense to the plaintiffs’ claims; a single law firm representing both defendants; and avoiding the possibility of assisting the plaintiff by a divided approach to the defense.  On the other hand, the drawbacks to a common defense could include the possibility that one’s individual interest may be better served by an individual defense, or the facts could develop to indicate that one defendant’s better defense may be to place responsibility on the other.

It is agreed that, although ABC CORPORATION has agreed to pay for the defense of ROBERT SUPERVISOR by LAW FIRM in the lawsuit, ABC CORPORATION will not direct or control the representation of ROBERT SUPERVISOR, and will not interfere with the independence of judgment which must be exercised by LAW FIRM in the representation of ROBERT SUPERVISOR.

Therefore, we have all agreed after consultation that – in the event it becomes necessary for separate counsel to be retained by the defendants to protect their own interests – LAW FIRM will continue as counsel for ABC CORPORATION, notwithstanding that confidential information may have been disclosed by the individual defendants to LAW FIRM.  ABC CORPORATION and ROBERT SUPERVISOR, defendants named, above waive any conflict of interest which may appear by reason of this firm’s continued representation of ABC CORPORATION, including after withdrawing as counsel for ROBERT SUPERVISOR.  Of course, in the event that this should occur, all confidential information which had been disclosed to the lawyers by the individual defendant in confidence will be kept confidential and will not be used against him in any way in the litigation.  In addition, ROBERT SUPERVISOR agrees not to take any action to disqualify LAW FIRM from representing ABC CORPORATION, and will not intentionally waive the attorney-client privilege and work product doctrine applicable to any communications between LAW FIRM and ROBERT SUPERVISOR.

We recommend that you engage independent counsel before agreeing to this waiver.

If each of you agrees with this manner of proceeding, please indicate your approval below and return one copy of this letter, with your signature, to the undersigned.  Please call me if you have any questions or comments.

Sincerely,

JAMESLAWYER

After consultation, including the opportunity to consult with independent counsel, I believe that the relationship between me and LAW FIRM will not be adversely affected by the potential conflict described above, and I consent to the representation under the terms listed above, and I hereby waive any conflict of interest on the part of LAW FIRM.

________________________________

ROBERT SUPERVISOR

After consultation, including the opportunity to consult with independent counsel, ABC CORPORATION believes that the relationship between it and LAW FIRM will not be adversely affected by the potential conflict described above, and it consents to the representation under the terms listed above, and it hereby waives any conflict of interest on the part of LAW FIRM.

ABC CORPORATION

By______________________________

Title_____________________________


APPENDIX C

MINOR CLIENT – PARENT PAYING

WAIVER OF CONFLICTS OF INTEREST
JOHN MINOR

ADDRESS

MR. ROBERT PARENT

ADDRESS

Re: SUSAN PLAINTIFF v. JOHN MINOR

Ladies and Gentlemen:

This law firm has been retained to represent JOHN MINOR, who is a defendant in the above-referenced case which is pending in the District Court Any County, Kansas.  We understand that our fees are to be paid by ROBERT PARENT.

At this time, there does not appear to be a conflict of interest between JOHN MINOR and ROBERT PARENT.  However, because ROBERT PARENT has agreed to pay the costs of this defense, including our attorneys’ fees, it must be understood among us that our client is JOHN MINOR, and that our actions and decisions have to be taken on the basis of our independent advice and consultation with JOHN MINOR.

It is agreed that, although ROBERT PARENT has agreed to pay for the defense of JOHN MINOR by LAW FIRM in the lawsuit, ROBERT PARENT will not direct or control the representation of JOHN MINOR, and will not interfere with the independence of judgment which must be exercised by LAW FIRM in the representation of JOHN MINOR.  Further, no confidential information between JOHN MINOR and LAW FIRM may be shared with ROBERT PARENT, in deference to the attorney-client relationship and the obligation of confidentiality imposed upon all lawyers, without waiver and consent by JOHN MINOR.

If each of you agrees with this manner of proceeding, please indicate your approval below and return one copy of this letter, with your signature, to the undersigned.  Please call me if you have any questions or comments.

Sincerely,

JAMES LAWYER

After consultation, including the opportunity to consult with independent counsel, I believe that the relationship between me and LAW FIRM will not be adversely affected by the potential conflict described above, and I consent to the representation under the terms listed above, and I hereby waive any conflict of interest on the part of LAW FIRM.

________________________________

ROBERT PARENT

After consultation, including the opportunity to consult with independent counsel, I believe that the relationship between me and LAW FIRM will not be adversely affected by the potential conflict described above, and I consent to the representation under the terms listed above, and I hereby waive any conflict of interest on the part of LAW FIRM.

________________________________

JOHN MINOR