            United States Attorney's Representation of
          Private Insurance Company in Civil Litigation

It is not improper for the Department of Justice to admit the liability o f the United States
   on an indemnity claim in civil litigation, even if the Department previously refused to
   enter into a “hold harmless” agreement with the party seeking indemnity.
Representation arrangement, whereby the United States Attorney will appear as counsel
 both for a private insurance group and for the United States in the same civil litigation,
  creates no ethical difficulty, given the coincidence o f both parties’ interests and their
 consent.

                                                                        January 9, 1981

     M EM ORANDUM O PIN IO N FO R T H E U N IT E D STA TES
       ATTORNEY, EA STER N D ISTR IC T O F NEW YORK

   You have requested the views of this Office on two questions that
have arisen in connection with civil litigation in the Eastern District
involving the New Hampshire Insurance Group (NHIG). The facts, as
we understand them, are as follows: NH IG has been sued on a perform­
ance bond or bonds that were written by a bonding agent who was
working undercover for the Federal Bureau of Investigation (FBI).
NH IG was originally represented in the litigation by private counsel,
but your office has recently assumed the defense under a representation
agreement that was developed with the approval o f the Associate
Attorney General. While represented by private counsel, N H IG filed a
third-party complaint against the United States seeking indemnity for
any losses that it might sustain in the litigation. The Torts Branch of
the Civil Division has now proposed that your office answer the third-
party complaint on behalf of the United States, and it has suggested
that the complaint be answered in a way that would effectively admit
the liability or potential liability of the United States on the indemnity
claim.
   Your questions are the following: First, inasmuch as the Department
has previously declined to enter into an explicit “hold harmless” agree­
ment with NH IG regarding these bonds, is it proper for the D epart­
ment to admit that the United States is or may be liable to N H IG on
the indemnity claim? Second, is it proper from a representational stand­
point for your office to appear as counsel both for N H IG and for the
United States?

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   W e have discussed these questions with the Deputy Associate A ttor­
ney General and Director o f the T orts Branch. Our views are set forth
below.
   T here is no law, regulation, or departmental policy that prevents the
D epartm ent from admitting the liability of the United States in a civil
case, if the United States is indeed liable, given the facts and the
applicable law. If the dealings among the FBI, the undercover agent,
and N H IG give NHIG a statutory cause of action for damages against
the United States, it is proper for the Department to admit the liability
o f the United States. The unwillingness of the Department to enter into
an express “hold harmless” agreement with NH IG resulted not from a
rule against admitting accrued liability, but from a belief that the
D epartm ent lacked, or m ay have lacked, the authority to create a new,
purely contractual obligation to hold N H IG harmless. For reasons we
need not explore, the Com ptroller General has suggested that the
Antideficiency A ct prevents executive officers from entering into cer­
tain kinds of indemnity agreements, and there is uncertainty in any case
about the authority of the Departm ent to pay from general departmen­
tal appropriations certain private claims arising from the conduct of
departmental investigators and agents. These technical fiscal constraints
do not prevent the Departm ent from acknowledging the validity of
well-founded claims asserted against the United States in civil litigation;
nor do they prevent the due payment o f such claims from the judgment
fund.
   As regards the representation question, we have two observations.
First, the Department has agreed to defend N H IG in the main action; it
has not agreed to prosecute N H IG ’s claim against the United States.
T here would be grave doubt about our authority to do the latter, but it
is clear that a defense of N H IG will advance the interests of the United
States, given our contingent liability for the losses N H IG may sustain.
In other words, there is a coincidence of interests between N H IG and
the United States in the main action. This brings us to the second point.
Because of the coincidence of interests, and because both parties have
consented to the representation arrangement, we think that the dual
appearance of government counsel in this case, to defend N H IG on the
one hand and to admit the liability of the government on the other,
creates no ethical difficulty, at least at this stage. This is an unusual
case, but we think the representation arrangement is proper.
                                              J o h n M. H a r m o n
                                          Assistant Attorney General
                                           Office o f Legal Counsel



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