OPINION NO. 90-17 Dcmbr 28, 1990 FACTS: Th inquiring law firm has bn rtaind by a workrs compnsation carrir~ primarily to proscut third-party lawsuits that injurd mploys hav lctd not to pursu. Th carrir has also askd th law firm to contact th injurd workrs concrning rprsntation. Th law firm has askd this committ for an opinion on whthr it would b thically prmissibl to do so A.R.S. 5 23-1023 (8A A.R.S. (1983) at p. 80) provids that~ if an mploy is injurd in th cours of mploymnt by th nglignc or othr wrongdoing of anothr not in th sam mploy, and th injurd mploy collcts workrs compnsation but fails to bring a prsonal injury action against th third party wrongdor within on yar aftr th caus of action accrus, th claim against th third party is dmd assignd by opration of law to th workrs compnsation carrir. Th carrir may thn proscut th claim aftr th nd of th first yar and within th applicabl limitations priod aftr th caus of action has accrud (two yars in cass of nglignt torts)~ Or may rassign th claim in its ntirty to th injurd mploy. If th mploy procds against th third party, th compnsation carrir that has paid th claim for compnsation and mdical, surgical and hospital bnfits has a lin on th amount collctibl to th xtnt of such bnfits so paid to th injurd workr. Th amount collctibl quals th amount of th rcovry obtaind lss attornys fs and othr rasonabl and ncssary xpnss incurrd and paid in obtaining th rcovry. Th statut rquirs that th mploy Obtain writtn approval from th compnsation carrir if th mploy dcids to compromis th claim for lss than th amount of bnfits paid to him or hr by th carrir. Th inquiring law firm rprsnts th workrs compnsation carrir. Th carrir has suggstd that th law firm contact th injurd workr and notify th workr: (1) that th law firm rprsnts it: and (2) that? if th workr wishs to rcovr monis on his or hr own bhalf for pain and suffring~ th workr may contact th inquiring law firm or anothr law firm for rprsntation, in which cas th claim will b rassignd by th compnsation carrir to th injurd workr. May a law firm that rprsnts a workrs compnsation carrir thically contact th,injurdworkrs and offr to prcvid thm with lgal rprsntation if thy dsir to pursu thirdparty claims undr A.R.S. S 23-1023? @
o ETHICAIJRULES INVOLVED: ER 1.7. Conflict of Intrst: Gnral Rul (a) A lawyr shall not rprsnt a clint if th rprsntation of that clint will b dirctly advrs to anothr clint, unlss: (1) th lawyr rasonably blivs th rprsntation will not advrsly affct th rlationship with th othr clint; and (2) ach clint consnts aftr consultation. 0 (b) A lawyr shall not rprsnt a clint if th rprsntation of that clint may b matrially limitd by th lawyr s rsponsibilitis to anothr clint... unlss: (1) th lawyr rasonably blivs th rprsntation will not b advrsly affctd; and ER 7.1. [2) th clint consnts aftr consultation.... Communications Concrning a Lawyr s Srvics A lawyr shall not mak a fals or mislading communication about kh lawyr or th lawyr s srvics. A communication is fals or snisladingif it: (a) contains a matrial misrprsntation of fact or law, or omits a fact ncssary to mak th statmnt considrd as a whol not matrially mislading; (b) is likly to crat an unjustifid xpctation about rsults th lawyr can achivr or stats or implis that th lawyr can achiv rsults by mans that violat th ruls of profssional conduct or othr law; or (c) srvics, compars th lawyr s srvics with othr lawyrs unlss th comparison can b factually substantiatd. ER 7.2. Advrtising (amndd ffctiv August 1, 1989) (a) Subjct to th rquirmnts of ER 7.1 and ER 7.3, a lawyr may advrtis srvics through public mdia, such as a tlphon dirctory, lgal dirctory? nwspapr or othr priodical, outdoor, radio or tlvision? or through writtn communication. (b) A copy or rcording of an advrtismnt or writtn communication shall b kpt for thr yars aftr its last dissmination along with a rcord of whn and whr it was usd. (90-17) 2
***** (d) Any communication mad pursuant to this rul shall includ th nam of at last on lawyr rsponsibl for its contnt. () Writt@n communications to prospctiv clints for th purpos of obtaining profssional mploymnt ar subjct to th following rquirmnts: (1) Such writtn communications shall b plainly markd Advrtismnt on th fac of th nvlop and at th top of ach pag of th writtn communication in typ no smallr than th largst typ usd in th writtn communication; and (2) A copy of ach such writtn communication shall b rtaind by th lawyr for thr yars. If writtn communications idntical in contnt ar snt to two or mor prospctiv clints, th lawyr may comply with this rquirmnt by rtaining a singl copy togthr with a list of th nams and addrsss of prsons to whom th writtn communication was snt. (f) A lawyr shall not snd, or knowingly prmit to b snt? on bhalf of himslf? his firml his partnrr an associat, or any othr lawyr affiliatd with him or his firm a writtn communication to a Prospctiv clint for th -. Purpos of obtaining profssional m~loyrnntif: ***** @ (3) Th communication fraud, ovrraching, harassmnt, nc; ER 7.1. ***** includs corcion, durss, intimidation, or undu influ- (4) Th communication is othrwis impropr undr ER 7.3. Dirct Contact with prospctiv Clints (amndd ffctiv August 1, 1989) (a) A lawyr may not solicit profssional mploymnt from a prospctiv clint with whom th lawyr has no family or prior profssional rlationship in prson or by tlphon, whn a motiv for th lawyr s doing so is th lawyr s pcuniary gain. (b) Subjct to th rquirmnts of ER 7.1 and ER 7.2, and paragraph (c) hrin, a lawyr may initiat writtn communication, not involving prsonal or tlphon contact, with prsons known to nd lgal srvics of th kind providd by th lawyr in a particular mattr? for th purpos of obtaining profssional (90-17) 3 a.
