Can a firm jointly represent an employer and employee co-defendants under an advance agreement that lets it share confidences and keep representing the employer if a conflict arises?

Plain-English summary

A former employee sued Company X and Supervisor Y in an employment matter. Company X, a longtime client of the firm, wanted to pay for Y's defense and asked the firm to represent both. Before doing so, the firm consulted with Y and with X about the implications of dual representation, and both signed an agreement reciting that there were no known conflicts, that any confidential information the firm later discovered about either would be revealed to both, that disclosure could lead to Y's termination or a claim by X against Y, that the firm would not later represent either against the other without both consenting, and that the firm could continue to represent X in the present litigation even if that adversely affected Y. The firm's investigation then revealed that Y, though innocent of the suit's charge, was not a suitable supervisor; X and Y were told, Y was fired, and the firm withdrew from Y and continued for X.

The Committee analyzed the questions under Rules 1.05 (confidentiality) and 1.06 (conflicts). On confidentiality, it focused on Rule 1.05(c)(2), which lets a lawyer reveal confidential information when the client consents after consultation. The Committee read that exception not to require that consent be obtained only after the information is learned: while obtaining consent after the information is known helps ensure the client is fully informed, the rule does not require that consent and consultation occur only after the details are known. (The other 1.05(c) exception, authorized disclosure to carry out the representation, allows disclosure to carry out the representation of that client, not of another party, and the remaining provisions of (c), (d), (e), and (h) did not apply.)

On conflicts, the Committee noted Rule 1.06 bars representing opposing parties to the same litigation, but the employer and employee were not opposing parties in the suit; their interests in it were common, and the conflict between them concerned the employee's termination, not the subject of the suit, so Rule 1.06 did not prohibit the initial joint representation. The Committee concluded that if the firm fully advised both clients of the implications, the potential disadvantages of dual representation, and the consequences of disclosure before the agreement was signed, then no rule was violated by the agreement, the firm could reveal to the employer the confidential information about the employee learned in the firm's interview, and the firm could withdraw from the employee and continue representing the employer in the litigation.

Currency note

This opinion was issued in 1992, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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 client consent in advance to a lawyer disclosing confidential information?

A: The Committee concluded yes. Rule 1.05(c)(2) allows disclosure when the client consents after consultation, and the rule does not require that the consent be obtained only after the specific information is learned.

Q: Could the firm represent both the employer and the co-defendant employee at the start?

A: The Committee concluded yes. Rule 1.06 bars representing opposing parties to the same litigation, but the employer and employee were not opposing parties in the suit; their interests there were common.

Q: After the conflict surfaced, could the firm drop the employee and keep the employer?

A: The Committee concluded yes, provided the firm had fully advised both clients of the implications and consequences before the agreement was signed; it could disclose the information to the employer and continue representing the employer in the litigation.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 1.05 (confidentiality of information; ABA Model Rule 1.6), particularly the paragraph (c)(2) exception for disclosure with the client's consent after consultation, and Rule 1.06 (conflict of interest: general rule; Model Rule 1.7), which prohibits representing opposing parties to the same litigation. The analysis turns on whether the employer and employee were opposing parties in the underlying suit and on whether consent to later disclosure can be given before the information is known.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest: current clients), MR 1.6 (confidentiality)
• Texas Disciplinary Rules 1.05 (including paragraph (c)) and 1.06

See also

• TX Ethics Op. 500: Joint Representation of Personal-Injury Co-Plaintiffs
• TX Ethics Op. 512: An In-House Lawyer Loaned to a Joint Venture
• TX Ethics Op. 497: A City Commissioner Defending Criminal Cases

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-487/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_487.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

QUESTION PRESENTED

Is it proper for a law firm to represent an employer and employee, both of whom are named as defendants in a suit, deliver to the employer and employee confidential information adversely affecting the employee that leads to a conflict of interest between the employer and employee, and continue representing the employer but not the employee in the suit, pursuant to a written agreement executed by the employer and employee?

STATEMENT OF FACTS

A former employee sues Company X and Supervisor Y in an employment-related matter. Company X wants to pay for Y's defense. Law firm has been representing Company X for several years in its labor and employment matters. Thus, Company X enlists law firm in the representation of both X and Y. Prior to entering into representation of X and Y, law firm consults with Y and discusses the implications of this dual representation. After a similar discussion with X, both X and Y sign the following agreement:

"There are no known or suspected conflicts of interest between X and Y at this time. X, Y and law firm reasonably believe that none will arise. Both X and Y declare that they have revealed to each other all information they are aware of that may indicate a conflict of interest or a potential conflict of interest between them. In this suit, X and Y are generally aligned in interest. The expense of separate representation and unlikelihood of a conflict, indicate that it would be a prudent use of X's resources for law firm to represent both X and Y in this common lawsuit.

