Legal Ethics Opinion #1526

Conflict of Interest: Representing Beneficiaries of a Fund and
Representing Corporate Contributors to Fund

You have presented a hypothetical situation in which a law firm
brought a class action suit on behalf of the beneficiaries of an
employee benefit plan to enforce the guarantee of benefits
contained in a collective bargaining agreement ("Agreement"). 
The Agreement had been negotiated between a union and a multi-
employer group ("Association").  Under the Agreement, the
Association was responsible for determining the rate of
contributions by the employers who were signatory to the

Under the facts you present, the class action suit resulted in
the issuance of injunctions requiring the trustees of the fund to
continue payment of benefits under the Agreement and directing
the Association to raise the contribution rate for the remaining
term of the Agreement.  The agreement covered a period of five
years and has now expired.

You indicate that the beneficiaries have obtained payment for all
but their claims of the final months of the term of the
Agreement. Claims for these final months have not yet been
processed.  You state that during the pendency of the class
action suit, a new federal statute was enacted which creates new
funds and plans for future benefits and provides expressly for
the payment of any deficit in the fund resulting from claims for
the benefits guaranteed under the Agreement.

Further, you state that the federal statute requires certain
employers ("Agreement Operators") to make contributions to pay
off any deficit in the benefit fund following the expiration of
the Agreement.  The Agreement Operators include the members of
the Association, the largest employers in the industry. You
indicate that members of the Association and other Agreement
Operators are obligated under the federal statute to pay whatever
remains to be paid in order to fund the remaining cost of the
benefits guaranteed under the Agreement.

You indicate that the trustees have brought suit against a group
of employers who either were not signatory to the Agreement or
signed an altered version of the Agreement that modified or
limited their obligations to contribute to the fund
("Companies").  The trustees allege that these Companies are
contractually liable for contributions to the fund because each,
at one time, signed a predecessor to the Agreement which
contained a successorship clause.  One or more of the Ced the law
firm to represent them in their defense against the contractual
claim based on the successorship clause.  Furthermore, you
indicate that the potential liability of these companies is a
relatively insignificant fraction of the vast sums the trustees
have received and spent in connection with health benefits during
the term of the Agreement. 

You state that the successorship clause provided that, with
respect to contributions to the fund, the employer would be bound
by the provisions of each successor agreement.  Thus, the
trustees assert that the Companies were contractually bound to
make contributions in accordance with the terms of the Agreement. 
Some of the Companies may also be Agreement Operators as defined
by statute.  The alleged contractual liability of the Companies
is for contributions to the fund during the term of the
Agreement.  The statutory liability of the Agreement Operators is
to pay any deficit that remains in the fund at the end of the

You indicate that the federal statute guarantees the funding of
benefits for the beneficiaries and it also removes any
uncertainty as to who must pay for the remaining debts of the
fund.  Finally, you also indicate that under the federal statute,
the obligation of the Agreement Operators to pay any deficit in
the fund is not contingent on the trustees' inability to enforce
the successorship clause against the Companies.  If the trustees'
contractual claims against the Companies results in additional
contributions to the fund, creating a surplus, the Agreement
Operators will receive credit for any overpayments by way of
reductions of their obligations to pay into the new funds.

You have asked the committee to opine whether, under the facts of
the inquiry, the law firm may represent both the class of
beneficiaries of a benefit fund in a suit to continue payment of
benefits and one or more of the Companies, i.e. employers, who
have been sued for breach of alleged contractual obligations to
contribute to the fund, when a new es payment of the benefits by
requiring the Agreement Operators to pay any deficit in the fund.

The appropriate and controlling Disciplinary Rule related to your
inquiry is DR 5-105(A) which states that a lawyer shall decline
proffered employment if the exercise of his independent
professional will be or is likely to be adversely affected by the
acceptance of the proffered employment, except to the extent
permitted under DR 5-105(C).  Disciplinary Rule 5-l05(C) provides
that a lawyer may represent multiple clients if it is obvious
that he can adequately represent the interest of each and if each
consents to the representation after full disclosure of the
possible effect of such representation on the exercise of his
independent professional judgment on behalf of each.  The
committee also directs your attention to DR 5-l07(A) which
requires that a lawyer who represents two or more clients shall
not make an aggregate settlement of the claims of or against his
clients unless each client has consented to the settlement after
being advised of the existence and nature of all the claims
involved in the proposed settlement, of the total amount of the
settlement, and of the participation of each person in the

The committee believes that the fact situation presented here is
analogous to that of an attorney representing several creditors
against a single debtor.  The committee has previously opined
that it is not improper for an attorney to represent separate
creditors against a single debtor, if, after full disclosure to
each creditor, all creditors consent to the multiple
representation and concur as to the distribution of any funds
collected should the amount be inadequate to pay fully each
creditor's claim.  See LEO #478.

Under the facts you have posed, the committee is of the opinion
that the law firm's representation of both the beneficiaries and
one or more of the Companies would not be per se violative of DR
5-105(A) or (C).  You state that, because the success of the
trustees' contractual claim will have no effect on the
beneficiaries, the interests of the two clients are not presently
in conflict. However, because the interests of the two clients
are potentially differing, the requirements of full disclosure
and consent to the representation by all clients, as articulated
in DR 5-105(C), must be met.  Furthermore, should the potential
differing interests mature into actual adverse interests, it may
then become necessary for the law firm to withdraw from
representing both the beneficiaries and the Companies or to
obtain separate counsel for the issues giving rise to a conflict. 
See LEOs #1410, #1454.     

Committee Opinion
May 11, 1993