Wellman v. Willis

• Decision Date: 13 July 1987
• Citation: 400 Mass. 494,509 N.E.2d 1185
• Parties: Arthur O. WELLMAN, Jr. v. Dana J. WILLIS.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1185

509 N.E.2d 1185

400 Mass. 494

Arthur O. WELLMAN, Jr. v. Dana J. WILLIS.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued May 7, 1987.

Decided July 13, 1987.

J. Owen Todd (Kenneth R. Berman, Boston, with him), for plaintiff.

Alan M. Spiro, Boston, (Penny Kozol, Brighton, with him), for defendant.

Before HENNESSEY, C.J., and ABRAMS, NOLAN and LYNCH, JJ. ABRAMS, Justice.

At issue is the correctness of an order disqualifying the plaintiff's attorneys, the law firm of Hale and Dorr, from representing the plaintiff in a civil matter arising out of the sale of rare coins to the plaintiff by the defendant. The plaintiff seeks actual and punitive damages from the defendant claiming fraud, breach of warranty, unfair and deceptive pricing of coins, false grading of coins, and the sale of altered and adulterated coins. The plaintiff, through counsel, sought to depose the defendant Willis. Willis then moved for a protective order, see Mass.R.Civ.P. 26(c), 365 Mass. 772 (1974), to preclude Hale and Dorr from representing the plaintiff at the deposition because of "the very real conflict between Hale and Dorr's representation of a high-level corporate officer and its representation of a plaintiff against another high-level corporate officer and Standard." ¹ The trial judge invited the parties to submit affidavits regarding the allegations of conflict of interest set forth in the motion. Each party filed affidavits. Thereafter, the judge determined that Hale and Dorr had a conflict of interest. He ordered that Hale and Dorr withdraw from its representation of the plaintiff. Pursuant to G.L. c. 231, § 118, first par. (1984 ed.), a single justice of the Appeals Court stayed the disqualification order pending appeal. ² On our own motion, we transferred the case. We vacate the order of disqualification.

We recite the prior related proceedings and summarize the affidavits filed with this court. Prior to the commencement of this action, the Federal Trade Commission (FTC) began an investigation involving Standard Financial Management Corporation (Standard) and its principal officers (who were its owners), the defendant and Taglione. The investigation concerned allegations of overgrading, overpricing, and misrepresentation of the grade and investment quality of rare coins sold to the public. During 1986, a financial officer of Standard, John Doe (see note 1, supra ), consulted Hale and Dorr concerning the FTC investigation. According to the affidavit of the Hale and Dorr attorney, Doe was informed that he was neither a target nor a subject of the FTC investigation. The Hale and Dorr attorney also communicated with an attorney who represented Willis in the FTC proceeding to ascertain the status of the investigation. ³ The affidavits of both attorneys agree that they spoke on two occasions. The affidavit of Willis's attorney indicates that he discussed his professional opinion as to the "roles, and the potential exposures" of both Willis and Doe. The affidavit of the Hale and Dorr attorney, however, indicates that the two attorneys did not discuss "any common or mutual approach, method, or strategy to deal with the Federal Trade Commission." ⁴

The judge ruled that because Hale and Dorr had a conflict of interest, the firm could not represent the plaintiff. The judge noted that it was clear that all the attorneys involved had acted in good faith to protect the interests of their clients. Nonetheless, the judge determined that because the interests of the plaintiff and the former Hale and Dorr client, Doe, ⁵ were adverse, Doe's interest in maintaining the confidentiality of the disclosures he made to his attorney was threatened by Hale and Dorr's continued representation of the plaintiff here. See S.J.C. Rule 3:07, DR 4-101, as appearing in 382 Mass. 778 (1981). The judge also looked to the common law rule of disqualification enunciated in T.C. Theatre Corp. v. Warner Bros. Pictures, 113 F.Supp. 265 (S.D.N.Y.1953), to determine that disqualification of Hale and Dorr was the appropriate remedy. The judge considered affidavits submitted by Doe, his attorney, the plaintiff's attorney, and Willis's attorney in the FTC matter, and found that they established the "inescapable conclusion" that Hale and Dorr received certain confidential information during its representation in the FTC matter which may now be used to advance the plaintiff's claim against Willis and which may actually work to the detriment of Hale and Dorr's former client. ⁶ Finally, the judge looked to Canon 9 of the ABA Model Code of Professional Responsibility (code), which states that a lawyer should avoid even the appearance of impropriety and concluded that Hale and Dorr should cease its representation of the plaintiff. See S.J.C. Rule 3:07, DR 9-101, as appearing in 382 Mass. 795 (1981).

