#16484 - Conflict Of Interest - Professional Responsibility

03. Conflict of Interest

163-185; 185-203; 214-226

226-237; 249-272

The Basic Architecture Of Lawyer-Client Conflicts

1. Lawyers have duties to clients of diligence, confidentiality, loyalty and related fiduciary duties (e.g., honesty).

2. The client is usually not able to monitor the behavior of a lawyer.

3. Conflict rules aim to reduce the risk that the lawyer will violate the duties in #1.

4. They do this by identifying situations where the lawyer’s duties to another client, to a former client, or to a third person, or the lawyer’s own interest will detract to an unacceptable degree from the lawyer’s ability to satisfy the duties in #1.

5. Which can lead to (a) client suspicion and (b) misconduct.

• Conflicts are –

  • Fact specific (granular): You must get into the detail

  • Literary: You will tell story that has the structure : “On the one hand…., but on the other hand….”

  • Psychological:

    • You will be assessing the lawyer’s temptation, conscious or otherwise

    • You will be assessing the client’s objectively reasonable suspicion of counsel’s loyalty

• Actual misconduct – succumbing to a conflict is an

  • independent violation of other rules

• Goals of the conflict rules:

  • Encourage client trust (allay suspicion)

  • Reduce the likelihood of temptation -- lawyer disloyalty or abuse of confidential information, even unintentionally

• How do you measure temptation?

• How do you measure reasonable suspicion?

• Countervailing considerations:

  • Facilitate choice of counsel

  • Facilitate specialization and career development

  • Strategic abuse

• Perez v. Kirk & Carrigan: Conflict between duty of confidentiality to Perez and interest of company in showing cooperation

• “In A Box”: Conflict between duty to inform Jennie Marsh that Endicott is facing possible indictment and duty to protect the confidential information of Font &Blue

What Are the Sanctions?

• Discipline (but usually not)

• Liability for malpractice or breach of fiduciary duty

• Fee disgorgement or forfeiture

• Disqualification from a matter

• Loss of a client

• Bad publicity

Concurrent Conflicts of Interest P.163-185

• Rule 1.7(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; or

  • (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.

• Rule 1.7(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; [a subjective/ objective test]

  • (2) the representation is not prohibited by law;

  • (3) the representation does not involve 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; and

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

• [7] loyalty and independent judgment are essential elements in the lawyer’s relationship to a client

  • Current client conflict exists if “significant risk that the representation of one or more client will be materially limited by the lawyer’s responsibilities to other client, a former client or third person or by a personal interest of the lawyer

  • Lawyers wishing to avoid a conflict must make predictions

• Restatement s.121 “a conflict of interest is involved if there is a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person”

  • Risk to representation – need not be actual

  • Significant risk (and not only lawyers who actually betrayed a client/0

    • It reduces the risk of misbehavior rather than try to discover and prove the misbehavior later

    • encourage client trust and honesty

• Concurrent conflict (conflicting interests a lawyer must avoid during the representation of a client)

  • C.f. successive conflict (chapter 6)

• Conflict of interest can result in discipline, disqualification from a representation, attendant embarrassment and cost; delay of client’s cause, negative publicity, fee forfeiture, and civil liability (rarely, crime – US v Gellene perjury for failing to reveal firm’s representation of clients with conflicting interest)

• Most conflict rules have no mens rea requirement – absolute liability

  • Exception: imputed conflicts - conflict that arises only because the conflict of a colleague is imputed to other lawyers in a law office (i.e. lawyer A has a conflict only because her office colleague lawyer B has a conflict)

• Rule 1.10(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9…[with certain exceptions]

  • forbids a lawyer knowingly to accept certain work that a conflicted colleague would have to decline

  • firm = an organisation, office – all seen as one lawyer

Introduction to Conflicts rules

1. Current client conflicts

   • Lawyer’s loyalties divided between 2 or more current clients, e.g. lawyer for co-defendants in a civil/ criminal case may find that on wants blame the other

   • Personal interest – e.g. lawyer’ spouse has large stock investment in the corporation that lawyer’s client wants to sue for a big sum

   • 1.7[1] uses the word ‘loyalty’ lawyer’s ability to be loyal and danger to client confidences

   • 1.7(a) definition of concurrent lawyer-client conflict

   • Rule 1.8 specific concurrent conflict situations – see later. Routinely reoccur

2. Former client conflicts

   • Successive conflicts

   • E.g. lawyer represented a former client in defending the legality of a patent, and later retained by new client to prove that the patent is invalid duty of loyalty to client A prevents lawyer from seeking to destroy the patent rights he has won for it 1.9(a)

   • Lawyer could have gained confidential info that could help the new client, if he reveals/ uses this info, he may violate rule 1.9(c)

   • But if new client seeks to sue former client for irrelevant matter (nature of the representation is unrelated to the patent work) lawyer may sue former client without disloyalty or danger to confidences

3. Imputed conflict within a law firm

   • Lawyer is prevented from representing a client because of a current/ former client conflict impute client conflict within a law firm

   • 1.0(c) Definition of firm/ law firm: a lawyer(s) in a law partnership, professional corporation, sole proprietorship or other association authorised to practice law; or lawyers employed in a legal service organisation or the legal department of a corporation or other organisation

   • If the lawyer changed firm (lateral lawyer), Model Rules provide that her conflict would travel with her to her new firm, unless the new firm screens the new lawyer

4. Government-lawyer conflicts

   • Lawyers who worked for government and moved to private sector (or vice versa)

   • Rule 1.11: screening provision enable them to work in private sector without imputing their conflicts to their new colleagues

5. Lawyer-witness conflict - ‘advocate-witness’ - Rule 3.7

   • Lawyer for a litigation client will/ should be a witness (called by client or opposing side)

   • Avoid conflict between the lawyer’s interest in being an advocate and interest of the client

   • 3.7(a) “a lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless 1) testimony relates to an uncontested issue, 2) relates to the nature and value of legal services rendered in the case; or 3) disqualification of the lawyer would work substantial hardship on the client.”

6. Organisational lawyer conflicts – rule 1.13 and chapter 10

   • Conflict can develop if lawyer is deemed to represent both the company and its constituents (board members, officers, non-managerial employees)

   • Even if the co. is the sole client, lawyer’s employment status is within the discretion of these people, who may have interests adverse to those of the co.

7. Conflicts in conflict rules

   • Conflict rules vary among American jurisdictions - federal court may apply conflict rules of the state they sit

   • Court look to norms in the Model Rules, Model Code, and local rules

   • When a dispute touches more than a jurisdiction and their conflict rules differ, a court may have to decide which rule to apply

   • Rule 8.5(a) lawyer subject to the disciplinary authority of the jurisdiction he is admitted to practice.

8. Conflict rules as default rules

   • If client give informed consent, lawyer and client may displace nearly all conflict rules

   • Definition of informed consent rule 1.0(e):

     1. agreement by a person to a proposed course of conduct after the lawyer has communicated adequate info and explanation about the material risk of and reasonably available alternatives to the proposed course of conduct

   • Client may also demand more protection against its lawyer’s conflict than the MA [lawyer would accept if it brings more money and business]

9. Competing interests P.167

1) Client-Lawyer Conflicts

• A lawyer’s business and financial interest - Lawyer. Realtor. Any Problem? (168)

  • Can a lawyer with real-estate license do some brokering along with the lawyering

• What rule(s) govern Melanie’s wish to represent current...