Who's My Client? Vicarious Or Accommodation Clients

• Jurisdiction: United States,Federal
• Law Firm: Frankfurt Kurnit Klein & Selz
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Law Department Performance, Insurance Laws and Products, Trials & Appeals & Compensation, Workflow and Workload Management , Performance
• Author: Mr Ronald Minkoff
• Published date: 10 January 2023

When is a client not really your client?

The answer: when the client is considered a "secondary," "vicarious" or "accommodation" client. Though often used interchangeably by courts, these terms actually have different meanings. A "secondary" or "accommodation" client is one who has an insubstantial relationship to the lawyer, because the lawyer represents her either in some nominal capacity or as an accommodation to a long-established "primary" client. For conflicts of interest purposes, this "client" is treated as if she is not and never was the lawyer's client. A vicarious client, on the other hand, is a client who the lawyer is representing through another client or, put another way, is "a member of an organization or entity that is being represented by the attorney." Ives v. Guilford Mills, Inc., 3 F. Supp. 2d 191, 202 (S.D.N.Y. 1998). This type of client is entitled to at least some protection under the conflicts rules, but not the same as a traditional client.

We originally wrote this article back in 2008. But while not much has changed in the case law, the underlying ethical rules have changed. More importantly, the question keeps coming up, so a new look at these principles is in order.

These situations have different doctrinal histories - the first under Canon 4 of the old New York Code of Professional Responsibility (attorney-client confidentiality, now addressed by Rule 1.6 of the New York Rules of Professional Conduct (the "RPCs"), and the second under Canon 5 (conflicts of interest, now addressed by RPC 1.7, 1.8 and 1.9) - and different origins in the case law. Nevertheless, a lawyer's ability to place an "accommodation" or "vicarious" label on a client helps significantly in defending against that client's motion to disqualify on conflict grounds in a subsequent case. But placing that label on a client is not easy.

Secondary or Accommodation Clients

Allegaert v. Perot

The concept of a "secondary" client was introduced more than 45 years ago in Allegaert v. Perot, 565 F.2d 246 (2d Cir. 1977), a case whose analysis is now outmoded but still retains considerable influence on New York federal and state courts.

In Allegaert, the trustee in bankruptcy of duPont Walston Inc. ("Walston"), a defunct Wall Street brokerage firm, sought to disqualify two law firms, Weil Gotshal & Manges ("WG&M") and Leva, Hawes ("Leva"), who were representing claimants in the bankruptcy but who Walston claimed had previously represented it. From the outset, WG&M and Leva had both represented entities controlled by the late billionaire H. Ross Perot: WG&M had represented another brokerage, duPont Glore Forgan ("DGF"), and Leva had represented Perot's main business, Electronic Data Services ("EDS"). DGF and Walston both had been in financial trouble, and Perot had sought a merger to preserve their lucrative business for EDS, a payroll services company. With Walston represented by its long-time counsel, Shearman & Sterling ("Shearman"), a "realignment" transaction had taken place, under which both brokerages had retained their separate identities and formed a joint venture. Id. at 248-49. After the re-alignment, Shearman had continued as Walston's main outside counsel, while WG&M and Leva had also represented Walston on a variety of matters, including in a class action lawsuit that involved similar allegations to those in the Trustee's lawsuit.

The district court denied the Trustee's disqualification motion, and the Second Circuit affirmed. Recognizing that Walston was now, at best, a former client of WG&M and Leva, the Second Circuit had to base its conflicts analysis on Canon 4 of the New York Code, pertaining to confidentiality, because the Code at the time did not yet include a conflict rule about former clients - first DR 5-108 and now RPC 1.9. Under its Canon 4 analysis, the Court ruled that the law firms could be disqualified only if they had obtained confidential information from Walston, something which would normally be presumed if there was a "substantial relationship" between the current and former representations. Allegaert, 565 F.2d at 250. But the Court made clear that the "substantial relationship" test would not apply at all unless Walston could show "that the [law firms were] in a position where [they] could have received information which [their] former client [Walston] might reasonably have assumed [they] would withhold from their present client[s]." Id.

The Court concluded that Walston had failed to make this showing "[b]ecause Walston necessarily knew that...