Conflicts of Interest

A second way to overcome the conflict is to satisfy all of the following conditions:

(i) Demonstrate that the lawyer who held discussions with the prospective client took care to avoid exposure to any more confidential information than was necessary to determine whether to represent the prospective client; (ii) Demonstrate that the disqualified lawyer is timely screened from any participation in the matter and will not share the fee (but he may take his ordinary salary or partnership share); and (iii) Give written notice to the prospective client.

Screening Can Avoid Imputed Disqualification If a lawyer is disqualified under Rule 1.12(a)(former judge, arbitrator, third party neutral) everyone else in the lawyer's firm is also disqualified unless the following conditions are met:

(i) The lawyer is timely screened from the matter; (ii) The lawyer is not apportioned any part of the fee earned in the matter; and (iii) Written notice is given to the parties and the appropriate tribunal so that they can ensure that the foregoing conditions are met. [ABA Model Rule 1.12(c); ABA Formal Op. 342 (1975)]

Direct adversity between clients' interests examples 1)

1) Lawyer L represents patent owner O in connection with the licensing of O's patent. Manufacturer M is one of O's licensees, but M does not realize that L represents O. M asks L's law partner P to sue O for a declaratory judgment that O's patent is invalid and that O's license agreements are void. Obviously, L herself could not represent M because M's interests are directly adverse to O's interests. L's conflict is imputed to her law partner P. A reasonable lawyer would advise O and M not to consent to this conflict. Moreover, consent will not solve the conflict when one client sues another client represented by the lawyer in the same litigation. [See ABA Model Rule 1.7(b)(3)] Therefore, P must not represent M.

Handling Conflicts in Nonlitigation Matters

1) The lawyer should analyze the facts and law to see if she can effectively represent the various clients, despite their potentially conflicting interests. 2) Next, the lawyer should disclose the potential conflicts to each client and explain how they can harm each client, the reasonable alternatives, and the disadvantages of having only one lawyer. 3) When the clients fully understand the situation, the lawyer may invite their informed consent to the joint representation and confirm such consent in writing.

A lawyer must not provide financial assistance to a client in connection with pending or contemplated litigation, except:

1. A lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter 2. A lawyer representing an indigent client may pay court costs and expenses of litigation outright Example: A lawyer representing a client in litigation may NOT make a loan to the client for living expenses or medical treatment.

Gifts from Clients

1. A lawyer must not solicit any substantial gift from a client, including a testamentary gift. 2. ABA Model Rule 1.8(c) also prohibits a lawyer from preparing a legal instrument (such as a will or a deed of property) that creates a substantial gift to the lawyer (or the lawyer's relative), except when the donor is one of the lawyer's relatives.

Aggregate Settlement Agreements [ABA Model Rule 1.8(g)] When settling on behalf of multiple clients for a lump sum, the lawyer must:

1. Assure that all clients agree as to how the sum will be shared; 2. Make extensive disclosures to the clients regarding the terms of the agreement; and 3. Get each client's informed consent in a writing signed by the client . Note: Aggregate settlements and business transactions (above) are the two areas where the conflict waiver must be signed by the client!

Conflicts Among Current Clients (Concurrent Conflicts) A concurrent conflict exists in two situations:

1. Direct adversity 2. Lawyer's personal interests and duties to others

A lawyer must 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:

1. The transaction is reasonable and fair to the client; 2. Terms are fully disclosed to client in writing that client can reasonably understand; 3. 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 4. Client consents in a writing signed by the client to the essential terms of the transaction and the lawyer's role in the transaction. (Although most waivers need only be "confirmed in writing," here the client's signature is required; also see aggregate settlement agreements below.) [ABA Model Rule 1.8(a)] Examples: A loan or sales transaction, or a lawyer investment on behalf of a client.

Third Party Paying Lawyer's Fee [ABA Model Rules 1.8(f), 1.7(b), 5.4(c)] A lawyer must not accept compensation for representing a client from someone other than the client unless all of the following conditions are met:

1. client gives informed consent, 2. payer does not interfere with the lawyer-client relationship (payer can't dictate case), and 3. confidential information is not revealed to the payer

A conflict is unconsentable if

A conflict is unconsentable if the representation involves asserting a claim by one client against another client represented by the lawyer in the same litigation (i.e., lawyer cannot be on both sides of the same litigation ).

