               NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 06a0168n.06
                            Filed: March 2,2006

                                          No. 05-5355

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT


                                                        )
                                                        )
                                                        )
DONALD M. SPEARS and PALMER HACKER,                     )
                                                        )
       Plaintiffs-Appellants,                           )       ON APPEAL FROM THE
                                                        )       UNITED STATES DISTRICT
              v.                                        )       COURT FOR THE WESTERN
                                                        )       DISTRICT OF KENTUCKY
WILLIAM DONALD OVERBEY,                                 )
                                                        )                  O P I N I ON
       Defendant-Appellee,                              )
                                                        )
OVERBEY AND ADAMS,                                      )

       Defendants.

BEFORE:       MOORE, ROGERS, McKEAGUE, Circuit Judges.

        McKEAGUE, Circuit Judge.

      Plaintiffs appeal the district court’s grant of summary judgment for the defendant in this

attorney malpractice action. The action arises from defendant William Overbey’s representation of

plaintiffs Palmer Hacker and Donald Spears. Overbey represented the pair in the formation of

Hacker/Spears LLC, and various tasks associated with the purchase of the Pacer Inn, a motel in

Murray, Kentucky. As part of the purchase transaction, Hacker and Spears executed personal

guaranties for one million dollars. The LLC defaulted on the loan payments, and the bank

foreclosed on the motel. After the foreclosure sale, a deficiency judgment was entered against

Hacker and Spears.
No. 05-5355
Spears and Hacker v. Overbey

       In the present action, Hacker and Spears allege that Overbey was negligent, and breached

his fiduciary duty because he did not advise them that he had represented the bank in other,

unrelated matters over the course of many years prior to representing them during the purchase of

the motel. They further allege that they would not have entered into the transaction if they had

known that Overbey represented the bank in the past, and therefore, they would not now be liable

on the personal guaranties.

       The district court granted Overbey’s motion for summary judgment, finding that Overbey

did not represent two directly adverse clients in the same matter, and therefore, Overbey had no duty

to disclose his prior representation of the bank to Spears and Hacker. Because plaintiffs failed to

set forth facts sufficient to satisfy an element of their malpractice claim, the district court granted

summary judgment to the defendant. For reasons that follow, we AFFIRM the grant of summary

judgment to the defendant.

                          I. JURISDICTION AND STANDARD OF REVIEW

       The district court exercised jurisdiction pursuant to 28 U.S.C. § 1332, diversity of

citizenship. Plaintiff Hacker is a citizen and resident of Mississippi and Plaintiff Spears is a citizen

and resident of Arkansas. Defendant Overbey is a citizen and resident of Kentucky. The amount

in controversy exceeds $75,000. This court has jurisdiction pursuant to 28 U.S.C. § 1291, because

the district court rendered a final decision on February 3, 2005, when it granted defendant’s motion

for summary judgment.

       This court reviews de novo a district court’s grant of summary judgment. Johnson v. Karnes,

398 F.3d 868, 873 (6th Cir. 2005). Summary judgment is proper “if the pleadings, depositions


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No. 05-5355
Spears and Hacker v. Overbey

answers to interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that the moving party is entitled to judgment as

a matter of law.” Fed. R. Civ. P. 56 (c); accord Daniels v. Woodside, 396 F. 3d 730, 734 (6th Cir.

2005). This court must view the evidence and draw all reasonable inferences in favor of the non-

moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The

“mere existence of some alleged factual dispute between the parties will not defeat an otherwise

properly supported motion for summary judgment; the requirement is that there be no genuine issue

of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)(emphasis in

original).

