Opinion ID: 2076416
Heading Depth: 1
Heading Rank: 7

Heading: Was a disclosure made to the parties having a conflict of interest; and if made, was the disclosure adequate?

Text: There is little dispute in the evidence concerning the fact that a disclosure was made to Smiley, who was acting as next friend for her minor son, Michael. While there is conflict in the evidence as to who discovered and first mentioned the conflict, it is clear that there was some discussion between Smiley and Respondents regarding the duality of their representation. I find that a disclosure of Respondents' conflict of interest was made to Smiley and that Smiley, through one means or another, was aware that Respondents were performing legal services for and defending the interests of Crooks I in other legal proceedings. I further find that there is no evidence of any disclosure of the dual representation made to Crooks I, however, disclosure was made to the Farm Bureau Insurance Company, carriers of the liability insurance on the automobile owned by Crooks II and driven by Crooks I. In light of the findings of the existence of a conflict of interest requiring application of Code, Section DR 5-105 and the duty on the part of Respondents to maintain the confidentiality of the disclosures made to them by Michael and Smiley as required by DR 4-101, it now becomes necessary to consider whether or not DR 4-101(C) and DR 5-105(C) have been complied with in order to render ethically acceptable the dual representation here involved, under DR 5-105(B). DR 4-101(C)(1) provides that a lawyer may reveal: `confidences or secrets with the consent of the client or clients affected, but only after a full disclosure to them.' I am unable to find any evidence that would indicate an informed discussion between Respondents and their clients regarding the significance of a disclosure of their clients' confidences. The evidence is silent on the nature or extent to which Respondents may have disclosed their clients' confidences or secrets to the Farm Bureau and/or Crooks I, except with regard to the incident wherein Respondent authorized the Farm Bureau to take a statement from Michael. It does not appear that there was any disclosure made to Smiley or Michael regarding the implications of such a disclosure with the exception of the fact that Respondents told Smiley that it was `all right' to give a statement and that it further appears that immediately after the giving of the statement the medical payments claim was paid. It does not appear that Respondents ever informed Smiley or Michael that the medical payments could be obtained without giving the statement. Under the circumstances, Smiley might well have inferred that the giving of the statement by Michael was a condition precedent to the right to obtain the medical payments disbursement, and Smiley so testified. Nothing in the testimony of either Respondent would have disabused her of this impression. With regard to this incident, I find that the disclosure to Smiley and Michael was not adequate. The standard of disclosure requires something more than merely telling a client it is `all right' to give a statement. The client is entitled to know what benefits the disclosure of confidential information may obtain and what detriments may be suffered as a consequence thereof. With regard to the giving of the statement, Respondents encouraged Smiley and Michael to disclose material key to that client's case. They did not discuss the advantages or disadvantages of such disclosure. Mr. Farr, in his testimony, stated that he did not remember whether he had told Smiley that he expected to get the benefit of Farm Bureau's investigation in exchange for the statement. He testified that he `had it in mind' but did not remember discussing it with Smiley. There was no testimony from either Respondent regarding the disadvantages of the disclosure of such information. Under the circumstances the disclosure must be regarded as inadequate. We turn now to the adequacy of the disclosure of the multiple employment and the determination as to whether or not Respondents have satisfied the requirements of DR 5-105(C). DR 5-105(C) sets the standards for multiple representation. They are in fact two in number. First, `If it is obvious that he (the lawyer) can adequately represent the interest of each;' and, Second, `If each (client) consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.' (Emphasis added) This Hearing Officer has already determined that `It is obvious that he (the lawyer) can adequately represent the interest of each... .' It is likewise undisputed that Smiley consented to the dual representation. The only remaining question is whether or not she did so after an adequate disclosure. DR 5-105(C) sets the standard for the adequacy of the disclosure by requiring that the disclosure be of such a nature that it would inform the client `of the possible effect of such representation on the exercise' of the lawyer's `independent professional judgment.' The pre-existing Canon of Professional Ethics sets essentially the same standard when it provides: `It is the duty of a lawyer at the time of retainer to disclose to the client all the circumstance of his relationships to the parties and any interest in or connection with the controversy which might influence the client in the selection of counsel.' The Canons further provide that: `The obligation to represent the client with undivided fidelity and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed.' DR 5-105(A) and (B) contemplate that the obligation of the lawyer in the multiple representation situation, not only make disclosure at the inception of the employment (A) but that he has a continuing duty to disclose all subsequent developments in a case which might adversely affect the independence of his professional judgment (B). In this case, at its inception, Respondents had no way of knowing that there would be a multiple employment and certainly not a conflict. While there is some dispute concerning when Respondents first knew or could have known of the presence in the case of Farm Bureau as insurer of Crooks I, it is certainly true that as of March, 1967, the fact was known and discussed with Smiley. The disclosure at this juncture was timely and certainly enabled Smiley to protect the rights of Michael and herself. The evidence of disclosure as to Smiley and Michael is reflected in the testimony of the two Respondents, Hulse and Farr, Smiley, Mrs. Bilbrey, and by inference the discussions between Smiley and her two other lawyers Messrs. Dietzen and Eisle. The letter