Friday, April 27, 2012

Conflicts Common Sense? (Firm Sanctioned for Representing Adverse Clients)

From Bloomberg BNA comes a doozy of a read, filled with jaw-dropping judicial commentary: "Firm Acted in Bad Faith in Not Withdrawing When Conflict Between Two Clients Surfaced." (Carnegie Cos. v. Summit Properties Inc., Ohio Ct. App. 9th Dist., No. 25622, 3/28/12)

In this case, a Midwest-based 180 lawyer firm finds itself on the hot seat (and $80,000 in attorneys' fees poorer):
  • "A law firm engaged in sanctionable bad faith conduct in refusing to withdraw as counsel for a client that was suing a company the firm was representing in a different matter, the Ohio Court of Appeals, Ninth District, concluded March 28, approving an award of attorneys' fees against the firm."
  • "The court faulted the firm for trying to ignore or conceal the conflict while pressing the company to waive it, rather than acknowledging the problem and withdrawing."
The judge in this matter did not mince words:
  • "This court concludes that a law firm that is aware it is representing a client in a matter which is directly adverse to the interests of another of its current clients, yet appears to act to conceal evidence of the adverse representation, is acting with a dishonest purpose, conscious wrongdoing, and in breach of a known duty premised on an ulterior motive. A refusal to withdraw from representation of a seemingly more important or lucrative client under such circumstances evidences an ulterior motive to put firm revenue and/or prestige above the interests of other clients.
  • There was: “competent, credible evidence to demonstrate that multiple attorneys at Ulmer & Berne acted to ignore or conceal the underlying conflict.”
  • We … conclude that a firm which is aware of its representation of directly adverse clients in separate matters, yet seeks a waiver of the conflict directly from one client despite the firm's knowledge that the client is represented by counsel from another firm, is acting in bad faith. By bypassing opposing counsel, the firm acts with a dishonest purpose, moral obliquity, conscious wrongdoing, and in breach of a duty premised on an ulterior motive to obtain a benefit or advantage it could not otherwise obtain."
See the complete article and decision for additional background.

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