Few people enjoy analyzing conflicts of interest in legal representations. And many lawyers have erroneous notions about them. Conflicts of interest are one of the most frequently inquired-about topics on our advisory opinion service. Lately, too, it has been an area where we are seeing more discipline. Because of this, it seems like a primer is in order.
Applicable rules
Several rules cover conflicts of interest, including Rules 1.7 (current clients), 1.8 (specific rules), 1.9 (former clients), 1.10 (imputation), 1.11 (former judges/neutrals), and 1.18 (prospective clients), Minnesota Rules of Professional Conduct (MRPC). For this column, I would like to mainly focus on Rules 1.7 and 1.9.
But before we jump in, I would like to remind counsel that before one can apply the ethics rules on conflicts, counsel needs to be clear on who they represent (or formerly represented) and the scope of that representation, including whether representation is completed or ongoing. Understanding who is and who is not your client and the scope of the representation (both in breadth and temporally) is often critical to effectively identifying and addressing conflicts (since the rules differ). And while it might sound straightforward, unless you are intentional about these matters, you and your client(s) may not be on the same page regarding these basic principles.
What is a conflict? Conflict is not a defined term under Rule 1.0 (terminology) but rather is defined through several rules. Let’s start with current clients. Rule 1.7(a), MRPC, prohibits a lawyer from representing a client if the representation involves a “concurrent conflict.” The rule then defines a “concurrent conflict” as one in which (1) “the representation of one client will be directly adverse to another client,” or (2) “there is a substantial 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.”
Let’s take each type of concurrent conflict in turn. A direct adversity conflict is often easy to spot. The key here is that the subject matter of the representations need not and often are not the same. Say you represent Company A in a lease dispute with its landlord. It is a concurrent conflict of interest if a different client wishes to sue Company A in a products liability matter. This is an example of a direct adversity conflict. Or you represent Company A in a merger with Company B, and a new prospective client wishes to hire you to negotiate a supply agreement with Company A. When I say “you,” I mean you and every lawyer in your firm due to the imputation of conflicts under Rule 1.10, MRPC. This is also a direct adversity conflict.
Many lawyers will end the analysis there—they see a conflict and choose to decline, even though many conflicts can be addressed by client consent (aka waiver).
Rule 1.7(b), MRPC, addresses when a lawyer may nonetheless represent clients notwithstanding the presence of a concurrent conflict that meets the definitions in Rule 1.7(a), MRPC. Four conditions must be met: (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.”
Returning to the direct adversity conflicts above, the first scenario is an unlikely candidate for consent because the lawyer (or firm) would be adverse (on opposite sides of the “v.”) in the products liability litigation, thus unable to satisfy Rule 1.7(b)(3), MRPC. The second scenario is arguably consentable if the lawyer can satisfy Rule 1.7(b)(1) (that is, reasonably believes they can provide competent and diligent representation to both affected clients) and the clients give informed consent confirmed in writing.
“Substantial risk” conflicts are likely more prevalent than direct adversity conflicts. Identifying them can also be more challenging than spotting direct adversity conflicts. The language of Rule 1.7(a)(2) is key—“there is a substantial risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities” to other clients, former clients, third parties, or the lawyer’s own interest. Let’s explore this a little more deeply.
All joint representations in a single matter should be evaluated for a substantial risk conflict. should be evaluated for a substantial risk conflict Ask yourself if there is a risk the client’s interests could diverge. Is divergence possible on issues that will materially interfere with the lawyer’s loyalty or provision of independent legal advice? How likely is this to occur? Then review the definition again—is there a substantial risk of material limitation? Often, the answer will be yes, there is a substantial risk of material limitation because common clients may disagree about important aspects of the matter and may provide directions to the lawyer that cannot be reconciled, or the lawyer’s independence can be compromised by competing obligations. The comments to Rule 1.7, particularly comments [29] through [33], also identify special considerations in common representation. They are worth your consideration and should be discussed with common clients.
“Substantial risk” conflicts can also arise due to your duty to a former client. The most common is the obligation to keep information relating to the former representation confidential. Perhaps a former client is a witness in your matter. Your current client is not adverse to your former client but you may have a current limitation due to your duty of confidentiality to a former client that another lawyer who does not have a former client relationship might not have. This is a “substantial risk” conflict that arises due to a responsibility to a former client if the confidentiality obligation places a material limitation on the representation.’
This does not end the analysis, however, unless you wish to avoid joint representations or other “substantial risk” situations. “Substantial risk” conflicts, like “direct adversity” conflicts, can be consented to by affected clients if the four prongs of Rule 1.7(b), MRPC (listed above) can be satisfied. Provided you can satisfy prongs (1) through (3) of Rule 1.7(b), each affected client must give “informed consent,” confirmed in writing as part of satisfying prong (4).
Informed consent is a defined term under the ethics rules. Rule 1.0(f), MRPC, defines “informed consent” as “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” It is important to give this thought, as each situation will be different. What is the nature of the conflict? What are the risks presented by that conflict? Be specific. What are the alternatives (which should always include, “you can hire someone else”)? It is unlikely that a form waiver (we discussed and you consented) will be sufficient to establish that the client’s consent to the conflicted representation was “informed.” Best practice is for your written confirmation of the client’s agreement—which is required—to cover what was discussed: how you described the conflict, the risks presented by that conflict, and the available alternatives to consent.
Former client conflicts are covered by Rule 1.9. Rule 1.9(a), MRPC, which provides that “[a] lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or substantially related matter in which that person’s interest are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.” Rule 1.9(c), MRPC, reminds counsel that they may not (1) “use information relating to the representation to the disadvantage of the former client… or (2) reveal information relating to the representation except as these rules would permit or require with respect to a client.”
Former clients (and their lawyers) are sometimes surprised to learn that lawyers can represent someone else adverse to a former client if the matter is not the same or substantially related to the prior representation and the lawyer does not “use” or “reveal” information relating to the former representation. Whether matters are the “same” is easy. Whether matters are “substantially related” can be a bit more challenging. Comment [3] to Rule 1.9 discusses this term. And, as noted in last month’s column on confidentiality, confidentiality obligations survive the conclusion of representation, and both use and disclosure are prohibited. As is true under Rule 1.7(b), former clients can give “informed consent” to the adverse representation under Rule 1.9.
Conclusion
This primer is offered to familiarize you with how conflicts are defined so that when there is a potential issue, you stop and turn to the rules (or ethics counsel) to carefully walk yourself and, if necessary, your client through the issues presented. Many conflicts can be consented to, but obtaining that consent requires a good handle on the nature of the conflict and what is being asked of the client. As noted in comment [1] to Rule 1.7, “Loyalty and independent judgment are essential elements in the lawyer’s relationship to a client.” Conflicts run counter to the fiduciary obligations, so all conflicts should be handled with care. And do not forget we are here to answer your ethics questions, including identification of, and whether it is possible to consent to, particular conflicts. We can be reached at 651-296-3952
CORRECTION AFTER PUBLICATION: My article on conflicts mistakenly noted in reference to a hypothetical that Rule 1.7(b)(3), MRPC, is not applicable if law firm clients were adverse in unrelated matters (lease dispute and products liability matter). Rule 1.7(b)(3), MRPC, applies to situations where clients are adverse in the same litigation before a tribunal (not consentable) but does not prevent lawyers from seeking consent to representation where firm clients have adverse matters in general. All parts of Rule 1.7(b), MRPC, must be satisfied for a lawyer to obtain consent to a direct-adversity or significant-risk conflict.