94 N.J.L.J. 44
January 21, 1971
Conflict of Interest
Representing Client and
Witnesses Against Him
The inquirer states that he formerly represented an out-of-
state insurance company in the defense of negligence claims against
its policyholders in New Jersey. The company was placed in
receivership in its state and, under a reinsurance treaty between
it and another company, this second company has assumed and is
defending the actions. The inquirer is now representing the second
The former president and secretary of the insolvent company have been indicted by a federal grand jury for S.E.C. violations and mail fraud. The inquirer has been retained by the former secretary to defend him in the criminal action. The latter is familiar with the fact that counsel is defending claims for the second insurance company.
In the course of discovery proceedings in the criminal case, it has been revealed that certain officers of the insolvent company, who now are officers of the second insurance company, were the main witnesses against the inquirer's client during the grand jury proceedings and presumably will be witnesses for the government when the case goes to trial. The attorney inquires whether he is exposing himself to a conflict of interest charge in representing the former secretary while representing the present company, whose officers will be testifying against his client. He has advised them of his representation of the former secretary, who, as noted above, is already aware of the attorney's continued representation of the second insurance company.
We said, in Opinion 42, 87 N.J.L.J. 285 (1964), that a lawyer should never accept a retainer where his position may be adverse to that of a former client, without taking extreme care to make certain that the new matter is one which will not affect in any way any confidential information that he may have obtained in his former relationship. In his former representation of the insolvent insurance company in the defense of negligence claims, the inquirer says that he obtained no confidential information with respect to the inner workings of that company, nor any information relating to the alleged S.E.C. or mail fraud violations.
This is not such a situation as was present in our Opinion 57, 87 N.J.L.J. 737 (1964), where we found that a conflict did exist when an attorney who had represented a husband in connection with difficulties with his wife was a partner in a law firm which thereafter proposed to defend a suit brought by the wife as a result of the wrongful death of the husband, with whom she had become reconciled. We said there that the one partner might have obtained information in his representation of the husband which could be used against the wife in the death case in order to prove that the marital relationship between the parties had been a stormy one, thus perhaps limiting the amount of damages which she could recover. Nor is this a case of suing a former client in an unrelated matter, which we dealt with in Opinion 154, 92 N.J.L.J. 353 (1969), where we said that a lawyer may bring suit against a former client if the representation of the former client has ended and the matter does not involve confidential communications. Drinker, Legal Ethics (1953) 112.
As we noted above, counsel points out that both his client (the former secretary) and the other defendant (the former president of the involvent insurance company) are completely aware of his relationship with the new company but that, nevertheless, his client insists that he continue to represent him. And, the new company is also aware of the situation.
It seems to us that Canons of Professional Ethics, Canons 6 and 37 are involved in this problem, the first having to do with conflicting interest and the second with confidences of a client. Canon 6 is not violated because there has been a complete disclosure of the situation to the client (the former secretary).
It seems clear that Canon 37 has not been violated because there are no confidences which this attorney obtained which could adversely affect his representation of the defendant in the criminal case nor his continued representation of the new insurance company in the defense of the negligence action.
We, therefore, conclude that counsel may continue to represent the former secretary of the company in connection with the federal indictment.