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FORMAL OPINION 1991-1

ACTION: Formal Opinion

OPINION:

This Opinion addresses whether and under what circumstances a lawyer has a duty to disclose to a current or prospective client that the lawyer is seeking or is considering whether to accept future employment with a person or entity having interests that are adverse to the interests of that current or prospective client.

Disciplinary Rule ("DR") 5-101(A) of the Lawyer's Code of Professional Responsibility ("the Code") provides that, except with the consent of the client after full disclosure, a lawyer must decline proffered employment if the exercise of the lawyer's independent professional judgment on behalf of that client "will be or reasonably may be affected by the lawyer's own financial, business, property, or personal interests". n1 For the reasons set forth below, the Committee concludes that when a lawyer's interest in obtaining specific future employment is sufficiently focused and concrete, it is a cognizable "financial, business, property, or personal interest [ ]" under the Code, and where the potential future employer is a party or counsel for a party having interests adverse to the interests of the lawyer's client that are the subject of the prospective representation, the interest in that future employment is one that "will" or "reasonably may" affect the lawyer's exercise of independent professional judgment on behalf of the client.

n1 "DR 5-101 Refusing Employment When the Interests of the Lawyer May Impair Independent Professional Judgment.

A. Except with the consent of the client after full disclosure, a lawyer shall not accept employment if the exercise of professional judgment on behalf of the client will be or reasonably may be affected by the lawyer's own financial, business, property, or personal interests."

Although DR 5-101(A) expressly addresses only the decision to undertake to represent a client, the Committee further concludes that the policies and ethical considerations embodied in the rule apply similarly where the lawyer's conflicting employment interest arises after the representation of the client by the lawyer has commenced. In such case, we conclude that the lawyer must either disclose the interest and seek the client's consent to continue the representation, withdraw from the representation if that can be done without prejudice to the client, or postpone the pursuit of the conflicting employment opportunity until the completion of the existing representation.

We believe that a lawyer's interest in prospective future employment often will have become sufficiently focused and concrete to constitute an "interest" under DR 5-101(A) (i) where the lawyer has made affirmative application for a new position or (ii) where the lawyer is in fact actively considering whether to pursue such a position in light of an expression of interest by the prospective employer. At a minimum, we believe that the disclosure obligations under DR 5-101(A) will arise in all circumstances no later than when an offer of conflicting employment has been extended to the lawyer and has not been promptly declined.

Finally, the policies and ethical considerations discussed herein generally apply not only in the context of litigation or formal adversarial proceedings but also in any legal representation where there is professional interaction between lawyers whose clients have differing and adverse interests. Thus, the Committee notes that the discussion of the application of DR 5-101(A), as set forth herein, should not be viewed as limited to the representation of a client in litigation. It should extend to any lawyer who is to have substantial, personal involvement in the representation of or otherwise to be in a position to exercise or to influence the exercise of professional judgment on behalf of a client regardless of the context.

I.

Employment prospects and opportunities are clearly matters of financial and personal interest to most lawyers. n2 The question is whether specific employment prospects with a party or counsel to a party with interests adverse to those of a client of the lawyer "will" or "reasonably may" affect the lawyer's exercise of professional judgment on behalf of that client.

n2 This Opinion arose from our consideration of situations where a lawyer contemplates "changing jobs", e.g., moving from one law firm to another, from private practice to a corporate or governmental position or from private defense work to a prosecutor's office. The discussion proceeds generally with that context in mind. However, the considerations, analyses, and conclusions can also be applied to a private practitioner's consideration of prospective future retention to represent a party in another matter.

There are several types of situations where at least an apparent conflict between the lawyer's personal interest in potential future employment and the interest of his or her client could arise. For example, where the outcome of the matter is of importance to the potential future employer, the lawyer could be tempted to act or to appear to act so as to benefit the future employer rather than the client in the course of the representation as a means of attempting to secure the future position. A conflict could also arise where the outcome of the matter could have a significant future effect on the perceived advantages of or benefits to be derived from the prospective future employment. Such effect could be of direct financial significance to the lawyer if the future employment were to occur and would, thereby, give the lawyer a potential personal stake in the outcome of the current matter in which he or she represents the party with interests adverse to those of the potential future employer. In short, protection of the interests of the lawyer's current client could be in conflict with the likelihood that the lawyer will get the future employment or with the potential benefits to the lawyer from the future employment or both.

A third, and probably more common, situation is where the lawyer perceives that his or her actions in the representation of the client may have some impact on the potential employer's view of the lawyer's abilities. The lawyer, conscious of the potential for evaluation, may be more aggressive, litigious or argumentative, on the one hand, or more passive, cooperative or forthcoming, on the other, than he or she otherwise might be. Similarly, the lawyer may respond to the circumstance of confronting a potential future employer by being more reserved or, alternatively, more gregarious; by being more cooperative or, alternatively, more combative. In all such events, the conscious or unconscious deviation in behavior could be to the detriment of the client. Moreover, it would be the direct result of the employment interest.