                                             II. FACTS

        In 1999, Donald M. Spears (“Spears”) and Palmer Hacker (“Hacker”) decided to enter into

a business relationship in order to purchase the Pacer Inn, a motel in Kentucky. Hacker, a hotel

franchiser, contacted Spears because he believed the motel presented a good investment, and Spears

had previously expressed interest in such an opportunity. Spears, a sophisticated real estate attorney,

was interested in purchasing the Pacer Inn, and Hacker began negotiations with the People’s Bank

for the purchase of the motel on behalf of Spears and Hacker. The Pacer Inn was owned by the

Thompson’s; however, the Inn was subject to a 1.5 million dollar Small Business Association

(“SBA”) loan. As part of the purchase negotiations, Harold Doran (“Doran”), a representative of

the People’s Bank,1 negotiated a buy down of the SBA loan to 1 million dollars. In fact, all of the



        1
         “Peoples Bank” is now “Branch Bank and Trust” as the result of mergers subsequent to this
transaction.

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No. 05-5355
Spears and Hacker v. Overbey

terms of the motel purchase were negotiated by Doran and Hacker, with Spears’ approval. As part

of the transaction, the bank required Spears and Hacker to sign personal guaranties for 1 million

dollars. These guaranties were drafted by the bank, and were understood by Spears to be an

inducement for the SBA to agree to the buy down on the 1.5 million dollar loan. O n c e t h e

negotiations between the bank, the Thompson’s and the SBA were complete, Hacker and Spears

needed an attorney to assist them with the formation of a limited liability company (“LLC”) and the

preparation of the closing documents. Hacker asked Doran to recommend an attorney. Doran

recommended Overbey, who represented the bank periodically for the preparation of deeds,

foreclosure actions and similar transactions.2 Hacker contacted Overbey, and secured his services

for the LLC formation and the closing. Overbey completed the appropriate paperwork for the LLC

formation, drafted the note and mortgage for the purchase of the Inn, and attended the closing at the

bank.

        The LLC defaulted on the loan payments in September, 2002. Subsequently, Overbey filed

the foreclosure proceedings on behalf of Branch Bank and Trust. According to Hacker and Spears,

this is the first notice they had that Overbey ever represented the bank. Overbey withdrew from this

representation when he became aware of the conflict. The Inn was sold pursuant to court order, and

a deficiency judgment was entered against Hacker/Spears LLC, Palmer Hacker and Donald Spears,

jointly and severally in the amount of $657,039.75.




        2
         Whether Hacker was aware that Overbey periodically represented the bank at the time of
the referral is in dispute.

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No. 05-5355
Spears and Hacker v. Overbey

         The plaintiffs filed this lawsuit after the foreclosure in September, 2003, alleging that

Overbey’s malpractice caused them to be held liable for the deficiency judgment, as a result of the

personal guaranties executed in conjunction with the purchase of the Pacer Inn. Overbey filed a

motion for summary judgment pursuant to Fed. R. Civ. P. 56, averring that there are no genuine

issues of material fact, and that the he is entitled to judgment as a matter of law.

         In their response brief, Hacker and Spears assert that Overbey was negligent because he did

not disclose his previous representation of the bank. Plaintiff’s assert that Overbey’s failure to

disclose this prior representation is in violation of The Kentucky Rules of Professional Conduct,

SCR 3.130 (1.7). Further, plaintiffs state that if they had known of Overbey’s “dual” representation,

they would not have entered into the transaction at all, and therefore, would not now be liable on the

note.3

         The district court granted Overbey’s motion for summary judgment on February 3, 2005,

finding that there was no “direct adversity” in Overbey’s representation of the plaintiffs during the

course of this transaction, because Overbey never represented the bank’s interest in this matter. In

so finding, the court applied the language of Rule 1.7(a), which prohibits an attorney from

representing a client, if the representation of that client will be directly adverse to another client,

unless the attorney believes that the representation will not adversely affect the relationship with the


         3
        In the complaint, Hacker and Spears allege that Overbey was negligent because he failed
to draft the personal guaranties in a manner which would limit their liability to $100,000.
(Complaint J.A. at 8). This theory of negligence was never advanced. Further, the theory is
undermined by Spears own deposition testimony, wherein he states that his understanding of the
personal guaranties was based on discussions with the bank, that Overbey was not involved in these
negotiations, and that the personal guaranties were prepared by the bank. (Spears Deposition, J.A.
at 185-197).

