## Facts

- JPMorgan Chase Bank, acting on behalf of Mahonia Limited and Mahonia Natural Gas Limited, sued multiple insurers seeking recovery on Enron-related surety bond obligations, including approximately $183 million sought from Federal Insurance Company.
- JPMorgan retained Davis Polk & Wardwell to pursue Enron-related surety bond recoveries.
- Davis Polk had represented The Chubb Corporation since 1967; Chubb was a holding company whose primary holding was Federal, which generated the overwhelming majority of Chubb’s revenue, and Chubb and Federal shared many corporate officers.
- On December 11, 2001, Davis Polk filed an SEC form on behalf of Chubb addressing Chubb’s outstanding Enron surety-bond obligations.
- The same day, Davis Polk filed this lawsuit on behalf of JPMorgan seeking to enforce Enron-related surety bond obligations against Federal.
- Federal moved to disqualify Davis Polk based on an asserted concurrent-client conflict arising from Davis Polk’s ongoing relationship with Chubb (and, effectively, Federal) in matters tied to the same Enron surety-bond exposure.

## Issues

1. Whether Davis Polk’s representation of JPMorgan in litigation against Federal was directly adverse to a current client relationship with Chubb (and/or Federal) and therefore impermissible under conflict-of-interest rules.
2. Whether the close parent-subsidiary relationship between Chubb and Federal, and the overlap in Enron surety-bond subject matter, required treating the adversity as a concurrent-client conflict warranting disqualification.
3. Whether any consent or waiver could cure the conflict under the circumstances.

## Decision

- The court granted Federal’s motion to disqualify Davis Polk from representing JPMorgan in the action.
- The court found Davis Polk’s work for Chubb concerning Enron surety-bond exposure and its simultaneous prosecution of JPMorgan’s claims against Federal created direct adversity in closely related matters.
- The court concluded that the relationship between Chubb and Federal was sufficiently intertwined that suing Federal amounted to suing a core component of a current client relationship.
- The court did not decide the underlying surety/coverage merits; it resolved only the disqualification motion.

## Legal Principles

- Counsel owes each current client a fiduciary duty of undivided loyalty; representing one current client in a matter directly adverse to another current client is generally prohibited absent adequate informed consent.
- In assessing conflicts in a corporate family, a parent and a major, integrated subsidiary with shared management and central revenue significance may be treated as effectively the same client for loyalty purposes.
- When concurrent representations involve the same or closely related subject matter, disqualification is strongly favored to protect the integrity of the attorney-client relationship and the proceedings.
- Consent must be informed and adequate; where a firm sues a core subsidiary of a longstanding client in a closely related matter, a court may find the conflict not properly waived and order disqualification.

## Conclusion

The court disqualified JPMorgan’s counsel because the firm simultaneously represented a corporate parent in Enron surety-related matters while suing the parent’s primary subsidiary over the same surety-bond exposure, creating a concurrent-client conflict incompatible with counsel’s duty of loyalty.


JPMorgan Chase Bank ex rel. Mahonia Ltd. v. Liberty Mut. Ins. Co., 189 F. Supp. 2d 20 (S.D.N.Y. 2002)