U.S.

Department of Justice
EN D 0 York
MEMO
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86 Chambers Street
New York, New York 10007
August 26,2013
By Hand
The Honorable Richard M. Berman
United States District Judge
United States Courthouse
500 Pearl Street
New York, New York 10007
DATE fILED: q
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Re: United States v. District Council o(Carpenters. 90 Civ. 5722 (RMB)
Dear Judge Berman:
This Office represents the United States in the above·named case. We write respectfully
in response to the Court's August 12, 2013, Order directing the parties to analyze any potential or
actual conflicts of interest arising from the fact that the District Council Benefit Funds ("Benefit
Funds") and the Contractors Association of Greater New York ("CAGNY"), an association of
employers, were both represented by the law firm of Kauff, McGuire & Margolis LLP (the
"McGuire firm"). This issue arose in connection with a request that the Court approve a
collective bargaining agreement ("CBA") entered into between the District Council and
CAGNY. As discussed below, while we believe there may be a potential conflict in the McGuire nr
firm's representation of CAGNY in collective bargaining negotiations with the District Council
in light of the Benefit Funds' status as a third party in interest. we cannot provide a definitive
answer, as this is a very fact dependent determination and this Office is without all of the
nertinent facts.
As an initial matter, our analysis is based on the New York Rules of Professional Conduct
(the "New York Rules"), as this matter is pending in the Southern District of New York, which
has adopted the New York Rules. See, e.g., Local Civil R. 1.5(b)(5). However, we also discuss
the comments to the New York Rules which, whi1e not officially adopted, are considered by the
New York State Bar Association and provide informative, if not binding guidance.
First, the issue before the Court implicates New York Rule 1.7. As relevant here, the rule
states:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if a
reasonable lawyer would conclude that either:
(1) the representation will involve the lawyer in representing differing interests; or
page 2
Hon. Richard M. Berman
August 26, 2013
(b) Notwithstanding the existence of a concurrent conflict of interest under
paragraph (a), a lawyer may represent a client if:
(I) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client
against another client represented by the lawyer in the same litigation or other
proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
New York Rule 1.7.
The New York Rules define "differing interests" as "every interest that will adversely
affect either the judgment or the loyalty of a lawyer to a client, whether it be conflicting,
inconsistent, diverse, or other interest." New York Rule 1.0(f); see also New York Rule 1.7 cmt.
8 ("Differing interests exist if there is a significant risk that a lawyer's exercise of professional
judgment in considering, recommending, or carrying out an appropriate course of action for the
client will be adversely affected or the representation would otherwise be materially limited by
the lawyer's other responsibilities or interests .... The critical questions are the likelihood that a
difference in interests will eventuate and, ifit does, whether it will adversely affect the lawyer's
professional judgment in considering alternatives."). Notably, "differing interests" conflicts can
occur in transactional matters as well, see New York Rule 1.7 cmt. 26, even if the attorney's
representation of the two clients at issue occurs in separate matters. Thus, an attorney's
representation of one client in a negotiation (here, the McGuire firm's representation of CAGNY
in CBA negotiations), which entails advocating a position that is adverse to the interests of
another client (here, the Benefit Funds) may result in a conflict, even though the attorney's
representation of the other client (Benefit Funds) is undertaken in connection with a separate
matter. See New York Rule 1.7 cmt. 7.
1
This is because, among other things, the first client
"may reasonably fear that the lawyer will pursue that client's case less effectively out of
deference to the other client, that is, that the lawyer's exercise of professional judgment on behalf
of that client will be adversely affected by the lawyer's interest in retaining the current client."
See id cmt. 6.
I There is no conflict if the adverse interest is only economic. "[S]imultaneous
representation in unrelated matters of clients whose interests are only economically adverse, ...
does not ordinarily constitute a conflict of interest and thus may not require consent of the
respective clients." New York Rule 1.6 cmt. 6.
page 3
Hon. Richard M. Berman
August 26, 2013
As applied here, "differing interests" may exist between the McGuire firm's .
representation ofCAGNY in the CBA negotiations and its representation of the Benefit Funds m
other matters, notwithstanding that the Benefit Funds are not a party to the CBA negotiations,
because the CBA directly addresses contributions to the Benefit Funds. One might reasonably
assume that an employer's association would seek to minimize contributions its constiturnt
em 10 ers must a on behalf of the union workers the em 10 while the Benefit Funds woul
seek to maximize those same amounts. However, as CBA negotiations are multifaceted an
complex, further factual development would be necessary to test the validity ofthis assumption.
For example, CAGNY may not have any contested any requested increase in contributions by the
District Council, but focused its efforts at challenging other requested modifications. This Office
is not privy to that information.
