On April 8, 1981, Disciplinary Counsel issued an Advisory Ethics Opinion and the Board has now been asked to issue a Formal Opinion pursuant to Section 26 of Rule 9 adopted by the Supreme Court of Tennessee at Nashville on January 28, 1981.
The following factual situation was presented:
The attorney defended the owner of a commercial building in a suit brought by the tenant in the building to cancel the lease and be allowed to remove his equipment where the building had been damaged by fire allegedly as a result of the tenant's negligence. The lease provided the tenant could cancel the lease if the building could not be repaired within 90 days and it was the tenant's contention that such could not be done. The attorney effected a settlement between the parties, as a result of which the owner's insurance company repaired the building within the 90 day period and the tenant dismissed his suit. Sometime later, a member of the owner's family retained the attorney to make claim against the tenant for damages to his personal property, and the insurance carrier of the owner retained the attorney to file suit against the tenant on its subrogation claim. The lease was silent as to waiver of subrogation and as to the tenant's responsibility for damage to the building. The owner refused to cooperate and refused to be named as plaintiff in the subrogation suit and the attorney raised the question as to whether he could properly represent the insurance company in an action against the owner, his former client, to recover the proceeds paid for failure of the owner to cooperate.
Rule 8 of the Rules of the Supreme Court of Tennessee incorporates the Code of Professional Responsibility. In the section on Definitions, we find "Differing Interests" defined to include every interest that will adversely affect either the judgment or the loyalty of a lawyer to a client, whether it be a conflicting, inconsistent, diverse, or other interest." The word Confidence" is defined in Disciplinary Rule 4-101.
The Court of Appeals, in the case of Harris v. Marshall, 8 Tenn. App. 508, quoted with approval the following language:
The relationship of attorney and client is an extremely delicate and fiduciary one, so far as the duty of the attorney toward the client is concerned, and the Courts jealously hold him to the utmost good faith in the discharge of his duty ....
The relation he (the attorney) bears to the client implies the highest trust and confidence. The client lays bare to his attorney his very nature and heart, leans and relies upon him for support and protection in the saddest hours of his life, knowing not which way to go to obtain his rights, he puts himself under the guidance of his attorney and confides that he will lead him aright ....
The Court from general principles of policy and equity will always look into the dealings between attorney and client, and guard the latter from any undue consequences resulting from a situation in which he may be supposed to stand unequal.
The language of the first paragraph of the quote was cited with approval again in the case of Coleman v. Moody, 52 Tenn. App. 138,372 S.W. (2d) 306,313.
In the case of American National Bank v. Bradford, 188 S.W. (2d) 971, the Middle Section of the Court of Appeals, at page 981, stated:
It is true the relation of client and attorney is one of great confidence and even after its termination the law continues to protect that confidence. An attorney who has once been made the recipient of the confidence of a client concerning a particular matter is thereafter disqualified from acting for any other party adversely interested in the same matter.
The Tennessee Court of Criminal Appeals, in the case of Autry v. State, 430 S.W. (2d) 808 at page 809, held:
It has long been firmly established, both in the canons of professional ethics and by judicial opinions, that attorneys cannot represent conflicting interests or undertake to discharge inconsistent duties. When an attorney has once been engaged and receives the confidences of his client, he cannot enter the services of those whose interests are adverse to that of his client or former client. The rule is a rigid one, and it is well that it is so.
The duty or loyalty owed by an attorney to his client with respect to matters as to which the attorney acted as counsel survive the formal conclusion of the attorney-client relationship to the extent that, having represented a party to a transaction, the attorney may not thereafter represent any other party in an action against his former client arising out of or closely related to the transaction. Under the facts given, it would certainly be impermissible for the attorney to file suit on behalf of the insurance company against his former client, the building owner.
This 25th day of June, 1981.
Joseph G. Cummings
F. Evans Harvill
John R. Rucker
APPROVED AND ADOPTED BY THE BOARD