of resignation (Disciplinary Commission Exhibit No. 4.) from Respondents to Smiley also reveals indirectly the nature and extent of the disclosures made. In sum, this evidence reveals that Respondents told Smiley that in their opinion Michael could not assemble sufficient evidence to sustain the burden of proof required in a guest case which would require evidence of wilful and wanton misconduct on the part of Crooks I. They also expressed the opinion that, in view of the lack of a guest case, there was no conflict of interest between Michael, Smiley, and Crooks I and that therefore they could, with Smiley's approval, represent both interests. During the progression of the case, Smiley became aware that Respondents were defending Crooks I in several other related actions. It is not clear whether Respondents communicated this fact, or Smiley learned it from other sources. With the exception of Disciplinary Commission Exhibit No. 4, all such communications were oral. The direct evidence does not disclose any discussion between Smiley and her attorneys of the effect of the conflict on the independence of Respondents' professional judgment. On the other hand, Respondents, as shown by the exhibits, made as many as thirty written reports to Farm Bureau in connection with their representation of Crooks I; and these contain several references to telephone conversations between Respondents and Farm Bureau personnel. These reports, while covering matters unrelated to the issues in Michael's case, also analyze and discuss evidence, points of law and related matters bearing upon Michael's case. If the regular and analytical reporting made to Farm Bureau was appropriate to the informed progression of the Crooks I and Farm Bureau interests, then similar disclosures and analyses should have been made to the Smiley-Michael interests. The purpose of the disclosure is to inform the client so that each client to the conflict may make an intelligent decision as to whether they want to continue the employment of a particular lawyer. It is obvious that disclosures to insurance company personnel who are experienced and sophisticated in making the numerous judgmental decisions required in a case of this kind need be far less detailed and analytical than disclosures made to a callow fourteen-year-old youth and his housewife mother. In the latter instance, substantially greater care should be exercised by the attorney to be certain that he has made his uninitiated client comprehend the full implications of the conflict. Further there is no evidence that Respondents ever revealed to or discussed with Smiley the possibility of a suit against Crooks II for the negligent entrustment of the Crooks II automobile to Crooks I, a non-licensed driver with a poor driving record and a propensity for intoxicating beverages. There is ample evidence in the record to support a serious consideration of initiating a suit based on this theory. This theory should have been discussed with Smiley. It might be argued that it is not unethical for a lawyer to fail to discuss all possible theories of recovery with a client, because some lawyers are more ingenious than others in ferreting out avenues of attack on behalf of their clients. All theories might not occur to all lawyers. With this argument, I agree. It is not a question of ethics but of competence. However, in the case at hand, Respondents in their written reports and apparently in their telephone conversations with Farm Bureau personnel, devoted much attention to efforts to remove Crooks II (and later his estate) from suits brought by the two Lapel Town Marshalls (See Disciplinary Commission Exhibit No. 13 and Disciplinary Commission Exhibit No. 22, and the reports dated December 5, 1967 and April 16, 1970). While numerous avenues were explored, Respondent Farr concluded that the evidence was sufficient to overcome of motion for directed verdict and thus present the case to the trier of fact. If the negligent entrustment theory was of such quality to warrant this attention in the defense of Crooks II, it likewise warranted disclosure and discussion with Smiley regarding its potential in Michael's case. The argument that Michael's story precludes a guest case recovery, should likewise preclude a negligent entrustment recovery, even though simple negligence is all that must be shown under this theory. This is not the point. Smiley should have been informed and given an opportunity to decide whether to forego such a theory as was done on the guest case theory. From the evidence, it is clear that Smiley was not aware at any time of this possibility. It is equally clear that she was not aware of the conflict of interest between herself and Crooks II. Respondents were engaged in defending Crooks II, another one of Farm Bureau's insureds. This conflict should have been disclosed  it was not. Ethical consideration 7-8 (page 351) is illustrative of the conclusion expressed herein. `A lawyer should exert his best efforts to insure that decisions of his client are made only after the client has been informed of relevant considerations. A lawyer ought to initiate the decision-making process if the client does not do so. Advice of a lawyer to his client need not be confined to purely legal considerations. A lawyer should advise his client of the possible effect of each legal alternative. A lawyer should bring to bear upon this decision-making process the fullness of his experience as well as his objective viewpoint. In assisting his client to reach a proper decision, it is often desirable for a lawyer to point out those factors which may lead to a decision that is morally just as well as legally permissible. He may emphasize the possibility of harsh consequences that might result from assertion of legally permissible positions. In the final analysis, however, the lawyer should always remember that the decision whether to forego legally available objectives or methods because of non-legal factors is ultimately for the client and not for himself. In the event that the client in a non-adjudicatory matter insists upon a course of conduct that is contrary to the judgment and advice of the lawyer but not prohibited by Disciplinary Rules, the lawyer may withdraw from the employment.' For the foregoing reasons, I find that the disclosures made to Smiley, as the next friend of Michael, were not adequate within the meaning of the Code; DR 5-105(C) and Canon 6. I further find that Respondents have violated Canon 6 Code Section DR 5-105(B) and DR 1-102(A) (1) as charged in Count I of each Verified Complaint for Disciplinary Action.