Conflicts: when are competing interests “materially adverse?”

As many lawyers know, identifying conflicts can be tricky.  That’s why, in my opinion, trusting your gut isn’t the worst approach.  As I’ve often mentioned, if it feels like a conflict, it probably is.

Alas, “but I didn’t feel it in my gut!” probably isn’t the best response to a motion to disqualify or disciplinary complaint. So, let’s go a bit deeper.

Conflicts

At least seven different rules address various types of conflicts.  Today, I’ll refer to three: V.R.Pr.C. 1.9(a), V.R.Pr.C. 1.9(b), and V.R.Pr.C. 1.18.  They apply when matters are the same or substantially related, and a prospective or current client’s interests are materially adverse to the interests of, respectively,

  • a former client;
  • someone represented by a law firm with which a lawyer was formerly associated; and,
  • a prospective client who met with but did not retain the lawyer.

More specifically, this post is intended to call your attention to the phrase “materially adverse.” 

Why? 

Because this morning, the ABA’s Standing Committee on Legal Ethics & Professional Responsibility issued Formal Advisory Opinion 497 – Conflicts Involving Materially Adverse Interests.

As always, what follows is a summary.  It is not a substitute for reading the advisory opinion itself.

Per the opinion, there are 2 situations in which material adversity is clear:

  1. Suing, litigating, or negotiating with a former client. I like the Committee’s use of two questions: in litigation, are you on the other side of the “v”? Or, in a transaction, are you sitting on the other side of the table?
  2. Attacking your own prior work or legal advice.

Next, the opinion advises that material adversity often, but not always, exists when competent representation will require a lawyer to cross-examine a former or prospective client.  Here, don’t spend too long trying to convince yourself “but the conviction, testimony, or conduct relevant to my former representation is public record.”  That is NOT the standard.  As regular readers know, the fact that information relating to the representation of a former client is “public record” doesn’t necessarily mean that it’s “generally known.”  Says who?  This blogger.

Finally, the Committee notes that material adversity can exist even in the absence of direct adversity.  For instance, it

  • “may exist when the former client is not a party or a witness in the current matter if the former client can identify some specific material legal, financial, or other identifiable concrete detriment that would be caused by the current representation. However, neither generalized financial harm nor a claimed detriment that is not accompanied by demonstrable and material harm or risk of such harm to the former or prospective client’s interests suffices”

Again, check out the opinion.

Now, an important reminder.

In my judgment, the analysis doesn’t end once a lawyer concludes that the lawyer does not have a conflict.  Rather, to me, competent representation includes asking “self, do client and I want to deal with this?”  That is, conflict or not, people are (naturally) upset to find their lawyer on the other side of the v or the table.  A motion to disqualify will delay resolution of your new client’s matter.  Moreover, even if the disciplnary complaint is ultimately dismissed, nobody likes receiving the email in which I let them know that it has been filed against them.

As always, be careful out there.

hill street blues

Avoid hot water by understanding Hot Potatoes

Ever consider dropping a client so as to be able to represent a different client?  It happens more often than you might think.

Figuratively, dropping a client like a hot potato can lead a lawyer into hot water.

See the source image

For the purposes of conflicts, the rules identify three types of clients.  Respectively,

The rules don’t treat all client conflicts equally.  The rule on current clients is more strict than the rule on former clients, which, in turn, is more strict than the rule on prospective clients.

For example, Rule 1.7(a)(1) states that it is a conflict for a lawyer to take any action that is directly adverse to another client.  The rule ensures that lawyers remain loyal to clients.

With respec tot the duty of loyalty, Rule 1. 7 is much broader than “a lawyer can’t represent both sides to the same action.”  As Comment [6] states, “absent consent, a lawyer may not act as an advocate in one matter against a lawyer the person represents in some other matter, even when the matters are wholly unrelated.” 

By contrast, the duty of loyalty to a former client is somewhat more relaxed.  Rule 1.9 prohibits a lawyer from representing someone who is adverse to a former client “in the same or a substantially related matter.”