mploymnt. Such writtn communication shall b clarly markd on th nvlop and on th first pag of th communication containd in th nvlop~ as follows: ADVERTISING MATERIAL: THIS COMMERCIAL SOLICITATION HAS NOT BEEN APPROVED BY THE STATE BAR OF ARIZONA Said notification shall b printd in rd ink, In all capital lttrs, in typ siz at last doubl that usd in th body of th communication... (c) At th tim of dissmination of such writtn communication, a copy shall b forwardd to th Clrk of th Arizona Suprm Court and th Stat Bar of Arizona at its Phonix offic. If a writtn communication idntical in contnt is snt to two or mor prospctiv clints, th lawyr may comply with this rquirmnt by forwarding a singl copy togthr with a list of th nams and addrsss of prsons to whom th writtn communication was snt. ETHICS OPINIONS CITED: Arizona (Novmbr 6, CASES CITED: Opinions No. 86-1 (January 6, 1986), and No. 89-09 1989). Ohralik v. Ohio Stat Bar Ass n, 436 U.S. 447, 98 S. Ct. 1912, 56 L. Ed.2d 444 (1978). OPINION: Shapro v. Kntucky Bar Association, 486 U.S. 466, 108 S. Ct. 1916, 300 L. Ed.2d 475 (1988). Parsons v. Continntal National Amrican Group, 113 Ariz. 223, 550 P.2d 94 (1976]. This inquiry rquirs th comitt to answr two qustions: (1) whthr th inquiring law firm may solicit rap30ymntfronta party known to nd lgal srvis of th kind providd by th firm s lawyrs in a particular mattr andt if sot in what mannr; and (2) whthr th law firm s dual concurrnt rprsntation of th workrs compnsation carrir and th injurd workr crats a conflict of intrst. o 1. Contact with iniurd workr. Th inquiring law firm could not solicit profssional mploymnt from th injurd workr in prson or by tlphon, absnt a family or prior profssional rlationship with th injurd (90-17) 4
workr~ whn a motiv for th law firm s doing so is th firm s pcuniary gain. ER 7.3(a); and s Ohralik v. Ohio Stat Bar Ass n, 436 U.S. 447? 98 S. Ct. 1912~ 56 L. Ed.2d 444 (1978), and Shapro v. KntuckY Bar Ass n, 486 U.S. 466, 108 S. Ct. 1916, 100 L. Ed.2d 475 (1988). Subjct to th rquirmnts of ER?.1, ER 7.2 and ER 7.3(c), a lawyr in th law firm could initiat writtn communication not involvingprsonal or tlphon contact? with th injur~gc;o~kr. ER 7.3(b). S ShaPro v. Kntucky Bar Ass n, supra. communicationmay not b fals or mislading. ER 7.1. Nor may it involv corcion~ durss~ fraud~ ovrraching? harassmnt, intimidationor undu influnc. ER 7.2(f)(3). Gnral nonxhaustiv guidlins to assist in dtrmining whthr a statmnt of advic and information rgarding a spcific lgal problm is fals or mislading may b found in our Opinion NO. 86-1 (January6, 1986). And, in our Opinion No. 89-09 (Novmbr 6, 1989), w rviwd thr proposd communications to prospctiv non-clints known to nd lgal srvics of th kind providd by th lawyr in a particular mattr, in th contxt of whthr thy wr fals~ mislading~ corciv or constitutd ovrraching. That Opinion also provids guidanc in th formulation and composition of solicitation lttrs. In addition, th writtn communications would hav to b lablld in accordanc with th rquirmnts of ER 7.3(b). Copis of such communications would hav to b kpt by th law firm for thr yars, ER 7.2(b)~ and copis of ach communication would hav to b snt to th Clrk of th Arizona Suprm Court and to th Phonix offic of th Stat Bar of Arizona, as rquird by ER 7.3(c). Th workrs compnsation carrir could crtainly notify an injurd workr that h or sh might hav a third-party claim: that such a claim would b rassignd if th injurd workr wishd to pursu it: and that th injurd workr might dsir to consult with counsl of his or hr own choic. Th law firm, on bhalf of th compnsation carrir~ could notify th injurd workrt ithr prsonally or in writin9~ Of th6 sam mattrs. Th problm ariss whn th law firm rprsnting th compnsation carrir notifis th injurd workr of thos mattrs with an y to rprsnting th injurd workr as wll. Howvr, ths problms ar amlioratd or minimizd whn th law firm dos not rprsnt th carrir in th compnsation cas rlating to th spcific injurd workr~ but only on othr unrlatd mattrs. Any thical problm would also b ngatd or substantially minimizd whn th law firm rprsnts th carrir in rgard to th spcific injurd workr s cas only as it rlats to rcovring from th rsponsibl third-party wrongdor th amounts paid out by th compnsation carrir (for compnsation and mdical, surgical and hospital bnfits) to th injurd workr which ar sub-, jct to th statutory lin in favor of th compnsation carrir. (90-17) 5
