UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER鈥橲 CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 92-27
In 1980, the Catawba Indians filed a lawsuit against 83 landowners seeking class action status. That status was denied, and an appeal is pending before the Fourth Circuit Court of Appeals. The Catawbas have announced plans to file an action in federal court against 27,500 landowners in three counties, seeking trespass damages since 1840 and the return of 144,000 acres of land. There are approximately 70 lawyers in York County available to defend these lawsuits. Most of the lawyers are also potential defendants as owners of claimed land. Several of the lawyers also are title insurance agents.
Questions:
1. Can a lawyer who is a defendant in this lawsuit also act as legal counsel for other defendants?
2. Can a lawyer who is the agent of a title insurance company also represent defendants in the proposed action?
Summary:
As long as the interests of the defendants, including the lawyer as a defendant, remain consistent there appears no per se prohibition upon the lawyer representing other defendants, provided that each client consents after consultation.
The lawyer's status as a title insurance agent should not affect the representation unless the lawyer is aware or becomes aware of circumstances relating to the client's earlier purchase of the land that may give rise to an action by the client against the lawyer or against the insurer in a matter in which the lawyer acted as title agent.
Opinion:
1. Rule 1.7(b) generally prohibits a lawyer from undertaking the representation of a client if the representation "may be materially limited" by the lawyer's own interest. Even in such circumstances, however, the lawyer may proceed with the representation if "the lawyer reasonably believes the representation will not be adversely affected" and the client consents after consultation. Id.
In litigation there is the risk that the interests of parties, even on the same side of the litigation, may at some point differ. For example, one defendant in the contemplated action may favor a proposed settlement of the entire action on terms that another defendant would find unacceptable. Thus, there is at least the possibility that the interests of a lawyer-defendant and of the client may at some point conflict.
It is important, however, that the general objectives of the defendants in this litigation appear to be identical. On the facts before us, we find nothing to suggest that it would be unreasonable for a lawyer to believe that the representation of other defendants will be adversely affected by the lawyer's own status as a defendant. Thus, the representation of other defendants may proceed under Rule 1.7(b) if each client is fully informed of the potential conflict and consents after consultation. The client should be informed not only of the potential conflicting interest with the lawyer but also of potential conflicts with other clients; of any limitations upon the attorney-client privilege that may arise from the representation of multiple parties in a common defense; and of any limitations upon the lawyer's exercise of professional judgment that may result from efforts to coordinate the defense of 27,500 defendants.
Given the scope of the proposed lawsuit, we note also the practical implications of communicating with large numbers of clients. A lawyer is required to keep every client "reasonably informed" about the status of a matter under Rule 1.4. This requirement is not waived when there are large numbers of clients. The lawyer, therefore, should make some appropriate arrangements to communicate with all clients regularly, regardless of the number represented.
2. We noted in S.C. Bar Advisory Opinion 92-03 that it is a matter of law as to whether a lawyer-client relationship exists between a title insurance agent and the insurance company. We assumed there as we do here that there is no such relationship. Any potential conflict created by an agent also serving as defense counsel for a landowner, therefore, also is governed by Rule 1.7(b). As in our answer to the first question, it is important that the objectives of both the title insurer and of any landowner appear identical, at least at the outset. Therefore, we again do not believe that it would be unreasonable for a lawyer to conclude that the duties owed by the lawyer as agent of the insurer would not adversely affect the representation of defendant landowners. The lawyer may then proceed with the representation with the consent of the client.
The client should be made aware of the lawyer's role as agent and of the possibility that a conflict might later arise if a settlement offer was acceptable to either the client or the insurer, but not the other. Since the lawyer would not be representing the insurer, however, we do not believe that even that event alone normally would require the lawyer to withdraw as counsel to a landowner.
The client also should be advised that if the client had a related claim arising out of some earlier alleged irregularity in the issuance of title when the land was purchased, the lawyer's independent professional judgment in recommending the pursuit of that claim could be affected adversely.
If the lawyer acted as title agent at the closing or represented the client and failed to recommend the purchase of title insurance, the lawyer might be required to withdraw from representing the client at the time that any claim by the client against the lawyer or insurer became apparent. The client should be aware at the outset of the likelihood of any such withdrawal and of any adverse affect upon the client if it should occur.
If the lawyer would be a necessary witness in a matter the lawyer should not ac as an advocate in that matter (See Rule 3.7).