CONFLICTS OF INTEREST
MODEL RULE 1.7
1
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; 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.
2
RULE 1.7 CONFLICT OF INTEREST: CURRENT CLIENTS
. . . 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;
(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.
3
4 CONDITIONS WHEN CONFLICTS ARE “CONSENTABLE”:
• LAWYER REASONABLY BELIEVES HE CAN STILL DO IT
• NOT OTHERWISE ILLEGAL
• NOT ADVERSE PARTIES IN SAME PROCEEDING
• INFORMED, WRITTEN CONSENT FROM CLIENTS
4
RULE 1.7 - REVIEW
(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.
5
RULE 1.7 REVIEW
. . . 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;
(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.
6
RULE 1.7 HISTORY & BACKGROUND
The comment was amended in 2002 to
address some recurring fact settings and to
encompass concerns formerly addressed by
Model Rule 2.2 (Intermediary). (Rule 2.2
was deleted in 2002).
Much of the former Rule 2.2 survives in Rule
1.7’s Comments [26] through [28]
(nonlitigation conflicts) and Comments [29]
through [33] (special considerations in
common representation).
7
RULE 1.7 - STANDING TO SEEK DISQUALIFICATION
The general rule is that only a former or
current client has standing to bring a motion
to disqualify counsel on the basis of a
conflict of interest. In re Yarn Processing
Patent Validity Litig., 530 F.2d 83 (5th Cir.
1976) (often cited in standing cases)
8
RULE 1.7 - STANDING TO SEEK DISQUALIFICATION
A nonclient may seek disqualification only if there is an
“ethical breach [that] so infects the litigation . . . that it impacts
the moving party’s interest in a just and lawful determination
of her claims.” Colyer v. Smith, 50 F. Supp. 2d 966 (C.D. Cal.
1999).
Jamieson v. Slater, No. CV 06-1524-PHX-SMM, 2006WL
3421788 (D.Ariz. Nov. 27, 2006) (plaintiff had standing to
move to disqualify opposing counsel, who was himself a
codefendant and whose actions while representing his codefendants were subject of plaintiff’s suit; notwithstanding codefendants’ waiver of conflict, lawyer’s interest in justifying
what he did while representing them would “undoubtedly
cloud” his ability to examine their alternatives)
9
RULE 1.7 - STANDING TO SEEK DISQUALIFICATION
Doe v. Lee, 178 F. Supp. 2d 1239 (M.D. Ala. 2001)
(plaintiff suing psychologist for disclosing her confidential
records lacked standing to seek disqualification of
defense counsel on grounds that counsel would have to
cross-examine his own wife, who was potential material
witness)
Bernocchi v. Forcucci, 614 S.E.2d 775 (Ga. 2005) (nonclient movant must show “violation of the rules which is
sufficiently severe to call in question the fair and efficient
administration of justice”).
10
RULE 1.7 - DISQUALIFICATION NOT INEVITABLE
A violation of Rule 1.7(a) does not always result in
disqualification, particularly if the firm has
implemented a screen and the complaining party
cannot show it was harmed.
See, e.g., Hempstead Video, Inc. v. Vill. of Valley Stream,
409 F.3d 127 (2d Cir. 2005); Bayshore Ford Truck
Sales, Inc. v. Ford Motor Co., 380 F.3d 1331 (11th Cir.
2004).
11
RULE 1.7 - COMMENT
[3] A conflict of interest may exist before
representation is undertaken, in which
event the representation must be declined,
unless the lawyer obtains the informed
consent of each client under the conditions
of paragraph (b).
12
RULE 1.7 - COMMENT
[3] …To determine whether a conflict of
interest exists, a lawyer should adopt
reasonable procedures, appropriate for
the size and type of firm and practice, to
determine in both litigation and nonlitigation matters the persons and issues
involved.
13
RULE 1.7 - COMMENT
[4] If a conflict arises after
representation has been undertaken,
the lawyer ordinarily must withdraw
from the representation, unless the
lawyer has obtained the informed
consent of the client under the
conditions of paragraph (b).
14
RULE 1.7 - COMMENT
Where more than one client is involved,
whether the lawyer may continue to
represent any of the clients is determined
both by the lawyer's ability to comply with
duties owed to the former client and by the
lawyer's ability to represent adequately
the remaining client or clients, given the
lawyer's duties to the former client.
15
RULE 1.7 – COMMENT 5
[5] Unforeseeable developments, such as
changes in corporate and other
organizational affiliations or the addition
or realignment of parties in litigation,
might create conflicts in the midst of a
representation, as when a company sued
by the lawyer on behalf of one client is
bought by another client represented by
the lawyer in an unrelated matter.