o 2. Conflict of intrst. 0 * ER 1.7(a,b) provids that a lawyr may not rprsnt a clint if th rprsntation of that clint will b dirctly advrs to anothr clint of th lawyr, or if th rprsntation of a clint may b matrially limitd by th lawyr s rsponsibilitis to anothr clint. Howvr, ths prohibitions ar not absolut. A lawyr may rprsnt two clints in a particular mattr if th lawyr rasonably blivs that th rprsntation will not advrsly affct ithr clint and both clints consnt aftr full disclosur of th implications of th dual rprsntation. Bcaus of ths xcptions, a dtrmination of whthr thr is a conflict of intrst btwn two clints or potntial clints must b mad on a cas-by-cas basis. Consquntly, w cannot unquivocally say that th inquiring law firm may or may not rprsnt both th injurd workr and th workrs coxupnsation carrir in ach and vry cas. Thr may b situations, lik th two xampls st forth abov, whr rprsntation of both clints would not advrsly affct ithr clint, or whr ~prsntationof on clint would not b matrially limitd by th law firm s rsponsibilitis to th othr. In such cass, th clints could consnt to th dual rprsntations aftr full consultation and advic concrning th possibl ramifications of th dual rprsntations. Howvr, in cass whr th law firm rprsnts th compnsation carrir in th undrlying compnsation cas itslf? it would sm to b th xcptional cas whr th rprsntation of on clint (i..r th compnsation carrir) would not advrsly affct th rlationship with th othr clint (i..r th injurd workr)~ or whr th rprsntation of on clint (i..? th injurd workr) would not b matrially limitd by th law firm s rsponsibilitisto anothr clint (i.,t th compnsation carrir). Th natur of workrs compnsation law producs inhrnt and virtually unavoidabl conflicts of intrst btwn th carrir and th injurd workr at on or mor points during th administration of a workr s compnsation cas whn th injurd workr pursus a civil action against th third-party wrongdor. Whn th compnsation carrir pursus a third-party lawsuit during th scond yar~ it pays th costs and attorny s fs. If th third-party claim is rassignd and th injurd workr pursus th claim, th injurd workr pays th costs and attorny s fs. H ox sh may also obtain compnsation for pain and suffring whil th carrir could not. Gnrally, th Injurd workr will far bttr in a third-party tort claim lawsuit than will th compnsation carrir. Evn aftr rducing th amount rcovrd by th injurd workr by th sum of costs and attorny s fs, th amount actually collctibl -- th amount subjct to th carrir s lin - will frquntly b gratr than it would hav bn had th compnsation carrir (90-17) 6
pursud th claim; and th compnsation carrir will not hav paid th costs and attorny s fs ncssary to pursu th claim. In most cass~ thrfor~ th compnsation carrir would prfr that th injurd workr pursu th third-party claim during th scond yar. This is undoubtdly why th compnsation carrir has askd th inquiring law firm to contact th injurd workrs. Howvr, having th compnsation carrir s law firm pursu th claim for th injurd workr crats obvious conflicts. @ For xampl~ it is in th intrst of th compnsation carrirs and th law firm that rprsnts it in th undrlying compnsation cas, to attmpt to minimiz th xtnt of an injurd workr s disability. If this is accomplishd, lss mony will hav to b paid out by th carrir to th injurd workr in compnsation and mdical bnfits. Howvr, in a third-party claim, it is in th intrst of th injurd workr, and th law firm that rprsnts him or hr~ to maximiz th xtnt of th injurd workr s disability. A compnsation carrir, and th law firm that rprsnts th carrir in th