Professional ResponsibilityLaw 115

Wed., Nov. 14

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DUTY OF LOYALTY(conflicts of interest)

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• Conflicts concerning current clients

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• Rule 1.7 Conflict Of Interest: Current Clients• (a) Except as provided in paragraph (b), a

lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

• (1) the representation of one client will be directly adverse to another client

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• (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

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• (b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

• (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client…and

• (4) each affected client gives informed consent, confirmed in writing.

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• Unconsentable conflicts:• 1.7(a)(1) lawyer cannot reasonably believe that

she will be able to provide competent and diligent representation to each affected client…

• 1.7(b)(2) the representation is…prohibited by law

• 1.7(b)(3) the representation involves the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal

Westinghouse Elec. Corp. v. Kerr-McGee Corp.(7th Cir. 1978)

imputation

MR 1.10

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• Positional conflicts

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• Comment [24] Ordinarily a lawyer may take inconsistent legal positions in different tribunals at different times on behalf of different clients. The mere fact that advocating a legal position on behalf of one client might create precedent adverse to the interests of a client represented by the lawyer in an unrelated matter does not create a conflict of interest.

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• A conflict of interest exists, however, if there is a significant risk that a lawyer's action on behalf of one client will materially limit the lawyer's effectiveness in representing another client in a different case; for example, when a decision favoring one client will create a precedent likely to seriously weaken the position taken on behalf of the other client.

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• Factors relevant in determining whether the clients need to be advised of the risk include: where the cases are pending, whether the issue is substantive or procedural, the temporal relationship between the matters, the significance of the issue to the immediate and long-term interests of the clients involved and the clients' reasonable expectations in retaining the lawyer.

quasi-clients

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• advance waiver of conflicts

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• Comment 22 to MR 1.7• If the consent is general and open-ended, then the

consent ordinarily will be ineffective, because it is not reasonably likely that the client will have understood the material risks involved.

• On the other hand, if the client is an experienced user of the legal services involved and is reasonably informed regarding the risk that a conflict may arise, such consent is more likely to be effective, particularly if, e.g., the client is independently represented by other counsel in giving consent and the consent is limited to future conflicts unrelated to the subject of the representation.

Fiandaca v Cunningham(1st. Cir. 1987)

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• Hot potato rule– Under 1.7 and 1.9 a lawyer can sue a former client

concerning issues not substantially related to the earlier representation

– Rule 1.16 allows a lawyer to terminate the relationship when there is no material adverse effect on the client as a result of the termination.

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• Thrust-upon conflicts– You discover late in game (and unforeseeably) that

you have a conflict– no consent (by one or both) is available– you try to solve it by dropping a party

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• Personal Interest Conflicts 1.8– All imputed to other members of firm (except

1.8(j) – sexual relations)• See 1.8(k)• While lawyers are associated in a firm, a prohibition in

the foregoing paragraphs (a) through (i) that applies to any one of them shall apply to all of them.

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• Business transaction with client• 1.8(a) A lawyer shall not enter into a business

transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless…

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• (1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

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• (2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and

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• (3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.

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• Comment 1 to 1.8• In addition, the Rule does not apply to

standard commercial transactions between the lawyer and the client for products or services that the client generally markets to others, for example, banking or brokerage services, medical services, products manufactured or distributed by the client, and utilities' services.

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• If duty of disclosure and consent not satisfied, lawyer can be disciplined – Even if the transaction is reasonable– And even if the lawyer loses money

Iowa State Bar Assn v Mershon (Iowa 1982)

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• 1.8(c) A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client.– For purposes of this paragraph, related persons

include a spouse, child, grandchild, parent, grandparent or other relative or individual with whom the lawyer or the client maintains a close, familial relationship.

1.8(d)Prior to the conclusion of representation of a client, a lawyer shall not make or negotiate an agreement giving the lawyer literary or media rights to a portrayal or account based in substantial part on information relating to the representation.

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• you have an poor client you are representing in an eviction case and you put him up in a hotel

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• 1.8(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that:

• (1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and

• (2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.

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• Champerty• Maintenance

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• 1.8(i) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client, except that the lawyer may:

• (1) acquire a lien authorized by law to secure the lawyer's fee or expenses; and

• (2) contract with a client for a reasonable contingent fee in a civil case.

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• Personal interests affecting representation – Need not be mentioned in 1.8

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• You are a partner in a small law firm. Another partner in your firm is representing P, who is suing D in a personal injury case. D is represented by your husband, who is counsel for D’s insurance company.

• Any conflicts problems?

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• Comment [11] to 1.7• When lawyers representing different clients in the same

matter or in substantially related matters are closely related by blood or marriage, there may be a significant risk that client confidences will be revealed and that the lawyer's family relationship will interfere with both loyalty and independent professional judgment. As a result, each client is entitled to know of the existence and implications of the relationship between the lawyers before the lawyer agrees to undertake the representation. Thus, a lawyer related to another lawyer, e.g., as parent, child, sibling or spouse, ordinarily may not represent a client in a matter where that lawyer is representing another party, unless each client gives informed consent.

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• The disqualification arising from a close family relationship is personal and ordinarily is not imputed to members of firms with whom the lawyers are associated. See Rule 1.10.