DR 5-101(A) does not require a showing that the lawyer's exercise of professional judgment will be affected; it requires only that the judgment "reasonably may be". The Committee concludes, in light of the examples set out above, that future employment interests "reasonably may" affect a lawyer's professional judgment. n3

n3 We also believe that the conclusions herein are strongly buttressed by the Canon 9 directive to avoid even the appearance of professional impropriety. It is not unlikely that at least some clients would be distressed to discover that shortly after the completion of the representation of the client, the client's lawyer took a job with the other side. The concern would be even greater if it were known or believed that negotiation over such employment had occurred undisclosed to the client during the course of the representation. Such consequences would clearly tend to undermine confidence in the profession and in the legal system. Conversely, our belief that at least some clients would want to and feel entitled to know about the lawyer's conflicting employment prospects lends support to our conclusion that the conflicting employment prospects "reasonably may" affect a lawyer's exercise of professional judgment.

II.

There is only limited precedent addressing when prospective employment can or will constitute the type of "interest" contemplated by DR 5-101(A). Nevertheless, the precedent we have located is consistent with the conclusions we express herein. n4

n4 We note that DR 5-101(A) does not specifically refer to an interest in future employment. The Code, however, does cite future employment as a possible disqualifying interest of the lawyer in the section regulating government lawyers. DR 9-101(B) states:

"Except as law may otherwise expressly permit: . . . 3. A lawyer serving as a public officer shall not: . . . b. Negotiate for private employment with any person who is involved as a party or as attorney for a party in a matter in which the lawyer is participating personally and substantially."

The inclusion of this section in the Code indicates that the drafters were concerned that prospective employment of a government lawyer may affect the independent judgment of the lawyer and, thereby, affect the lawyer's fair representation of the client. Thus, it is possible to formulate an argument, by negative inference, that the drafters did not consider an interest in prospective employment to be a concern for non-government lawyers. We reject that argument. Instead, we believe that DR 9-101(B) gives further support to our position here by explicitly recognizing the potential ethical significance of future employment prospects. See also Restatement of the Law Governing Lawyers 3206, comment d, illustration 6 (Tent. Draft, No. 3, April 10, 1990); Model Rules of Professional Conduct, Rule 1.12(b) (judicial clerk must disclose to judge negotiations for employment with a party or attorney involved in a matter in which clerk is participating "personally and substantially").

In New York City Opinion 79-37, the Committee concluded that DR 5-101(A), reinforced by Canon 9, prohibited continued representation of a client by a law student absent disclosure and informed consent, if that student has accepted an offer of post-graduation employment with the prosecutor's office handling that case against the student's client. New York City Opinion 79-37 (February 11, 1980). n5 As discussed above, we find no distinction, material to the concerns of DR 5-101(A), between the acceptance of an offer and either the serious consideration of an offer that has been made or the active pursuit of an offer of employment.

n5 Although the Code is addressed to "lawyers" (that is, persons who have been admitted to the Bar), its provisions apply to law students who are functioning as lawyers in clinical education programs, in many instances under the authority of Appellate Division practice orders or other court rules. See Opinion 79-37. In addition, the Code's provisions clearly are binding on members of a law school clinical faculty, whose supervisory responsibility over practicing law students is codified as an ethical obligation in DR 1-104(A). Similar considerations would apply with respect to law students engaged in part-time employment under the supervision of a practicing lawyer.

The Legal Ethics Committee of the District of Columbia Bar recently addressed the situation of a lawyer involved in criminal defense work applying for a position with the United States Attorney's Office and concluded that DR 5-101(A) requires full disclosure and the informed consent of the lawyer's clients who are being prosecuted by that Office no later than when the lawyer takes the first active step toward seeking such new employment. Legal Ethics Committee, District of Columbia Bar, Opinion 210, at 9 (April 17, 1990).

Similarly, a 1990 San Diego Bar Association opinion concluded that while the California ethics rules do not compel the lawyer to reveal to the client that he was hired by opposing party's counsel to act as an expert witness, the lawyer's duty of loyalty may nevertheless require such disclosure if the lawyer's personal financial interests in serving as an expert witness may affect representation of the client. The opinion explained, by way of example, that if a lawyer had acted as an expert witness for a law firm in the past with some expectation of similar employment in the future, then there would be more likelihood that the lawyer's own financial interests might affect the lawyer's actions in representing the client. San Diego Opinion 1989-4 (June 5, 1990).