So, imagine this scenario:

  • Lawyer represents Client A in Matter 1.
  • Client B asks Lawyer to sue Client A in Matter 2,
  • Matters 1 & 2 are wholly unrelated to each other.

Clearly, Rule 1.7(a)(1) prohibits Lawyer from suing a current client (A) on behalf of another client (B) even if the matters are wholly unrelated.

However, what if Lawyer “fires” A as a client?  Rule 1.7 would no longer apply since A would no longer be a “current client.”  Further, Lawyer would argue that Rule 1.9, the rule on former client conflicts, doesn’t apply since Matter 2 is not “the same as or substantially related” to Matter 1.

This is the so-called “hot potato” doctrine.  That is, Lawyer dropped Client A like a “hot potato.”

There’s been a lot written on the “hot potato” doctrine.  As Attorney Bill Freivogel noted in this this post, most courts will disqualify Lawyer from representing B against A.

In 2009, the Philadelphia Bar Association’s Professional Guidance Committee issued “The Hot Potato Rule and Conflicts of Interest.”  Analyzing a situation quite similar to the hypo that I presented above, the Committee concluded:

  • “Absent compliance with Rule 1.7(b), which includes informed consent from both clients, the inquirer can not represent Company A because the matter is directly adverse to the interests of the inquirer’s current client, Company B.  Moreover, the ethical violation cannot be avoided by the inquirer terminating his representation of Company B.  As noted in International Longshoremen’s Ass’n. Local Union 1332 v. International Longshoremen’s Ass’n., 909 F.Supp. 287, 293 (E.D. Pa. 1995), ‘[A]n attorney may not drop one client like a ‘hot potato’ in order to avoid a conflict with another, more remunerative client.’ ”

There are exceptions to the “hot potato” doctrine.  One is the so-called “thrust upon” exception.  That is, if a conflict is “thrust upon” a lawyer through no fault of the lawyer’s, it’s okay to drop a client like a hot potato.  Both the New York City Bar Association and the D.C. Bar Association have issued advisory opinions on the “thrust upon” exception.

In conclusion, think twice before you drop a client like a hot potato in favor of another client.

Why?

Because no matter what Snoop might say, when it comes to clients, it’s not always a good idea to drop ’em like they’re hot.

 

See the source image

 

 

 

 

Conflicts: In some cases, appearances matter.

Last week, the Vermont Supreme Court issued an opinion in which it addressed this question:

  • “whether a court may terminate parents’ parental rights following a hearing in which, over an objection, the State was represented by the same lawyer who had previously represented the children in the same matter.”

Short answer: no.  The opinion is here.

The Court’s opinion relies on an analysis of Rule 1.9 of the Vermont Rules of Professional Conduct.  As such, I think it’s a natural for this blog. That being said, as was the Court, I want to be crystal clear: I am not suggesting that the State’s lawyer should face a disciplinary sanction.

By way of background, of the inquiries I receive, no topic comes up more often than conflicts of interest.  I rarely, if ever, say “yes, you have a conflict” or “no, you don’t.” Rather, I cite lawyers to the relevant rules, comments, and opinions, then leave the decision to the lawyer.

Similarly, if a lawyer asks whether opposing counsel has a conflict, I never provide a definitive answer.  It’s impossible to do so without hearing from opposing counsel. Again, I cite the lawyer to the relevant rules, comments, and opinions. I also offer to discuss the matter with opposing counsel.

That being said, when talking about conflicts, it’s not uncommon for me to say two things:

  1. the rules prohibit actual conflicts, not the appearance of a conflict; and,
  2. even if you decide you don’t have a conflict, do you want to deal with the appearance? The other side will almost certainly file a motion to disqualify or a disciplinary complaint.  Either can be costly and aggravating.

Which gets me to the Court’s recent opinion: at least in TPR cases, appearances matter.

I don’t want to bore you or make this blog too long.  Plus, the Court writes better than I do anyway.  So, I suggest reading the opinion.