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No. 05-5355
Spears and Hacker v. Overbey

other client, and the client consents after the adverse relationship is disclosed by the lawyer. Id. The

court found that Overbey had no duty of disclosure under this rule, because the plaintiffs did not

introduce any evidence showing that Overbey represented the Bank on matters related to this

discrete transaction, and therefore, there was no direct adversity implicated in Overbey’s

representation. The court reasoned that because there was no impermissible conflict of interest

requiring disclosure under 1.7(a), Overbey did not commit the alleged breach.

        During the course of its analysis, the district court found that Overbey and Adams, Overbey’s

current law firm, was not an appropriate party to this action, because the law firm was formed after

the occurrence of the events giving rise to this litigation. The plaintiffs do not appeal the dismissal

of this defendant.

        On appeal, the plaintiffs do not argue that the district court erred in finding that there was

no direct adversity implicated by Overbey’s representation of Spears and Hacker under Rule 1.7(a).

Rather, plaintiffs argue that the district court erred in granting summary judgment because the court

failed to consider Rule 1.7(b), which “prohibits representation of a client if the representation may

be materially limited by the lawyer’s responsibilities to another client or by the lawyer’s own

interests.” (Plaintiff’s brief at 10) Plaintiffs urge that Overbey’s relationship with the bank

interfered with his ability to vigorously represent them, because it was against his own interest. The

plaintiffs also aver that the district court ignored evidence provided by Overbey and Overbey’s

expert witness regarding the applicable standard of care. Each of these issues will be reviewed in

turn.




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No. 05-5355
Spears and Hacker v. Overbey

                                          III. ANALYSIS

       The district court properly found that the transactions giving rise to the complaint are those

involving the purchase of the Pacer Inn, not the filing of the foreclosure suit by Overbey in 2002.

Overbey promptly withdrew from this representation, and there are no damages associated with that

particular incident. Instead, the alleged damages arise from the personal guaranties executed by

Hacker and Spears at the time of the real estate closing. Therefore, it is Overbey’s representation

relating to the real estate transaction that must be scrutinized for malpractice.4

       In order to prove legal malpractice in Kentucky, Hacker and Spears must establish that

Overbey represented them; that in the course of representation, Overbey neglected his duty to act

as a reasonable, competent attorney in similar circumstances; and that his negligence was the

proximate cause of the damages. See Marrs v. Kelly, 95 S.W.3d 856 (Ky. 2003). Further “[t]o

prove that the negligence of the attorney caused the plaintiff harm, the plaintiff must show that he

would have fared better in the underlying claim; that is, but for the attorney’s negligence, the

plaintiff would have been more likely successful.” Id.

           For purposes of our analysis, we assume for argument’s sake that Overbey represented

Hacker and Spears as individuals for the formation of the LLC and at the real estate closing, thereby

satisfying the first prong of the analysis.5 Next, we must decide whether Overbey neglected his duty



       4
        Spears and Hacker do not allege that Overbey was negligent in his representation of them
during the formation of the LLC.
       5
       In his brief, Overbey asserts that he never represented Spears and Hacker as individuals.
However, for purposes of this appeal, we assume without deciding that Overbey did represent Spears
and Hacker as individuals.

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No. 05-5355
Spears and Hacker v. Overbey

to act as a reasonable and competent attorney. In determining the standard of care for a claim

involving a conflict of interest, we rely on SCR 3.130 (1.7), Conflict of Interest. See Conrad

Chevrolet Inc. v. Rood, 862 S.W. 2d 312 (Ky. 1993). The rule states:

       (a) A lawyer shall not represent a client if the representation of that client will be
       directly adverse to another client, unless:
       (1) The lawyer reasonably believes the representation will not adversely affect the
       relationship with the other client; and
       (2) Each client consents after consultation.
       (b) A lawyer shall not represent a client if the representation of that client may be
       materially limited by the lawyer's responsibilities to another client or to a third
       person, or by the lawyer's own interests, unless:
       (1) The lawyer reasonably believes the representation will not be adversely affected;
       and
       (2) The client consents after consultation. When representation of multiple clients in
       a single matter is undertaken, the consultation shall include explanation of the
       implications of the common representation and the advantages and risks involved.

