Unified Sewerage Agency of Washington County, Oregon, a Municipal Corporation and County Service District, on Behalf of and for the Use and Benefit of Teeples & Thatcher Inc., a Corporation v. Jelco Incorporated, a Corporation, and Seaboard Surety Company, a Corporation

Citations: 646 F.2d 1339; 1981 U.S. App. LEXIS 12756Docket: 78-1920

Court: Court of Appeals for the Ninth Circuit; June 1, 1981; Federal Appellate Court

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Jelco Incorporated, the prime contractor on a sewer plant project in Oregon, sought to disqualify the law firm Kobin & Meyer from representing Teeples. Thatcher Inc., a subcontractor, arguing that the firm was effectively suing its own client, violating the Oregon Code of Professional Responsibility. The trial judge denied this motion, leading Jelco to appeal, which was treated as a petition for mandamus by the Ninth Circuit.

Kobin & Meyer had a longstanding relationship with Teeples. Thatcher, having represented them for ten years. The dispute began in 1975 when Ace Electric Co., an electrical subcontractor, claimed additional compensation from Jelco, prompting Jelco to involve Kobin & Meyer in the litigation despite potential conflicts due to their prior representation of Teeples. Thatcher. In mid-1976, as tensions escalated between Jelco and Teeples, Kobin & Meyer indicated a preference to continue representing Teeples but also agreed to represent Jelco in the ongoing Ace litigation, a decision reaffirmed by Jelco's management despite the potential conflict.

Ultimately, after adverse liability findings in the Ace litigation, Kobin & Meyer filed a lawsuit on behalf of Teeples. Thatcher against Jelco. In May 1977, Jelco replaced its legal counsel and subsequently sought to disqualify Kobin & Meyer from representing Teeples. Thatcher in their case against Jelco, leading to the current appeal.

Denial of a motion to disqualify counsel is not an appealable order according to established precedent, including Cohen v. Beneficial Loan Corp. and Firestone Tire. This jurisdiction has occasionally treated appeals from such nonappealable orders as petitions for writs of mandamus under the All Writs Act, with the decision to do so hinging on extraordinary relief criteria established in Bauman v. United States Dist. Court. These criteria include the absence of other adequate means for relief, potential irremediable damage, clear legal error by the district court, repetitive errors or disregard of federal rules, and the introduction of significant new legal issues.

In this case, Jelco has no other means to seek relief as denial of disqualification is not appealable and certification under 28 U.S.C. 1292(b) is unavailable. Jelco risks irremediable harm by waiting until after the trial to appeal, as any advantage gained by Kobin Meyer through representation could be detrimental. Furthermore, if the district court erred in not disqualifying Kobin Meyer, that error warrants review.

The trial court assessed the situation under Canon 4, which addresses attorney conduct regarding former clients, prohibiting adverse representation if related to prior engagements. However, the case involves representation adverse to a current client, thus necessitating evaluation under Canon 5, which emphasizes the attorney's duty of undivided loyalty to all clients. Disciplinary Rule 5-105(B) is pertinent to these considerations.

A lawyer cannot continue representing multiple clients if their independent judgment on behalf of one client is likely to be adversely affected by their representation of another, unless permitted under DR 5-105(C). The Third Circuit in International Business Machines Corp. v. Levin established that adverse effects are presumed when an attorney represents clients with conflicting interests, without the need for specific adverse effect proof. In the case of Kobin. Meyer representing Teeples. Thatcher and Jelco, dual representation triggers DR 5-105(B) due to the presumed adverse impact on each client's representation.

To avoid disqualification under DR 5-105(B), an attorney must meet two conditions of DR 5-105(C): both clients must consent to the multiple representation after full disclosure of risks, and it must be "obvious" that the attorney can adequately represent each client's interests. The Oregon Supreme Court clarified in In re Boivin that "informed consent" requires full disclosure of all material facts and a detailed explanation of the conflict of interest, allowing clients to understand the need for independent counsel. 

Jelco claimed it did not give "informed consent" because Kobin. Meyer only informed it of the conflict without detailing the implications. However, the district court found that Jelco provided an informed and knowing waiver of any conflict. The record shows that Jelco was aware from the outset of Kobin. Meyer’s long-standing representation of Teeples. Thatcher and the potential conflict involved. Kobin. Meyer alerted Jelco's counsel of the conflict twice and received confirmation from Jelco's management that it wished to continue the representation. Thus, it is concluded that Jelco consented to the representation after full disclosure, satisfying the "consent" requirement of DR 5-105(C).