Still, here’s a synopsis:

  • throughout a CHINS proceeding, Lawyer represented 4 children;
  • then, Lawyer represented the State in the subsequent TPR;
  • a guardian ad litem consented to Lawyer representing the State;
  • citing Rule 1.9, Mother’s attorney notified the trial court of concerns about Lawyer’s appearance for the State;
  • Lawyer argued that there was no conflict due to the State & children both taking the position that termination was warranted and, further, that the guardian had waived any conflict;
  • the trial court had “no concern” given that the State and children had the same interest (termination) and that the guardian had consented to Lawyer appearing for the State;
  • parents’ rights were terminated with respect to 3 of the children; and,
  • parents appealed.

When a lawyer has formerly represented a client in a matter, Rule 1.9 prohibts the lawyer from representing anyone in the same or a substantially related matter whose interests are materially adverse to the former client’s.  Exception: the former client gives informed consent that is confirmed in writing.

On appeal, the Court “decline[d] to parse the State’s and children’s specific positions in this case to evaluate whether they are actually materially adverse.”  Rather, the Court noted that:

  • “given the myriad issues in play in juvenile proceedings, the potentially dynamic nature of the parties’ positions, and the difficulty in discerning the children’s interests, determining whether the parties’ interests are truly aligned is a potentially complex undertaking.”

Thus, the Court concluded:

  • “as a matter of law that the potential conflict inherent in representing different clients in the same matter should be treated as an actual conflict for the purposes of determining whether counsel in an abuse-and-neglect case should be disqualified from subsequent representation of a different party in that same matter.”

In essence, then, the Court established a bright-line rule regarding disqualification in abuse & neglect cases, but recognized that the bright-line rule “is broader than the strict requirements of the ethical rule as applied in disciplinary proceedings.”

Finally, the Court noted that a lawyer’s prosecution of a TPR after having represented the children in the same matter “undermines the integrity of the judicial process . . . creates an appearance of impropriety and may be inconsistent with the lawyer’s role as a representative of the State – factors that are particularly significant in the context of abuse-and-neglect proceedings.”

In short, for disqualification purposes in abuse & neglect cases, appearances matter.

Image result for appearances matter

 

 

The More Things Change…

Since becoming bar counsel in June 2012, I’ve handled 4,421 ethics inquiries.  By far, the most common inquiry topic has been conflicts of interest.  Questions relating to conflicts have accounted for slightly more than half of all inquiries, with “former client” conflicts constituting the largest subset within the category.  Common questions:

  • Can I take a case against a former client?
  • I represent Buyer. I’ve known Seller for years.  She wants me to represent her. Can I?
  • For the past 10 years or so, I’ve represented a couple. Business stuff, some trusts, a small PI claim, nothing that either doesn’t know about.  They’re getting divorced.  Can I represent Wife?

This morning I realized that I needed to post today.  I was too busy watching the early coverage of The British Open to concentrate, so I figured I’d cheat with a “Throwback Thursday” post.

In between putts & wayward drives, I wondered what issues bar counsel types were dealing with 50 years ago.  So, I searched “legal ethics 1967.” I figured I’d find something simple, and post “here’s what was going on a long time ago.”

The top result was a compendium of the ethics opinions issued by the Indiana State Bar Association in 1967.

Opinion 1 is the genesis of this post’s title.

(Apparently, in 1967, lawyers had yet to resolve to use 37 words when 1 would do.  So, here’s the opinion, in its entirety.)

Opinion No. 1 of 1967
Lawyer Not Forever Barred From
Taking Case Against A Former Client

The Committee was asked its opinion by an attorney whose present
client wished to bring suit against a person who at one time had
been a client of the attorney.

Mr. Henry S. Drinker, in his book Legal Ethics, at page 112, stated:
“One may sue a former client if his representation is ended and. the
matter does not involve confidential communications.” An attorney
is not forever barred from suing a former client, so long as the present
matter was not connected with, and did not arise out of, the former
employment, and so long as there is no breach of confidential information
obtained during the former attorney-client relationship.

The opinion mirrors today’s rule.

Rule 1.9 prohibits a lawyer from representing a person:

  • in the same or a substantially related matter in which the lawyer represented a former client and in which the person’s interests are materially adverse to the interests of a former client, unless the former client gives informed consent, confirmed in writing.

