CO-COUNSEL/JOINT DEFENSE
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A. Introduction
The term "co-counsel" as used here means two or more
unaffiliated lawyers representing the same party in the same matter. This
could involve "lead counsel" assisted by "local counsel," or
it could involve a client's principal law firm bringing in a lawyer with unique
expertise from another law firm. In contrast, "joint defense" refers to the situation where
different lawyers represent different parties in the same proceeding. They
agree that they have enough in common to share resources, strategy, and
confidential information. They do not, however, agree to be
"co-counsel" for the same party or parties. The concepts are
treated together here because they are occasionally grouped together by courts
in analyzing issues before them. See, for example, the discussion of Essex
in Part C following.
B. Co-Counsel Disqualification
Issues
Lawyer A represents Client X in a
lawsuit. Lawyer A would like to use the expertise of Lawyer AA, who
is in a different firm, Firm AA, in the case. Lawyer AA and Firm AA
sign on as co-counsel for X. While the case is pending, the other
side, Y, moves to disqualify Lawyer A because Lawyer A used to represent Y
in matters similar to the pending one. Y claims that in the prior
representations Lawyer A would have gained confidential insights about Y
that Lawyer A could use to Y's detriment in the pending matter.
Lawyer A and Client X do not wish to contest the motion, so Lawyer A
withdraws, leaving Lawyer AA to represent X. Now, Y moves to
disqualify Lawyer AA and Law Firm AA, because of their status as
co-counsel to Lawyer A.
Virtually all courts that have
addressed this issue have held that the relationship of co-counsel does
not automatically result in the disqualification of one because of the
conflict of the other. These courts hold that if the disqualified
lawyer has not conveyed prejudicial information about the aggrieved party to
co-counsel, co-counsel is not disqualified. Examples are as follows:
Smith v. Whatcott, 774 F.2d 1032 (10th Cir. 1985); Panduit Corp.
v. All States Plastic Mfg. Co., 744 F.2d 1564 (Fed. Cir. 1984); Brennan's
Inc. v. Brennan's Restaurants, Inc., 590 F.2d 168 (5th Cir. 1979); Akerly
v. Red Barn System, Inc., 551 F.2d 539 (3d Cir. 1977); American Can Co.
v. Citrus Feed Co., 436 F.2d 1125 (5th Cir.) reh'g denied, (1971);
United States v. Ligas, 2006 U.S. Dist. LEXIS 31656 (N.D. Ill. May
10, 2006); Wheeler v. Siegelman, 2007 Ala.
LEXIS 86 (Ala. May 18, 2007); Baybrook
Homes v. Banyan Constr. & Dev., 991 F. Supp. 1440
(M.D. Fla. 1997); In re Airport Car Rental Antitrust Litigation, 470 F.
Supp. 495 (N.D. Cal. 1979); Realco
Services, Inc. v. Holt, 479 F. Supp. 867 (E.D. Pa. 1979); Ex
parte Terminix Int'l. Co., L.P., 736 So. 2d 1092 (Ala. 1998); Frazier
v. Superior Court, 118 Cal. Rptr. 2d 129
(Cal. App. 2002); and Brown
v. Eighth Judicial Dist. Court, 14 P.3d 1266 (Nev. 2000).
Restatement
§ 123 cmt. c(iii) illus. 2 takes this majority
view.
The court in Fund of Funds, Ltd. v. Arthur
Andersen & Co., 567 F.2d 225 (2d Cir. 1977) departed somewhat from
the majority view. The court felt the relationship between
co-counsel was so close in that particular case, that just being in a
position to receive client confidences meant that co-counsel should be
disqualified. For a similar result see Burnett v. Olson, 2005 U.S. Dist. LEXIS 4849 (E.D. La. March 18,
2005) (court noted majority view and Brennan's Inc., but troubled
by seriousness of claims against other party). Patriot Scientific Corp. v.
Moore, 2006 U.S. App. LEXIS 9285 (Fed. Cir. April 12, 2006) and Pound
v. Cameron, 36
Cal. Rptr. 3d 922 (Cal. App. 2005), also take the minority
view, but for no good reason.
Party walks away from a
common interest arrangement, and does not conflict out opponent's law firm.
Roush v. Seagate Technology, LLC,
58 Cal. Rptr. 3d 275 (Cal. App. 2007)
.