1. Canon 4. We recognize that the case is in a far different posture from that in which it was before the trial judge. The record before us differs significantly from the record before the trial judge. See note 6 supra. On appeal, the major issue is consent. ⁷ In determining whether disqualification was appropriate, the judge focused on Canon 4 and the attorney's duty to preserve client confidences. The judge looked to the judicially created protection of the "substantial relationship" test. ⁸ Although many courts have employed this test to analyze the propriety of successive representation, ⁹ we have not explicitly adopted this test. ¹⁰ Masiello v. Perini Corp., 394 Mass. 842, 848-849 n. 5, 477 N.E.2d 1020 (1985). Nor is it necessary to do so in this case.

The applicability of this test is questionable in circumstances in which the former client, after full disclosure, consents to subsequent representation by the law firm of a potentially adverse interest. See United States v. Agosto, 675 F.2d 965, 973-974 (8th Cir.1982); Melamed v. ITT Continental Baking Co., 592 F.2d 290, 293 (6th Cir.1979); In re Yarn Processing Patent Validity Litigation, 530 F.2d 83, 89 (5th Cir.1976); Interstate Properties v. Pyramid Co. of Utica, 547 F.Supp. 178, 183 (S.D.N.Y.1982). "Since the substantial relationship standard was developed primarily to protect the client who would not otherwise be able to prove a breach of his confidence, there would be little reason for the courts to interfere with an informed client decision to waive that judicially created protection. Thus, a greater deference to the desires of the parties in the successive representation cases seems fully appropriate." (Emphasis in original.) Note, Developments in the Law--Conflicts of Interest in the Legal Profession, 94 Harv.L.Rev. 1241, 1334 (1981). ¹¹

Both the plaintiff and the former client consent to Hale and Dorr's continued representation; therefore, we need not decide whether to adopt the substantial relationship test. Pursuant to the order of the single justice of the Appeals Court, the plaintiff supplemented the record to include a second affidavit of the former client revealing that he has no objection to Hale and Dorr's continued representation of the plaintiff. Moreover, the former client stated that he has consulted an attorney in a different law firm to determine whether he should withdraw his consent to Hale and Dorr's representation of the plaintiff. ¹² On the basis of this advice and his review of all the documents filed with this court, the former client stated that there was no reason for him to withdraw his consent. In addition, the plaintiff submitted an affidavit stating that he has been informed of Hale and Dorr's potential conflict of interest. After consideration of this factor, the plaintiff stated that he consents to Hale and Dorr's continued representation of both himself and the former client. Given that both clients consent to Hale and Dorr's representation after full disclosure of the relevant circumstances, we conclude that disqualification is unnecessary. ¹³

Willis contends the substantial relationship test should apply, despite the consent, because he and the former client were in a joint defense posture in the FTC proceeding. ¹⁴ The record before us, however, does not support Willis's claim that there was a joint defense in the FTC action. The affidavits of Doe and his attorney make clear that, in contrast to Willis, Doe was informed as early as 1984 that he was not a target of the FTC investigation. The FTC investigation focused on the two owners of Standard, the defendant and Taglione, and Standard. The FTC investigation was not focused on the company's employees. Thus, the record does not support Willis's claim of the existence of a joint defense agreement or posture.

2. Canon 5. ¹⁵ In addition to the concerns regarding the potential for a breach of the duty to preserve client confidences, this case also involves Canon 5 considerations. See S.J.C. Rule 3:07, DR 5-105, as appearing in 382 Mass. 781 (1981). Simultaneous representation of clients with adverse interests is broadly proscribed in DR 5-105(A) and (B). The only exception to this prohibition on simultaneous representation is contained in DR 5-105(C), which permits a lawyer to represent multiple clients "if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure." In McCourt Co. v. FPC Properties, Inc., 386 Mass. 145, 146, 434 N.E.2d 1234 (1982), we noted that these provisions expressly forbid one attorney from defending a client in one action and then subsequently representing a new client against the former client, unless each client, after full disclosure, consents. See Masiello v. Perini Corp., 394 Mass. 842, 845-846, 477 N.E.2d 1020 (1985).

As previously noted, on the basis of the record before us, it is clear that both clients have consented to Hale and Dorr's representation after full disclosure of the consequences of the simultaneous representation. We have not, however, utilized the second aspect of DR 5-105(C)...