incompatible selman objectives the conflict exists regardless of any common interest at mount vernon vision need my share after sullivan sued visionary for wrongful termination a claim that mount vernon is obligated to defend the insurance policy the first lawyer that mount vernon hired to defend vision aid threaten a counter suit against sullivan for misappropriation of company funds in response to that threat sullivan dropped a settlement demand from vernon and vision aid because such a settlement would favor him her name but disadvantage vision aid the conflict exists because panel counsel is in a position to shape how the cases develops which can further mt vernon settlement objectives division its detriment when it became apparent to vision a that there was a conflict now vernon's first panel counsel withdrew from representing vision age because vision aid would not sign a conflict waiver the second panel counsel that member and hired told mt vernon that he might have he might be forced to file vision it's counterclaim but he would not have to acknowledge its validity as a defense when it came time to file the answer that panel counsel didn't insurer and the insured and owes a duty of loyalty to both if the interests of the two are in conflict the insured is entitled to pick the defense lawyer but insure is still obligated to pay for representation m vernon argues that there's no conflict because of the common interest that vision it in mount vernon have and using the counter claim to defeat sullivan's claim or negotiate a favorable settlement but the presence of a common interest does not erase a conflict of interest and mount vernon envision a did have a conflicting interest in the counterclaims folder development if mount vernon saw benefit to itself in the full development of the counterclaim and mount vernon would be funding the prosecution of the counter claim and would not be suing for counter claim happens to be and there's an extra to be intertwined with the claim that you defending on that's correct ok if it wasn't the conflict in theory could see exist just as easily critic theory exists in fact nothing about the argument for the conflict is dependent on the fact that the counterclaim is inextricably linked that's correct ok so put aside the inextricably intertwined issue for a moment are you arguing that because of the conflict and because of the inn for one and for all rule mt vernon has to do has a duty to defend the counterclaim because of the conflict you get to choose the lawyer and mount vernon would have to pay for the costs of the counter claim even if the counter claim was not inextricably intertwined with the but just a different point because the conflict issue would still arise because we had the economic incentives were off just as you suggest like a suit on a promissory note exactly than mt vernon would not have to pay for  time envisioning what well you have the same set of facts it could be very very similar for litigation management purposes it would make perfect sense to include the claim right but in terms of whether it's interval to the fence right to prosecute it might not be what makes that something that to pay for because their argument is we don't have to pay for defending against claim and counterclaim you're prosecuting conventionally speaking is not defending against the claim you know the defense costs only means just proof supporting the denials or proving the affirmative defenses whereas we say it's offense across cover the cost of anything that a defense attorney would be hired to do in the service of the defendant in the litigation so if you have a compulsory counterclaim if you have a a counterclaim that is intertwined with the defense if you have a counter claim that will help the defense that and in the natural order of things the defense counsel would be expected to assert that then yes that comes with into fastpass however if it's a counter claim that for example is completely unrelated for example a suit on a promissory note the insurance company can say this i know you have that suit against  for a promissory note it doesn't have anything at all to do with his wrongful determination claim we're not covering it it's not compulsory it's not going in there if you want to bring that lawsuit you do that on your own we're going to be providing a lawyer for you to handle everything that the defense counsel would but the counter claim also stands as an impediment so well i don't know if all that sullivan i would think would have an interest in saying that to prove that there's no discrimination you have to go so far as to prove misappropriation whereas i think you would be saying to prove there's no discrimination we don't have to prove there's no misappropriation but that's what you'd say to the judges you'd say we don't have to prove know misappropriation all we have to prove is that we had a reasonable belief he was a misappropriated we had some non descript reason you might want to prove he was a misappropriate or we do want your legal position defending it would be you absolutely do not have to prove that i would agree that if we're in the sullivan suit we're not going to be arguing for a higher burden of proof however we would want to prove that sullivan was misappropriated because if we prove misappropriation we win then the issue of pretext goes away but does that mean it's inexplicable intertwined in another i'm trying to figure out what the test of that lead to your belief that of course yes of course it's a legal test that's why i'm trying to get past that since that's the legal test you want us to read inextricably intertwined to mean it it if we show that we had a belief in a legitimate reason for terminating then the burden shifts to sullivan's approve it that was just a pretext so well that doesn't shift the burden of proof once he proves it that's a pretext which he could do let's say by saying that there were other people in the company who  terminated there were similar circumstances affecting that and then the burden shifts to us to show that it's not a pretext and i'm that if all we do is say to the jury what we believed but we don't have any evidence to back it up then the jury it's much more easy for the jury to find that i was pretext you have put forward evidence but you would necessarily have to go through the proving out that he misappropriated well it would be folly not to prove that it may even