Looking back on approximately six years of Ethics Curbstone columns, it occurs to me that I have largely neglected, at least in a systemic way, treatment of the professional responsibility area that touches most frequently on the day-to-day working lives of lawyers: conflicts of interest. I propose to remedy that situation by a high-level overview of conflicts in this column, then over the course of the next year or so to discuss the main categories of conflicts in more detail: current client conflicts, former client conflicts, and imputation of conflicts to lawyers working within the same law firm.
Conflict of interest concerns are not unique to lawyers—they are embedded in the law of fiduciaries. But the legal professional probably has the most mature body of law—both rule and case-based—in this area.
Loyalty and Confidentiality
There are two fundamental principles that drive conflicts of interest for lawyers. The first is the importance of client confidentiality. Lawyers have a strong sense of confidentiality. I doubt there is a professional value that is more basic. Not only are we required to respect the confidences of our current clients, Rule of Professional Conduct 1.6, our duty to keep those confidences persists beyond the termination of the attorney-client relationship. Rule 1.9(c). Indeed, beyond the mortal lifetimes of our clients. We will examine in closer detail how this persistent duty of confidentiality works itself out in the areas of both current client conflicts and, more prominently, former client conflicts.
The second fundamental principle is that of client loyalty. This is our profession’s take on the biblical injunction that a man cannot serve two masters. That is, of course, a gross oversimplification. If it were literally true, each lawyer could only have one client. We will see that client loyalty is a significant driver in the world of concurrent conflicts, but much less so when it comes to former client conflicts.
Conflicts of interest are mostly governed by Rules 1.7 (current client conflicts), 1.9 (former client conflicts) and 1.10 (imputation of conflicts). Rule 1.8 addresses a number of specific types of current client conflicts of interest. Rule 1.13, dealing with representation of organizational clients, has some special things to say about simultaneous representation of an organization and its constituents. Rule 1.13(f) and (g). Also, Rule 1.11 is a special application of conflict of interest principles to current and former government lawyers, and Rule 1.12 governs conflicts that arise when judges and other third-party neutrals are faced with related employment as attorneys.
Current Client Conflicts: Direct Adversity
Rule 1.7 sets forth the general rules governing conflicts implicating the interests of current clients. There are two sub-types of current client conflicts of interest. The first is direct adversity conflicts. Rule 1.7(a)(1). A lawyer cannot represent one client in a matter that is directly adverse to another client. Note that there is no mention of the relatedness of the matters. That is because relatedness is not a consideration in determining whether a direct adversity conflict exists (although will be relevant to whether a direct adversity conflict is consentable by the client). If a lawyer represents one client against a person or entity that the lawyer simultaneously represents in an entirely unrelated matter, there is a direct adversity conflict. This is so even if the client to whom the lawyer is adverse has independent legal counsel in the matter. This illustrates the predominance of client loyalty as the motivation behind the prohibition on direct adversity conflicts. If the two matters are entirely unrelated, there is no danger that one client’s confidences will be compromised in service of another client. But that doesn’t matter; it is said to be disloyal to a client to be directly adverse to that client, even in an unrelated matter.
Current Client Conflicts: Material Limitation
The other branch of current client conflicts is material limitation conflicts. In matters that are not directly adverse, a lawyer may not represent a client if there is a signficant risk that the representation will be materially limited by other responsibilities of the lawyer, including responsibilities to another client, to any third person or to the lawyer’s own interests. Rule 1.7(a)(2). Material limitation conflicts usually require some relatedness between the current client representation and the materially limiting responsibility. The rule is easily stated. Its application can be very difficult and inevitably requires a very careful and disciplined analysis of the facts of each particular matter.
Current Client Conflicts: Client Consent
Sometimes, representation is possible notwithstanding a current client conflict. The rules are generally permissive of clients consenting to conflicts of interest, and it happens with considerable frequency. Rule 1.7(b). However, a lawyer may not even approach a client about consenting to a concurrent conflict of interest unless the lawyer reasonably believes that he will be able to provide competent and diligent representation to any client affected by the conflict. Rule 1.7(b)(1). Note that this standard has both a subjective and an objective component. Even if a lawyer subjectively believes that he can provide competent and diligent representation in the face of a conflict, he may not solicit client consent if that belief is not objectively reasonable. On the other hand, even if a reasonable lawyer would believe that the conflict would not impair competence or diligence, the lawyer who is subjectively impaired by the conflict cannot solicit client consent.
Some current client conflicts are per se non-consentable: for example, when the representation is prohibited by law, Rule 1.7(b)(2), or when the representation will involve asserting a claim on behalf of one client against another client represented by the lawyer in the same litigation or other legal proceeding. Rule 1.7(b)(3). The latter consideration is typically understood to prohibit a single lawyer from representing both parties in a so-called amicable divorce.
Having crossed the competence/diligence hurdle, the lawyer must still obtain informed consent from each affected client, and client consent must be confirmed in writing. Rule 1.7(b)(4). I’ll say more about obtaining informed client consent in a future column. For now, it must suffice to say that “informed consent” is defined in Rule 1.0(e), and “confirmed in writing” is defined in Rule 1.0(b).