Adequate representation under DR5-105(C) necessitates more than consent after full disclosure; it requires that it be "obvious" a lawyer can adequately represent each client's interests. The Oregon Supreme Court, in In re Porter, highlighted the ambiguity of what constitutes "adequate representation," noting that the court did not need to address this requirement since full disclosure was not achieved. The Bar interprets DR5-105(C) as establishing a two-part test, asserting that consent only becomes relevant after the obvious capability of adequate representation is confirmed, which reflects a policy allowing differing interests to be represented only in rare circumstances. Supporting opinions from the Oregon State Bar and ABA emphasize the need for the adequacy requirement to be a separate standard. However, a literal interpretation of "obvious" complicates the representation of conflicting interests, particularly when a lawyer's independent judgment might be adversely affected. Historical context reveals that consent was intended to hold significance; Canon 6 of the 1908 Code allowed for multiple representation with client consent but was interpreted restrictively by courts, indicating that such representation is not always appropriate, especially when public interest or significant prejudice risks to one party are present.

Consent can justify representation that would otherwise be deemed improper under Canon 6 of the Code of Professional Responsibility. Historical opinions, such as Oregon State Bar's Opinion No. 57 (1957), illustrate that attorneys may represent both an insurance company and sue it on behalf of another client with consent. The California case Arden v. State Bar of California (1959) confirmed that an attorney's representation of both adopting parents and a natural mother was permissible with consent, despite subsequent conflicts.

Canon 6 allowed for multiple representation with "express consent," a clause the ABA committee declined to remove. The 1969 Model Code introduced Disciplinary Rule 5-105(C), which broadened the scope of permissible multiple representations. It stipulates that a lawyer may represent multiple clients if it is clear they can adequately represent each client's interests and if all clients consent after full disclosure of potential impacts on independent judgment.

This revised rule differs from Canon 6, which primarily addressed conflicting interests arising from an attorney's obligations to different clients. DR5-105(C) encompasses scenarios where one client's representation might adversely affect another's, requiring a more rigorous assessment of the attorney's capability to manage differing interests.

Case law under DR5-105(C) continues to support multiple representation under certain conditions of consent and disclosure. Examples include the Oregon State Bar's Opinion No. 218 (1972), which permitted an attorney to represent both parties in a childless divorce, and Fulton v. Woodford (1976), where consent allowed dual representation despite potential conflicts. Other cases, such as Matter of Farr (1976) and In re Hansen (1978), highlight the necessity of disclosures in conflict situations, while Matter of Kali (1977) and In re Taylor (1977) reaffirm the importance of consent in dual representation scenarios.

The discussion focuses on the structure and interpretation of DR5-105(C) within the Code of Professional Responsibility. It clarifies that client consent can justify actions that are otherwise improper in limited situations, as outlined in specific sections of the Code. Despite objections, DR5-105(C) remains intact, emphasizing that the mere foreseeability of a conflict does not necessitate clients to abandon their choice of attorney. The text acknowledges the court's role in maintaining public confidence in the judicial process but argues against imposing a blanket prohibition on clients hiring attorneys with potential conflicts, provided clients are informed of the risks. The balance between a client’s right to choose counsel and the need for undivided loyalty is emphasized, citing case law that supports client autonomy in these decisions. Furthermore, defining "adequate representation" under DR5-105(C) is complex, as it is generally deemed inadequate when public interest is compromised or significant prejudice is likely, with examples illustrating these limitations.

Determining adequate legal representation does not have a universally agreed-upon set of factors, but courts may consider the nature of the litigation, access to information, the client's ability to protect their interests, the complexity of the questions in dispute, and the involvement of governmental entities. The court examines whether a law firm can adequately represent clients with conflicting interests by referencing past cases. 

In the current case, the district court found no significant relationship between two litigations involving the same construction contract—one concerning contract interpretation and the other related to scheduling disputes. The court determined that Kobin. Meyer did not gain any unfair advantage from its representation in the first case that would affect the second. The findings, which were not clearly erroneous, noted that the facts in both cases were distinct and that the information provided by Jelco to Kobin. Meyer was limited in scope. 