Second, and relatedly, the McGuire firm owes both CAGNY and the Benefit Funds a duty
of confidentiality. The duty of confidentiality is defined in New York Rule 1.6, which states in
relevant part:
(a) A lawyer shall not knowingly reveal confidential information, as defined in
this Rule, or use such information to the disadvantage of a client or for the
advantage of the lawyer or a third person, unless:
(l) the client gives informed consent, as defined in Rule l.O(j);
(2) the disclosure is impliedly authorized to advance the best interests of the client
and is either reasonable under the circumstances or customary in the professional
community; or
(3) the disclosure is permitted by paragraph (b) [which defines certain exceptions
not applicable here].
New York Rule 1.6. "Confidential information" consists of information gained during or
relating to the representation of a client, whatever its source, that is (a) protected by the
attorney-client privilege, (b) likely to be embarrassing or detrimental to the client if disclosed, or
(c) information that the client has requested be kept confidential. ld.
2
Here, the McGuire firm almost certainly obtained confidential information from each of
CAGNY and the Benefit Funds in representing each in the respective matters. Accordingly,
absent client consent, the firm's professional obligations preclude (1) revealing such information;
(2) using that information to the disadvantage of either; or (3) using that information to the
advantage of a third party (such as the other client). It is possible that the McGuire firm obtained
pertinent confidential information from CAGNY or the Benefit Funds involving CBA provisions
that affect both entities. If this was the case, the duty of confidentiality would "materially limit"
its representation of the client who did not supply the confidential information. New York Rule
2 "Confidential information" does not ordinarily include (i) a lawyer's legal knowledge
or legal research or (ii) information that is generally known in the local community or in the
trade, field or profession to which the information relates. See id.
Hon. Richard M. Berman
page 4
August 26, 2013
1.7(a)(2). Again, this Office is not in possession of infonnation indicating whether or not this
occurred.
Third, to the extent there were conflicts ofinterest between the McGuire finn's
simultaneous representation of CAGNY and the Benefit Funds, those conflicts are waivable,3 and
the McGuire finn has represented that consent has been obtained. See Ltr. from McGuire to
Court dated August 22,2013. Conflicts under New York Rule 1.7 can be consented to if:
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client
against another client represented by the lawyer in the same litigation or other
proceeding before a tribunal; and
(4) each affected client gives infonned consent, confinned in writing.
New York Rule 1.7(b). We have not uncovered any prohibitions in law, see N.Y. Rule 1.7(b)(2),
of the McGuire finn's representation ofCAGNY and the Benefits Funds. Moreover, the
McGuire finn's representation ofCAGNY and the Benefits Funds does not involve a claim by
one against the other in the above-referenced case, and so New York Rule 1.7(b)(3) also would
not preclude consent.
4
Accordingly, if a conflict did exist, CAGNY and the Benefit Funds would both have to
provide infonned consent to the McGuire finn to continue to represent both. "'Infonned
consent' denotes the agreement by a person to a proposed course of conduct after the lawyer has
communicated infonnation adequate for the person to make an infonned decision, and after the
lawyer has adequately explained to the person the material risks of the proposed course of
conduct and reasonably available alternatives." New York Rule LOG). It also requires "that the
client have the opportunity to consult other counsel if the client so desires." New York Rule 1.7
cmt. 18.
Thus, to obtain infonned consent, the McGuire finn must explain to CAGNY and the
Benefit Funds the nature of the conflict, the risks (such as risks related to confidential
infonnation), and the potential outcomes. The sophistication of CAGNY and the Benefit Funds
and nature of the conflict are relevant to the infonnation that the McGuire firm must provide.
3 While a client can consent to future or speculative conflicts so long as the consent is
knowing, see New York Rule 1.7 cmt. 22, the possibility of future or speculative conflicts is no
longer at issue here since the McGuire firm no longer represents CAGNY, see Ltr. from McGuire
to Court dated August 22, 2013.
4 Only the McGuire firm can address whether New York Rule 1.7(b)(1) precludes
consent.
Hon. Richard M. Berman
page 5
August 26, 2013
See N. Y. Rule 1.7 cmt. 18 ("The infonnation that a lawyer is required to communicate to a client
depends on the nature of the conflict and the nature of the risks involved, and a lawyer should
take into account the sophistication of the client in explaining the potential adverse consequences
of the conflict."). The requirement that the consent be confinned "in writing," New York Rule
1.7(b)(4), requires either a document from the client, a document from the lawyer promptly
transmitted to the client confinning oral consent, or a statement on the record by the client, see
New York Rule 1.7 cmt. 20.
We thank the Court for its consideration of this matter.
Respectfully,
PREET BHARARA
United States Attorney
By: /s/ Tara M La Morte
BENJAMIN H. TORRANCE
TARA M. La MORTE
Assistant United States Attorneys
Telephone: 212.637.2703,2746
Fax: 212.637.2702
cc: Raymond McGuire, Esq. (by-email)
Dennis Walsh, Esq. (bye-mail)
Bridget Rohde, Esq. (bye-mail)
James Murphy, Esq. (bye-mail)
Su
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Richard M. Berman, U.S.D.J.