SCR 3.130 (1.7).

       In granting Overbey’s motion, the district court determined that the parties must be in direct

adversity to find a conflict of interest under 1.7(a). “In order to survive the motion for summary

judgment, then, Plaintiffs must have alleged facts sufficient for a jury to find Overbey represented

them in spite of ‘direct adversity’ of their interests to the interests of the Bank in the capacity in

which he represented the Bank.” Spears and Hacker v. Overbey, and Overbey & Adams, No. 03-

CV-230-R slip op. at 4 (W.D. Ky. filed Feb. 3, 2005) (emphasis in original). The district court

found no evidence that the parties were in direct adversity to one another in this transaction.

       Because the plaintiffs do not appeal the district court’s determination under Rule 1.7(a), we

proceed to their claim of error with regard to Rule 1.7(b). Spears and Hacker state:

       the trial court erred in failing to consider paragraph (b) of Rule 1.7. That paragraph
       prohibits representation of a client if the representation may be materially limited by

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No. 05-5355
Spears and Hacker v. Overbey

       the lawyer’s responsibilities to another client or by the lawyer’s own interests.
       Certainly, a lawyer has an interest in maintaining a good relationship with a long
       time client. In this case, Overbey had represented the bank for more than thirty years
       - the bank was certainly a long time client. Overbey had a personal interest in
       continuing the relationship which he had with the bank - that personal interest posed
       the probability that Overbey would do nothing in his representation of Hacker and
       Spears to damage his long time relationship with the bank.

Brief of Appellant at 10.

       First, this particular theory establishing a conflict of interest was not succinctly stated below,

and defendant asserts that it is improper for review at this juncture. Even if this is not so, we find

that the plaintiff’s theory of a conflict of interest under 1.7(b) is wholly without merit.

       Under the plaintiff’s theory, the threshold determination for a violation of 1.7(b) concerns

whether Overbey was materially limited in his representation of plaintiffs because of his own

interest in maintaining an ongoing relationship with the bank. Overbey was hired by Spears and

Hacker to represent them in the formation of the LLC, to prepare the note and the mortgage, and to

attend the closing. There is no indication anywhere in the record that Overbey was materially

limited in his ability to perform these functions because of his relationship with the bank. In fact,

there is no indication in the record that Overbey’s performance of these tasks was in any way sub-

standard.

       The only plausible way in which Rule 1.7(b) could be implicated under this set of

circumstances is if Overbey was retained by Spears and Hacker to negotiate the terms of the

purchase on their behalf, and particularly, if Overbey had any involvement in negotiating the terms

of, or the drafting of the guaranties. However, the record is clear that the terms of the entire

transaction were negotiated between the bank and Spears and Hacker, without any involvement of


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No. 05-5355
Spears and Hacker v. Overbey

Overbey, and the guaranties were drafted by the bank. (Spears Deposition J.A. 196-97) Because we

conclude that Overbey’s representation was not materially limited by his own interests in preserving

an ongoing relationship with the bank, there was no violation of Rule 1.7(b). This theory of a

conflict of interest requiring disclosure is simply without merit.

        The dissent insists that Overbey violated rule 1.7(b) because his representation of Spears and

Hacker may have been materially limited due to his longstanding relationship with the bank. In so

deciding, the dissent relies on three inapposite Kentucky Supreme Court Opinions interpreting

Kentucky Bar Association Ethics Opinions; see In re Advisory Opinion of Ky. Bar Ass’n, 847

S.W.2d 723 (Ky. 1993); In re Advisory Opinion of Ky. Bar Ass’n, 613 S.W.2d 416 (Ky. 1981) and

Am. Ins. Ass’n v. Ky. Bar Ass’n, 917 S.W.2d 568 (Ky. 1996). In the first case, the court found that

a City Attorney would have an impermissible conflict of interest if he were to represent criminal

defendants, thereby requiring him to cross examine the city police. “We are of the further opinion

that the apparent potential for conflict endangering an attorney’s ability to represent his client exists

when a City Attorney undertakes to represent a criminal defendant who has been charged by the city

police department.” 847 S.W.2d at 724.

