                 FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

LUCILLE ABBOTT; ANN SEXTON;          
LUCILLE ABBOTT SEXTON; ANN
SEXTON PETERSON,
           Petitioners-Appellants,        No. 03-71908
               v.                         Tax Ct. No.
                                            19418-98
UNITED STATES INTERNAL REVENUE
SERVICE,
            Respondent-Appellee.
                                     

ANN SEXTON PETERSON, Executor,       
ESTATE OF LUCILLE ABBOTT SEXTON,
Deceased,                                 No. 03-71919
             Petitioner-Appellant,
               v.                         Tax Ct. No.
                                            3076-992
COMMISSIONER OF INTERNAL                    OPINION
REVENUE,
            Respondent-Appellee.
                                     
         Appeal from a Decision of the Tax Court

                  Argued and Submitted
         February 11, 2005—Pasadena, California

                   Filed March 1, 2005

     Before: John T. Noonan, David R. Thompson, and
          Michael Daly Hawkins, Circuit Judges.

                Opinion by Judge Noonan

                           2379
                        SEXTON v. IRS                     2381


                         COUNSEL

Robert P. Sticht, Los Angeles, California, for the petitioners-
appellants.
2382                     SEXTON v. IRS
Francesca U. Tamami, United States Justice Department,
Washington, D.C., for the respondent-appellee.


                          OPINION

NOONAN, Circuit Judge:

   The taxpayer, Ann Sexton Peterson, executor of the estate
of Lucille Abbott Sexton, appeals the Tax Court’s denial of
her motion to vacate its decisions of January 23, 2001. These
decisions were based on stipulations by the parties. The law-
yer for the taxpayer was employed as a consultant by the
Internal Revenue Service during the period he represented the
estate. Alleging a breach of legal ethics such that the estate
had not been properly represented in the settlement, Peterson
sought to set the decisions aside. The Tax Court held that
there was “no credible evidence” that the lawyer failed to
properly represent the estate. We affirm the judgment of the
Tax Court.

                            FACTS

   Lucille Abbott Sexton died June 21, 1994. Peterson, her
daughter, timely filed a return as her executor showing liabil-
ity for estate tax of $68,894. An audit of the return led the IRS
on October 1, 1997 to increase the estate tax to $415,868 and
to assess gift tax. The deficiencies were based on (1) the
IRS’s view that $930,350 from decedent to her daughter, son-
in-law, and their real estate partnership were taxable gifts; and
(2) the disallowance of a claimed $200,000 deduction for an
unsecured note to the partnership. The estate petitioned the
Tax Court in opposition. In December 1999, the IRS Appeals
officer offered a settlement reducing the gross estate by 25
percent. Peterson declined the offer. Preparation went on for
trial scheduled for October 2000. The trial judge initiated a
call to counsel for both parties and indicated a sense of the
                        SEXTON v. IRS                     2383
unlikelihood of Peterson prevailing. Counsel so informed
Peterson and recommended settlement as had been proposed
in December 1999. She agreed. Counsel contacted counsel for
the IRS, who said that the settlement was open if accepted by
5:00 p.m. of that day. Peterson accepted. Stipulations reflect-
ing the settlement were signed on October 5, 2000 and filed
on January 23, 2001.

   Counsel for Peterson during these proceedings, beginning
on October 25, 1996, was Dennis Harkavy. Harkavy was a
graduate of Wharton School and of Brooklyn Law School,
class of 1954. He was a member of the California and New
York bars and also a certified public accountant. He was
listed as a real estate attorney in Best Lawyers in America. He
had been in practice since 1958.

   In August 1998, the IRS Appeals Office in Los Angeles
was looking for a real estate expert in the McGuire Partners
case. Lorene Sams, an appraisal program coordinator, under-
took to find the expert. She, in turn, asked the Los Angeles
County Bar Association for suggestions. The association pro-
vided her six to ten names, among them Harkavy’s. Tom
Adams, in the same office as Sams, sent out a request for a
bid to each lawyer on the list. Harkavy submitted a bid of
$16,250 to review the documents relating to the air rights
acquired by McGuire Partners in a building. He also offered
for $2,000 to spend up to 8 hours at a conference between IRS
personnel and representatives of the McGuire Partners, and
for $5,000 “to provide any appropriate pre-trial preparation
and trial testimony in U.S. Tax Court.” He further offered to
do research on “the threshold question” of whether air rights
were solely allocable to land and therefore not depreciable.
Harkavy disclosed that he represented taxpayers but did not
disclose the name of any clients. Sams was unaware of his
connection with the Sexton Estate case or of the case itself.
She selected Harkavy on the basis of price, his experience,
and his “potential to be an expert witness.” Harkavy worked
on this matter from October 9, 1998 until July 1999. In the
2384                    SEXTON v. IRS
course of it, he attended two conferences between the Appeals
Office and representatives of the McGuires. His services were
not needed for trial.

                      PROCEEDINGS

   In April 2001, Peterson obtained new counsel and moved
to vacate the Tax Court decisions on the ground that she had
discovered Harkavy’s work for the IRS and that Harkavy
therefore had had a conflict of interest preventing proper rep-
resentation of the estate. The Tax Court held a hearing and
reviewed evidence; it then denied the motion to vacate. The
Tax Court found “no credible evidence” that Harkavy failed
to properly represent the estate or that his employment by the
IRS had “any effect” upon his representation of the estate.

  Peterson appeals.