Finally, we note that the Committee on Professional Ethics of the New York State Bar Association, relying in part on DR 5-101(A), concluded that a lawyer could not properly undertake the representation of another lawyer who is counsel for an adverse party in a pending lawsuit without at least full disclosure and the consent of the first lawyer's client in that pending lawsuit. N.Y. State 579 (March 20, 1987).

III.

A serious issue arises as to when, in the process of looking for and deciding to accept new employment, the lawyer's interest in such employment becomes sufficiently concrete and serious to require disclosure under DR 5-101(A). The Committee is quite aware of the desirability of a "bright-line" rule that would be easy to apply and would provide unambiguous guidance. However, we have concluded that no such "bright-line" test can adequately accommodate the variety of circumstances in which the issues addressed herein might arise.

Nevertheless, the Committee believes that disclosure would be required under DR 5-101(A) in any case no later than when an offer of conflicting employment is extended to the lawyer, which offer is not promptly declined. Therefore, disclosure would always be necessary at least where an offer of future employment is outstanding and being considered (or has been accepted). This rule, however, is not sufficient. Although disclosure at the point an offer is extended would protect against certain of the types of conflicts identified above; it is not sufficient as to others. In particular, it does not deal at all with the potential conflicting influences that may arise in connection with the process of securing the offer of employment. Therefore, the Committee notes that, in many cases, the disclosure obligations under DR 5-101(A) may arise as soon as the lawyer either (i) has taken clear affirmative steps to seek to obtain specific conflicting employment (e.g., applied for such a position) or (ii) is seriously considering the pursuit of such employment in response to some expression of interest by the potential employer. Both situations can raise the ethical problems identified above. We are not prepared, however, to opine that in all cases the obligation to decline proffered representation or make disclosure will arise at these earlier identified points in the process. n6

n6 For example, the Committee recognizes that law students may send resumes to a large number of possible employers, participate in informational activities such as "job fairs," or attend numerous campus "interviews". None of these activities would generally represent an expression of serious interest in any particular employer or position. Thus, we would not consider such actions to reflect a "focused and concrete interest" that could give a rise to a conflict. The same type of reasoning would apply generally where, for example, a lawyer consults a legal recruiting firm or sends out form letters or resumes to many prospective employers.

IV.

Where applicable, DR 5-101(A) requires disclosure of the conflicting interests to the client, and the client's consent to the representation notwithstanding that interest. This requirement involves full disclosure of all relevant facts, thereby resulting in an informed and knowing consent by the client. As stated by the Committee in Opinion 79-37:

"[T]he consent required by DR 5-101(A) must be an informed consent, made by the client after full disclosure of all relevant facts, including the availability of other counsel as an alternative to continued representation. . . . In this regard we note that special care must be taken in attempting to obtain the consent of indigent persons to avoid possible overreaching and to ensure that adequate disclosures of all relevant facts is made." New York City Opinion 79-37, supra.

In this context, we note that full disclosure may require some explanation to the client of the expected process of application (e.g., that the lawyer may engage in personal interviews with the adverse entity) and its timing, as well as the fact that the future employment is being sought or may occur.

V.

Generally, disclosure and consent will fully satisfy DR 5-101(A). However, we add a caveat and caution.

Canon 5 of the Code and its ethical considerations stress the lawyer's duty of undivided loyalty to the client. Canon 5 instructs a lawyer to exercise independent professional judgment on behalf of the client, while EC 5-1 and EC 5-2 advise the lawyer against allowing anything to compromise or influence that judgment, against accepting employment where such undivided loyalty will be affected and against acquiring any interest or position that would diminish that loyalty once representation has commenced. These Ethical Considerations read as follows:

"EC 5-1 The professional judgment of a lawyer should be exercised, within the bounds of the law, solely for the benefit of the client and free of compromising influences and loyalties. Neither the lawyer's personal interests, the interests of other clients, nor the desires of third persons should be permitted to dilute the lawyer's loyalty to the client.

"EC 5-2 A lawyer should not accept proffered employment if the lawyer's personal interests or desires will, or there is reasonable probability that they will, affect adversely the advice to be given or services to be rendered the prospective client. After accepting employment, a lawyer carefully should refrain from acquiring a property right or assuming a position that would tend to make his or her judgment less protective of the interests of the client."

Thus, in the context of future employment interests being addressed herein, if the lawyer in fact concludes subjectively that the conflict will interfere with his or her exercise of independent professional judgment or compromise his or her duty of loyalty, then the lawyer should decline the proposed representation of the client (regardless of whether the client is willing to consent to such representation).

We note that the analogous provision of the Model Rules, Model Rule 1.7(b), also expounds the principle of loyalty, stating:

"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." n7

n7 The legislative history of Model Rule 1.7(b) also illustrates the precept of Model Rule 1.7(b), asserting that loyalty to the client is essential and that the lawyer's own interests should not be permitted to have an adverse effect on the lawyer's representation of the client, nor should a lawyer allow related business interests to affect representation.