16
RULE 1.7 – COMMENT 5
Depending on the circumstances, the lawyer
may have the option to withdraw from
one of the representations in order to
avoid the conflict. The lawyer must seek
court approval where necessary and take
steps to minimize harm to the clients.
17
RULE 1.7 – “HOT-POTATO” RULE
A law firm trying to take on a matter that
presents a conflict under Rule 1.7 may not
simply drop a client to be free to take on a
more attractive one. Violation of the socalled “hot-potato” rule normally results in
disqualification.
See, e.g., Flying J. Inc. v. TA Operating Corp., No.
1:06-CV-30TC, 2008WL 648545 (D. Utah Mar. 10,
2008) (collecting cases); El Camino Res., Ltd. v.
Huntington Nat’l Bank, 623 F. Supp. 2d 863 (W.D.
Mich. 2007).
18
RULE 1.7 – “HOT-POTATO” RULE
Courts are more forgiving if the conflict was
unforeseeable and arose through no fault of the law
firm—as, for example, when a conflict is created by a
corporate merger or acquisition. See Model Rule 1.7,
cmt. [5]. This is sometimes referred to as the “thrustupon” exception to the “hot-potato” rule.
 See, e.g., Carlyle Towers Condo. Ass’n, Inc. v. Crossland Sav., FSB,
944 F. Supp. 341 (D.N.J. 1996) (conflict created by defendant’s
merger with parent corporation of subsidiary for which
plaintiff’s law firm had done transactional work did not require
disqualification; firm had promptly withdrawn from
representation of subsidiary)
19
SIMULTANEOUSLY REPRESENTING CLIENTS INVOLVED IN
DIFFERENT SUITS OVER RELATED MATTERS
Simultaneous representation of clients involved in
different lawsuits can give rise to a conflict if the
suits involve related matters. Rembrandt Techs., LP v.
Comcast Corp., No. 2:05CV443, 2007 WL 470631
(E.D. Tex. Feb. 8, 2007) (disqualifying law firm from
simultaneously prosecuting patent infringement case
for one client and representing potential infringer on
other matters); Andrew Corp. v. Beverly Mfg. Co.,
415 F. Supp. 2d 919 (N.D. Ill. 2006) (without
consent, law firm may not render noninfringement
opinion for one client if patent belongs to another
client)
20
RULE 1.7 - IDENTIFYING CONFLICTS OF
INTEREST: DIRECTLY ADVERSE
[6] Loyalty to a current client prohibits
undertaking representation directly
adverse to that client without that
client's informed consent.
21
RULE 1.7 - IDENTIFYING CONFLICTS OF
INTEREST: DIRECTLY ADVERSE
[6] …Thus, absent consent, a lawyer
may not act as an advocate in one
matter against a person the lawyer
represents in some other matter, even
when the matters are wholly
unrelated.
22
RULE 1.7 - IDENTIFYING
CONFLICTS OF INTEREST:
DIRECTLY ADVERSE
[6] …The client as to whom the
representation is directly adverse is
likely to feel betrayed, and the
resulting damage to the client-lawyer
relationship is likely to impair the
lawyer's ability to represent the client
effectively.
23
FEELINGS OF BETRAYAL
24
FEELINGS OF BETRAYAL
25
RULE 1.7 - IDENTIFYING CONFLICTS
OF INTEREST: DIRECTLY ADVERSE
[6] …Similarly, a directly adverse
conflict may arise when a lawyer is
required to cross-examine a client
who appears as a witness in a
lawsuit involving another client, as
when the testimony will be damaging
to the client who is represented in the
lawsuit.
26
RULE 1.7 - IDENTIFYING CONFLICTS
OF INTEREST: DIRECTLY ADVERSE
[6] …On the other hand, simultaneous
representation in unrelated matters of
clients whose interests are only economically
adverse, such as representation of
competing economic enterprises in
unrelated litigation, does not ordinarily
constitute a conflict of interest and thus may
not require consent of the respective clients.
27
RULE 1.7 - IDENTIFYING CONFLICTS
OF INTEREST: DIRECTLY ADVERSE
[6] …On the other hand, simultaneous
representation in unrelated matters of
clients whose interests are only economically
adverse, such as representation of
competing economic enterprises in
unrelated litigation, does not ordinarily
constitute a conflict of interest and thus may
not require consent of the respective clients.
28
RULE 1.7 - IDENTIFYING CONFLICTS
OF INTEREST: DIRECTLY ADVERSE
[7] Directly adverse conflicts can also arise
in transactional matters. For example, if a
lawyer is asked to represent the seller of a
business in negotiations with a buyer
represented by the lawyer, not in the same
transaction but in another, unrelated matter,
the lawyer could not undertake the
representation without the informed consent
of each client.