Example:

A husband consults with a lawyer about representing him in his divorce, and tells the lawyer during the consultation that he has been secretly stashing money in an offshore account. Even if the lawyer ultimately declines to represent the husband, he may not subsequently represent the husband's wife in the divorce.

Organization as Client who does the lawyer represent?

A lawyer employed or retained by an organization represents the organization, NOT individual officers or directors (but dual representation may be permitted subject to conflicts of interest rules). [ABA Model Rule 1.13(a)]

Acquiring an Interest in Litigation [ABA Model Rule 1.8(i)]

A lawyer may not acquire a proprietary interest in the cause of action or the subject matter of litigation that the lawyer is conducting for a client, except: 1. A lawyer may acquire a lien authorized by law to secure the lawyer's fee or expenses. 2. A lawyer may contract with a client for a reasonable contingent fee in a civil case.

Former Client Conflicts

A lawyer may not represent a client with adverse interests to a former client in the same or substantially related matter without the former client's consent. [ABA Model Rule 1.9(c)]

Consent to Future Conflicts

A lawyer may properly ask a client to consent to conflicts that may arise in the future, but only if it is reasonable to do so, and only if the client truly understands the particular kinds of conflicts that may arise and the consequences of consenting. [ABA Model Rule 1.7, comment 22; and see ABA Op. 05-436]

Multiple representation

A lawyer may represent multiple clients in the same matter in certain circumstances (generally civil cases only). However, if the clients may potentially become adverse or have different interests, the lawyer must obtain the clients' informed consent at the outset. If the potential conflict ripens into an actual conflict, the lawyer may need to withdraw if the conflict cannot be effectively waived.

Sexual Relations with Clients

A lawyer must not have sexual relations with a client unless the sexual relationship existed before the representation. Again, this type of conflict is personal and therefore not imputed.

2. Lawyer's personal interests and duties to others

A lawyer must not represent a client if there is a significant risk that the representation of that client will be materially limited by the lawyer's responsibilities to another client, a former client, or a third person, or the lawyer's own personal interests.

Conflict Situations Concerning "Material Limitation"

a) Civil Litigation b) Representing Two Clients with Inconsistent Legal Positions in Two Unrelated Cases c) Unnamed Members of a Class Do Not Count as Clients d) Representing Multiple Clients in Nonlitigation Matters

Conflicts of interest—specific rules for current clients ABA Model Rule 1.8, Using Client's Confidential Information

A lawyer must not use information relating to the representation of a client to the disadvantage of a client without informed consent.

report up requirement

A lawyer ordinarily MUST report violation to some higher authority (e.g, president) within the organization. --Affirmative duty to report what you know up the chain of command (board of directors, outside board of directors).

Example:

A lawyer who has represented a businessperson and learned extensive private financial information about that person may not subsequently represent that person's spouse in seeking a divorce.

Former Government Employee in Private Practice

A lawyer who previously worked for the government must not later represent a client in connection with a matter in which the lawyer participated personally and substantially as a public officer or employee, unless the government agency consents.

Clients of Former Firm

A lawyer whose firm formerly represented a client in a matter and who acquired protected confidential information [Rule 1.6] or information pertaining to the representation [Rule 1.9(c)] may not thereafter represent another person in the same or a substantially related matter if that person's interests are materially adverse to those of the former client, unless the former client gives informed consent, confirmed in writing. [ABA Model Rule 1.9(b)]

Disqualification of Lawyer's Former Firm

A lawyer's former firm is prohibited from representing a person with interests materially adverse to those of a client of the formerly associated lawyer if: (i) the matter is the same or substantially related to that in which the formerly associated lawyer represented the client; and (ii) a lawyer remaining in the firm has information protected by Rules 1.6 and 1.9(c) that is material to the matter. [RPC 1.10(b)]

Lucrative Appointments

ABA Model Rule 1.8(c) does not prohibit a lawyer from seeking to have himself or his law partner or associate named as executor of an estate or counsel to the executor or to some other fee-paying position. However, the general conflict of interest principles expressed in ABA Model Rule 1.7 do prohibit such efforts if the lawyer's advice is tainted by the lawyer's self-interest.