administration of a workr s compnsationasr may rtain physicians and vocational consultants wht thy bliv~ will b mor inclind to support thir viw of th limitd xtnt of th workr s disability. This would clarly impact th third-party claim advrsly. Th contrary would also b tru. Exprts rtaind to support th plaintiff workr s claims mad in th third-party action would advrsly affct th position takn by th compnsation carrir on th xtnt of th workr s disability. Th qustions of which consultants to rtain, and who will pay th xpnss of rtaining thm, ar just a fw of th issus which vry rarly could b rsolvd without producing bnfit to on clint and countrvailing disadvantag to th othr. Confidncs communicatd to th law firm alrady rprsnting th compnsation carrir in th undrlying compnsation cas concrning th injurd workr s ability to work ithr bnfit th carrir, to th dtrimnt of th injurd workr, or vic vrsa. Th administration of a workr s compnsation cas oftn lasts for yars. What is don in a third-party cas may advrsly affct th administration of th workr s compnsation cas for yars into th futurt possibly ncssitating th withdrawal of th law firm from th rprsntation of both th injurd workr and th compnsation carrir? to th prjudic of on oz both of th clints. whil it may prhaps appar to th law firm at th outst that no conflict of intrsts will a~ist thr is almost invitably a divrgnc of intrsts btwn th injurd workr and th compnsation carrir whnvr a thirdparty claim is assrtd by th workr. Prhaps th most srious conflict would aris whn th claim against th third-party wrongdor is sttld. Usually, th claimant s lawyr attmpts to compromis th compnsation car-, rir s lin claim so as to Incras th amount of th workr s (90-17) 7
o rcovry. Knowldg of th carrir s philosophy on compromising such claims may bnfit th injurd workr at th xpns of th carrir? or vic vrsa. Confidncs obtaind from th injurd workr rspcting his or hr willingnss to satisfy th carrir s lin in full or partially might bnfit th carrir. And, confidncs on th sam subjct rcivd from th carrir could bnfit th innurd workr at th xpns of th carrir. Th prospct of additional mploymnt by th carrir may color th lawyr s judgmnt. If thr is any disput ovr th amount of th lin -- which thr frquntly is -- th Jaw firm clarly could not rprsnt both partis. @ Whn a law firm is rtaind by an insurr to rprsnt an insurd, th law firm ows its undviating and singl allgianc to th insurd. It dos not rprsnt th insuranc company, but th insurd, vn though it is bing paid by th insuranc company. E.q., Parsons v. Continntal National Amrican Grou~, 113 Ariz. 223, 227, 550 P.2d 94, 98 (1976); s ER 1.7, Commnt. Hr, th law firm would b rprsnting=th th compnsation carrir and th injurd workr. It would ow an undviating duty of loyalty to both. Bcaus of th invitabl divrgnc of intrsts, it could not concurrntly discharg that duty fully to both. Hnc, th conflict. This conflict would substantially dissolv if th law firm had not rprsntd th compnsation carrir in th undrlying compnsation cas, and was contactd by th carrir solly to pursu th potntially liabl third party. 3. Conclusion. Assuming that th rsponsibl lawyr in th law fim rasonably blivs that: (1) rprsntation of th compnsation carrir will not advrsly affct th injurd workr s intrsts; (2) rprsntation of th injurd workr will not advrsly affct th compnsation carrir s intrsts; and (3) rprsntation of on of thos clints would not b matrially limitd by rsponsibilitis to th othr? th law firm could solicit profssional mploymnt from th injurd workr in writing in accordanc with ER s 7.1~ 7.2 and 7.3. Both clints would hav to consnt to th dual rprsntation aftr a full consultation and xplanation. Howvr, th concurrnt rprsntation of both a workrs compnsation carrir and an injurd workr who brings a civil action against a third-party wrongdor rsults in a conflict of intrst in virtually vry cas whr th law firm rprsntd th carrir in th undrlying compnsation cas. In such casss th law firm cannot thically rprsnt both partis. (90-17) 8