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• Having sex with clients

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• 1.8(j) • A lawyer shall not have sexual relations with a

client unless a consensual sexual relationship existed between them when the client-lawyer relationship commenced.

other personal interest conflicts

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• Problem of jointly representing criminal defendants

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• Comment [23] to 1.7 … The potential for conflict of interest in representing multiple defendants in a criminal case is so grave that ordinarily a lawyer should decline to represent more than one codefendant.

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• When does a conflict in representing joint criminal defendants result in ineffective assistance of counsel?

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• Problems in representing joint clients in transactional work

• First problem – Don’t know you are jointly representing

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• But joint representation can be in clients’ interest

• Despite disadvantages– Especially if there is a falling out– No attorney client privilege with respect to one

another– And cannot represent one in a substantially

related issue unless the other consents

State v. Callahan(Kan. 1982)

MR 1.2(c) (c) A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives

informed consent.

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• Successive Representation

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• 1.9(c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:

• (1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or

• (2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

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• Rule 1.9 Duties To Former Clients• (a) A lawyer who has formerly represented a

client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

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• Last year you represented P1, who sued D Airlines concerning a plane crash in which P1 was injured. This year you are considering representing P2 in her suit against D Airlines concerning her damages from the same crash. Any conflicts problems?

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• Last year you drafted a prospectus for a debt offering for A. This year B approaches you and asks you to sue A for fraud in connection with the debt offering.

• Do you have to get A’s consent to conflict?

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• Do you have to get B’s consent?

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• Last year, you represented a number of California banks. A, who obtained a loan from bank B, which you did not represent, wants you to bring suit against B on the grounds that B violated federal law concerning the disclosure of interests on loans. The legal issue raised by A’s case is a novel one. If you win, the precedent could submit your former bank clients to important losses. Any conflicts problems?

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• Comment 3 to 1.9• substantially related = same transaction or

legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter

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• Last year you helped the A Corp. obtain a patent for a product. The patent was subsequently assigned to the B Corp. The B Corp. then sued the C Corp. for infringement of the patent. The C Corp. hires you to argue that the patent that you helped obtain is invalid. Any conflicts problems?

Brennan’s Inc v Brennan’s Restaurants Inc(5th Cir. 1979)

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• You represented A in connection with the incorporation of his small business last year. This year A’s wife approaches you and asks you to represent her in divorce proceedings against A. Any conflicts problems?

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• You were corporate counsel for the A Corp. from 1996-98. Since then a new board of directors has gained control. B approaches you and asks you to represent him in a suit against members of the board concerning actions they undertook after you left. Any conflicts problems?

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• You have defended the A Corp. in employment discrimination suits brought against it from 1978-98. This year B approaches you and asks you to bring an employment discrimination suit against the A Corp. concerning actions by the corporation that occurred after you terminated your relationship with it. Any conflicts problems?

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• You unsuccessfully defend A in criminal charges. Afterward the prosecutor in the case approaches you and asks you to bringing a high profile product liability action on his behalf against the D Corp. Any conflicts problems?

Prosecutor approaches you and asks you to bringing a high profile product liability action on his behalf against the D Corp. The suit was successfully concluded. Then A asks you to defend him in criminal changes brought by Prosecutor. Any conflicts problems?

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• Prospective clients

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• Rule 1.18 Duties To Prospective Client• (c) A lawyer subject to paragraph (b) shall not

represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d).

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• L represents A is the simple drafting of a will• L is approached by B to discuss L representing

B in drafting B’s will (no actual representation)• assume A and B give same amount of info to L• assume that A’s and B’s wives want to sue A

and B for child support and have L as their lawyer

• does B have a greater burden in disqualifying L than A?

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• A – must show only that the matters are substantially similar, interests are materially adverse, and that L acquired confidences that are material to the matter

• B – must also show that the information could be significantly harmful

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• Comment 3 to 1.9• Matters are "substantially related" for

purposes of this Rule if they involve the same transaction or legal dispute or if there otherwise is a substantial risk that confidential factual information as would normally have been obtained in the prior representation would materially advance the client's position in the subsequent matter

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• A former client is not required to reveal the confidential information learned by the lawyer in order to establish a substantial risk that the lawyer has confidential information to use in the subsequent matter. A conclusion about the possession of such information may be based on the nature of the services the lawyer provided the former client and information that would in ordinary practice be learned by a lawyer providing such services.

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• Comment [6] to 1.18• Even in the absence of an agreement, under

paragraph (c), the lawyer is not prohibited from representing a client with interests adverse to those of the prospective client in the same or a substantially related matter unless the lawyer has received from the prospective client information that could be significantly harmful if used in the matter.

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• Conflict tainting

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• Comment 2 to 1.18• A person who communicates information

unilaterally to a lawyer, without any reasonable expectation that the lawyer is willing to discuss the possibility of forming a client-lawyer relationship, is not a "prospective client" within the meaning of paragraph (a).

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• If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d).

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• 1.18(d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if:

• (1) both the affected client and the prospective client have given informed consent, confirmed in writing, or

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• (2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and

• (i) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; and

• (ii) written notice is promptly given to the prospective client.