Opinion 2005-6
(March 2005)

The inquirer has posed a multi-question inquiry to the Committee. The facts underlying this inquiry, as outlined by the inquirer, are summarized below.

Companies A (“A”), B (“B”) and C (“C”) are owned by individual 1 (“One”). A employed Individual P (“P”). A and B are operated by Individual 2 (“Two”). Although the term “partners” and the phrase “split profits” and “50-50” are used to describe the business relationship between One and Two as respects Companies A and B, the inquirer has confirmed that this is simply a characterization of the manner in which those companies compensate Two and that Two is neither a legal partner nor does he have any ownership interest in A or B. Company C is owned by One but Two has no ownership interest in or business or employment relationship with C.

The inquirer indicates that P was killed in a one-vehicle accident in which his blood alcohol level was .17. This accident occurred after a party arranged by Two on a boat owned by C and “operated” by A. The party is said to have been “for” the employees of A and B, including P. There is no further indication in the inquiry as to whether the party was in some way officially sanctioned by A, B or C or was something more informal.

P’s Estate (“the Estate”) has now brought an action against A, B, C, One and Two. The Committee’s understanding from the inquirer is that the claims asserted by the Estate sound in tort and relate, inter alia, to social host and/or dram shop liabilities. These claims could implicate workers’ compensation exclusivity defenses. All of the defendants except Company C are represented by Law Firm D (“LFD”). C is represented by Law firm E (“LFE”). LFE has been retained by C’s liability insurer.

LFD has objected to LFE’s request to interview One and review the records of C. Additionally, the inquirer understands that there is a tentative settlement between the Estate and all of the defendants represented by LFD. A term of that settlement is reported to be that One and Two will not execute affidavits in favor of C or cooperate with LFE in the defense of C.

The Committee regards this inquiry as a request by LFE for advice concerning its obligations under the Pennsylvania Rules of Professional Conduct (the “RPC”). The Committee believes that RPC 1.7 (a)(2), RPC 1.13 (b) and RPC 4.2 are directly implicated.

First, the inquirer asks whether there are any limitations on LFE’s ability to meet with One, have One execute affidavits “in favor” of C and review C’s records out of the presence of LFD.

The Committee presumes that this question is directed at limitations imposed on LFE by the Rules of Professional Conduct.

The Committee is unaware of any restriction in the Rules that would limit LFE’s access to the business records of its own client. Indeed, to the extent that those records contain information relevant to C’s defense, LFE would presumptively be required to undertake this review pursuant to the obligations imposed by RPC 1.1 (“Competence”), 1.3 (“Diligence) and 1.4 (“Communication”) unless a written agreement between C and LFE to limit the objectives of the representation to this effect has been entered into with the informed consent of C. See RPC 1.2 (c) and 1.0(e). However, the Committee understands that such an agreement is not in place.

By contrast, however, LFE’s ability to obtain “affidavits” from One in his capacity as a principal of C or to conduct a private interview with One may be circumscribed. RPC 4.2 provides:

In representing a client, a lawyer shall not communicate about the subject of a representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.

In this instance, One is represented by LFD. Thus, without LFD’s consent – which likely will not be forthcoming – LFE may not communicate with One unless authorized by law or by court order. The Committee does not opine on whether the inquirer’s engagement by C’s insurer as counsel for C may constitute an authorization by law to communicate with One. However, because it is likely that the cooperation of One will be important to the defense of C, the Committee notes that RPC 4.2 recognizes that there may be occasions when legal remedies (“court order”) may be sought to rectify the situation. The Committee does not opine on what the appropriate legal remedies might be under these particular circumstances.

The inquirer’s attention is also directed to RPC 1.13 relating to “Organization as Client.” Subsection (a) of Rule 1.13 recognizes that a lawyer’s representation of an entity client can ordinarily be conducted only through its constituents (officers, directors, employees, etc.) and, as per Comment [2] to the Rule, confidential communications with those constituents about the affairs of the entity are protected under Rule 1.6 (“Confidentiality of Information”). In the inquirer’s situation, however, it is the refusal of One, in his capacity as the “owner” of C, to communicate with LFE that is at issue. Therefore, subsection (b) of Rule 1.13 may, in pertinent part, be relevant:

(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization… refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interest of the organization…

It is the Committee’s opinion that One’s refusal, albeit through LFD, may, in fact, be encompassed within RPC 1.13(b). Specifically, liability insurance policies typically contain a “cooperation clause” that obligates the insured (C, in this instance) to cooperate with its defense upon pain of voiding the coverage. Because the inquirer’s representation of C is through C’s liability insurer and because One is the principal of C, One’s uncooperativeness may have the effect of jeopardizing that coverage as One may be considered to have violated his “legal obligation” to C to insure compliance with the terms of the insurance policy. If the coverage were to be voided by reason of a breach of a cooperation clause, C might become exposed to direct financial injury in the event it is found liable to the Estate. The inquirer must, therefore, attempt to gauge the likelihood of such an injury and whether or not such an injury would be “substantial.”

