|Oregon State Bar Bulletin OCTOBER 2009|
A Periodic Series
By Sylvia Stevens
Based on the inquiries we receive, it is a safe bet that conflicts of interest are among — if not the most — vexing ethical questions facing lawyers. This column will be the first in a periodic series discussing the rules governing conflicts of interest. We begin with conflicts between current clients.
The first step in any conflicts analysis is to make sure you know who you represent. While seemingly a simple matter, many conflict problems are the result of misidentifying or not being clear about who is actually the client when representing organizations, governments, insurers, would-be (prospective) clients and fiduciaries. Entity clients and prospective clients are addressed in Rules 1.13 and 1.18, respectively. For a discussion of insurers as clients, see OSB Formal Ethics Ops. Nos. 2005-30, 2005-77 and 2005-121. For a discussion of fiduciary clients, see OSB Formal Ethics Ops. Nos. 2005-62 and 2005-119. See also, Ch. 5, The Ethical Oregon Lawyer (OSB 2006).
A related issue to properly identifying the client is knowing when the representation is over. Even a client who has not had a need for a lawyer’s services in some time may nevertheless consider herself a current client. Oregon, like most jurisdictions, uses the “reasonable expectations” test, pursuant to which a person will be deemed to be a client if the person has a reasonable expectation under the circumstances that such a relationship exists. In re Weidner, 310 Or 757 (1990). A lawyer who has not taken effective steps to document or clarify the end of a representation may find that a person believed to be a former client is in fact a current client. See, e.g. OSB Formal Ethics Op. No. 2005-146.
Once it is clear that some issue exists between two or more existing clients, it must be determined whether there is a conflict within the meaning of the rules. RPC 1.7(a) divides conflicts between current clients into two principal categories: “directly adverse” conflicts and “material limitation” conflicts.1 The third type of current client conflict is the “spousal” or “family” conflict, which is really a type of “material limitation” conflict.2
Directly Adverse Conflicts
“Directly adverse” conflicts represent a relatively small universe of situations. The most obvious directly adverse conflict is where a lawyer, on behalf of Client 1, pursues a claim or asserts a defense against Client 2. Even where the lawyer’s representation of Client 2 is wholly unrelated to Client 1’s matter, this kind of adverse representation is forbidden unless both clients give their informed consent pursuant to RPC 7.1(b),3 as discussed below.
Direct adversity conflicts are not limited to representing the opposing parties in litigation. Cross-examining or seeking discovery from Client 2 on behalf of Client 1 will violate RPC 1.7(a) if Client 2’s testimony would be damaging to Client 1 or if Client 2’s testimony has to be compelled and Client 1 wants to seek sanctions for Client 2’s lack of cooperation. The same limitations apply to transactional matters so that for instance, a lawyer cannot represent the seller in a business transaction while at the same time representing the buyer in a different matter.
Material Limitation Conflicts
Even where the interests of the current clients are not directly adverse, a conflict exists under RPC 1.7(a)(2) if there is a significant risk that the lawyer’s ability to consider, recommend or carry out an appropriate course of action for a client will be materially limited by the lawyer’s other responsibilities or interests. In other words, there is a conflict if the lawyer’s responsibilities to others or to the lawyer’s own interests will foreclose alternatives that would otherwise be available to the lawyer’s client. ABA Model Rule 1.7, Comment .4
One example of a “material limitation” conflict is the so-called “issue” or “positional” conflict. Ordinarily a lawyer may take inconsistent legal positions in different tribunals at different times on behalf of different clients. It is not a conflict merely because a lawyer seeks an outcome for one client that will create an undesirable precedent for another client who is represented in an unrelated matter. On the other hand, a lawyer may not proceed with antagonistic legal positions if a decision in favor of one client will weaken the legal position taken on behalf of the other client. ABA Model Rule 1.7, Comment .
A material limitation may result from the lawyer’s responsibilities to former clients under RPC 1.95 or from the lawyer’s service as a corporate officer, or as a personal representative or other fiduciary. A lawyer’s own interests may also create a substantial risk of a material limitation in the lawyer’s representation of a client. For example, when a client has expressed serious dissatisfaction with the lawyer’s performance, there may be a substantial risk that the lawyer’s advocacy on behalf of the client will be materially limited by the lawyer’s desire to avoid liability or because of the damage such claims do to the lawyer-client relationship.