        This opinion and our facts are distinguishable. First, the City Attorney has an ongoing

employment relationship with the city, as do the city police officers. Overbey had no ongoing

employment relationship with the bank nor was he on a retainer. Further, a conflict of interest is

obvious when the City Attorney is defending an individual that the city police are prosecuting.

There was no such direct conflict in our facts, wherein Overbey’s scope of representation was

limited to the preparation of a note and mortgage, and attending a real estate closing. Finally, the


                                                 - 10 -
No. 05-5355
Spears and Hacker v. Overbey

opinion states that “criminal defense is a field of law that has become subject to intensive public

scrutiny. Public demand for professional independence is great.” Id. The court was addressing the

special concerns underlying possible improprieties in the course of providing criminal defense, a

concern that is simply not before us.

       In the second case, In re Advisory Opinion of Ky. Bar Ass’n, 613 S.W.2d 416 (Ky. 1981),

the court found that an attorney who represented the Fraternal Order of Police in grievance

proceedings could not represent criminal defendants in the same jurisdiction. Again, we find these

facts markedly different from those here. The court noted that a criminal defense attorney may have

to vigorously cross examine a prosecuting officer in order to discredit the officer. Id. “Presented

with the dilemma of alienating a group of police officers on the one hand and providing a criminal

defendant with the most energetic possible defense on the other, the attorney faces a conflict which

seriously endangers his ability to zealously represent his client. . . .” Id. Overbey was never in a

position of obvious, direct, adversarial conflict during the course of his representation of Spears and

Hacker, nor was he retained to vigorously represent them in a criminal defense matter involving his

employer.

       Finally the opinion in Am. Ins. Ass’n v. Ky. Bar Ass’n, 917 S.W.2d 568 (Ky. 1996)

considered whether a lawyer can enter into a contract with a liability insurer, whereby the lawyer

or his firm agrees to do all of the insurer’s defense work for a set fee. Id. The court found that this

scenario created an impermissible incentive for the lawyer to provide fewer services to the client,

the insured, because payment would remain the same regardless of services rendered. Id. Further,

under such a plan, the insurer is required to take on an impermissible dual role because "the insurer


                                                - 11 -
No. 05-5355
Spears and Hacker v. Overbey

wants to continue to promise the insured a defense in the contract of insurance, while limiting the

extent of its undertaking in a side contract between the insured's lawyer and the insurer to which the

insured is not a party.” Id. at 569 (citation omitted) The opinion considers the conflict of interest

that may arise between an insurer and its insured when the insurer implements cost containment

measures in obtaining defense counsel for the insured. Id. Hence, this opinion offers no guidance

in the resolution of this case.

        The dissent ignores Kentucky Bar Association Ethics Opinion KBA E-148 (Issued July

1976), an opinion that is far more relevant. In KBA E-148, the Kentucky Bar determined that “[a]n

attorney who was employed by a bank on numerous occasions over a period of years, but who was

not paid a retainer, may accept employment adverse to the bank if the employment involves a matter

unrelated to any matter on which the attorney was formerly employed by the bank.” Id. It is

undisputed that Overbey’s representation of Hacker and Spears was completely unrelated to any

matter for which he had previously represented the bank.                 Further, the opinion states:

“[r]epresentation of a client in one matter does not in itself create any lawyer-client relationship with

respect to other, unrelated matters, In re Advisory Opinion, 361 S.W.2d 111 (Ky. 1962). . . . Former

representation of a client does not preclude subsequent representation adverse to him in a matter

unrelated to the former representation . . . .” (citations omitted) Thus, even assuming that “some

issue might arise after negotiations were completed and before the closing” as the dissent suggests,

Overbey would still not be impermissibly conflicted because of his past representation of the bank.