be malpractise to prove it out because if you have the evidence you are going to want the jury to believe that mr sullivan misappropriated because the jury is not going to find in favor of the misappropriated they're going to find in favor of the victim and also under the  rule if we prove that he actually misappropriated then his remedies for wrongful discharge for discriminatory termination and as of the time that the employer learned of misappropriation he won't get any front pay from that point he won't get reinstatement he won't get back pay his remedies and at the moment that we discover that he actually misappropriated so in order to invoke mckenna rule we actually have to prove that he was a wrongdoer not just simply that we believe that he was wrong we actually have to prove the underlying grounds in deposition mount vernon is rule thirty six designate admitted that the counterclaim stands as an impediment to settlement because of the counterclaim so the lowest point that would be sufficient to persuade sullivan to drop his claim in exchange for vision it's release while it's invision aids interest to develop the counter claim to its full value let's look at it this way  believe that in the process of litigating with sullivan mount vernon will be able to get the case to come to an end for less than five hundred thousand dollars and the only way that mt vernon can buy that release from vision a for less than five hundred thousand is if the value of the counterclaim were cut  not all the way to zero because then sullivan would have no reason to drop his plane but to some value lower than five hundred thousand now mount vernon acknowledges that insured has a right to select its own defense counsel an independent counsel  defense under reservation of rights the reason that the insured has that right in a reservation right situation is because one panel counsel is defending on the insurance to half the panel counsel is in a position to shape the case to the insurers advantage and it's that a shaping power of the ability to influence the outcome by choosing which defenses to build up and which ones under play that's why when there is a conflict of interest between the insured and the insurer insured gets to control the defense  release mount vernon walked away from the very counter claim that it's panel counsel threaten to bring in its brief amount heard and takes the position that the counter claim is only tangential and entirely irrelevant to the defense but that's not so for the reasons that i have already articulated mt vernon also knows that it's not tangential or relevant because it's rule thirty six designee admitted in deposition that a vision aid wins the counterclaim he couldn't see how sullivan could win his suit vernon is contractually obligated to provide vision aid would have two lawyers in the courtrooms and the courtroom stage one paid for by vision and one by mount vernon with no clear demarcation possible as to who does what and with no guarantee even that the trial judge would allow that and if these two lawyers couldn't agree on how to litigate the case the defense would be uncoordinated and dysfunctional and that's why the end for one in for all rule says that an insurance company has to cover claims even that are outside the scope of the policy because we don't wa please the court my name is james wayne and with a scarlet response to my co counsel we represent now in front of fire insurance company in this matter i urge the court to start with the policy language here mount vernon is players liability legal fees and expenses incurred by the company or by any attorney designated by the company to defend the insured resulting from the defense of any claim claims are similarly devoted nowhere in the policy does actually recognize he was stealing from them but thought that wasn't a good reason to fire him it's because he's old now you're on a date of a decision to fire him before they discover that he was misrepresenting it i'm not saying that it would happen but i'm saying that the counter claim is not necessary to defeat the claim for him you want to look at the abstract legal matter whether the claimed in principle is a complete defen discriminated against them but in practice it seems like a pretty good defense and so if you want to say i guess for purposes of applying the inextricably intertwined test we only look at the legal abstraction we don't look at how  a real ruled answer as opposed to a legal abstraction because then your honor i think you have to go back to the policy language if the policy language included defense of counter claim and defense of claims includes bringing complete or some other language counterclaims that would defeat war or assist in some way the defense of the case that would be a different story but that's not what the policy language says well why isn't this the best defense and the way you're looking at the counterclaim is very narrowly yes there's an alternative theory of proving that there was no pretext that there was good basis because they legitimately leaked he may have been stealing but why is that actual proof of misappropriation which is the same evidence you would put the and if it were in fact a counterclaim why is that not the best that that's possible the proof of misappropriation would go to the counter claim the program to the defense well the proof of a reasonable suspicion of misappropriation in addition to  plead in the alternative you can say there was a reasonable suspicion one but also there was absolutely the fact that there wasn't that there bolsters the claim that there was a reasonable suspicion and often that happens in most of i don't disagree and defense attorneys don't parse that's the whole point is that all us defense attorney is going to bring the best game in defense of the claimant always or we don't forget there but then you're left with the money piece and if you can prove the misappropriation with which once again is the same evidence you would prove in prosecuting a counter claim once again you're pulling apart the best defense in a way that doesn't support the notion of zealously representing the client if there's a conflict with how you are analyzing the defense but let me let me pose a hypothetical not maybe in direct answer to your question i think i agree with you that it would not hurt the defense at all and it could very well help but suppose that in two thousand and