THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK
FORMAL OPINION NO. 1999-01
TOPIC: Lawyer’s ability to represent a trade association as well as clients with interests adverse to individual members of the association.
DIGEST: There is no per se rule that representation of a trade association creates an attorney-client relationship with each member of the association, but the particular circumstances of the representation may create an attorney- client relationship with one or more of the members
CODE: DRs 5-105(A); 5-105(B); 5-105(C); 5-108; EC 5-18.
May a lawyer who represents a trade association also represent interests adverse to the individual members of the trade association?
The Committee concludes that there is no per se rule that would disqualify an attorney in future litigation adverse to a member of a client association. The conflict analysis is largely driven by the individual facts and circumstances and turns on the nature of the attorney’s dealings, if any, with the association member whose interests would be adverse to the attorney’s hypothetical client in the future representation(s).
A. Formation of an Attorney-Client Relationship
The threshold issue is whether, and under what circumstances, an individual member of a trade association becomes an attorney’s client by virtue of that attorney’s representation of the association. EC 5-18 provides guidance here:
A lawyer employed or retained by a corporation or similar entity owes allegiance to the entity and not to a stockholder, director, officer, employee, representative, or other person connected with the entity. In advising the entity, a lawyer should keep paramount its interests and the lawyer’s professional judgment should not be influenced by the personal desires of any person or organization.
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Occasionally a lawyer for an entity is requested to represent a stockholder, director, officer, employee, representative, or other person connected with the entity in a individual capacity; in such case the lawyer may serve the individual only if the lawyer is convinced that differing interests are not present.
Thus, there is no per se rule of derivative representation in the case of a corporation or, by analogy, the members of an unincorporated trade association. See also Or. Op. 27 (1991) (an attorney who represents a trade association may represent one member of the association against another member with respect to a matter unrelated to the work performed for the association without disclosure to or consent from the association). Rather, to determine whether and to what extent an attorney has entered into an attorney-client relationship with a member of an association through representation of the association, one must analyze the circumstances of the representation and the relationships among all of the parties.
An attorney-client relationship may be formed in the absence of an express agreement. Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311,1317 (7th Cir.), cert. denied, 439 U.S. 955 (1978) (disqualification of law firm in action adverse to association member based on submission of confidential information by members to law firm with reasonable belief it was acting as their attorney); Glueck v. Jonathan Logan, Inc., 653 F.2d 746, 749 (2d Cir. 1981). The following factors are particularly relevant to determine the existence of an attorney-client relationship: the nature of any disclosures that the member made to the attorney; the member’s expectations of the attorney; and the reasonableness of the member’s expectations. See Westinghouse, 580 F.2d at 1319-1320; Shadow Isle, Inc. v. American Angus Assoc., No. 84-6126-CV-SJ-6, 1987 WL 17337 (W.D. Mo. Sept. 22, 1987).
In its opinion regarding the representation of trade associations, the American Bar Association Committee on Ethics and Professional Responsibility drew upon its previous conflict analysis with respect to the representation of corporations and partnerships. ABA Op. 365 (1992); see also ABA Op. 390 (1995). Specifically, the ABA Committee considered whether the attorney had affirmatively assumed a duty of representation to the member; whether the member had separate representation; whether the attorney represented the member before commencing its representation of the association; and whether the member relied upon the attorney’s representation of its individual interests. ABA Op. 365. In addition, the size of the trade association may bear on the reasonableness of any member ’s expectation of representation; for example, it is more likely to be unreasonable for a member of a large association to expect that the association’s attorney represents its individual interests. Id. n.4.
If, under the analysis described above, a lawyer concludes that the individual association member is a current client of the law firm, the lawyer may not, absent valid consent, represent a client with interests adverse to the member. The basic conflict of interest rule is DR 5-105(B), which provides that
A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer’s representation of another client, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under DR 5-105(C).
Canons 4 (duty to maintain confidences) and 9 (appearance of impropriety) may also be implicated. See Westinghouse, 580 F.2d at 1321. Of course, the existence of a conflict does not necessarily require termination of the representation; under certain circumstances a client may consent to the representation, pursuant to DR 5-105(C). If the firm’s representation of the association has concluded when the hypothetical new matter is presented, such that the association is a former client, DR 5-108 would control:
A. Except with the consent of a former client after full disclosure a lawyer who has represented the former client in a matter shall not:
1. 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.
2. Use any confidences or secrets of the former client except as permitted by DR 4-101[1200.19] (C) or when the confidence or secret has become generally known.
B. Recognition of Vicarious Clients
If the relationship between the attorney and the member does not rise to the level of attorney-client, the attorney may nonetheless be disqualified if representation of the new client against the member would be materially limited by the firm’s representation of the association. Glueck, 653 F.2d at 749 (firm representing association disqualified from representing another client in suit against a member of association). The member in this situation has been referred to as a "vicarious" or "derivative" client, although the Committee does not necessarily find such names helpful to the analysis. DR 5-105(A) provides:
A lawyer shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under DR 5-105(C).
In Glueck, the Second Circuit adopted the following substantial relationship test:
Disqualification will ordinarily be required whenever the subject matter of a suit is sufficiently related to the scope of the matters on which a firm represents an association as to create a realistic risk either that the plaintiff will not be represented with vigor or that unfair advantage will be taken of the defendant.
Glueck, 653 F.2d at 750, quoted in ABA Op. 365 (1992). This test involves a careful analysis of the attorney’s relationship and dealings with the member and the member’s relationship and dealings with the association. For example, the member’s disclosure of confidential information relevant to the association’s matter undertaken by the attorney may be a basis for disqualification. Id.; see Ill. Advisory Op. 790 (1983). Further, the significance of the member’s position within the association may be relevant. ABA Op. 365 (1992) (citing North Star Hotels Corp. v. Mid-City Hotel Assoc., 118 F.R.D. 109 (D. Minn. 1987) (disqualifying a firm from representing a hotel manager in a breach of contract suit against the partnership owning the hotel in light of the firm’s representation of a partnership in which the general partner of the partnership hotel had substantial holdings).
To summarize, there is no per se rule that the representation of a trade association creates an attorney-client relationship with each member of the association. The particular engagements an attorney accepts on behalf of the association and the circumstances of those representations may, however, create an attorney-client relationship.