City's Corporation Counsel rejects that argument, contending instead that an earlier provision of the same statute (id. P 2-302(a)) grants City an unlimited right to "appear and defend against the claim or action." On that reading, City (through its Corporation Counsel) could handle the case through the trial and to judgment--although the Corporation Counsel does acknowledge that if the trier of fact were to return a verdict against any defendant, any portion of the judgment that was designated as punitive damages would have to be borne by the individual personally. And Corporation Counsel's Mem. 3-4 says that possibility was explained to the individual defendants up front.
But that response reflects an incomplete analysis of the problem. This Court has had occasion to address the subject in at least two of its published opinions, Clay v. Doherty, 608 F.Supp. 295, 305 (N.D. Ill. 1985) and Coleman v. Frierson, 607 F.Supp. 1566, 1572-73 (N.D. Ill. 1985). More recently the Court of Appeals for the Sixth Circuit has dealt with the identical question when posed by defendant police officers who had also been sued in a 42 U.S.C. § 1983 action--a situation wholly parallel to this one, though presented to the court by the defendants rather than by the plaintiff ( Gordon v. Norman, 788 F.2d 1194, 1196 (6th Cir. 1986) (footnotes omitted)):
Defendants Norman, Prows, and Martin initially argue that they were deprived of their right to a fair trial and were deprived of due process of law because their attorney, the Law Director of the City of Knoxville, experienced a conflict of interest in representing them. Thus, defendants assert, even though the City of Knoxville was not a party to this action, it was the principal client of their attorney and this prevented him from exercising independent judgment in representing defendants.
Gordon analyzed the problem in depth and at substantial length. After the Court of Appeals there initially set out and quoted from the Second Circuit's decision in Dunton v. County of Suffolk, 729 F.2d 903 (2d Cir. 1984) (a decision to which this Court had declined to adhere in its own Clay and Coleman opinions), the Court was flattering enough to discuss and quote from Coleman in some detail in support of its own determination that Dunton should not be followed.
And although Gordon ultimately rejected defendants' due process arguments on the facts that were presented there--more specifically, because of defendants' failure to show any prejudice flowing from the complained-of representation--the Court of Appeals concluded in this fashion (788 F.2d at 1199 & n.5 (emphasis in original)):
At the same time, we are aware of the great potential for conflict in this field. For this reason, we agree with Coleman, supra, that there is a "need for sensitivity to the risk of conflict" in § 1983 suits, 607 F.Supp. at 1572, and that the judge and the parties have joint responsibility to guard interests that are actually threatened.
This is a significant case in a troublesome area. Government attorneys have routinely represented individual defendants as have insurance counsel, post Monell, without any thought for the most part as to conflict of interest. The bar should be aware of potential ethical violations and possible malpractice claims.
This opinion has already suggested the lack of "sensitivity to the risk of conflict" that has been displayed by the Assistant Corporation Counsel. It is plain that insufficient heed has been given to the restraints imposed by Rule 1.7 of the Rules of Professional Conduct in force in this District Court, or to the teachings of the Comments that accompany Rule 1.7. There is of course a different and wholly nonproblematic way for the individual defendants and City to deal with the problem: If defendants were instead to be represented by lawyers whose sole and undivided loyalty was owed to defendants themselves--that is, whose full-time employer did not have a potential interest in a finding of wilfulness on defendants' part, and a consequent award of punitive damages, to accompany any finding that defendants had violated Smith's constitutional rights
--then an ultimate holding that either (1) found no liability at all on defendants' part or (2) found that they were liable for compensatory damages alone would entitle defendants to full indemnification, including the payment of all attorneys' fees that they had incurred.
Thus the matter seems to boil down to one of convenience and perhaps economics: It may be easier, and maybe cheaper as well, to have the Corporation Counsel handle the case. But that explanation alone cannot carry the day in the present posture of the case, given the ethical constraints implicated here. Some further submission by the Corporation Counsel is really needed to beef up the incomplete response that they have provided at this point, and they are given leave to do so on or before November 2, 1992.
This Court will then deal with the current motion.
Milton I. Shadur
Senior United States District Judge
Date: October 21, 1992