Is the Conflict Consentable?
Having determined that a current client conflict exists, the next question for the lawyer is whether the conflict is consentable — that is, whether the representation can proceed notwithstanding the conflict if the affected clients agree. RPC 1.7(b) allows a lawyer to represent a client even where a conflict exists under RPC 1.7(a) if four conditions are met:
- The lawyer must have a reasonable belief that she can provide competent and diligent representation to each affected client.
- The representation is not prohibited by law.
- The representation does not obligate the lawyer to contend for something for one client that the lawyer must oppose for another client.
- Each affected client gives informed consent, confirmed in writing.
The first requirement is perhaps the most important, because no amount of consent can relieve the lawyer of the duty to provide competent and diligent representation to a client. Lawyers must consider honestly whether they can, in the face of the conflict, nevertheless afford each client the undivided loyalty to which every client is entitled.
Bankruptcy proceedings are one area where substantive law imposes limits on representations that are otherwise permissible under the rules of professional conduct. There may well be others and lawyers are cautioned to ensure that no such legal limit applies to the types of matters they handle.
The third requirement comes from the definition of an “actual conflict” under former DR 5-105.6 It describes situations where a lawyer might attempt to represent both positions in a dispute, such as by representing plaintiff and defendant in the same lawsuit or buyer and seller in the same transaction. The impermissibility of such representations is generally self-evident, but not always. See, e.g., In re McKee, 316 Or 114 (1993) (representing co-petitioning spouses in divorce); In re Wittemyer, 328 Or 148 (1999) (representing lender and borrower in same transaction); In re Jeffery, 321 OR 260 (1995) (representing co-defendants with differing interests in same criminal proceeding). Lawyers may not seek the clients’ consent to conflicts of this type.
Finally, when a conflict is consentable, the clients’ consent must be informed and confirmed in writing, as those terms are defined in RPC 1.0.7 Lawyers are subject to discipline for failing to comply with the technicalities of consent even when the clients have given their informed consent orally. See In re Lawrence, 332 Or 502 (2001) and In re Brandt/Griffin, 331 Or 113 (2000).
1. Oregon RPC 1.7(a) provides:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a current conflict of interest. A current conflict of interest exists if:
(1) the representation of one client will be directly adverse to another client;
(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; or
(3) the lawyer is related to another lawyer, as parent, child, sibling, spouse or domestic partner, in a matter adverse to a person whom the lawyer knows is represented by the other lawyer in the same matter.
2. The ABA Model Rules do not have a separate category of spousal or family conflicts.
3. Oregon RPC 1.7(b) provides:
(b) Notwithstanding the existence of a current 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;
(2) the representation is not prohibited by law;
(3) the representation does not obligate the lawyer to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client; and
(4) each affected client gives informed consent, confirmed in writing.
4. Some commentators suggest that the “material limitation” conflict subsumes the “direct adversity” conflict because when a lawyer represents two clients with directly adverse interests they are each likely to feel betrayed and the resulting damage to the lawyer-client relationship is likely to limit the lawyer’s ability to represent each client effectively. The Restatement uses a single standard: “if there is a substantial risk that the lawyer’s representation of the client would be materially and adversely affected” by the lawyer’s duties to another client. Restatement of the Law Governing Lawyers §121 (2000).
5. Conflicts under RPC 1.9 will be discussed in a future article.
6. The Oregon Code of Professional Responsibility (the DRs) was repealed effective Jan. 1, 2005 with the adoption of the Oregon Rules of Professional Conduct.
7. For definitions of “informed consent” and “confirmed in writing, see Oregon RPC 1.0(g) and (b), respectively
ABOUT THE AUTHOR
Sylvia Stevens is general counsel for the Oregon State Bar. She can be reached at (503) 620-0222 or toll-free in Oregon at (800) 452-8260, ext. 359, or by e-mail at email@example.com..
© 2009 Sylvia Stevens