2)

Attorney A represents GenCorp, a genetic engineering company that is working on a cure for melanoma. A's law partner P represents BioTek, another genetic engineering company that is working on an entirely different way to cure melanoma. BioTek and GenCorp are head-to-head adversaries in an economic sense, but their interests are not adverse in any legal sense. If A and her partner P can disclose the situation to their respective clients without revealing confidential information, they may do so for the sake of client goodwill, but they would not be subject to discipline for failing to do so. [See ABA Model Rule 1.7, comment 6]

4)

Attorney A represents client C as plaintiff in an employment discrimination case against Mack's Grill. While that matter is pending, one of A's regular clients, Grinch Rentals, Inc., asks A to represent it in unlawful detainer proceedings to have C thrown out of her apartment for failure to pay rent. Even if the two cases are completely unrelated, A faces a conflict of interest. If A agrees to represent Grinch, C could feel betrayed by her own lawyer, and that could destroy A's ability to represent C effectively in the employment discrimination case. [See ABA Model Rule 1.7, comment 6] Would the conflict be solved by getting informed consent, confirmed in writing, from both C and Grinch? Comment 6 suggests that it could. (Do you agree?)

Personal interests

Example: A lawyer may not refer clients to an enterprise in which the lawyer has an undisclosed financial interest.

Rule of Imputed Disqualification

Generally, if one lawyer in a firm has a conflict, it is imputed to all other lawyers at the firm.

Consequences of a Conflict of Interest

If a conflict of interest is apparent before a lawyer takes on a client's matter, then the lawyer must not take it on. [ABA Model Rule 1.7(a)] If a conflict becomes apparent only after the lawyer has taken on the client's matter, and if informed consent of the affected client(s) will not solve the problem, then the lawyer must withdraw. [ABA Model Rule 1.16(a)(1); ABA Model Rule 1.7, comment 4]

Revocation of Consent

Just as a client can almost always fire a lawyer, the client can almost always revoke a previously given consent to a conflict. [Comment 21 to ABA Model Rule 1.7] The revocation may or may not mean that the lawyer can continue representing other clients in the matter, depending on the particular facts

Disqualification of Lawyer's New Firm

If a lawyer who is disqualified from representing a client joins a new firm, the new firm may be disqualified as well unless the lawyer is properly screened

Conflicts Caused by Lawyer's Own Interests

If a lawyer's own interests are likely to materially limit her ability to represent a client effectively, then she must not take on the matter (or she must withdraw) unless she obtains the client's informed consent, confirmed in writing. [See ABA Model Rule 1.7(a)(2)]

1. Direct adversity

In general, a lawyer may not represent Client 1 if Client 1's interests are directly adverse to Client 2, even if the lawyer represents Client 2 in completely unrelated matters.

3)

Lawyer L is defending D, who is accused of the armed robbery of a liquor store. L is stunned when he sees the prosecutor's witness list because it includes Z, a purported eyewitness to the armed robbery. L knows Z very well because he is defending Z in a drunk driving case. From confidential information L gathered in the drunk driving case, L knows that Z is an alcoholic who sometimes sees things that are not there and sometimes remembers things that did not happen. In defending D, L will have to cross-examine Z about his capacity to perceive, remember, and relate events accurately. If L cross-examines Z vigorously, he might seem to be using information about Z that he learned in confidence, or at least Z might think so. On the other hand, if L soft-pedals the cross-examination of Z, D might think he is not getting the effective assistance of counsel. A reasonable lawyer would have to advise D and Z not to consent to this conflict of interest. L must seek the court's permission to withdraw from one case or the other, preferably the case in which his withdrawal will be least harmful to the client. [See ABA Model Rule 1.7, comment 6]

5)

Lawyer L represents buyer B in negotiations for the purchase of a run-down shopping center from seller S. While those negotiations are in progress, S seeks to hire L to represent it in negotiations with the Planning Commission of a different city concerning an urban renewal project S wants to pursue. The shopping center sale is totally unrelated to the urban renewal project. Nevertheless, L must not represent S without first getting informed consent, confirmed in writing, from both B and S. [See ABA Model Rule 1.7, comment 7]

Attorneys Who Are Related

Lawyers related to each other as parent, childe, sibling, or spouse ordinarily may not represent adverse parties unless each client gives informed consent. This type of conflict is personal and therefore not imputed .

How to Overcome a Prospective Client Conflict

One way to overcome the conflict is to obtain informed consent, confirmed in writing, from both the affected client and the prospective client. [ABA Model Rule 1.18(d)(1)]

Serving as Both Director and Lawyer

The ABA Model Rules do not forbid a lawyer from serving as both a director of an organization and as a lawyer for the organization, but the Model Rules point out that the dual role can create conflicts of interest.

