Can a law firm consult its own in-house ethics counsel about a client matter, without the client's consent, without creating a conflict with that client?

Plain-English summary

A New York firm appointed a committee of partners to advise the firm and its lawyers on ethics and professional-responsibility issues, to assure compliance with the law governing lawyers, and to represent the firm in challenges to its conduct. Many of those issues (the limits of zealous representation, conflicts, a client's allegation that the firm acted unethically, possible failures of duty) can put the firm's interests at odds with the affected client's. The committee was asked whether a firm's consultation with its own in-house lawyers, without the client's consent, creates an impermissible conflict with the affected client. The committee concludes it does not.

The committee notes the question is novel, prompted by cases suggesting that in-house ethics advice may not be privileged against a then-current client on the theory that the consultation created a firm-versus-client conflict. The committee distinguishes the evidentiary privilege question (for the courts) from the conflicts question under Canon 5 (which it may address). It first observes that the Code itself contemplates an internal ethical infrastructure: DR 1-104 requires firms to make reasonable efforts to assure compliance and to supervise, and EC 1-8 encourages mechanisms such as confidential referral of ethics problems to a senior lawyer or committee. Requiring a firm to always hire outside counsel to consider such issues would be impractical and would deny the firm its recognized right to represent itself.

On DR 5-101(A), the committee concludes a lawyer's interest in complying with ethical duties is not an interest "extraneous" to the representation but an inherent part of the professional judgment the representation requires, so seeking or giving in-house ethics advice does not generally create a personal-interest conflict. On DR 5-105(A) and (B), the committee concludes the in-house adviser does not represent a "differing interest," because considering the firm's own legal and ethical obligations in service of a client does not adversely affect the lawyer's judgment or loyalty to the client. As to disclosure, the firm need not tell the client that it consulted in-house counsel, but it may owe the client the firm's conclusions, for example when the firm concludes it can no longer represent the client under DR 5-101 or DR 5-105, or that it has made a significant error or omission that the client needs to know about (citing N.Y. State 734).

In practice

Under the New York Code as it stood at the time, the opinion holds that a firm may consult its own in-house ethics counsel about a client matter, even one adverse to the client's interests, without advance consent and without an impermissible conflict, because complying with ethical duties is inherent in the representation rather than a "differing" or "extraneous" interest. The committee separates the duty to disclose the fact of consultation (none) from the duty to disclose its product: where the firm concludes it has a conflict requiring withdrawal, that client consent is needed, or that it made a significant error or omission, the firm may have to inform the client of those conclusions, with timing and extent varying by circumstance.

Common questions

Q: Does a law firm need a client's consent before asking its own in-house lawyers about an ethics issue in the client's matter?

A: No. The committee concludes that consulting in-house ethics counsel does not create an impermissible conflict, so advance informed consent is not required.

Q: Is the firm's interest in complying with its ethical duties a conflicting personal interest under DR 5-101(A)?

A: Generally no. The committee reasons that interest is inherent in the representation, not extraneous to it, so it does not "affect" the lawyer's independent professional judgment within the meaning of the rule.

Q: Must the firm tell the client it consulted in-house counsel?

A: No. The committee concludes there is no duty to disclose the fact of the consultation.

Q: Does the firm ever have to disclose anything from the consultation?

A: Yes, sometimes the conclusions. The committee notes that where the firm concludes it must withdraw, that it needs the client's consent, or that it made a significant error or omission, the firm may owe the client that information.

Background and rules framework

The opinion applies New York's former Code of Professional Responsibility. DR 5-101(A) governs personal-interest conflicts and DR 5-105(A), (B), and (C) govern representation of differing interests (both facets of Model Rule 1.7). DR 1-104 imposes firm-level supervision and compliance duties (analogous to Model Rule 5.1), and DR 5-109 treats a lawyer employed by an organization as owing duties to the organization (analogous to Model Rule 1.13). The disclosure analysis draws on the duty to keep clients informed (analogous to Model Rule 1.4) and N.Y. State 734 (2000).

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts; personal interest and differing interests); NY DR 5-101(A), DR 5-105
• MR 5.1 (firm supervision and compliance); NY DR 1-104
• MR 1.13 (organization as client); NY DR 5-109
• MR 1.4 (keeping the client informed)

Cases:

• VersusLaw, Inc. v. Stoel Rives, LLP, 127 Wash. App. 309 (2005), privilege and in-house firm consultation
• Koen Book Distrib. v. Powell, Trachtman, 212 F.R.D. 283 (E.D. Pa. 2002), same issue
• Bank Brussels Lambert v. Credit Lyonnais (Suisse) S.A., 220 F. Supp. 2d 283 (S.D.N.Y. 2002), same issue
• In re Sunrise Sec. Litig., 130 F.R.D. 560 (E.D. Pa. 1989), conflict-based limit on the privilege

Other opinions cited:

• N.Y. State 734 (2000): a lawyer's duty to disclose a significant error or omission to the client

See also

• NY State Bar Op. 1045: In-house counsel as a witness in an agency investigation
• NY State Bar Op. 1102: Insurance in-house counsel office confidentiality
• NY State Bar Op. 793: Of-counsel conflict imputation

Source

• Landing page: https://nysba.org/ethics-opinion-789/