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No. 05-5355
Spears and Hacker v. Overbey

       Having found no conflict under 1.7(b), we now address plaintiff’s second claim of error,

namely, that the district court ignored “the evidence regarding the standard of care provided by

Overbey and Overbey’s expert witness.” (Appellant’s brief at 12) Plaintiffs point out that Thomas

Keuler (“Keuler”), Overbey’s expert stated “as to the alleged dual representation of Overbey in the

purchase and loan transactions, the standard of care would require attorney Overbey to notify both

the bank and the limited liability company of such dual representation.” (Expert Opinion J.A at 65)

However, viewing the expert’s report in its entirety, it is apparent that his opinion was based on an

incomplete review of the record, as well as inaccurate information. In particular, Keuler did not

review the deposition testimony of Overbey or Hacker, and his opinion is based on “an allegation

of dual representation”, which states: “Defendant Overbey failed to disclose to Spears and Hacker

that he represented the bank in connection with the purchase and loan transactions.” (Expert

Opinion J.A. 63) This allegation of directly adverse, “dual representation” is completely inaccurate,

and any opinion based on it is without merit.

       Further, we find that plaintiff’s reliance on Overbey’s deposition testimony to establish the

standard of care is equally unpersuasive. Overbey states in his deposition that he believed that

Hacker had a right to know that Overbey had represented the bank in the past, but he also states that

he believed that Hacker already knew of his relationship with the bank by virtue of Doran’s referral

of Hacker to Overbey. He also clarified that his representation of the bank was for other, unrelated

matters, and that he wasn’t the exclusive attorney for the bank. Reviewed in its complete form,

Overbey’s one sentence testimony that Hacker had a right to know that he represented the bank can




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No. 05-5355
Spears and Hacker v. Overbey

hardly be taken as an expression of the standard of care for an attorney under the totality of these

circumstances. There was no error in the district court’s decision to not rely on this evidence.

                                      IV. CONCLUSION

       For the aforementioned reasons, the district court’s grant of Defendant Overbey’s motion

for summary judgment is AFFIRMED.




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Spears and Hacker v. Overbey

        KAREN NELSON MOORE, Circuit Judge, dissenting. Because I do not agree with the

majority’s interpretation or application of Kentucky Rule of Professional Conduct 1.7(b) in this case,

I respectfully dissent.

        Spears and Hacker argue that Overbey breached his duty of care as their attorney when he

allegedly failed to inform them that he also represented the bank. Relying on Rule 1.7(b), Spears

and Hacker explain that the conflict arose from the fact that “personal interest posed the probability

that Overbey would do nothing in his representation of [them] to damage his long time relationship

with the bank.” Appellants Br. at 11. Rule 1.7(b) states as follows:

        A lawyer shall not represent a client if the representation of that client may be
        materially limited by the lawyer’s responsibilities to another client or to a third
        person, or by the lawyer’s own interests, unless:
        (1) The lawyer reasonably believes the representation will not be adversely
            affected; and
        (2) The client consents after consultation. When representation of multiple clients
            in a single matter is undertaken, the consultation shall include explanation of the
            implications of the common representation and the advantages and risks
            involved.

The majority concludes that the plaintiffs’ theory regarding Rule 1.7(b) is “wholly without merit,”

because Overbey was not “materially limited” in carrying out his limited representation of Spears

and Hacker. Majority Op. at 9.

        The majority incorrectly assumes that a lawyer violates Rule 1.7(b) only if he or she is

actually affected by a conflicting interest, whereas the rule prohibits representation even if the

attorney “may be materially limited.” On its face, then, the rule requires an attorney to avoid those

cases in which there is a potential for such limitation, and simply putting one’s clients at risk of

limitation is a violation. The Kentucky Supreme Court’s review of ethics opinions issued by the


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No. 05-5355
Spears and Hacker v. Overbey

Board of Governors of the Kentucky Bar Association supports this reading of Rule 1.7(6), as it “has

held that interests other than direct adversity may prohibit representation.” Appellants Br. at 11; see

In re Advisory Opinion of Ky. Bar Ass’n, 847 S.W.2d 723, 723-24 (Ky. 1993) (affirming an ethics

opinion stating that a city attorney may not participate in criminal defense matters that involve the

city police because the risk of a conflict “is not completely removed”); In re Advisory Opinion of

