May an attorney bring a third-party forgery claim for his litigation clients against a bank he currently represents, and has represented, in unrelated matters?

Plain-English summary

An attorney defended a corporate and an individual defendant in an action by insurance companies seeking the return of allegedly fraudulent insurance proceeds. After discovery, it appeared the proceeds checks had been deposited with a national bank, and that the defendants' best move was to join that bank as a third-party defendant on the theory that their endorsements were forged. The complication was that, as a result of mergers, the bank was one the attorney's former firm had served as solicitor until 1974, and the attorney himself had handled forgery claims for that bank and still handled some of its matters, including a pending, unrelated forgery case.

The Committee applied DR 5-101 and DR 5-105. It found the attorney faced the problem of asserting forgery and improper payment against a bank that was also a client for whom he had done considerable work and whom he was then defending in another forgery case. The "surprise" timing of the third-party issue did not change the analysis.

The attorney proposed two alternatives to withdrawing: continuing with both clients' written consent after full disclosure, or referring the third-party motion to another attorney and continuing himself if the motion failed. The Committee rejected both, citing Opinion 188 (such representation improper notwithstanding consent) and Opinion 156. It concluded counsel should ask the court to be relieved from the trial. Drawing on Opinions 158 and 6, it explained that the impropriety of taking a case against a former client is not based solely on the risk of disclosing confidences; where the former client has reason to feel aggrieved, the need to avoid the appearance of wrongdoing should cause the attorney to decline employment adverse to that client. It added that merely having advocated different views of law or fact under a prior retainer does not automatically disqualify a lawyer where two matters are wholly unrelated.

Currency note

This opinion was issued in 1975, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and predates the 1984 replacement of the Disciplinary Rules by the RPCs. The conflict provisions then in DR 5-101 and DR 5-105 are now treated under RPC 1.7 (concurrent conflicts) and RPC 1.9 (former clients). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer sue a bank he currently represents, even on an unrelated matter, for his other clients?

A: Under this opinion, no. The Committee concluded the attorney should ask to be relieved from the trial rather than assert the forgery claim against his own bank client.

Q: Would written consent from both clients let him continue?

A: No. The Committee rejected the consent alternative, citing Opinion 188 that such representation is improper notwithstanding consent.

Q: Could he just hand off the third-party motion to another lawyer?

A: No. The Committee found that alternative would not properly address the conflict and concluded he should seek to be relieved from the trial.

Q: Does adversity to a former client always disqualify a lawyer?

A: Not automatically. The opinion noted that merely having advocated different views under a prior retainer does not disqualify a lawyer where two matters are wholly unrelated; the problem here was the live adversity to a current and former client.

Background and rules framework

The opinion applied DR 5-101 (refusing employment where the lawyer's own interests may impair his judgment) and DR 5-105 (declining or withdrawing from conflicting employment, with limited consent), reading them against the appearance-of-wrongdoing concern from Opinions 6 and 158 and former Canon 6. In current New Jersey terms, the analysis is governed by RPC 1.7 and RPC 1.9.

Citations and references

Rules of Professional Conduct:

• DR 5-101 and DR 5-105 (conflicts; lawyer's own interests; multiple clients), as in effect 1975; now MR 1.7 / NJ RPC 1.7 and MR 1.9 / NJ RPC 1.9
• ABA Canon 6 (predecessor conflict canon)

Other opinions cited:

• NJ ACPE Opinion 6, 86 N.J.L.J. 718 (1963)
• NJ ACPE Opinion 156, 92 N.J.L.J. 481 (1969)
• NJ ACPE Opinion 158, 92 N.J.L.J. 641 (1969)
• NJ ACPE Opinion 188, 93 N.J.L.J. 789 (1970)
• ABA Opinions 71, 72 (1932) and 262 (1944)

See also

• NJ ACPE Op. 352: Suing a Former Client in an Unrelated Matter (Two Inquiries)
• NJ ACPE Op. 367: Suing a Former Client in an Unrelated Matter
• NJ ACPE Op. 391: A Conflict in a Foreclosure Against a Former Client
• NJ ACPE Op. 313: A Lawyer Switching Sides in the Same Case

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp301-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

98 N.J.L.J. 209, March 13, 1975

OPINION 301

Conflict of Interest Prosecuting Third-Party Forgery Claim Against Client

An action was brought by several insurance companies against several corporate and individual defendants, seeking the return of insurance proceeds paid on account of a loss which the insurance companies allege was a fraudulent claim. The attorney for one of the corporate defendants and one of the individual defendants, entered his appearance and commenced defense of the action. After much discovery and numerous applications to the court, and after the pretrial conference, all of the checks (originals and photocopies) representing the proceeds of the insurance claims were made available to counsel. Thereupon it was determined that all said checks had been deposited initially with a national bank, and under the Uniform Commercial Code, proper practice would be to join that bank as a third-party defendant since the attorney's clients claimed that their signatures were not authorized and were in fact forged. In this regard, due to the length of time prior to the insurance companies' suit in the matter and the additional length of time during which the matter was pending, the bank involved may have a defense. As a result of several mergers, the bank involved is a bank for which the firm with which the attorney was formerly connected, was the solicitor until February 1, 1974. While the firm was the solicitor, the attorney had handled several forgery claims under the Commercial Code in defense of the bank and since he went into practice with his own office, he has continued to handle a few of the bank's matters, including an unrelated forgery claim which matter is still pending and presents this conflict.

