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A twilight zone of inharmonic convergence

By Diane Karpman

Ethics expert Diane Karpman can be reached at karpethics@aol.com.
Karpman

A "twilight zone" is developing in the legal malpractice arena that you need to understand for effective risk management and to maintain your personal equilibrium. It demonstrates the intersection between established professional responsibility principles of conflicts, loyalty and privilege. Generally, these ethereal concepts are appearing out of state in federal cases. However, by understanding the theories, maybe we can immunize California lawyers to be careful in these situations.

You enter the zone when the mistake or error occurs. Everyone makes mistakes. Do not self-flagellate or substitute a hair shirt for the camisole beneath the "suit du jour."

After the error occurs, there is a "repair period" when the firm can attempt to correct the mistake and, hopefully, make the client whole. During "repair," you still represent the client, but you are about to encounter an inharmonic convergence of duties.

All clients are owed fiduciary duties, whether they are individuals or organizations, including law corporations or partnerships. Generally, a law firm is entitled to retain counsel and receive all the benefits of attorney-client privilege, like any other business or professional organization.

However, an attorney violates the duty of loyalty to the client by assuming a position adverse to the client. Therefore, "when a law firm seeks legal advice from its inhouse counsel, the law firm's representation of itself (through inhouse counsel) might be directly adverse to . . . the law firm's representation of another client, thus creating a prohibited conflict of interest." Sunrise Securities Litigation (E.D. Pa. 1989)130 F.R.D. 560, 595.

The simultaneous representation of two clients requires an informed written consent, under Rule of Professional Conduct 3-310. The

firm's interests may or may not be diametrically opposed to the client's interests. Continued representation, when possible legal malpractice has occurred, is risky. Yet, it is doubtful that any other lawyer in the entire world would be as motivated to make sure the client is successful.

Often, a flurry of internal e-mails and memos are generated regarding the case. But, wait a minute. The firm still represents the "outside" client, who is entitled to loyalty. A claim of privilege may be denied as to internal communications created before a malpractice claim is made, since the joint client exception could later apply. "Permeating the documents is consideration of how best to position the firm in light of a possible malpractice action." Koen Book Distribs. v. Powell (E. D. Pa. 2002) 212 F.R.D. 283, 256.

Arguably, lawyers may have greater fiduciary duties. However, even in the zone, fair boundaries must exist, because everyone is entitled to a defense. Lawyers should not be required to "fend for themselves based on their own research and what they can remember from a State Bar ethics program." Fox Searchlight v. Paladino (2001) 89 Cal. App. 4th 294, 312. We should encourage lawyers to consult with each other to remediate client harm, and it is antithetical to penalize them for their efforts.

Ethics expert Diane Karpman can be reached at karpethics@aol.com or 310-887-3900.

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