ETHICS OPINION 557-1968 CONFLICTING INTERESTS APPEARANCE AS WITNESS

Opinion Number 557

NUMBER 557

QUESTION.

Your opinion is requested in connection with the following problem:

 

In 1963 this firm represented a corporate c1ienc in negotiating an agreement with various other parties Pursuant to this agreement a sum of money was deposited in escrow with two individuals pending the resolution of certain tax questions connected with the transaction These questions have now been resolved and the escrow agents desire to make distribution of the sums being held by them pursuant to the agreement However a dispute has arisen among the various parties to the agreement as to the proper division to be made of the escrow funds

 

In the interim, our client filed a Petition for an Arrangement under Chapter XI of the Bankruptcy Act New interests acquired the corporation and we no longer represent <Text not Clear>

 

The escrow agents have requested this firm to represent it in an action in interpleaded. The escrow agents claim no interests in the funds and will seek merely to determine the proper parties to whom payment should be made, so that they may be discharged It is quite probable that during the course of that action the undersigned will be called upon to testify as to the intent of the agreement. As a result, it is our thought that the litigation should be handled entirely by my partner We would, of course, obtain the approval of our former client in advance of commencing the action

 

If your opinion is that it will not be proper tor us to act in this matter, we would then appreciate your opinion as to whether an attorney associated with this firm, whose name appears as an associate upon our letterhead may act as attorney for the escrow agents in his own name and on his own behalf This attorney did not in any way participate in the transaction which gave rise to the escrow In addition to being associated with this firm, he also conducts his own independent practice and would represent the escrow agents in the course of such independent practice, without participation by this firm in the fee which would be charged.

 

ANSWER.

 

While it is axiomatic that one who was formerly counsel to a corporation may not generally accept employment from those with interests adverse to the corporation, two factors would seem to make this interdiction inapplicable to the inquiring attorney First, the attorney states that he would of course, obtain the approval of the former client. Canon 6, which forbids the representation of conflicting interests makes an exception where there is “express consent of all concerned given after a full disclosure of the facts”. This committee has held, for example, that the lawyer of the creates of an insolvent any, with this creditor’s consent represent other creditors in having proceedings set aside because of fraud and collusion in which the first client was involved (opinion 75). opinion Number 389 also recognized that express consent will permit an attorney who has represented one client to accept employment against him in a subsequent phase of the matter brings up to the second basis for deeming proper the acceptance of the representation of the escrow agent, In acting for the escrow agent, the stakeholder of a fund deposited with it, the attorney is not truly representing an adverse interest since this client’s only interest in the fund is in seeing to its proper distribution, There is no occasion to tale sides, (See Drinker, Legal Ethics, page 113).

 

It is assumed that the inquiring attorney will be guided by Canon 19 “Appearance of Lawyer as fitness for His Client” and that if it is unavoidable that he appear as a witness he will arrange to leave the trial of the case to other counsel not in any way associated with is office.

 

February 15, 1968