It is understood that the remote possibility of a future conflict of interest does exist. Law firm may discover confidential information about either X or Y that may damage X's relationship with Y, thereby causing a conflict of interest. In the event such information is discovered, such information is to be revealed to both X and Y as soon as the conflict is recognized. Both X and Y understand the revelation of such information may result in Y's termination or a cause of action by X against Y. Law firm will not subsequently represent either X or Y in any suit against the other unless and until consent is obtained from both parties. Law firm may continue to represent X in the present litigation even though that representation may adversely affect Y."

In the course of law firm's investigation for the defense of former employee's suit, it discovers that while Y is innocent of the former employee's charge in the suit, he is not a suitable supervisor. Y has committed no criminal or fraudulent acts. X and Y are informed of law firm's discovery and Y is fired by X. Law firm withdraws from Y's representation and continues to represent only X in the present litigation.

QUESTIONS
Does the agreement between X and Y violate any Disciplinary Rule?
Is it proper for the law firm to reveal to the employer confidential information about the employee obtained by the law firm's interview of the employee?
Is it proper for the law firm to withdraw from representing the employee and continue representing the employer in the present litigation after discovery of the information about the employee that led to termination of employment?

DISCUSSION

Answers to the questions presented are governed by Rules 1.05 and 1.06, Texas Disciplinary Rules of Professional Conduct.

Rule 1.05 provides that a lawyer shall not knowingly reveal confidential information of a client or a former client to anyone else, other than the client, the client's representatives, or the members, associates, or employees of the lawyer's law firm, except as permitted by paragraphs (c) and (d), or as required by paragraphs (e) and (h) of Rule 1.05.
Paragraph (c) provides:
A lawyer may reveal confidential information:
(1) When the lawyer has been expressly authorized to do so in order to carry out the representation.
(2) When the client consents after consultation.
Implicitly, the first exception under subparagraph (c) means that the lawyer may reveal confidential information about a client when the lawyer has been expressly authorized to do so in order to carry out the representation of the client. Therefore, this exception does not allow disclosure of confidential information in order to carry out the representation of another party.

The second exception under paragraph (c), authorizing a lawyer to reveal confidential information when the client consents after consultation, does not require, on its face, that the client's consent be obtained after the confidential information is obtained by the lawyer.

Requiring a lawyer to obtain consent after consultation would aid in insuring that a client is fully informed of the consequences or potential adverse effect of the disclosure of confidential information so that the client can give (or withhold) informed consent to the disclosure of that information. It may be difficult to fully inform a client of all potential consequences of the disclosure of confidential information before knowing the substance of that information. That difficulty does not, however, require a determination that consultation about and consent to the disclosure of confidential information occur after knowledge of the details of that confidential information is obtained by a lawyer.

The other provisions of paragraph (c) and the provisions of paragraphs (d), (e), and (h) provide no guidance to the answer of the question presented and are inapplicable under the facts of this inquiry.

Rule 1.06 provides that a lawyer shall not represent opposing parties to the same litigation. The employer and employee are not opposing parties in the lawsuit in which the law firm was employed. Their interest in that suit is stated to be common and free from conflict. The conflict that exists between the employee and employer relates to the employee's termination, and not the subject of the suit under the facts stated. Therefore, Rule 1.06 did not prohibit the law firm from representing the employer and employee initially.

It is not improper for the law firm to continue representing the employer if all implications of the dual representation of the employer and employee, including the potential consequences to the employee of the disclosure to the employer of confidential information about the employee were fully discussed with the employee by the lawyer and the employee was fully and competently informed as to the consequences prior to the execution of the agreement.

If the law firm fully advised the employer and employee of the implications, any potential disadvantage or adverse consequences to the dual representation, and the consequences of the disclosure of confidential information before the agreement was executed, then:
No disciplinary rule was violated by the law firm in allowing the employer and employee to execute the agreement.
It is not improper for the law firm to reveal to the employer confidential information about the employee obtained during the law firm's interview of the employee.
It is not improper for the law firm to withdraw from representing the employee and continue representing the employer in the present litigation.

CONCLUSION

If the law firm fully advised the employer and employee of the implications, any potential disadvantage or adverse consequences to the dual representation, and the consequences of the disclosure of confidential information before the agreement was executed, then:
No disciplinary rule was violated by the law firm in allowing the employer and employee to execute the agreement.
It is not improper for the law firm to reveal to the employer confidential information about the employee obtained during the law firm's interview of the employee.
It is not improper for the law firm to withdraw from representing the employee and continue representing the employer in the present litigation.

Tex. Comm. On Professional Ethics, Op. 487 (1992)