The attorney inquires as to whether he may continue representation of a client in a pending litigation which has reached the trial list stage, at which point a motion to join as a third-party defendant the bank which he represents in an unrelated matter is appropriate on the basis of the alleged forged endorsements. The third-party action would be brought by the attorney's clients in the pending litigation as defendants third-party plaintiffs, against the same bank which the attorney is defending in an unrelated forgery case and which bank the same attorney has represented in the past, although he is not the solicitor for that bank.

Disciplinary Rule 5-101 reads as follows:

Refusing Employment when the Interests of the Lawyer May Impair His Independent Professional Judgment

(A) Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial business, property, or personal interests.

Disciplinary Rule 5-105 reads as follows:

Refusing to Accept or Continue Employment if the Interests of Another Client May Impair the Independent Professional Judgment of the Lawyer

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

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

(C) In situations covered by DR 5-105(A) and (B) except as prohibited by rule, opinion, directive or statute, a lawyer may represent multiple clients if he believes that he can adequately represent the interests of each and if each consents to the representation after full disclosure of the facts and of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.

(D) If a lawyer is required to decline employment or to withdraw from employment under DR 5-105, no partner or associate of his or his firm may accept or continue such employment.

It is not clear why the attorney, through his own clients, was not aware of the alleged forged endorsements at the outset and why he therefore did not anticipate the third-party question. Be that as it may, the question should not be decided on the fact that a "surprise issue" arose at a relatively late time in the legal proceedings. Even if it could not have been anticipated, the attorney is faced with a problem of asserting on behalf of his defense clients the alleged forgery and payment by the bank, which bank is also a client for which the attorney has done considerable legal work and which he is presently defending in another unrelated forgery case.

The attorney asks whether: As alternatives to the withdrawal as counsel for the defendants in the insurance company litigation, would it be permissible to continue if: (a) both clients agree in writing, after full disclosure, that I can continue, or (b) refer the matter to another attorney to argue and present the motion to bring in the third-party defendant bank, and if the motion is granted, to continue and if not granted, to allow me to continue with the handling of the matter thereafter through trial?

Problems involving third-party actions can and do arise. In our Opinion 188, 93 N.J.L.J. 789 (1970), we held that such proposed representation is improper notwithstanding consent. In Opinion 156, 92 N.J.L.J. 481 (1969), we held that it was improper for an attorney to represent two or more parties to litigation where all such parties agree to make no claims against each other, because there were potential claims among the parties so joined and the attorney's opinion as to whether or not valid claims could be asserted might be in error. We believe that counsel should ask the court to be relieved from the trial of the case, and do not believe that the alternatives which counsel suggests would properly take care of the facts herein stated.

In Opinion 158, 92 N.J.L.J. 641 (1969), which was a conflict of interest case, the question involved was whether counsel could represent a corporation against a former employee for whom counsel had conducted a change of name proceeding. In deciding that there was no conflict because the legal issues were entirely independent of each other and there appeared to be no secrets or confidences disclosed to the attorney in the present controversy which in any way related to the prior employment, we referred to our Opinion 6, 86 N.J.L.J. 718 (1963), which in part reads as follows:

Irrespective of any actual detriment the purchaser might suffer, he might naturally feel that he had in some way been wronged when confronted by an action against him by the same attorney whom he had employed.... To maintain public confidence in the bar, it is necessary not only to avoid actual wrongdoing, but even appearance of wrongdoing.

The impropriety of taking a case against a former client is not based solely on necessity for disclosure of confidential communication. If the former client has any reason to feel aggrieved, the necessity of maintaining proper public relations for the bar and of avoiding the appearance of wrongdoing should cause the attorney to refuse to accept employment in a capacity which is adverse to the interests of the former client.

The mere fact that under a prior retainer the attorney has advocated views of the law and facts different from those on which his present client rests his case will not ipso facto disqualify him. See Drinker, Legal Ethics 114 (1953). It is only when there is no conflict of interests that former Canon 6 does not apply, as where two matters are wholly unrelated. See A.B.A. Comm. on Professional Ethics and Grievances, Opinions 71, 72 (1932) and 262 (1944).