The ABA/BNA Lawyers’ Manual on Professional Conduct™ is a trusted resource that helps attorneys understand cases and decisions that directly impacts their work, practice ethically, and...
A law firm engaged in sanctionable bad faith conduct in refusing to withdraw as counsel for a client that was suing a company the firm was representing in a different matter, the Ohio Court of Appeals, Ninth District, concluded March 28, approving an award of attorneys' fees against the firm (Carnegie Cos. v. Summit Properties Inc., Ohio Ct. App. 9th Dist., No. 25622, 3/28/12).
The court faulted the firm for trying to ignore or conceal the conflict while pressing the company to waive it, rather than acknowledging the problem and withdrawing. One of the involved lawyers and the firm's ethics counsel even went so far as to contact the company directly to seek a conflict waiver despite knowing that it was represented by other counsel in the matter, Judge Donna J. Carr pointed out. The firm was ordered to pay nearly $80,000 in attorneys' fees to the complaining company.
Ulmer & Berne, a Midwest-based law firm with some 180 lawyers, was sanctioned for its conduct when faced with a conflict between two business clients, Carnegie Cos. Inc. and Summit Properties Inc.
While one lawyer in the firm, Bob Karl, was advising Carnegie about environmental concerns relating to a property known as Frontier Shopping Center, another lawyer in the firm, Stuart Laven, was representing Summit in a lawsuit claiming that Carnegie defrauded Summit in a real estate deal.
According to the court, Carnegie's lawyers in the Carnegie-Summit matter notified Laven about the conflict, but Ulmer & Berne did not withdraw. Ultimately Carnegie formally raised the conflict issue by filing a motion for disqualification.
The trial court disqualified Ulmer & Berne from continuing to represent Summit in the litigation. It also held Summit and the law firm jointly and severally liable to Carnegie for $79,856.26, to cover the attorneys' fees Carnegie incurred in pursuing the motion to disqualify.
The court of appeals affirmed, concluding that the law firm acted in bad faith and that sanctions were therefore warranted.
The trial court found that when Ulmer & Berne became aware of the conflict, it took steps to make sure there was no record of its representation of Summit in the Carnegie-Summit matter so that no conflict of interest was apparent within the firm. Moreover, the judge found, the firm persisted in its position that there was no conflict requiring a waiver, and allowed Laven to make the decision regarding how to proceed despite his personal interest in continuing Summit's representation.
The appeals court said credible evidence supported the finding that Ulmer & Berne acted in bad faith in failing to voluntarily withdraw from representing Summit in the Carnegie-Summit matter. Both Karl and Laven delayed opening new matters when they began representing Carnegie and Summit, despite previous discussions indicating they were aware of each other's involvement with those clients.
Both of them knew of the other's involvement with their respective client but failed to acknowledge the conflict situation, even after Carnegie's counsel in the Carnegie-Summit matter made several informal attempts to get Ulmer & Berne to withdraw, the court said.
Laven testified that he did not open a new Summit matter because he believed the Carnegie-Summit matter would be resolved easily; Karl testified that he did not recognize Carnegie as a current client. Emphasizing that the trial court did not credit this testimony, Carr said there was “competent, credible evidence to demonstrate that multiple attorneys at Ulmer & Berne acted to ignore or conceal the underlying conflict.”
This court concludes that a law firm that is aware it is representing a client in a matter which is directly adverse to the interests of another of its current clients, yet appears to act to conceal evidence of the adverse representation, is acting with a dishonest purpose, conscious wrongdoing, and in breach of a known duty premised on an ulterior motive. A refusal to withdraw from representation of a seemingly more important or lucrative client under such circumstances evidences an ulterior motive to put firm revenue and/or prestige above the interests of other clients.
The court also faulted Ulmer & Berne for pressing Carnegie to waive the conflict instead of withdrawing from Summit's representation.
Carr pointed out that two members of the law firm--including its ethics attorney--contacted the president of Carnegie directly, bypassing Carnegie's counsel of record in the Carnegie-Summit matter, in efforts to obtain a conflict waiver so that Ulmer & Berne could continue to represent Summit.
We … conclude that a firm which is aware of its representation of directly adverse clients in separate matters, yet seeks a waiver of the conflict directly from one client despite the firm's knowledge that the client is represented by counsel from another firm, is acting in bad faith. By bypassing opposing counsel, the firm acts with a dishonest purpose, moral obliquity, conscious wrongdoing, and in breach of a duty premised on an ulterior motive to obtain a benefit or advantage it could not otherwise obtain.
It also declared that “a firm's designated ethics attorney, who has no involvement in the representation of either client, clearly demonstrates bad faith when he contacts a client he knows to be represented by another firm in an effort to obtain a conflict waiver from that client.”
Deborah J. Michelson of Miller Goler Faeges, Cleveland, represented Carnegie. The appellants were represented by Orville L. Reed III of Buckingham, Doolittle & Burroughs, Akron, Ohio, and James A. Deroche of Seaman Garson, Cleveland.
Full text at http://op.bna.com/mopc.nsf/r?Open=kswn-8tel4x.
Copyright 2012, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)