Treatise.
Hazard & Hodes § 14.6.
C. Joint Defense Arrangements - "Switching Sides"
X and Y are defendants in a lawsuit.
They each have their own lawyers, A and B, respectively. They believe
their interests are close and enter into an agreement to share resources,
strategy, and confidential information. They meet several
times. At the conclusion of that lawsuit, X decides to sue Y in a
matter arising out of the same facts that were involved in the first
case. Lawyer A files the complaint on behalf of X. Y moves to
disqualify Lawyer A because of the earlier joint defense agreement.
In the following cases the courts held that,
absent receipt of the other party's confidences in the joint proceeding, a
lawyer in A's position would not be ethically precluded from bringing the
action: Wilson P. Abraham Construction Corp. v. Armco Steel Corp.,
559 F.2d 250 (5th Cir. 1977); Avocent
Redmond Corp. v. Rose Electronics, Inc., 2007 U.S. Dist. LEXIS 76085 (W.D.
Wash. Oct. 9, 2007) (court also found that there had been no joint defense
agreement); Clean
Investments, LLC v. DiSanto, 489 F. Supp. 2d 100
(D. Me. 2007); GTE North, Inc. v. Apache Products Co.,
914 F. Supp. 1575 (N.D. Ill. 1996); Kaskie v. The Celotex Corp.,
618 F. Supp. 696 (N.D. Ill. 1985) (lawyer may even represent a new plaintiff in
a new case against non-client member of arrangement); IMC Global, Inc. v. Moffett (In
re IMC Global, Inc.), 1998 Del. Ch. LEXIS 224 (Del. Ch. 1998); and Associated
Wholesale Grocers, Inc. v. Americold Corp., 975 P.2d 231 (Kan. 1999).
In GTE North the court found that the lawyer had, in fact, learned
the other party's confidences during the joint proceeding, and
disqualified the lawyer and his entire firm. In United
States v. Henke, 222 F.3d 633 (9th Cir. 2000), the issue
was not whether a lawyer could sue a member of a joint defense
arrangement. The issue was whether the lawyer could cross examine
the member. Pursuant to the joint defense arrangement, the parties had
exchanged confidences. Because the lawyer could not cross examine the
member, his client's conviction was reversed.
In In re Sharplin, Jr., 2006 Tex. App. LEXIS 6834 (Tex. App. Aug. 3,
2006), the court was dealing with a lawyer who had changed firms. He was
party to a joint defense agreement in an earlier case, which was substantially
related to this case. He joined the law firm, which was adverse to one of
the parties to the joint agreement in the earlier case. The court,
citing Nat. Med. Enterprises, Inc. v. Godbey, 924 S.W.2d 123 (Tex. 1996), said there was an
irrebuttable presumption that he shared information from the earlier case with
his new partners and disqualified the firm.
The following case reflects
the majority. A manufacturer
brought a declaratory judgment
action against six insurance companies that have denied the manufacturer
coverage for a loss. Each insurance company hired its own law
firm. They entered into a joint defense agreement. The plaintiff
moved to disqualify all the law firms, because one of them formerly
represented the plaintiff and thereby knew all about the plaintiff.
That law firm withdrew. Did the joint defense agreement mean that
all the law firms must be disqualified? That was what the
magistrate held in Essex Chem. Corp. v. Hartford Accid. &
Indem. Co., 975 F. Supp. 650 (D.N.J. 1997). The district judge
reversed the magistrate, Essex Chem. Corp. v. Hartford Accid. &
Indem. Co., 993 F. Supp. 241 (D.N.J. 1998). The district judge
held that being part of a joint defense arrangement does not alone cause a
lawyer to be disqualified. Only lawyers who became privy to the
aggrieved party's confidences should be disqualified. The judge
remanded to the matter to the magistrate to make findings on whether that
had occurred.
In the second Essex opinion the court relied
on the co-counsel cases, many of which appear at Part B above. Surely, if a lawyer is to be permitted to bring an action against one of
the parties to an earlier joint defense arrangement, that lawyer lacks
sufficient confidential information to cause disqualification in an Essex-like
situation.
Cites Essex.
In re Gabapentin Patent Lit., 407 F. Supp. 607 (D.N.J.
2005). This is a multi-district patent infringement case.
