Skip to: Site menu | Main content

John T. Floyd Law Firm
Board Certified Houston Criminal Lawyer


“Serious Criminal Defense Throughout Texas”

Board Certified Criminal Law Specialist
Experienced Criminal Trial Lawyer
Federal And State Criminal Defense

Phone #  (713) 224-0101
Toll Free 1-866-374-1327
E-mail jfloyd@JohnTFloyd.com

Board Certified-Criminal Law-Texas Board of Legal Specialization
Top Lawyers: Criminal Defense - 2008, 2009, 2010 HTexas

 

Conflict of Interest and Joint Representation

Representing Executives, Board Members and Employees of Corporations and Businesses under Investigation by Department of Justice, Federal Law Enforcement and Regulatory Agencies

June 23, 2011

JOINT REPRESENTATION: THE PITFALLS OF UNCHECKED CONFLICTS OF INTERESTS

Identifying Conflicts when Representing Businesses and their Employees

By: White Collar Criminal Lawyer John Floyd and Paralegal Billy Sinclair

Issues surrounding joint representation by attorneys in criminal cases are fairly straightforward. The U.S. Supreme Court three decades ago, in Cuyler v. Sullivan, held that a defendant in a criminal case may demonstrate a denial of effective representation of counsel, guaranteed under the Sixth Amendment, by satisfying a dual criteria: 1) defense counsel was actively representing conflicting interests, and 2) the conflict(s) had an adverse impact on counsel’s performance while representing the defendant.

Rule 44 of the Federal Rules of Criminal Procedure permits a trial court in cases where multiple defendants are represented by the same counsel to promptly hold a hearing to determine the existence of potential conflicts and to advise each defendant of their right to separate representation. The trial court’s failure or refusal to conduct a Rule 44 hearing is not reversible error unless it is established that there was an actual conflict of interest. That’s because Rule 44 is not a mandatory “shall” statute prohibiting the joint representation in a criminal case because such representation is not per se violation of the right to effective assistance of counsel.  Although the statute does not use a mandatory “shall,” lawyers who represent clients with potential conflicts are treading on very thin ice and should seriously consider referring one of the clients to another lawyer, possibly working under a joint defense agreement.

Joint representation in quazi-criminal situations, such as government regulatory investigations, is far more complex and complicated.  This is especially so in cases where an attorney represents both a corporation and its individual officers, or employees, in government investigations or court proceedings. This was underscored in a 2009 United States District Court ruling in the case of United States v. Nicholas involving the suppression of privileged communications. In 2006 the law firm of Irell & Manella LLP (“Irell”) undertook joint representation of Broadcom Corporation (“Broadcom”) and its Chief Financial Officer, William J. Ruehle. Irell was representing Broadcom in an “internal investigation of its stock option granting practices” while simultaneously representing Ruehle against two shareholder lawsuits.

More...

When a corporation or other type of business entity is being investigated by federal authorities, or local law enforcement, the company will typically hire a law firm to help protect its interests, which often is intended primarily to protect the company’s image, existence or its assets.  The individuals who make up the business, such as its executives, board members, and employees may also find themselves being questioned or investigated by regulators or law enforcement.  Often the individual cannot, and should not, be represented by the company’s law firm due to a potential conflict of interest.

Usually, an investigation of a company will have a high degree of cooperation between the company and investigators.  This is because cooperation, rapid resolution and good press relations are usually in the best interest of the company.  Additionally, the United States Department of Justice and the Securities and Exchange Commission have both adopted guidelines that encourage companies to cooperate, and to disclose wrong doers, by giving leniency to those companies that cooperate fully.  Therefore, while cooperation can be highly beneficial to the company, it is often inconsistent with the best interest of the individual, who can face serious individual criminal exposure, fines and even incarceration

If a company decides that it is in its best interest to cooperate with investigators, it may ask its employees to cooperate as well.  Because the company’s interest and those of the individual are obviously different, an inherent conflict of interest usually exists.  It is therefore almost always advisable that the individual have an independent attorney, whose sole responsibility is to protect his client’s interests.