                         ANALYSIS

   [1] Conflict of interest. Peterson argues that Harkavy vio-
lated the American Bar Association’s Model Rules of Profes-
sional Conduct 1.7, which provides in relevant part:

       (a) A lawyer shall not represent a client if the rep-
    resentation of that client will be directly adverse to
    another client, unless:

         (1) the lawyer reasonably believes the rep-
         resentation 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 rep-
    resentation of that client may be materially limited
    by the lawyer’s responsibilities to another client or
                            SEXTON v. IRS                           2385
      to a third person, or by the lawyer’s own interests,
      unless:

          (1) the lawyer reasonably believes the rep-
          resentation will not be adversely affected;
          and

          (2) the client consents after consultation.1

   [2] Rule 1.7(a) has no application here. Representation of
the IRS in the McGuire Partners case was not “directly
adverse” to the representation of the estate. The cases were
entirely unrelated. Rule 1.7(b) also has no application. No evi-
dence was produced by Peterson that representation of the
estate was “materially limited” by Harkavy’s responsibilities
to the IRS or to his own interests. Harvaky’s selection by the
IRS was in no way related to his representation of the estate.
No showing was made that Harkavy’s loyalty to the estate
was diluted by his services to the IRS. Peterson asks us to
adopt an interpretation of the Rule that would mean that any
time a lawyer represents a private client confronting a govern-
ment agency, the lawyer could do no work of any kind for
that agency, although his work for the agency and selection
by the agency had no connection whatsoever with the work
for the private client. We decline to adopt such reading of the
Rule.

  [3] In its Reply Brief, the estate cited California State Bar
Rules of Professional Conduct, Rule 3-310(C). It provides:

      A member shall not, without the informed written
      consent of each client: (1) Accept representation of
      more than one client in a matter in which the inter-
  1
   ABA Model Rule 1.7 has been amended since the events of this case
occurred. However, the 1995 version of the rule should apply, because it
was in effect at all relevant times. See Iacono v. Humphrey, 722 F.2d 435,
438 (9th Cir. 1983).
2386                         SEXTON v. IRS
      ests of the clients potentially conflict; or (2) Accept
      or continue representation of more than one client in
      a matter in which the interests of the clients actually
      conflict; or (3) Represent a client in a matter and at
      the same time in a separate matter accept as a client
      a person or entity whose interest in the first matter
      is adverse to the client in the first matter.

Peterson argues that Harkavy represented the estate and
accepted as a client the IRS, whose interest in the estate tax
matter was adverse to the estate’s interest in that matter,
thereby violating clause (3) of Rule 3-310(C).

   [4] This rule was not invoked by the estate in the Tax Court
and was belatedly invoked in the Reply Brief in this court;
therefore, we could decline to consider the argument based
upon it. Out of an abundance of caution, we nevertheless
asked the government to respond, and we therefore treat the
question as properly before us. The estate relies on American
Airlines v. Sheppard, Mullin, Richter & Hampton, 117 Cal.
Rptr. 2d 685 (2002), which held that Rule 3-310(C) applied
to a lawyer acting as an agent for one client in a way that
jeopardized the secrets of an existing client.2 The court’s
broad dictum is helpful to the estate, but must be read in con-
  2
    Gregory A. Long, a lawyer, represented American Airlines in a claim
against McDonnell-Douglas Corp. based on the performance of its MD-11
aircraft. Without filing suit, American Airlines eventually settled with
McDonnell Douglas. During the same period, a Swiss aircraft broker,
ADO, sued McDonnell-Douglas for deficiencies in the MD-11. At Ameri-
can Airlines’ request, Long reviewed documents subject to production by
McDonnell Douglas in this litigation; Long’s assignment was to protect
information that American considered confidential. Long further repre-
sented American in opposing a request for documents by ADO. Long was
then sought by ADO as a witness in the litigation against McDonnell-
Douglas. American objected but Long believed that the work would not
be adverse to American and accepted the engagement by ADO as a wit-
ness under Fed. R. Civ. P. 30(b)(6). At a deposition, Long asserted the
attorney-client privilege as to all questions related to American. ADO later
settled with McDonnell-Douglas, but American sued Long and his law
                           SEXTON v. IRS                         2387
junction with the facts of the case that the court decided; in
it, the lawyer’s agency for client #2 put at risk secrets that cli-
ent #1 valued. Nothing of the sort occurred or could occur
here. Even if we were bound by a single state court of appeals
decision (which we are not) we would find it extravagant to
extrapolate from American Airlines a rule that would effec-
tively impede the IRS from obtaining the expert aid of prac-
ticing members of the tax bar.

   [5] Prejudice. As a separate and alternative ground for our
decision, Rule 91(e) of the Rules of Practice and Procedure of
the United States Tax Court provides: “The Court will not
permit a party to a stipulation to qualify, change, or contradict
a stipulation in whole or in part, except that it may do so when
justice requires.” The holding by the Tax Court that there was
no credible evidence of any adverse effect on the estate by the
IRS’s employment of Harkavy precludes the contention that
justice requires setting aside the stipulated decisions.

  AFFIRMED.




firm for breach of the duty of loyalty. The jury returned a verdict for
American of $8,174. On appeal, Long argued that he had not represented
ADO when he undertook to be a witness. The court of appeals disagreed.
Long had a duty as a faithful agent to ADO and as a lawyer to American.
Even though Long was “not engaged to render legal advice to ADO,” he
had breached Rule 3-310(C).