Under the Model Rules, the lawyer must "reasonably" believe that representation will not be adversely affected by the personal interest. This requirement exists independent of and in addition to the client's consent. We would observe that this requirement is consistent with the pronouncement of EC 5-2; although, it is not explicitly contained in DR 5-101(A).

We believe that these considerations underscore the importance that the disclosure be full and detailed so that the consent, if obtained, will be informed and knowing.

VI.

Although DR 5-101(A) addresses expressly only the decision whether to accept employment to represent a client, other provisions of the Code make it clear that the policies and ethical considerations of Canon 5 -- the duty of loyalty to and the obligation to exercise "independent" professional judgment, untainted by conflicting personal or professional interests, on behalf of the client -- extend throughout the representation. See, e.g., EC 5-1, EC 5-2, DR 5-102(A), DR 5-104(A) and DR 5-105(B). Therefore, the Committee concludes that where the representation has already commenced, a lawyer for whom an interest in future conflicting employment arises should disclose the interest to the client and obtain the client's consent or either postpone seeking such new employment until the representation is completed, n8 or withdraw from the representation, if withdrawal can be accomplished without prejudice to the client (see DR 7-101(A), DR 2-110(A) and (C)). If the lawyer concludes that the conflicting interest will interfere with his or her exercise of independent professional judgment, then disclosure and consent will not be adequate.

n8 EC 5-2 advises that a lawyer "carefully should refrain from acquiring a property right . . . that would tend to make his or her judgment less protective of the interests of the client". The Committee does not consider an application for a job to be such a "property right", but the acceptance of an offered employment position would, in our judgment, come within that language.

VII.

We have addressed this Opinion to the obligations of the lawyer who is seeking other employment, and we do not undertake to discuss in the abstract the various related issues that may arise in different situations with respect to the obligations of other, associated lawyers. Nevertheless, we note that under the Code, certain conflicts, including a conflict under DR 5-101(A), will be imputed to other lawyers "associated" with the directly affected lawyer in "a law firm". Specifically, DR 5-101(D) provides: "While lawyers are associated in a law firm, none of them shall knowingly accept or continue employment when any one of them practicing alone would be prohibited from doing so under DR 5-101(A) . . ., except as otherwise provided therein." ("Law Firm" is defined quite broadly in the Code to include a legal department and a legal services organization, as well as a law partnership or professional legal corporation. See "Definitions" section of Code.) This provision is a new addition to the Code, being part of the Amendments effective September 1, 1990. As such, there are few examples of its application and little reported analysis. See, e.g., New York State Bar Association, Opinion 615 (Jan. 29, 1991).

While we do not here opine on the application of DR 5-105(D) to any particular set of facts, it is apparent to the Committee that the imputation of conflicting interests of the type discussed herein to other associated lawyers could have results that would appear to be extreme or could be very disruptive in the context of practices we believe to be common and widespread at least within larger professional organizations, including private firms, governmental agencies and legal service organizations. Therefore, this Committee seriously questions the wisdom and suitability of including DR 5-101(A) as a type of conflict that is automatically imputed to other associated lawyers under DR 5-105(D).

First, DR 5-101(A) concerns the individual lawyer's "own financial, business, property or personal interests". If such an interest of one lawyer in a particular case does not also give rise to such a conflicting interest for an associated lawyer (e.g., because of the lawyers' shared financial interests, or the first lawyer's influence over the second lawyer), it is not obvious that it ought to be imputed to the associated lawyer. Of course, if it does constitute such an interest of the second lawyer under DR 5-101(A), then imputation pursuant to DR 5-105(D) is unnecessary.

Second, the possibility of undesirable consequences within "law firms", as broadly defined, from the imputation of conflicts personal to one lawyer to all other lawyers could tempt ethics committees or courts to construe the types of personal interests covered by DR 5-101(A) more narrowly than this Committee believes to be appropriate, when viewed in terms of the requirements of DR 5-101(A) alone. We believe that there are personal, individual interests that raise conflicts for the particular lawyer if he or she were to represent a client in a specific matter -- and which, therefore, should be disclosed if the lawyer is to be personally involved in the representation -- but that do not raise any tangible ethical concerns where the representation will be undertaken by an associated lawyer with no personal involvement by the lawyer with the personal conflict. In such cases, this Committee is of the opinion that the proper and preferable result would be a limitation of the imputation of the conflict to other lawyers and not the determination that the personal interest may be ignored even by the lawyer with the interest (thereby, presumably reading that type of personal interest out of DR 5-101(A)).

Therefore, this Committee invites the examination by other ethics committees and consideration by the Appellate Division of whether the DR 5-101(A) should be eliminated from the list in DR 5-105(D) of conflicts that are to be automatically attributed to associated lawyers.