Because the individual should not, and in most cases cannot, be represented by the company’s law firm, she will need an independent attorney that will look out for her interests, while allowing her to continue to cooperate while being supportive of the company, assuming this is in her the best interest.

Bottom line, if you are being specifically targeted in an investigation of company, demand your own lawyer.  Demand a lawyer who is dedicated to protecting your rights and interests above all others, even the company’s.  Demand a Lawyer who has no conflict of interest, real or perceived.  While hiring your own lawyer does not mean that you intend to hurt the company, it does mean that you will be represented by a lawyer who only has your interest to protect.

Board Certified Criminal Defense Lawyer John Floyd has successfully represented executives and employees in criminal investigations of corporations, companies and businesses accused of violating criminal or regulatory statutes.
 
Conflicts of Interest under the Texas Disciplinary Rules of Professional Conduct

Rules 1.06 through 1.09 of The Texas Disciplinary Rules of Professional Conduct (“TDRPC”) govern attorneys’ approaches to actual and potential conflicts of interest. 

Conflicts of Interest Involving Current Clients

Rule 1.06(a) states that an attorney cannot represent opposing parties to the same litigation; in other words, an attorney cannot represent both the plaintiff and the defendant.  In criminal investigations and prosecutions this almost never poses a problem.  However, Rule 1.06(b) further prohibits representation when representation:

(1) involves a substantially related matter in which that person's interests are materially and directly adverse to the interests of another client of the lawyer or the lawyer's firm; or

(2) reasonably appears to be or become adversely limited by the lawyer's or law firm's responsibilities to another client or to a third person or by the lawyer's or laws firm's own interests.

In other words a lawyer cannot represent two clients if their interests might become adverse to each other.  Furthermore, a lawyer cannot accept representation of a client if it reasonably appears that the lawyer will not be able to fully represent the client to a conflict with the personal interest of the lawyer, another client, or to a third person.

There is an exception under Rule 1.06(c) to this prohibition, and it is very narrow.  If the attorney reasonably determines that representation of both clients will not be materially affected, and both clients consent to the representation after a full disclosure of the existence, nature, implications, and possible adverse consequences of the common representation.  In most criminal investigations, however, attempting to represent two clients in the same investigation, or litigation, is not advisable and should be avoided. 

Rule 1.06 covers a few more general concepts regarding representing multiple parties in a related matter.  Most significant is the prohibition against representing any of the parties in a dispute subsequently arising out of the matter, if the lawyer has represented multiple parties in the matter or related transaction.  This means the lawyer is “conflicted out” of representing any one of the parties in a matter arising from the matter after which the lawyer representing multiple parties.  This alone is sufficient reason for the potential clients to refuse joint representation because the clients will have to hire new counsel and thus will lose the time and expense associated with the lawyer’s prior work.

Violating the prohibition against conflicts of interest can have very severe effects to our clients and our firm.  First, if we agree to jointly represent multiple parties and later a conflict of interest develops between them, we must withdraw from our representation, causing a potentially significant loss of time and money for the clients.  Second, if one lawyer of a firm is prohibited from engaging in representation because of prior representation of a conflicted client, no other lawyer in the firm may represent the client either.  TDRPC 1.06(e)-(f).  This is partly because the Supreme Court of Texas has refused to accept the concept of  the “Chinese Wall,” which is a fictitious partitioning of a conflicted lawyer from other lawyers in a law firm, that theoretically prevents the sharing of confidential information to that lawyer, in order to allow representation by other lawyers in the firm; this is because there is a conclusive presumption that confidences and secrets are shared with other members of the attorney’s firm, due to the interplay among lawyers who practice together.  Phoenix Founders v. Marshall, 887 S.W.2d 831, 833-35 (1994), citing Petroleum Wholesale, Inc. v. Marshall, 751 S.W.2d 295 (Tex.App.—Dallas 1988, orig. proceeding).  “One reason for this presumption is that it would always be virtually impossible for a former client to prove that attorneys in the same firm had not shared confidences.  Another reason for the presumption is that it helps clients feel more secure.  Also, the presumption helps guard the integrity of the legal practice by removing undue suspicion that clients' interests are not being fully protected.”  National Medical Enters. v. Godbey, 924 S.W.2d 123, 131 (Tex. 1996) (internal citations omitted).