Even if the matters are not the same or substantially related, Rule 1.9(c) prohibits a lawyer from using or revealing information relating to the representation of a former client.

Nothing has changed.

Next, I wondered what Vermont’s hot  topics in ethics were back in the day.  The Vermont Bar Association publishes advisory ethics opinions.  The earliest available are from 1978.  (As regular reader Hal Miller knows, it was a year that shall forever live in infamy on this blog.  More on that tomorrow.)

The VBA released 3 advisory ethics opinions in 1978.  They dealt with conflicts, conflicts, and conflicts.  Two of the three involved questions I continue to receive to this day.

Opinion 78-04 concluded that it is improper to represent both buyer & seller in real estate transaction.  I agree with the conclusion.

Opinion 78-03 concluded that it is improper for a lawyer who has represented a couple to represent one in a divorce if the issues in the divorce are substantially related to the former representation of the couple.  Again, I agree.  Comment 3 to Rule 1.9 addresses this very question.

I’m not complaining. If you have questions about a potential conflict, don’t hesitate to call, text, or e-mail.  I bring it up only because I’m struck by the fact that conflicts always have been and likely always will be the most common, but trickiest, ethics issue confronted by lawyers.

Actually, let’s be honest: I bring it up mainly I needed to post a blog about something- anything! – to drive traffic towards tomorrow’s #fiveforfriday quiz.

conflict

 

 

 

 

 

Monday Morning Answers – Update

Answers rolled in today….great participation!  I had to update the Honor Roll to reflect some late submissions.

Week 25’s questions are HERE.

The HONOR ROLL spans the gamut.  

Large firms, solos, government lawyers, and my brother – the systems engineer.

Family law, elder law, title insurance, insurance litigation, labor law, telecommunications law, criminal law, transactional work, trial work.

Bennington County, Chittenden County, Rutland County, Washington County, and Windham County.  Orange County too, but not the one where my grandparents lived for over 50 years. Nope, the one they make television shows about.

PERFECT SCORES

  • Matthew Anderson, Pratt Vreeland Kennelly Martin & White
  • Keith Kasper, McCormick, Fitzpatrick, Kasper & Burchard
  • Glenn Jarrett, Jarrett Law Office
  • David Kennedy, JD, GAL Programs Administrator, Office of the Court Administrator
  • Patrick Kennedy, Principal, Systems Engineer, Dealer.Com
  • Brian Martin, Green Mountain Care Board
  • Hal Miller, First American
  • Team Silver & Andrews, Barr Sternberg
  • Kane Smart, Downs Rachlin & Martin

HIGH HONORS

ANSWERS

Question 1

In 1977, the United States Supreme Court opined that it is permissible as long as it is not  false, deceptive, or misleading.  In the context of this blog, what is “it”?

“It” is lawyer advertising.  Bates v. State Bar of Arizona, 433 US 350 (1977).  The Court held that lawyer advertising is commercial speech entitled to First Amendment protection.  The upshot is HERE.

Question 2

Lately, I seem most interested in the rule that relates to:

  • A.  Conflicts of Interest – why shouldn’t firms with offices in multiple jurisdictions be allowed to represent clients who are adverse to each other as long as Office A does not share information with Office B?
  • B.  Disclosure of Client Confidences – why shouldn’t information relating to the representation of a former client, and that is in the public record, be fair game?
  • C.  Unauthorized Practice of Law – should paralegals be allowed to represent clients  without being supervised by attorneys?
  • D.  Nonlawyer Ownership – should nonlawyers be allowed to have ownership interests in law firms?

I’m doing a series on Alternative Business Structures. So far, I’m 3 posts in.

Question 3

Lawyer called me with an inquiry. I listened. I replied “you should write to your clients, tell them what’s happening, and give them the option of you, your firm, or someone else. Unless you hear back that it’s you, it’s the firm.”

Based on my statement, what is Lawyer most likely about to do?

Lawyer is most likely about to leave her firm for another (or to go out on her own).

Question 4

Which response best fills in the blank?