Former Client Conflicts: Substantially Related
The other major branch of conflicts of interest involves conflicts involving former clients. Rule 1.9. Conceptually, former client conflicts are mostly about protecting former client confidences and very little about client loyalty. If you pause to think about it for a bit it is apparent that if we continued to have a loyalty obligation to former clients, we could never sue a former client (at least, without that former client’s consent) even on matters entirely unrelated to the subject of the past representation. The consequences of such a rule would be too significant to tolerate—not just for lawyers, but for clients, too. The limitations such a rule would impose on lawyers is obvious. But such a rule would also place signficant cost burdens on clients in two ways. First, it would make it difficult for some clients to find a lawyer. Lawyers would certainly think long and hard about taking on a new client if doing so put that client off-limits to unrelated adverse matters forever. Second, for that very reason, the cost of legal services would probably go up because the opportunity costs imposed on any lawyer who accepted a new client would undoubtedly be passed on to clients in the form of higher fees.
Rule 1.9 implements the concern with former client confidentiality by prohibiting representations that are materially adverse to former clients only for matters that are the same or substantially related to the past representation. If there is no substantial relationship—and hence, no reasonable possibility that the confidences of the former client will be revealed or used against the former client—the lawyer is free to take on a new client adverse to a former client. Application of the substantial relationship test is where much of the action is in disqualification proceedings based on claims of conflict of interest.
Former Client Conflicts: Consent
There is greater room for consent to conflicts in the realm of former versus current client conflicts of interest. All former client conflicts are consentable by the former client so long as it is informed consent that is confirmed in writing. Rule 1.9(a). This makes sense given the concern is to protect former client confidentiality, and clients are always free to give informed consent to the revelation of their confidences. Rule 1.6(a).
Note that there is typically an overlap between current and former client conflicts of interest as follows: when a lawyer takes on a new matter adverse to a former client that is substantially related to the past representation, the former client’s consent will be required under Rule 1.9. At the same time, the current client representation will usually be viewed as materially limited by the fact that the adverse party was a former client of the lawyer in a substantially related matter. Thus, the current client’s consent will usually be required under Rule 1.7.
Imputation of Conflicts
When lawyers ban together to practice law within the same organization, described in the rules as a “firm,” the concept of imputation treats all of the lawyers in that organization as one lawyer for conflict of interest purposes. The general imputation rule is found in Rule 1.10(a). With the exception of conflicts that are purely personal to one lawyer in a firm and do not present a significant risk of materially limiting client representation by other lawyers in the firm, all conflicts are imputed within the firm.
There are other varieties of imputed conflicts that require a more nuanced analysis. For example, when a lawyer practiced law in one law firm, leaves that firm and goes to work for another law firm, what conflict of interest baggage does that lawyer leave behind at the old firm and what baggage follows the lawyer to the new firm? This question is addressed in Rule 1.9(b) for the migrating lawyer, and in Rule 1.10(c) for the other lawyers in the new firm. Conversely, when a lawyer leaves a firm and takes a client with him, what conflict of interest limitations remain behind at the now-former law firm? This situation is addressed in Rule 1.10(b). The migration of lawyers from firm-to-firm is part of the modern reality of law practice. We will drill down into the gory details of conflicts of interest presented by this new reality in a future installment.
Detecting and Avoiding Conflicts
Conflicts of interest can be like monsters in the dark: they can sneak up behind you and bite you in the butt. If you turn the light on, those monsters don’t exactly disappear, but you are in a better position to fight them off. So it is with conflicts of interest. The metaphorical light is a robust conflict of interest checking system. The key here is to spot conflicts and avoid them rather than deal with them after someone else calls them to your attention—usually in a disqualification motion.
No lawyer should operate a law practice without a system that records all current and historical clients, adverse interests and other interested parties. All prospective new clients and adverse interests must be checked against those historical records. That is the only way to achieve some degree of assurance that the prospective client is not bringing in a new matter adverse to or materially limited by a current client, or that the prospective client’s matter is not adverse to a former client in a substantially related matter. The key to a good conflicts checking system is that it is intentionally overbroad. It will capture the fact that the adverse interest in the prospective new representation was a former client and leave it to more careful analysis to determine whether the prospective new matter and the past matter are substantially related. It will let you know that there is another party with an interest in the prospective new matter, even if not adverse, who is a current client and might present a material limitation conflict once the situation is carefully analyzed.
Analyzing conflicts of interest can be difficult. There are some easy categories: for example, absent informed client consent, a lawyer cannot sue a current client, even in an unrelated matter. But things quickly break down into shades of grey. When does a current client become a former client? When is a limitation material? When is a relationship substantial? I can’t guarantee that this series of columns will separate grey into its black and white components, but I hope to provide an analytical framework to assist in thinking through conflict problems in a way that avoids surprise and minimizes the grey area.