Conflicts of Interest Involving Former Clients

The admonition against representation of parties with adverse interests to an attorney’s current client applies in cases where a potential client has adverse interests to an attorney’s former client, as well.  Unless prior consent is secured, an attorney who has formerly represented a client in a matter cannot thereafter represent another person in a matter adverse to the former client:

Tex. Disciplinary R. of Prof. Conduct 1.09(a).

Furthermore, when lawyers are or have become members of or associated with a firm, none of them shall knowingly represent a client if any one of them practicing alone would be prohibited from doing so by the previous concerns.  TDRPC 1.09(b).

Finally, when the association of a lawyer with a firm has terminated, the lawyers who were then associated with that lawyer shall not knowingly represent a client, if the lawyer whose association with that firm has terminated would be prohibited from doing so, or if the representation in reasonable probability will involve a violation of Rule 1.05 (confidentiality).  TDRPC 1.09(c).

Conflicts of Interest Involving Government Employees Going into the Private Sector

Quite often, a prosecutor or other government lawyer will leave the public arena and go into private practice, either as a solo practitioner, or as a member of a law firm.  There are specific conflict of interest rules that apply to these attorneys.

First, subject to exceptions, an attorney may not represent a private client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee, unless the appropriate government agency consents after consultation.  TDRPC 1.10(a).

Furthermore, no attorney in a firm in which such an attorney is associated may knowingly undertake or continue representation in such a matter unless

TDRCP 1.10(b).

Additionally, an attorney having information that he knows, or should know, is confidential government information about a person or other legal entity acquired when the attorney was a public officer or employee, may not represent a private client whose interests are adverse to that person or legal entity.  TDRPC 1.10(c).  This rule operates only when the attorney has actual as opposed to imputed knowledge of the confidential government information.  Id. 1.10, cmt. 7.

After learning that a lawyer in the firm is subject to such a bar with respect to a particular matter, a firm may undertake or continue representation in that matter only if the disqualified attorney is screened from any participation in the matter, and receives no part of the fee for representation.  TDRPC 1.10(d).

In addition, an attorney serving as a public officer or employee shall not:

TDRPC 1.10(e).

Texas Ethics Opinions Regarding Multiple Representation

While the previous rules of professional conduct may see relatively straight-forward, there are a number of instances where questions have arisen as to the propriety of representing multiple clients.  The State Bar of Texas will from time to time issue opinions regarding conflict of interest questions that are not easily resolved.  The following are a few opinions regarding conflicts of interest and how they should be handled.

Tex. Comm. on Professional Ethics, Op. 482, V. 57 Tex. B.J. 200 (1994).  In an instance where a law firm was hired by an insurance company to represent an insured and two of the insured’s former employees, a situation arose where one of the ex-employees began to complain of its employer, and directed the firm to cease representing it.  The ex-employee, in other words, demonstrated interests that were hostile to another party represented by the firm.  Therefore, there was a conflict of interest requiring the firm to withdraw from its representation of the employer and the remaining ex-employee.  The firm had to withdraw completely from the case because a law firm owes obligations to each client it represents, and it is bound to protect any confidence the firm received. To safeguard those confidences, the firm had to withdraw completely.