29
RULE 1.7 - DIRECT ADVERSITY IN
NONLITIGATION CONTEXT (CMT 7)
Comment [7] points out that direct adversity “can
also arise in transactional matters.” See, e.g., Iowa
Supreme Court Bd. of Prof’l Ethics & Conduct v.
Wagner, 599 N.W.2d 721 (Iowa 1999) (may not
represent both buyer and seller in residential real
estate transaction).
Even so, outside the litigation context the lawyer is
far more likely to encounter material-limitation
conflicts under Rule 1.7(a)(2), discussed below, than
direct-adversity conflicts under Rule 1.7(a)(1).
30
IDENTIFYING CONFLICTS OF
INTEREST: MATERIAL LIMITATION
[8] Even where there is no direct
adverseness, a conflict of interest exists if
there is a significant risk that a lawyer's
ability to consider, recommend or carry out
an appropriate course of action for the
client will be materially limited as a result
of the lawyer's other responsibilities or
interests.
31
IDENTIFYING CONFLICTS OF
INTEREST: MATERIAL LIMITATION
[8]…For example, a lawyer asked to
represent several individuals seeking to form
a joint venture is likely to be materially
limited in the lawyer's ability to recommend or
advocate all possible positions that each might
take because of the lawyer's duty of loyalty
to the others. The conflict in effect forecloses
alternatives that would otherwise be available
to the client.
32
IDENTIFYING CONFLICTS OF
INTEREST: MATERIAL LIMITATION
[8]…The mere possibility
of subsequent harm does
not itself require
disclosure and consent.
33
IDENTIFYING CONFLICTS OF
INTEREST: MATERIAL LIMITATION
[8]…The critical questions are
• the likelihood that a difference in interests
will eventuate and
• if it does, whether it will materially interfere
with the lawyer's independent professional
judgment in considering alternatives or
foreclose courses of action that reasonably
should be pursued on behalf of the client.
34
IDENTIFYING CONFLICTS OF
INTEREST: MATERIAL LIMITATION
In re Shay, 756 A.2d 465 (D.C. 2000) (conflict
materially limited lawyer’s representation of couple in
estate planning when lawyer knew at time wills drafted
that husband, unbeknownst to wife, was actually married
to another person)
In re Toups, 773 So. 2d 709 (La. 2000) (assistant district
attorney representing husband in divorce case should
have withdrawn after client’s wife filed criminal
complaint against husband)
35
LAWYER'S RESPONSIBILITIES TO FORMER
CLIENTS AND OTHER THIRD PERSONS
[9] In addition to conflicts with other current
clients, a lawyer's duties of loyalty and
independence may be materially limited by
responsibilities to former clients under Rule
1.9 or by the lawyer's responsibilities to
other persons, such as fiduciary duties
arising from a lawyer's service as a trustee,
executor or corporate director.
36
PERSONAL INTEREST CONFLICTS
[10] The lawyer's own
interests should not be
permitted to have an
adverse effect on
representation of a client.
37
PERSONAL INTEREST CONFLICTS
For example, if the probity of a
lawyer's own conduct in a
transaction is in serious question,
it may be difficult or impossible
for the lawyer to give a client
detached advice.
38
PERSONAL INTEREST CONFLICTS
Similarly, when a lawyer has
discussions concerning possible
employment with an opponent of
the lawyer's client, or with a law
firm representing the opponent,
such discussions could materially
limit the lawyer's representation of
the client.
39
PERSONAL INTEREST CONFLICTS
In addition, a lawyer may not allow
related business interests to affect
representation, for example, by
referring clients to an enterprise in
which the lawyer has an undisclosed
financial interest.
40
PERSONAL INTEREST CONFLICTS
[11] 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.
41
PERSONAL INTEREST CONFLICTS
…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.
42
PERSONAL INTEREST CONFLICTS
[12] A lawyer is prohibited from engaging
in sexual relationships with a client unless
the sexual relationship predates the
formation of the client-lawyer relationship.
See Rule 1.8(j).
43
PERSONAL INTEREST CONFLICTS
Even in the absence of the specific prohibition
(Rule 1.8j), however, courts have had no trouble
applying Rule 1.7 or its Model Code predecessor
to lawyer-client sexual relationships.
See, e.g., Horaist v. Doctor’s Hosp. of Opelousas, 255
F.3d 261 (5th Cir. 2001); In re Ryland, 985 So. 2d 71
(La. 2008); Attorney Grievance Comm’n v. Hall, 969
A.2d 953 (Md. Ct. Spec. App. 2009); cf. In re
Anonymous, 699 S.E.2d 693 (S.C. 2010) (sex with
client’s wife is “per se violation of Rule 1.7”)
44
PERSONAL INTEREST CONFLICTS
A lawyer’s financial interests may conflict with a
client’s interests.
