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DIRECTIONS

1. There are no restrictions as to the materials that may be brought into the final examination.

2. Three hours will be allotted for the examination. Blue books will not be passed out for the first 30 minutes. This time should be spent reading and thinking about the question before you begin writing your response. You may use scratch paper to begin outlining your answer during this initial 30 minute period.

3. There will be one essay question on the final examination.

4. In answering the essay question, you should rely upon case law from the textbook and handouts, our class discussions, and EITHER the ABA's Model Rules OR the Model Code of Professional Responsibility. You will not be expected to use both the Code and the Rules in your answer.

5. Students who wish to compare and contrast the Model Rules and the Model Code in their answers may do so, and will receive additional points for accurate & thoughtful analysis. However, you should try to fully discuss all the issues raised by the question before attempting to gain extra points by comparing the Model Code and the Model Rules.

6. DO NOT CITE A CASE WITHOUT FURTHER DISCUSSION! There is no presumption that use of a case name results from knowledge of its contents. Discuss and analyze any case law you plan to use in your answer.

7. Write on only one side of each page in the blue books.

DO YOUR BEST TO WRITE LEGIBLY. FAILURE TO WRITE LEGIBLY WILL RESULT IN AN IRATE GRADER READING YOUR EXAMINATION.

GOOD LUCK!

Kayla Carlyle joined the Wall Street firm of White & Bright in 1991, and began to develop a specialty in corporate law. Kayla quickly developed a good working relationship with George Thoroughgood, a partner in the corporate department, and began to work on matters involving Occidental Paint & Merchandising.

Occidental was a successful, publicly held company with over eighty years of profitable business experience. Marvin Michelin, its CEO, was a high profile maverick with a hands-on management style. Occidental specialized in producing high quality, limited production paint for specialized uses, such as airplanes and military equipment. Occidental's newest premium paint was a product called "Cadmium Scarlett," a vivid, indelible paint that could withstand jungle temperatures and humidity, extreme wear and tear, and had a visibility range of over ten miles. White & Bright handled all of Occidental's legal business, including patent and intellectual property matters, environmental litigation and general corporate planning.

1992 was not a good year for Occidental. Despite attempts to market Cadmium Scarlett as a designer color, sales of the strikingly garish paint plummeted, and other research and development projects yielded poor results for greater than anticipated costs. In a secret corporate meeting with Occidental's Board of Directors, Michelin decided to dump their existing supply of Cadmium Scarlett at a waste site located next to a deserted Occidental warehouse in West Orange, New Jersey, then sell the warehouse and move on to other projects. Michelin used a trucking company of which he was the sole owner to transport the paint to the dump site. Over four thousand gallons of this extremely toxic paint was dumped, dirt was loaded over the dump site, and the warehouse was sold to a small trucking company called Burro's which needed a storage facility in the area.

As it happened, Burro's used the same law firm as Occidental-- White & Bright. Upon learning that the buyer and seller were both clients of the firm, White & Bright advised the two companies to retain outside counsel to handle the sales transaction. Both companies obtained independent counsel, and a sales agreement was drawn up. During the negotiations, Burro's insisted that an environmental audit of the property be done by an independent engineering firm. Occidental contracted with Gorsuch Engineering to perform the audit. Gorsuch was a sole proprietorship owned by Andy Gorsuch, son-in-law of Marvin Michelin. Gorsuch's environmental audit reported no toxic wastes on the site.

One year later, Edna Gardner, who lived just down the street from the warehouse, turned on her tap water and screamed. The Cadmium Scarlett had leached into the water table, and the water coming from the tap was as red as Edna's hair, which closely resembled ruby nail varnish. In short, that water was pretty darn red. Edna called the City Services Department in West Orange, which quickly tracked down the problem. Two days later, state and federal officials from the EPA showed up at Burro's West Orange warehouse, with a warrant to search the premises.

Burro's turned the matter over to White & Bright, and sent over the environmental audit statement that had been prepared by Gorsuch at the time of the sale. The EPA investigators had many questions about Occidental's use of the property. White & Bright told Occidental that it would be best if Occidental turned over all its files relating to the warehouse site so that the law firm could handle the government inquiries of both companies as it thought best.

Upon reviewing the audit, Kayla became very concerned. It looked as though Andy Gorsuch had never even visited the site. Descriptions of the property were inaccurate and incomplete. Her quick check on Gorsuch himself revealed that he was only two years out of engineering school, self-employed, and living at Michelin's mansion. In addition, Kayla remembered hearing that Occidental had an overstock of Cadmium Scarlett in 1992 through her earlier work for the company.

Kayla went to George Thoroughgood and outlined the situation. George's response was equivocal. "We may have a tricky situation here," he said to Kayla. "Best thing is not to act precipitously. Besides, I'm not worried about Gorsuch. I've referred some work to him -- Michelin told me he needed help getting started. I've never had a complaint and he sends me 5% of all his billings with a note saying he appreciates the business. That young man has the right instincts."