Law Firm P represented one of the plaintiffs.
There are five defendants, D1, D2, D3, D4, and D5.
Law Firm D represents D1. Lawyers
X and Y were with Firm D and had principal responsibility for the representation
of D1 in this case. D1 had a joint
defense agreement with D2, D3, D4 and D5. While
with Firm D, and pursuant to the joint defense agreement, X and Y became privy
to many confidences of the other defendants.
X and Y left Firm D to join Firm P.
Firm P obtained D1’s consent to bring in X and Y, provided a screen be
created. That happened, but then
D2, D3, D4, and D5, parties to the joint defense agreement, but not
parties to D1’s consent, moved to disqualify Firm P.
The court granted the motion. The
essential holding was that because X and Y had actually become privy to
the defendants’ confidences pursuant to the joint defense agreement, Firm P
should be disqualified, notwithstanding the screen and D1’s consent.
This is consistent with the majority rule in the joint defense cases.
ABA Op. 95-395 (1995) ("Obligations of a Lawyer
Who Formerly Represented a Client in Connection With a Joint Defense
Consortium") takes the approach of the above cases. The ABA
Committee said that if the lawyer had received other parties' confidences
while acting jointly, the lawyer would be disqualified in being adverse to
the other party. The Committee said that the lawyer owed no duty to
the other party under the legal ethics rules. It said that as a
matter of agency law, if the lawyer's client had a fiduciary obligation to
maintain the other parties' confidences, the lawyer, as the client's
agent, was likewise precluded from using or disclosing the
information. That could, of course, result in the lawyer having
to refuse the representation.
This is also the approach of the Restatement.
See § 132, cmt. g(ii).
What about "common counsel"?
In City of Kalamazoo v. Michigan Disposal Serv. Corp.,
125 F. Supp. 2d 219 (W.D. Mich. 2000), a law firm had been
characterized as "common counsel" for several parties in an environmental suit.
When the firm later attempted to be adverse to one of those parties in a related
environmental action, the court held that the firm had a conflict.
Joint defense with insurance carrier. In
re Skiles, 102 S.W.3d 323 (Tex.
App. 2003). Skiles sold
property to Bridecam. Bridecam has
now sued Skiles for fraud. Bean is
Bridecam’s lawyer in this case. After
this case began, Bean joined the Chambers firm. For that reason, Skiles has moved to disqualify the Chambers
firm. This is because the Chambers
firm has previously represented Skiles’ insurance carrier in a coverage
dispute arising out of this case. The
trial court denied the motion. The
Appellate Court reversed because Skiles’ lawyer had communicated with the
Chambers firm pursuant to the joint defense privilege.
Skiles claims this included Skiles’ confidential information, which
Bridecam did not deny.
Distinction between cooperation clause and joint defense agreement.
Great
American Ins. Co. v. Christopher, 2003 U.S. Dist. LEXIS 10076 (N.D.
Tex. June 13, 2003). Court held that where communications took place
pursuant to the cooperation clause in a D&O policy, the lawyer for the
insurance company can be adverse to the insured in an action to rescind the
policy. The court refused to adopt the joint defense analogy.
No fiduciary duty among
co-counsel, but indemnification for malpractice damages is allowed.
Beck v. Wecht, 48 P.3d 417 (Cal. 2002). Michael and Ronald Stephens hired Daniel Beck to represent
them in a product liability suit against General Motors. Beck
brought in Ronald Wecht as local counsel. They both were on a
contingent fee agreement. During trial GM offered $6 million to
settle the case. Nevertheless, the case went to the jury, which
found for GM. Beck sued Wecht for not conveying the settlement
offer, thereby depriving Beck of his contingent fee. Reconciling a
conflict between two California appellate courts, the California Supreme
Court disallowed the claim, holding that co-counsel do not have fiduciary
duties to one another. However, on the
same day, in Musser v. Provencher, 48 P.3d 408 (Cal. June 27, 2002), the court held that the policies that prohibit
co-counsel from suing each other for breach of fiduciary duty do not apply
where one seeks indemnification from the other in a malpractice damages
context.
Treatise.
Hricik
on Ethics.
Law Review. Howard M. Erichson,
Informal Aggregation: Procedural and Ethical Implications of Coordination among Counsel in Related
Lawsuits, 50 Duke L. J. 381 (2000).
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