Panel Fractures Over Whether Adversaries May Waive Conflict to Hire Same Law Firm

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By Joan C. Rogers  

Oct. 18 --A trial court got it right in ruling that a law firm could not represent defendants in a personal injury action while also representing the plaintiff's employer in asserting a lien on any recovery the plaintiff receives in the lawsuit, the Florida District Court of Appeal, First District, decided Oct. 9 (Anheuser-Busch Cos. v. Staples, 2013 BL 280310, Fla. Dist. Ct. App. 1st Dist., No. 1D13-1038, 10/9/13).

The three judges on the appellate panel produced three opinions that spotlight the question whether clients' consent makes it permissible for a law firm to represent parties that have divergent interests but still want to hire a single firm to represent them.

Although the majority opinion does not directly address the issue, Chief Judge Joseph Lewis Jr. said in dicta that it was unreasonable for the law firm to believe it could adequately represent the premises liability defendants while concurrently representing the plaintiffs' employer in pressing a workers' compensation lien on the plaintiff's recovery.

Another panel member, concurring, insisted that the conflict of interest facing the law firm was nonconsentable because its clients were adversaries in litigation.

In dissent, another judge argued that the clients' consent cured the conflict in the procedural posture of this case, which had been sent to mediation. It is reasonable for a law firm to believe it will be able to provide solid representation to sophisticated corporate businesses that have voluntarily waived any conflict in writing, he contended.

Defense Counsel Must Exit

Christopher Staples was injured while working for his employer, Container Corp., and he received workers' compensation benefits from Container, which was self-insured. Staples subsequently sued the companies that owned the brewery where the accident occurred, Anheuser-Busch Cos. and Anheuser-Busch, Inc.

Fernandez Trial Lawyers, P.A., entered an appearance for the defendants in the action. The firm also filed a notice of lien on behalf of Container in which the company asserted that it has paid workers' compensation benefits to Staples and is entitled to reimbursement from any recovery he may receive from the defendants.

After the tort case was sent to mediation, Staples moved to disqualify the Fernandez firm on the ground that its joint representation of the defendants and the employer entailed a conflict of interest.

The trial court disqualified the firm from representing both the defendants and the employer on the ground that their interests were directly adverse to one another.

Although the firm provided the court with written consents executed by the clients, the trial court held that the conflict could not be waived under Florida Rule of Professional Conduct 4-1.7(b). It was unreasonable for the firm to believe that it would be able to provide competent and diligent representation to each affected client, the judge said, where representation of the defendants involved the assertion of a position adverse to the plaintiff's employer.

Rule 4-7.1(b) allows a lawyer or firm to represent a client notwithstanding the existence of a concurrent conflict involving another client if four conditions are met:

“(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

“(2) the representation is not prohibited by law;

“(3) the representation does not involve the assertion of a position adverse to another client when the lawyer represents both clients in the same proceeding before a tribunal; and

“(4) each affected client gives informed consent, confirmed in writing or clearly stated on the record at a hearing.”

 

Disqualification Order Stands

In a motion for rehearing, the defendants contended that their interests did not clash with those of the employer because the employer had agreed to indemnify them for any liability in the case. The trial court refused to change its ruling.

Nor did the defendants convince the appellate court to let the Fernandez firm keep representing them.

In the majority opinion, Lewis said the only issues the defendants raised on appeal were whether the plaintiff had standing to seek disqualification of the defendants' counsel and whether the indemnity agreement established that the defendants' interests were not fundamentally antagonistic to the interests of the plaintiff's employer.

Without delving into those questions in any detail, Lewis said that “we find no departure from the essential requirements of the law in this case.”

Dissent: Consent Cured Conflict

In dissent, Judge Scott D. Makar argued that the trial court was wrong under the circumstances to deny the defendants and the employer their choice of counsel.

Although joint representation of the defendants and the employer indisputably involved a conflict, he said, that did not end the analysis. The companies recognized the conflict, voluntarily agreed they both wanted the Fernandez firm to represent them, and explicitly waived the conflict in writing, he pointed out.

With regard to Rule 4-7.1(b)(1), Makar said it was clear legal error for the trial court to conclude that the firm could not reasonably represent multiple sophisticated corporate businesses that clearly asked the firm to represent them jointly and waived any conflict from the joint representation in writing.

“Multi-party representation may not be the norm, but it has become commonplace due to its significant benefits (and risks) that the parties may choose to bear,” Makar said, citing a 2005 law review article on ethical considerations in representing multiple parties in litigation.

Nothing indicated that the joint representation here was unreasonable, Makar said. He emphasized that Fernandez believed it could provide competent and diligent representation to the clients, and the companies concurred in that assessment. Moreover, plaintiff's counsel could not identify any prejudice arising from the joint representation, he said.

Makar also contended that the firm was not representing the clients in “the same proceeding before a tribunal” within the meaning of Rule 4-7.1(b)(3). A mediation is not a proceeding before a tribunal because no neutral official renders a binding legal judgment, he said, citing Comment [17] to Model Rule 1.7.

Applying the rule to mediation is inconsistent with the goal that mediation be a cost-effective way to resolve disputes, Makar argued. The disqualification order here had the effect of multiplying the costs for companies that were trying to reduce their legal expense by using one law firm, he said.

Majority: Clashing Interests

In the majority opinion, Lewis said the defendants did not raise the issues addressed by the dissent. But even if they had the disqualification order still would not be overturned, he said in a footnote.

It was unreasonable, Lewis said, for the law firm to believe it could provide competent and diligent representation to both Anheuser-Busch and the plaintiff's employer, because the defendants' interests would lie in minimizing the damages awarded to the plaintiff, while the employer's interest would lie in helping the plaintiff recover the maximum possible damages so that it could maximize the recovery on its workers' compensation lien.

Lewis also contended that Makar's focus on mediation as the procedural posture of the case was too narrow. The employer's notice of lien was filed in the underlying tort case, which was certainly “a proceeding before a tribunal” under Rule 4-7.1(b)(3), he reasoned.

Concurrence: Adversaries in Litigation

In his concurring opinion, Judge Robert T. Benton II said the disqualification order should not be quashed because the Fernandez firm was representing adversaries in litigation.

The employer's filing of its lien was the assertion of a position adverse to another client when counsel represents both clients in the same proceeding before a tribunal within the meaning of Rule 4-7.1(b)(3), he said.

“When clients are aligned directly against each other in the same litigation, the institutional interest in vigorous development of each client's position renders the conflict nonconsentable,” Benton said, citing the Restatement (Third) of the Law Governing Lawyers (2000).

This rule applies, he said, even if the parties themselves believe the common interests are more significant than the interests dividing them. While the parties might give informed consent to share counsel for purposes of negotiating their differences, the joint representation may not continue if the parties become opposed to each other in litigation, he added, citing the Restatement.

E.T. Fernandez III and Brian Sebaaly of Fernandez Trial Lawyers, P.A., Jacksonville, Fla., represented the Anheuser-Busch companies. Philip S. Kinney of Kinney & Sasso, P.L., Jacksonville, and Brett Hastings of Brett A. Hastings, P.A., Jacksonville, represented Staples.

To contact the reporter on this story: Joan C. Rogers in Washington at jrogers@bna.com

To contact the editor responsible for this story: Kirk Swanson at kswanson@bna.com


Full text at http://www.bloomberglaw.com/public/document/ANHEUSERBUSCH_COMPANIES_INC_and_ANHEUSERBUSCH_INCORPORATED_Petiti.

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