DUTY OF LOYALTY
(conflicts of interest)
1
• Conflicts concerning current clients
2
• 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
3
• (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.
4
• (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.
5
• 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
6
• 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.
7
• 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…
8
• (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;
9
• (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
10
• (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.
11
• 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)
12
• Different problems of being lawyer for
startup (even when you don’t get a cut)
• First lawyer for people creating startup
– Representing adverse sides in transaction
• Then represent corporation instead (or
also)
– Could have conflict due past (or continued)
representation of the people starting up
13
• What about buying a stick of gum from
your client’s store?
• Is that a violation of 1.8(a), unless
informed consent etc.
14
• 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.
15
• In such transactions, the lawyer has no
advantage in dealing with the client, and
the restrictions in paragraph (a) are
unnecessary and impracticable.
16
• Lawyer is representing client in slip and
fall litigation
• Lawyer also enters into an agreement with
client to buy piece of property
• Does 1.8(a) apply?
17
• One financial transaction almost always
occurs between lawyer and client
• Fee for legal services
• Will discuss this later
– R 1.5
18
• Assume that L draws up the papers for a
startup corp - gets hourly fee
• after project is completed C offers to sell L
shares at below market rate because he
believes that L did good work and wants to
cement the relationship
• What should L do?
19
• Client gifts?
20
• 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.
21
• you have an poor client you are
representing in an eviction case and you
put him up in a hotel
22
• 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.
23
• Champerty
• Maintenance
24
• Special rules on contingency fees
• Will do later 1.5(d)
25
• 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.
26
• 1.8(f) A lawyer shall not accept
compensation for representing a client
from one other than the client unless:
• (1) the client gives informed consent;
• (2) there is no interference with the
lawyer's independence of professional
judgment or with the client-lawyer
relationship; and
• (3) information relating to representation of
a client is protected as required by Rule
1.6.
27
• Personal interests affecting representation
– Need not be mentioned in 1.8
28
• 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?
29
• 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.
30
• 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.
31
• Having sex with clients
32
• 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.
33
• Problem of jointly representing criminal
defendants
34
• 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.
35
• When does a conflict in representing joint
criminal defendants result in ineffective
assistance of counsel?
36
• Problems in representing joint clients in
transactional work
• First problem
– Don’t know you are jointly representing
– State v. Callahan (SCt Kan)
37
• 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
38
• Puzzle about confidentiality in joint
representation
• AvBvHill Wallack
• Lawyer jointly represents husband and
wife husband in connection with drafting
will
• Husband discovers he has an illegitimate
child
• Husband says don’t tell wife
• What do you do?
39
• 1.7(a)(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.
40
• 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;
41
• So must withdraw
• But may the lawyer tell the wife?
42
• Restatement section 60 Comment l
• When a conflict of interest exists, as part of
the process of obtaining consent, the lawyer
is required to inform each co-client of the
effect of joint representation upon disclosure
of confidential information, including both
that all material information will be shared
with each co-client during the course of the
representation and that a communicating
co-client will be unable to assert the
attorney-client privilege against the other in
the event of later adverse proceedings
43
between them.
• Co-clients can also explicitly agree that the
lawyer is not to share certain information,
such as described categories of
proprietary, financial, or similar information
with one or more other co-clients…. If one
co-client threatens physical harm or other
types of crimes or fraud against the other,
an exception to the lawyer's duty of
confidentiality may apply.
44
• Rest 3d
• In the course of withdrawal, the lawyer has
discretion to warn the affected co-client that a
matter seriously and adversely affecting that
person's interests has come to light, which the
other co-client refuses to permit the lawyer to
disclose. Beyond such a limited warning, the
lawyer, after consideration of all relevant
circumstances, has the further discretion to inform
the affected co-client of the specific
communication if, in the lawyer's reasonable
judgment, the immediacy and magnitude of the
risk to the affected co-client outweigh the interest
of the communicating client in continued secrecy.
45
• compare: DC Bar Legal Ethics Comm
Opinion No. 296
•
no revelation possible
46
• 1.8(g) A lawyer who represents two or
more clients shall not participate in making
an aggregate settlement of the claims of or
against the clients, or in a criminal case an
aggregated agreement as to guilty or nolo
contendere pleas, unless each client gives
informed consent, in a writing signed by
the client. The lawyer's disclosure shall
include the existence and nature of all the
claims or pleas involved and of the
participation of each person in the
settlement.
47
• Successive Representation
48
• 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.
49
• 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.
50
• 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?
51
• 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?
52
• Do you have to get B’s consent?
53
• 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?
54
• 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
55
• 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?
56
• Brennan’s Inc v Brennan’s Restaurants
• Wegmann represented a number of
Brennan family corps
• secured trademark
• family fight
• divided corps
• Brennan’s Inc. claimed owned trademark
• sued Brennan’s Restaurants
• Wegmann stayed counsel for the
defendants (Brennan’s Restaurants)
• Motion to disqualify
57
• Accommodation client
58
• 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?