Assuming, arguendo, that the inquirer concludes that there is a risk of a substantial financial injury to C resulting from One’s refusal to aid in its defense, paragraph (b) of RPC 1.13 sets forth remedial steps that a lawyer may take to resolve the situation.1 For the most part, however, these steps contemplate some kind of corporate structure that could evaluate, address and/or cure the “constituent’s” behaviors that are putting C at risk. However, since it is the Committee’s understanding that One is the only “constituent” of C with the knowledge LFE may need to defend C, the only remedy that suggests itself is “reconsideration”; RPC 1.13(b)(1). However, as discussed below, LFE’s ability to be able to communicate with One to seek reconsideration of his refusal to interact with LFE is likely circumscribed by RPC 4.2.

The Committee cautions, however, that if the inquirer is ultimately able to remonstrate with One concerning the risk, if any, to C’s coverage arising from his lack of cooperation, this remonstrance is not to be shared with the insurer nor should the inquirer engage in any discussion with the insurer of the interaction between One’s putative lack of cooperation and the “cooperation clause” or any other coverage feature, for that matter. This is because to do so would place the inquirer at risk of being in breach of RPC 1.7 (“Conflict of Interest: Current Client”) and, specifically Rule 1.7(a) (2) which provides

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to…a third person or by a personal interest of the lawyer.

Here, where the inquirer has been engaged by C’s insurer and his or her compensation for services is dependent thereon, the risk is that the inquirer’s ability to represent C’s interests could be considered materially limited by the inquirer’s responsibility to the insurer unless coverage discussions are avoided.2

LFE needs, of course, to be mindful of the three-way clash between One’s role as the principal in Company C (LFE’s client), and his roles as the principal in companies A and B and as a defendant in his own right as LFD’s client(s). Thus, if LFE is afforded the opportunity to meet with One, it needs to disclose to One the possibility, if any, that C’s defense may be based, in part, on defenses pertaining to One’s conduct, such as whether One may have been acting ultra vires or outside the course and scope of his employment as a corporate officer and advise One to consult with LFD to determine (a) the effect that these defenses may have on One’s personal exposure and the exposures of A and B; and (2) whether LFD’s representation of One in his personal capacity can address those defenses. If, after that consultation, One, in his role as C’s corporate principal, directs LFE not to take certain steps that LFE may feel are necessary to the defense of C, then LFE must give consideration to either:

(1) Withdrawing from the representation under RPC 1.16(a)(1) (mandatory withdrawal if the representation will result in a violation of the RPC or other law);3 or

(2) If it can be accomplished without material adverse effects on the interests of C, withdrawal under RPC (b) (4) (permissive withdrawal allowed if C insists upon taking action with which the lawyer has a fundamental disagreement).

Alternatively, LFE and C (presumably acting through One) may consider entering into a written agreement - with C’s informed consent as defined in RPC 1.0 (e) - to limit the scope of LFE’s representation. The Committee notes that the viability of this second option is very limited given the potential clash between One’s self-interest and the interests of C, coupled with the extreme likelihood that C’s insurer would not allow it.

Second, the inquirer asks if it is it “proper” for the Estate and the defendants other than C to enter into a settlement, one term of which is that One and Two not meet or cooperate with LFE or execute affidavits in favor of C.

The Committee believes this is fundamentally a question of substantive law, as to which the Committee does not offer advice. The Committee also notes that it is not clear which client or law firm’s conduct might be at issue in this portion of the inquiry.

Third, the inquirer asks if the putative settlement limits LFE’s ability to interact with One, with respect to meetings and affidavits on behalf of C, without the permission of or outside of the presence of LFD.

The Committee believes that if LFE has sufficient objective knowledge that One has entered into the settlement as described, it may not meet or solicit affidavits from One, except as permitted under Rule 4.2, and it seems to the Committee that from the circumstances any approach to One sanctioned under RPC 4.2 is mooted.


  1. Subsection (b) goes on to recite the criteria that the lawyer needs to evaluate in determining how to proceed under this subsection of Rule 1.13.
  2. One’s lack of cooperation could, of course, have a substantive effect on the defense of C. In that event, the inquirer might have a contractual obligation to disclose that lack of cooperation, without comment, to the insurer.
  3. The Committee does not opine on whether One must – because this is the real question – be interviewed and must execute affidavits outside the presence of LFD. The Rules do not impose obligations on lay clients and presumptively these positions are being taken by LFD with the full consent of One (and of A and B). The Committee notes that there may be curative legal remedies for this situation. The Committee is troubled however, by the acute potential for violations of RPC 1.7 (“Conflicts of Interest: Current Clients”) on the part of LFD arising from the concurrent representations of A, B, One and Two although the true adversity of those conflicts cannot be gauged without more knowledge of the facts.