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Ethics Advisory Opinion 05-22

April 13, 2005

South Carolina Bar Ethics Advisory Opinion 05-22

RULES 1.0(f) and 1.7

Date: December 16, 2005

Facts
Lawyer A represents a military member who was injured in an automobile accident. The Army requests that the attorney sign the attached proposed representation agreement to protect the Army's costs incurred in paying the military member's medical benefits.

The Army acknowledges in the proposed representation agreement that the interest of the United States Government is not a lien but instead constitutes a cause of action which is independent from any personal injury action that may be asserted by the injured military member against a third party. It is clear from a review of the proposed agreement that the attorney is not required to sign the agreement, nor is the attorney required to pay out of the proceeds of any personal injury settlement the medical bills the Army incurred. The agreement itself states that "either party may terminate this agreement for failure to abide by the terms thereof." The agreement also states that it is a voluntary agreement, and the communication is clearly in the form of a request rather than a requirement.

Moreover, 42 USC §2652(c) provides that no action taken by the United States shall operate to deny to the injured person the recovery for that portion of his damages not covered hereunder.

Issue
In a situation wherein third party liability is questionable and the available liability coverage is very limited in relation to the total cognizable damages, may the attorney sign the agreement?

Summary
It appears the attorney's client has nothing to be gained by the attorney's signing the agreement and much to lose. Signing the agreement would create a conflict for the attorney under Rule 1.7(a)(2). However, the client could give informed consent, confirmed in writing, as discussed below.

Opinion
Rule 1.7(a) provides that “[e]xcept as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest.” Under Rule 1.7 (a)(2), a concurrent conflict of interest exists if “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….” It appears that in the situation provided by the inquirer, if the attorney were to sign the agreement, there is certainly a likelihood that a difference in interests will eventuate, which would interfere with the attorney’s ability to represent his client. There is a conflict because of the likelihood of limited recovery due to the lack of insurance coverage and questionable liability, which would create a situation where the client’s net recovery would be significantly lower due to the dual representation.

There may be situations when an attorney might properly decide in the exercise of his discretion that the agreement may be signed without compromising his client's interest. For example, in a situation wherein liability is clear and the amount of liability insurance would easily cover the amount of damages, the inclusion of the Government's independent claim for medical bills might, in the attorney's judgment, increase the total award or settlement for the military member under the concept of applying a multiple to special damages.

Also, under Rule 1.7(b), the attorney may sign such an agreement upon the client giving informed consent, confirmed in writing. See Rule 1.0(f) (defining “informed consent”).

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