See In re Evans, 902 A.2d 56 (D.C. 2006) (when
lawyer whose title company was insuring real
estate in loan transaction learned that actual
owner was unprobated estate of borrower’s
deceased mother-in-law, lawyer initiated
probate proceeding on borrower’s behalf to
transfer title to her but did not explain his own
financial interest in facilitating closing)
45
PERSONAL INTEREST CONFLICTS
ABA Formal Ethics Op. 04-432 (2004)
(advancing bail on behalf of accused client
may pose conflict if amount of bail is
“material” to lawyer)
ABA Formal Ethics Op. 02-427 (2002)
(discussing propriety of lawyer taking
security interest in client’s property to
guarantee payment of fees).
46
PERSONAL INTEREST CONFLICTS
Professional interests that are not purely financial
can also materially limit a representation.
See Jamieson v. Slater, No. CV 06-1524-PHXSMM, 2006 WL 3421788 (D. Ariz. Nov. 27,
2006) (“[The lawyer’s] position as both a codefendant and counsel to the remaining
defendants is so egregiously untenable that . . .
any informed written consent to the concurrent
conflicts of interest identified here would be
ineffective.”)
47
PERSONAL INTEREST CONFLICTS
In re Allsep, 541 S.E.2d 245 (S.C. 2001)
(lawyer who represented client in
foreclosure proceedings against real estate
owners failed to advise client that real
estate owners’ lawyer concurrently
represented him in ongoing matter)
48
PERSONAL INTEREST CONFLICTS
ABA Formal Ethics Op. 08-453 (2008)
(discussion of role of “ethics counsel” within law
firm and duties to clients versus duties to law
firm);
ABA Formal Ethics Op. 97-406 (1997) (not
necessarily improper for two lawyers to represent
adverse interests at same time that one lawyer
represents the other; each lawyer must evaluate
whether relationship could materially limit
representation of third-party client, but disclosure
of their relationship is “prudent”)
49
PERSONAL INTEREST CONFLICTS
ABA Formal Ethics Op. 94-384 (1994) (lawyer
usually need not withdraw from representation
just because opponent files grievance against him
or her, but if lawyer’s interest in avoiding
discipline could materially limit representation,
lawyer first must reasonably conclude
representation will not be adversely affected and
then must seek client’s consent)
50
INTEREST OF PERSON PAYING FOR A
LAWYER'S SERVICE
[13] A lawyer may be paid from a source
other than the client, including a co-client, if
the client is informed of that fact and
consents and the arrangement does not
compromise the lawyer's duty of loyalty or
independent judgment to the client.
51
INTEREST OF PERSON PAYING FOR A
LAWYER'S SERVICE
[13] …If acceptance of the payment from any other
source presents a significant risk that the lawyer's
representation of the client will be materially limited by
the lawyer's own interest in accommodating the person
paying the lawyer's fee or by the lawyer's
responsibilities to a payer who is also a co-client, then
the lawyer must comply with the requirements of
paragraph (b) before accepting the representation,
including determining whether the conflict is consentable
and, if so, that the client has adequate information
about the material risks of the representation.
52
PROHIBITED REPRESENTATIONS
[14] Ordinarily, clients may consent to
representation notwithstanding a conflict.
However, as indicated in paragraph (b), some
conflicts are nonconsentable, meaning that the
lawyer involved cannot properly ask for such
agreement or provide representation on the
basis of the client's consent. When the lawyer is
representing more than one client, the question
of consentability must be resolved as to each
client.
53
PROHIBITED REPRESENTATIONS
[15] Consentability is typically determined by
considering whether the interests of the clients
will be adequately protected if the clients are
permitted to give their informed consent to
representation burdened by a conflict of
interest.
Thus, under paragraph (b)(1), representation is
prohibited if in the circumstances the lawyer
cannot reasonably conclude that the lawyer will
be able to provide competent and diligent
representation.
54
PROHIBITED REPRESENTATIONS
[16] Paragraph (b)(2) describes conflicts that are
nonconsentable because the representation is
prohibited by applicable law.
For example, in some states substantive law
provides that the same lawyer may not represent
more than one defendant in a capital case, even
with the consent of the clients, and under federal
criminal statutes certain representations by a
former government lawyer are prohibited,
despite the informed consent of the former client.
55
PROHIBITED REPRESENTATIONS
[16] …In addition, decisional
law in some states limits the
ability of a governmental client,
such as a municipality, to
consent to a conflict of interest.
56
PROHIBITED REPRESENTATIONS
[17] Paragraph (b)(3) describes conflicts that are
nonconsentable because of the institutional
interest in vigorous development of each client's
position when the clients are aligned directly
against each other in the same litigation or
other proceeding before a tribunal.
Whether clients are aligned directly against
each other within the meaning of this paragraph
requires examination of the context of the
proceeding. . .
57