Certain Underwriters at Lloyd’s London v. Sidley Austin LLP
(Mass Super. Ct. November 30, 2010)
Certain Underwriters at Lloyd’s London (“Lloyd’s”) issued a reinsurance policy to Liberty Mutual Insurance Company (“Liberty”). After Lloyd’s refused to pay reinsurance billings, on April 6, 2010 Liberty commenced an arbitration against Lloyd’s.
Liberty retained the law firm of Sidley Austin LLP to give it advice with regarding to its potential claims under the reinsurance agreements. Resolute Management Inc. (“Resolute”) manages United States direct insurance claims for Lloyd’s on insurance contracts entered into prior to 1993. Thereafter, Resolute contacted Sidley Austin LLP about possible representation on an appeal of an injunction entered in a coverage action between Lloyd’s and Teck Metals Ltd.
Lloyd’s commenced a declaratory judgment action seeking a preliminary and a permanent injunction disqualifying Sidley Austin LLP from acting as counsel for Liberty in the arbitration on the grounds that the firm has a concurrent conflict in violation of Rule 1.7(a) of the Massachusetts Rules of Professional Responsibility for which no informed consent had been given by Lloyd’s. The complaint alleges that Sidley Austin must have known about but failed to disclose through various communications.
The complaint alleges that Rule 1.7 of the Massachusetts Rules of Professional Conduct prohibits a lawyer from representing a client against another client unless each client consents after consultation. Rule 9.1(c) of the Massachusetts Rules of Professional Conduct specifies that “consultation” denotes communication of information reasonably sufficient to permit the client to appreciate the significance of the matter in question. The complaint alleges that Sidley Austin did not obtain Lloyd’s consent after consultation to its concurrent conflict of interest because Sidley Austin did not inform Lloyd’s that, as of its retention in the Teck matter the firm was then representing and advising Liberty with regard to a large potential reinsurance claim against Lloyd’s and a potential claim of willful and intentional unfair or deceptive practices. Additionally, the firm continued to seek Resolute’s signature on the engagement letter without at any time advising Resolute of the filing of the arbitration demand. Moreover, the engagement letter excludes from the scope of the conflict consent any conflicting representation that is “substantially related” to the scope of the firm’s representation set forth in the letter. The complaint alleges that a question of law involved in the Teck matter is also at issue in the arbitration, the two matters are substantially related. Accordingly, even if the engagement letter did constituted a valid consent after consultation, that consent would not apply to Sidley Austin’s representation of Liberty against Lloyd’s. The complaint alleges that the firm’s unconsented representation of Liberty against Lloyd’s deprives Lloyd’s of the loyalty which is an essential element of the lawyer’s relationship to a client.
The complaint alleges that allowing Sidley Austin to continue to represent Liberty inflicts immediate and irreparable injury to Lloyd’s and therefore seeks a preliminary and permanent injunction requiring Sidley Austin to withdraw from representing Liberty in the arbitration.
For a copy of the complaint click here
Toni Frain and Jeffrey Kingsley
https://www.goldbergsegalla.com/attorneys/Frain.html