Exception:

The conflict is based on a personal interest of the disqualified lawyer and does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.

Prospective Client Conflicts A prospective client is

a person who consults with a lawyer about the possibility of forming a client-lawyer relationship with respect to a matter.

Literary or Media Rights

While representing a client, a lawyer must 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. However, the lawyer may do so once the representation is complete (appeals and all).

Possible Civil Liability Even When Client Is Not Disadvantaged

a lawyer who uses the confidential information for his own pecuniary gain (other than in the practice of law) may be subject to civil liability—i.e., he may have to account to the client, former client, or prospective client for his profits. [Restatement §60(2)]

Waiver of conflict Despite a concurrent conflict of interest, a lawyer may represent a client if

a. Lawyer reasonably believes that he can represent the affected client competently and diligently despite the conflict, b. Representation not prohibited by law c. each affected client gives informed consent, confirmed in writing. (can be electronic, and a confirmatory memo from the lawyer following the client's oral waiver will suffice).

General rules concerning conflicts of interest

absent the necessary informed consent (see B.2., infra), a lawyer must not represent a client if a conflict of interest exists.

If organization's lawyer learns that

an act has been or is about to be committed in a way that violates a duty to the organization, or violates a law in a way that might be imputed to the organization, AND if the violation is likely to cause substantial injury to the organization, the lawyer MUST proceed as is reasonably necessary to protect the interests of the organization. [ABA Model Rule 1.13(b)]

Limits of business transactions with clients rule

does not apply to an ordinary fee agreement between a lawyer and client or to standard commercial transactions in which the lawyer buys goods or services that the client routinely markets to the public (e.g., the lawyer who buys a car from his car dealer client or the lawyer who uses a client as her stockbroker). [See ABA Model Rule 1.8, comments 1 - 4]

"Firm" includes

groups of lawyers who practice law closely together (e.g., legal aid group, corporate law department, public defenders' office)

A lawyer who has obtained information from a prospective client

must not represent a client adverse to the prospective client if the lawyer received information from the prospective client that could be significantly harmful to the prospective client in the matter. This conflict can be waived with the informed consent of the client and prospective client. [ABA Model Rule 1.18(a)]

Sometimes a lawyer cannot obtain informed consent from one client without

revealing a fact that she learned in confidence from another client; if the second client will not permit the lawyer to reveal that confidence, then the lawyer cannot represent the first client; consent will not solve the conflict.

For purposes of this rule, a "matter" is

specific facts with specific parties. a. Drafting laws that apply to everyone and compiling statistics are NOT matters, so there is no conflict. b. Drafting a government contract that is now at issue DOES constitute a matter.

Informed consent means

that the affected client is aware of all of the relevant circumstances, reasonable alternatives, and foreseeable ways the conflict might harm her. [See ABA Model Rule 1.0(e); ABA Model Rule 1.7, comment 18]

However, the conflict is NOT imputed to other attorneys at the disqualified lawyer's firm if

the disqualified lawyer is screened from the matter, does not share in fees from the matter, and the government is notified in writing.

report out If higher authority fails to act,

the lawyer MAY report relevant information to appropriate persons outside the organization only if, and to the extent that, the lawyer reasonably believes such reporting is necessary to prevent substantial injury to the organization. --Outside disclosure: Lawyer can exercise discretion as to whether they wish to take action outside the organization and have discretion as to what they disclose.

if the potential conflict eventually ripens into a present conflict,

the lawyer must repeat steps a), b), and c), below. The lawyer must withdraw from the joint representation if a reasonable lawyer would have to advise either of the two clients not to consent. [See ABA Model Rule 1.7, comments 4, 14, and 15] The lawyer may continue to represent one consenting client, but only if the client who is dropped gives informed consent to the continuation, confirmed in writing. [See ABA Model Rule 1.9(a)]

A conflict of interest arises when

there is a substantial risk that the lawyer's representation of the client will be materially and adversely affected by the lawyer's own interests or the lawyer's duties to another current client, a former client, or a third person. [Restatement §121; ABA Model Rule 1.7(a)]

Matters may be considered substantially related if

they involve the same transaction, or if confidential information learned in the former representation (**could be a different litigation matter) would materially advance the new client's position in the current matter.