Because of the public outcry over the colorful and toxic drinking water, the EPA placed the West Orange site on its Superfund priority list. The agency cleaned the site up at a cost of fifteen million dollars and filed suit against Burro's and Occidental for compensation. Under federal law, present owners of the property, transporters and generators of the toxic waste are potentially responsible for compensating the government for clean up costs. Criminal penalties are available for company executives and officers who knowingly engage in illegal dumping.

In its deposition of Michelin, attorneys for the EPA pushed hard to determine whether the company had ever had an overstock of Cadmium Scarlett, and if so, what arrangements were made for its disposal. Michelin testified that the company did have an overstock in 1992, but that he had contracted with Burro's to dispose of the waste at an out- of-state site. Michelin insisted that he had paid Burro's $20,000 to cover the out-of-state dumping costs at a North Carolina dump that had special facilities to handle toxic liquids.

Kayla listened to this testimony with a mounting sense of horror and disbelief. She remembered talking to Burro's CEO -- Stan Schwartz -- at the time the warehouse was sold, and he had told her that the company knew nothing about Occidental, had never had any dealings with them, and wanted to know anything the law firm could tell them about the company. At the first recess in the deposition, Kayla pulled George aside and told him she thought Michelin was lying to try and save himself from criminal liability.

George sternly reminded Kayla that an attorney's primary duty is to protect and vigorously represent their clients, not to turn them in for suspected misconduct. Kayla asked if they should question Michelin to determine whether he was telling the truth. George took the position that this would be insulting to the client, would undermine the relationship of trust and confidence and would be "bad form." Kayla acquiesced.

Two weeks later, the CEO of Burro's dropped by the law firm. George was out golfing, so the receptionist took him to Kayla's office. Stan told Kayla that EPA officials were interrogating him, wanting to know why he hadn't taken the Cadmium Scarlett to North Carolina, as required by his contract with Michelin. Stan was confused and frightened. He wanted to know if White & Bright had reached some agreement with the EPA and Occidental to treat Burro's as "the fall guy."

Kayla told Stan that White & Bright would never "cut a deal" with the fed's to protect one client at another's expense. She also said that Michelin's testimony at the deposition had come as a surprise to the firm, that she personally thought he had been untruthful and she suspected his lies would "catch up with him." She then assured Stan that White & Bright would do everything possible to minimize the liability of both clients for the cleanup costs.

One month later, the EPA filed a motion to disqualify White & Bright from representing either Occidental or Burro's in any suit to recover federal funds spent cleaning up the West Orange dump site. George Thoroughgood promptly held a press conference, in which he compared the EPA attorneys to a "lawless pack of jackals, mindlessly bent on recovering money." He stated that neither Occidental nor Burro's had ever done anything "that could possibly be described as violating the environmental laws," and that both companies were fine, All-American examples of entrepreneurship that were determined to keep the environment safe for children everywhere. Thoroughgood also said that EPA "scalawags" were too lazy and incompetent to track down the real source of the contamination, which he himself strongly suspected to be traceable to an old project done by the Army Corps of Engineers.

The district court denied the EPA's motion to disqualify White & Bright, holding that separate trials for each defendant would be sufficient to resolve the conflict. The court then began to select jurors for the trials. No juror was asked whether or not they remembered hearing Thoroughgood's statement, or whether they had read anything at all about the case. Three separate trials were held: one for Occidental, one for Burro's, and one to determine the criminal liability of Marvin Michelin. George Thoroughgood handled Occidental's and Michelin's trial, and Kayla handled the trial of Burro's.

Occidental and Michelin both argued at trial that the site had been clean when sold, that there had been an agreement with Burro's to properly dispose of the Cadmium Scarlett and that any toxic waste on the property must have been dumped by Burro's. Burro's argued that there had been no such contract, and that it had bought the warehouse site in reliance on the Gorsuch audit. Michelin testified at his own trial and at Occidental's. His testimony in both actions was consistent with his deposition testimony. When asked why there was no written contract with Burro's, Michelin replied that he had relied on their good reputation in the community and done a "handshake deal." Michelin was acquitted of criminal charges. Both companies were convicted of violating federal environmental laws. Kayla resigned from White & Bright to start a solo practice.

Once these proceedings had terminated, Occidental brought a breach of contract action against Burro's for failure to comply with an oral agreement to deliver the Cadmium Scarlett to a proper dumpsite. Occidental retained Melvin Belli, a solo practitioner, to bring this action. Stan tracked down Kayla, who agreed to represent Burro's. She filed an answer denying the existence of any contract, offered to testify in support of her client and requested Rule 11 sanctions against opposing counsel. She also counterclaimed for fraudulent misrepresentation connected with the sale of the West Orange warehouse.

Identify and discuss all ethical issues.

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