Tex. Comm. on Professional Ethics, Op. 487, V. 57 Tex. B.J. 304 (1994).  In a matter where a law firm was hired by Employer X and Employee Y to defend both against suit filed by Employee Z, the firm consulted with both X and Y prior to representation, explaining potential pitfalls of multiple representation.  It was agreed by the firm, X, and Y that there might be a remote possibility of a conflict of interest, and that if such a conflict arose that could damage X’s relationship with Y, then the firm would inform both X and Y of the conflict.  The firm would then withdraw from representation of Y and continue representing X.  It was determined that, if the law firm fully advised the employer and employee of the implications, any potential disadvantage or adverse consequences to the dual representation, and the consequences of the disclosure of confidential information before the agreement was executed, then:

Opinion 109, January 1955, 18 Baylor L. Rev. 238 (1966).  It would be improper for a district attorney to represent the State in a criminal proceeding against a father for child desertion, and at the same time to accept employment on behalf of the mother in a divorce proceeding.

Opinion 143, March 1957, 18 Baylor L. Rev. 255 (1966).  It would be improper for a district attorney to prosecute a defendant in a criminal proceeding growing out of a highway accident, and to also accept employment on a contingent fee basis on behalf of the victim of the accident to press a civil damage suit against the defendant.

Court Decisions on Multiple Representation

In re Seven-O Corp., 289 S.W.3d 384, 389 (Tex.App.—Waco 2009)
“[H]aving the same litigation strategy and the same theory of liability is not the test for determining whether parties are opposing.”  In other words, “the meaning of adversity is ‘broader than being ‘on the same side of the suit.’’”  Id. citing In re Roseland Oil & Gas, Inc., 68 S.W.3d 784, 787 (Tex.App.—Eastland 2001).  As the commentary to Rule 1.06(a) states: “The term ‘opposing parties’ as used in this Rule contemplates a situation where a judgment favorable to one of the parties will directly impact unfavorably upon the other party.”  Seven-O, 289 S.W.3d at 390.  In a situation where there is a third-party defendant, that third-party defendant “is generally an opposing party to the plaintiff, directly or indirectly, because a third-party defendant is or may be ultimately liable to the plaintiff for all or part of the plaintiff’s claim.”  Id.

Client Communication Confidentiality

One of the primary purposes for the prohibition on representation in the presence of a conflict of interest is to preserve client confidentiality.  And one of the keystones of the attorney-client relationship is the attorney-client privilege and the mandate that attorneys keep client communications confidential.  Confidential information includes both privileged and unprivileged client information.  TDRPC 1.05(a).  Unprivileged client information includes all information relating to a client or furnished by the client, other than privileged information, acquired by the lawyer during the course of or by reason of the representation of the client.  Id.

Generally, an attorney may not knowingly

TDRPC 1.05(b).

An attorney may reveal confidential information, however, in the following circumstances:

TDRPC 1.05(c).

Furthermore, a lawyer may reveal unprivileged client information.

TDRPC 1.05(d).

Additionally, when a lawyer has confidential information clearly establishing that a client is likely to commit a criminal or fraudulent act that is likely to result in death or substantial bodily harm to a person, the lawyer must reveal confidential information to the extent revelation reasonably appears necessary to prevent the client from committing the criminal or fraudulent act.  TDRPC 1.05(e).

Finally, an attorney must reveal confidential information when required to do so by Rule 3.03(a) (2), 3.03(b), or by Rule 4.01(b).  TDRPC 1.05(f).  Rule 3.03(a) (2) requires an attorney to not knowingly fail to disclose a fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act.  Rule 3.03(b) applies when an attorney has offered material evidence and then comes to know of its falsity.  The attorney must make a good faith effort to persuade the client to authorize the attorney to correct or withdraw the false evidence, and if such efforts are unsuccessful, the attorney must take reasonable remedial measures, including disclosure of the true facts.  Finally, Rule 4.01(b) requires an attorney not to knowingly fail to disclose a material fact to a third person when disclosure is necessary to avoid making the attorney a party to a criminal act or knowingly assisting a fraudulent act perpetrated by a client.

Keeping most information imparted to an attorney confidential, therefore, is of paramount importance to the legal system, and breaching those confidentialities should not be taken lightly. 

Subscribe in a reader

 

 

Board Certified

[ Back to top ]