eleven when vision a got notice of the report that said that there were some questionable transactions and that they suspected strongly suspect apparently that sullivan was stealing money if at that point the vision aid had brought suit against sullivan for misappropriation and terminated him in front of wouldn't be required to pay for that offensive suit the decision of whether or not they should pay shouldn't depend on the timing just because it's a counterclaim in a suit that was brought by sullivan it would make no sense in other words why would they pay for an get policy and then apply real life solutions to the next is demonstrated not us i understand your honest point but suppose that mr sullivan had decided to leave his case in it would work on the rule you want to assume a conflict argument is a good one i know you may disagree with that or you can just assume that in for one and for all applies to a compulsory counterclaim which has some force to prosecute the whole defense you can't get to lawyers because in for one and for all we say goes against that there's going to have to be an allocation of costs them that's right or right and in the real world how would one allocate the costs in light of the practical overlap between the argument that everything that one could make about the misappropriation argument would be the best defense also of the aids discrimination so even if you won on all those points as long as one in for one for all applies we're still going to have to get to what's a reasonable allocation and on that score it would seem like there's a fairly strong argument that the most reasonable allocation is it's all one piece here so just by that route i think you get to the same result is if we try and do it through the on track language well what's wrong with that one thing it would be would not fit with your honor's question would be for example damages damages would not be part of it if it damages a misappropriation would not be part of the defense but that might be true even if you did under the contract in other words even on that and that's a point not reason the brief but even under the inextricably intertwined test that they said you might say that the damages portion of the tourney's time that spent on the proving out damages for misappropriation is not a necessary and reasonable expenses part of the fence of the aids discrimination claim so under the contract maybe you have an argument that you don't have to pay for that but on the main but i'm saying left if we disagree with that we thought there's got to be one lawyer for this case i don't quite see how even under a reasonable allocution rule it would make sense to parse it out such that the time spent trying to prove out misappropriation is not understood as part of the same cost as proving out non discrimination and that cost might well fall on mt vernon because the first case to go with likely be the discrimination case that i'm not saying mount vernon should pay for defending the case fully and properly and they are and they continue to be and the two lawyers did work together your honor they  vision as attorney drafted the counterclaim the attorney appointed by mount vernon to represent vision a draft of the answer and they filed and the case has been stayed pending the outcome of this case so they  problem or come to an agreement on that your honor for the benefit of the client which the insurer has an obligation to do and which i presume that the client would want also they want best defense possible and mount vernon has no interest in not providing the best if that's possible because it could result in a very costly verdict for that no but the best defense possible is the defense in which the claim of reasonable basis to discharge  on reasonable suspicion of of misappropriation is confirmed by proof of massive misappropriations if there is a proof of nassif defeat this appropriation then the possibility of settling fast which is in mt vernon is interest is going to require the sacrifice of a potentially massive recovery on the part of the insured and the was and so so and so and the panel lawyer who wants to stay on the good side of the company that puts him in the panel is still going to find it in his interest and in the company's interest to prove a less misappropriation rather than more because that makes it more likely that in fact the insured will throw in its potential recovery to get everything settled in over with so once again the conflict is inescapable that would be a very very fine calculation on the part of defense counsel and defense counsel should and does have vision eight interests at heart in pursuing the best possible defense of the case if that happens to result in a large recovery or health of to fund a l to result in a large recovery for vision a so much the better but i think you're with your honest question assumes that for some reason defense council appointed by mt vernon is not going to do a good job or is going to hold back your belief that argument is sound  then it's an argument that can be made in any situation in which there is a conflict of interest because it's an argument saying never mind a conflict of interest the lawyer will do the right thing and that is that is not an that is not an admissible answer to a conflict situation it's well vision aid has its own lawyer involved in the case and i was hoping that vision age lawyer wouldn't allow that to happen and then we have as has been mentioned because of the argument then we were brother brother then you have the situation in which the conflicting interests of the two lawyers is sort of a threat to the chaos in the trial but that that is only hypothetical or are there ways of dealing with it and it does happen all the time and the courts that have addressed this issue he cited pages twenty twenty three deal with that very issue and say that the shore is not obligated to prosecute a counter claim in situations just like this just so if i understand what you're saying you're not intending that in fact if the parties couldn't reach an agreement the judge at trial might not say look there's only going to be one lawyer that's fine you want it to be that all the negotiations that occur and whatever the trial judge does below is done on the understanding that mount vernon had no duty to defend the counter claim but i that's that's that's a fair statement thank you my time is up thank you very much