59
• 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?
60
• 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?
61
• 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?
62
• Prospective clients
63
• 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).
64
• 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).
65
• 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
66
disqualifying L than A?
• A – must show only that the matters are
substantially similar and interests are
materially adverse
• B – must also show that the information
gained could be significantly harmful
67
• 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
68
• 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.
69
• 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.
70
• Conflict tainting
71
• 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).
72
• 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
73
• (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.
74
• Imputed conflicts
• Transitory lawyers
75
• 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, unless
• the prohibition is based on a personal
interest of the prohibited lawyer and does
not present a significant risk of materially
limiting the representation of the client by
the remaining lawyers in the firm
76
• If one lawyer in a firm is prohibited
from representing a client (w/o
consent) under conflicts rules 1.7 or
1.9 (not personal interest conflicts), all
lawyers in the firm are.
77
• c) A disqualification prescribed by this rule
may be waived by the affected client under
the conditions stated in Rule 1.7.
78
• 1.10(b) When a lawyer has terminated an
association with a firm, the firm is not prohibited
from thereafter representing a person with
interests materially adverse to those of a client
represented by the formerly associated lawyer
and not currently represented by the firm,
unless:
• (1) the matter is the same or substantially
related to that in which the formerly associated
lawyer represented the client; and
• (2) any lawyer remaining in the firm has
information protected by Rules 1.6 and 1.9(c)
that is material to the matter.
79
• If a tainting lawyer leaves the firm, the
remaining lawyers are free of limitations
except
• They still not may not represent (w/o
consent) someone with interests materially
adverse to a client of the tainting lawyer
• If the matter is the same or substantially
similar to the earlier representation and
• The remaining lawyers have confidential
information material to the matter
80
• 1.9(b) A lawyer shall not knowingly represent a
person in the same or a substantially related matter
in which a firm with which the lawyer formerly was
associated had previously represented a client
• (1) whose interests are materially adverse to that
person; and
• (2) about whom the lawyer had acquired information
protected by Rules 1.6 and 1.9(c) that is material to
the matter;
• unless the former client gives informed consent,
confirmed in writing.
81
• If a lawyer who was tainted leaves the firm
with the tainting lawyer, he is free of
limitation except
• she still may not represent (w/o consent)
someone with interests materially adverse
to the tainting lawyer’s client
• If she has confidences material to the
matter
82
• Assume X, a lawyer at Firm 1, defends A
in connection with an antitrust claim
against A brought by B. Y, also a lawyer
at Firm 1, is approached by C, who wants
to sue A for employment discrimination. Is
there a conflicts problem?
employment
discrimination C
A
antitrust
Firm 1
X
Y
B
83
• What if “Firm 1" was not a partnership, but
was merely a collection of lawyers that
shared the same offices?
84
• Assume X, no longer represents A. Now
may Y represent C?
employment
discrimination
C
A
antitrust
Firm 1
X
Y
B
85
• May Y represent D, who is suing A for
antitrust violations?
antitrust D
A
antitrust
Firm 1
X
Y
B
86
• May Z, who entered Firm 1 after X
dropped A as a client, represent D?
antitrust D
A
Firm 1
Z (brand new lawyer)
antitrust
X
B
87
• Assume that after dropping A as a client, X
moves to Firm 2. May X now represent D
in his suit against A?
Firm 2
X
antitrust D
A
antitrust
Firm 1
X
B
88
• May W, another lawyer at Firm 2,
represent D in his suit against A?
W
Firm 2
X
antitrust D
A
antitrust
Firm 1
X
B
89
• After X leaves for Firm 2, may Y, who is
still a lawyer at Firm 1 and who did a small
amount of discovery work for A in B’s suit
against A, represent D?
Firm 2
X
antitrust D
A
antitrust
Y (small amt. of discovery
work for A)
Firm 1
X
B
90
• May V, who is still a lawyer at Firm 1 and
who knew nothing about B’s suit against
A, represent D?
Firm 2
X
antitrust D
A
Y (small amt. of discovery
work for A)
Firm 1
V
antitrust
X
B
91
• Assume Y moves to Firm 3. May he now
undertake to represent D?
Y
Firm 3
antitrust D
A
antitrust
Y (small amt. of discovery
work for A)
Firm 1
X
B
92
• May U, another lawyer at Firm 3,
represent D?
Y
U
antitrust D
A
antitrust
Firm 3
Y (small amt. of discovery
work for A)
Firm 1
X
B
93
• Assume it is a secretary or paralegal with
confidences changing firms?
• Is screening allowed?
94
• Assume instead that V moves to Firm 3.
May V represent D?
V
Firm 3
antitrust D
A
antitrust
Y (small amt. of discovery
work for A)
Firm 1
X
V
B
95