The subsequent question was whether the district court abused its discretion in denying the motion to disqualify Kobin. Meyer. The standard for reviewing such a decision is based on whether the district court acted within its discretion, as it holds primary responsibility for regulating attorney conduct within its jurisdiction.

The district court did not abuse its discretion regarding Kobin. Meyer's representation of both Jelco and Teeples. Thatcher, as the nature of the litigation in the two cases differed significantly—one focused on contract interpretation and the other on disputed factual claims about performance—despite being covered by an overarching contract. There was no indication that Kobin. Meyer lacked specific information detrimental to Teeples. Thatcher's case against Jelco, aside from general client personality insights. Jelco, informed by its regular counsel, understood the risks associated with employing Kobin. Meyer. No evidence suggested that Kobin. Meyer would compromise the interests of one client to protect another, supporting the conclusion that adequate representation was possible. 

Regarding Canon 9, Jelco's claim that the multiple representation created an appearance of impropriety was addressed by clarifying that Canon 9 does not override the provisions of Canon 5, which permits multiple representation under certain conditions, including client consent and full disclosure. The district court's decision not to disqualify Kobin. Meyer was justified, as Jelco consented after being fully informed, and the court confirmed Kobin. Meyer’s capacity to represent both clients adequately. Therefore, the district court's ruling stands undisturbed.

The court affirmed the denial of a motion to disqualify the plaintiff's attorney in Cord v. Smith, emphasizing that federal courts are not mandated by state law regarding attorney conduct, as the attorney acts as an officer of the federal court. The U.S. District Court for the District of Oregon follows the State Bar of Oregon’s disciplinary rules, which align with the American Bar Association's Model Code of Professional Responsibility. The court noted that while these disciplinary rules guide the courts, they were not drafted for disqualification motions.

After the appeal was submitted, the appellee attempted to dismiss it based on Firestone Tire & Rubber Co. v. Risjord, which stated that mandamus is not the proper method to review disqualification denials. However, the court distinguished the current case, asserting that the potential harm to the appellant is greater than that faced by typical litigants. Following the precedent set in Bauman v. United States District Court, the court found that this case warranted mandamus to prevent irreparable harm that could result from waiting for a final judgment.

The opinion evaluates whether the district court improperly declined to disqualify Kobin. Meyer, concluding that Disciplinary Rules DR5-105(B) and (C) do not establish a blanket prohibition against dual representation in unrelated matters involving clients with conflicting interests. The situation is determined to be a legal question appropriate for writ of mandamus review, with an adequate record available for assessing both the alleged abuse of discretion and the legal question at hand.

Teeples and Thatcher assert that the "present-client approach" is not relevant since Jelco has dismissed Kobin. Meyer. However, Jelco cites a precedent affirming that the present-client standard remains applicable if an attorney represents clients with conflicting interests, regardless of whether that representation ends before a disqualification motion is filed. 

Disciplinary Rule 5-105(C) states that a lawyer may represent multiple clients if they can adequately represent each party's interests and if all consent after being fully informed of the potential impact on their independent professional judgment. Although Jelco has withdrawn its consent to Kobin. Meyer’s representation of Teeples and Thatcher, the effectiveness of this withdrawal is crucial, as Jelco may be estopped from revoking consent due to reliance on its prior position. Jelco also claims ignorance of the conflict and contends that its counsel cannot bind it regarding dual representation; however, the district court appears to have settled the agency issue based on established principles, with no cited law necessitating its reconsideration given the current record.

DR5-105(A) mandates that a lawyer must decline employment if it compromises their independent professional judgment or involves representing differing interests, specifically defined as any interest that adversely affects the lawyer's judgment or loyalty to a client. DR5-105(C) underwent revisions, shifting from a subjective standard—where a lawyer's belief in their ability to represent multiple clients was key—to an objective standard, indicating that it must be apparent that the attorney can adequately represent each client without substantial doubt. The Code and various authorities emphasize that if there is any uncertainty about the appropriateness of multiple representation, the attorney should refuse the representation. While the Code serves as a guide for ethical conduct, it does not preclude the possibility of disciplinary action in certain circumstances, even if the attorney continues to represent a client in ongoing litigation. Various case law examples illustrate the complexities surrounding multiple representation, including instances where attorneys were disqualified for representing parties with conflicting interests without proper consent, reinforcing that consent alone may not suffice if it risks breaching client confidences.