So Many Defendants - So Few Lawyers!
Issues Relating to Multi-Party Defense

Introduction

Representing more than one defendant in litigation is an inherent conflict of interest. The liability of one defendant/client over another likely turns on different facts and has different strengths and weaknesses. Moreover, prioritizing the defense of one client over another technically increases the exposure of the remaining defendants(s)/clients. Disclosing privileged information to shared counsel potentially waives attorney-client privilege within the defense team. And divisive issues may develop in the course of litigation that enhance existing, or create additional, conflicts of interest. Notwithstanding these perils, the combined defense of different clients is not per se prohibited in New York (and most jurisdictions). The propriety of such a defense will likely turn on two critical mechanisms: disclosure and consent.

The Ethical Framework

The controlling Rule in New York is Attorney Disciplinary Rule 5-105, more specifically, the first three sections of “DR 5-105.” This edition of our newsletter provides some basic guidelines to counsel and client when, for any variety of reasons, joint defense “teams” and representation of multiple defendants are being considered. DR 5-105 provides in pertinent part:

A. A lawyer shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under DR 5-105 (C).

B. A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer's representation of another client, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under DR 5-105 (C).

C. In the situations covered by DR 5-105 (A) and (B), a lawyer may represent multiple clients if a disinterested lawyer would believe that the lawyer can competently represent the interest of each and if each consents to the representation after full disclosure of the implications of the simultaneous representation and the advantages and risks involved. (emphasis added).

In sum, section “A” requires a lawyer to decline retainer or “instruction” if his/her exercise of independent professional judgment will be adversely affected or if the lawyer will represent differing interests.  Under section “B,” even a lawyer clearing the hurdle of the initial retention under section “A,” may be required to discontinue “multiple employment” if a conflict arises in the course of the multiple representation.  However, the critical section “C” allows the lawyer undertake or continue representing multiple clients in the face of potential adversity or conflict if: (1) a hypothetical “disinterested lawyer” would believe that the lawyer can competently represent the multiple clients; (2) the full potential conflict is disclosed to all clients; and (3) all of the potential clients consent to this multiple representation despite the disclosed conflict.

One Potential Structure

As can be seen above, multiple-party representation is more than a one-time inquiry.  In our view, a proposed retention by distinct and unrelated multiple defendants presents an initial conflict, requiring disclosure and consent under section “A”.  Moreover, the ongoing dynamic of litigation will require ongoing monitoring, and may well require updated consent as potential conflicts develop in the course of a given litigation pursuant to sections “B” and “C”.
 
In his excellent treatise on New York Professional Liability, Professor Roy Simon lists some of the benefits and perils of multi-party representation.  The benefits include better coordination, increased efficiency, and lower pro rata costs.  The potential perils include strategic disagreement among multiple clients, risk of perceived favoritism, and inefficiencies in the event a client refuses to waive a later conflict and insists on independent counsel.  Perhaps of greatest concern is the potential for a withdrawing team member to force the withdrawal of team counsel because of a conflict of interests, forcing the whole team back to square one with new counsel!  See SIMON’S NEW YORK CODE OF PROFESSIONAL RESPONSIBILITY ANNOTATED 555-56 (West 2003).
 
Faced with duplicative claims and cooperative clients (and their insurers[1]), what are some viable options to share defense costs and counsel while minimizing the risks that the whole thing will blow up at some later date?  Because New York law relies so heavily on a hypothetical “disinterested counsel,” we would propose that actual disinterested “conflicts counsel” be retained solely for the following purposes: (1) analyzing conflicts and potential conflicts; (2) drafting and securing appropriate waiver letters; (3) monitoring the litigation and events for purposes of advising of new or potential conflicts as they arise and securing updated waivers as necessary; and (3) providing independent advice to team members on potential conflicts and entitlement to independent counsel, thus buffering team counsel from potential “coalition busting” conflicts described above.[2]
 
Unfortunately, there is a dearth of case law and formal ethical opinions on shared defense, let alone the two-tiered approach described above.  Fortunately, there appear to be few “non-consentable” conflicts of interest, i.e., conflicts so severe that a client could not consent to joint representation.  One clear example of such a taboo conflict is, not surprisingly, representing both sides in the same litigation.  Query: What about cross-claiming co-defendants?  Although arguably not as divisive as representing both sides in litigation, some form of non-aggression pact would probably be a wise component of a multi-party defense and consent.

In Closing

This Newsletter touches upon just a few of the critical issues relating to multi-party representation.  No doubt, other mechanisms could be conjured to minimize the risks of a multi-party defense.  To further strengthen any team arrangement, we would recommend a comprehensive independent legal analysis of the proposed joint defense framework and, ideally, a formal advisory opinion from the appropriate bar association.  Obviously, the dual approach discussed above would add little efficiency to small cases with few team members and few common issues.  However, in a true multi-party context, two law firms as compared to say, ten, could offer considerable savings and efficiencies.  Assuming parties with common issues, defenses, and similar exposures, the potential benefits of a coordinated multi-party defense should not be left unexamined.

 [1] A separate issue beyond the scope of this newsletter is whether an insurer, pursuant to its right to control the defense and appoint counsel, could unilaterally binds its insured to multi-party defense.  This position is not without support, but the conservative and safer approach would be to obtain the consent of the insured.  For an outline of the critical quid pro quos of the attorney-insured-insurer tripartite relationship see our web site at www.alony.com/Archives/insuranceethics2.htm.
[2] Another potential avenue to prevent a withdrawing team member from forcing the collapse of the entire defense team would be to insist that joint defense team members, while maintaining their right to obtain independent counsel, waive their right to insist that team defense counsel withdraw in the event of later-developing conflicts.  Such an agreement does not appear inherently improper, but we are aware of no such agreement having been scrutinized judicially.