Ky. Bar Ass’n, 613 S.W.2d 416, 416 (Ky. 1981) (affirming an ethics opinion “[stating] that an

attorney who represents the Fraternal Order of Police in grievances and other civil matters may not

practice criminal law in the same jurisdiction” because of the probable conflict of interest). In a

1996 opinion, the state supreme court approved an ethics opinion stating that it is impermissible for

“a lawyer [to] enter into a contract with a liability insurer in which the lawyer or his firm agrees to

do all of the insurer’s defense work for a set fee.” Am. Ins. Ass’n v. Ky. Bar Ass’n, 917 S.W.2d 568,

569, 574 (Ky. 1996). The court explained that such contracts carry great risk of conflict, and that

“while the insured and the insurer may share some common interests, the two parties are subject to

complete divergence at any time.” Id. at 573.

       The majority argues that the above-cited opinions are distinguishable because this case does

not arise in the criminal or insurance context. Majority Op. at 10-12. However, these opinions are

relevant not because they present the same factual scenario, but because they illustrate that the

principle articulated in Rule 1.7(b) is equally applicable to cases involving a potential for conflict

as to cases involving a direct conflict. The majority instead cites Kentucky Bar Association, Ethics

Opinion KBA E-148 (1976), an advisory-only ruling not adopted by the Kentucky Supreme Court.

Ethics Opinion KBA E-148 states that “a private practitioner has no conflict of interest with respect


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No. 05-5355
Spears and Hacker v. Overbey

to an adverse party unless it is conflict based on concurrent or former representation of the now-

adverse party in a matter substantially related to the present adverse employment.” Id. Even if

Ethics Opinion KBA E-148 were a relevant precedent, it is based upon different concerns than those

that are presented in this case. Ethics Opinion KBA E-148 addressed a situation in which a bank

objected to the representation of an adverse party by a lawyer that the bank had employed in the

past. The Kentucky Bar Association cited old ABA Canon of Ethics 6 for its conclusion that such

representation was not inappropriate: “The obligation to represent the client with undivided fidelity

and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or

employment from others in matters adversely affecting any interest of the client with respect to

which confidence has been reposed.” This ethics opinion is thus focused on the notion of

confidentiality of information. In contrast, the issue in this case is the possibility that Overbey’s

long-term representation of the bank could have some effect on his representation of Spears and

Hacker because of Overbey’s desire to maintain his relationship with the bank.

       Overbey should have informed Spears and Hacker of his affiliation with the bank. The

Kentucky Supreme Court Commentary to Rule 1.7(b) provides guidance in applying this provision:

       A possible conflict does not itself preclude the representation. The critical questions
       are the likelihood that a conflict will eventuate and, if it does, whether it will
       materially interfere with the lawyer’s independent professional judgment in
       considering alternatives or foreclose courses of action that reasonably should be
       pursued on behalf of the client. Consideration should be given to whether the client
       wishes to accommodate the other interest involved.

At the time that Overbey prepared the note and the mortgage for Spears and Hacker for the purchase

of the Pacer Inn, he knew that these documents would be assigned to the bank. While Spears and

Hacker negotiated the terms of the transaction on their own, there was always a chance that some

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No. 05-5355
Spears and Hacker v. Overbey

issue regarding the deal would arise after those negotiations were completed and before the closing.

If such an issue had presented itself, Overbey’s personal interest in maintaining his long-term

representation of the bank may have limited his representation of Spears’s and Hacker’s interests.

The closing also presented opportunities for conflict between the two parties. In fact, there was a

brief dispute between Hacker and the bank’s representative regarding the operating capital, which

delayed the closing by several hours. J.A. at 400-01 (Overbey Dep.). Thus, while the majority may

be correct that Overbey adequately performed the tasks for which he was hired by Spears and

Hacker, there was nonetheless a potential for a conflict such that he should have notified his clients

of his relationship with the bank.

       There are disputed issues of material fact related to the conflict-of-interest claim, such as

whether Overbey did in fact inform Spears and Hacker of his representation of the bank. I would

accordingly reverse the district court’s grant of summary judgment in favor of Overbey and remand

for further proceedings.




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