Attorney called me with an inquiry. I listened. Then I said “okay, the matters aren’t the same or substantially related.  So you’re okay on section (a) of the rule.  But, don’t forgot about section (c).  Be wary of _____________ :”

  • A.   charging an unreasonable fee.
  • B.   cross-examining or deposing a former client
  • C.  removing funds from trust before you’ve earned them
  • D.  communicating with a represented party

Rule 1.9(a) prohibits an attorney from representing a client in a matter in which the client’s interests are materially adverse to the interests of a former client whom the attorney represented in the same or a substantially related matter.

If the two matters aren’t the same or substantially related (or if the current client’s interests aren’t materially adverse to the former client’s), then Rule 1.9(a) does not apply. Still, Rule 1.9(c) might apply.  Section c requires lawyers to protect information related to the representation of former clients.  So, while a conflict might not exist under section (a), the duties imposed by section (c) should give a lawyer pause if in a position to cross-examine or depose a former client.  The duty to protect that client’s information might create a concurrent conflict under Rule 1.7.  

For more, check out this oldie, but goodie, from the Massachusetts Board of Bar Overseers on “Conflicts in Cross-Examination.”

Question 5

This 2002 movie is based on a real-life story and is not about lawyers or practicing law.  It featured two megastars. One played Carl, the other Frank.

Frank spent much of the movie trying to avoid Carl.  However, by the end of the movie, Frank was working for Carl.  A scene in their office included this conversation:

  • Carl:   “How’d you do it Frank? How did you cheat on the bar exam in                                               Louisiana?”
  • Frank: “I didn’t cheat. I studied for two weeks and I passed.”

Name the movie.

Catch Me If You Can, starring Tom Hanks as Carl Hanratty and Leonardo DiCaprio as Frank Abagnale.

catch me if you can

Monday Morning Answers

Week 25’s questions are HERE.

The HONOR ROLL spans the gamut.  

Large firms, solos, government lawyers, and my brother – the systems engineer.

Family law, elder law, title insurance, insurance litigation, labor law, telecommunications law, criminal law, transactional work, trial work.

Bennington County, Chittenden County, Rutland County, Washington County, and Windham County.  Orange County too, but not the one where my grandparents lived for over 50 years. Nope, the one they make television shows about.

PERFECT SCORES

  • Matthew Anderson, Pratt Vreeland Kennelly Martin & White
  • Keith Kasper, McCormick, Fitzpatrick, Kasper & Burchard
  • Glenn Jarrett, Jarrett Law Office
  • David Kennedy, JD, GAL Programs Administrator, Office of the Court Administrator
  • Patrick Kennedy, Principal, Systems Engineer, Dealer.Com
  • Brian Martin, Green Mountain Care Board
  • Hal Miller, First American
  • Team Silver & Andrews, Barr Sternberg
  • Kane Smart, Downs Rachlin & Martin

HIGH HONORS

ANSWERS

Question 1

In 1977, the United States Supreme Court opined that it is permissible as long as it is not  false, deceptive, or misleading.  In the context of this blog, what is “it”?

“It” is lawyer advertising.  Bates v. State Bar of Arizona, 433 US 350 (1977).  The Court held that lawyer advertising is commercial speech entitled to First Amendment protection.  The upshot is HERE.

Question 2

Lately, I seem most interested in the rule that relates to:

  • A.  Conflicts of Interest – why shouldn’t firms with offices in multiple jurisdictions be allowed to represent clients who are adverse to each other as long as Office A does not share information with Office B?
  • B.  Disclosure of Client Confidences – why shouldn’t information relating to the representation of a former client, and that is in the public record, be fair game?
  • C.  Unauthorized Practice of Law – should paralegals be allowed to represent clients  without being supervised by attorneys?
  • D.  Nonlawyer Ownership – should nonlawyers be allowed to have ownership interests in law firms?

I’m doing a series on Alternative Business Structures. So far, I’m 3 posts in.

Question 3

Lawyer called me with an inquiry. I listened. I replied “you should write to your clients, tell them what’s happening, and give them the option of you, your firm, or someone else. Unless you hear back that it’s you, it’s the firm.”

Based on my statement, what is Lawyer most likely about to do?

Lawyer is most likely about to leave her firm for another (or to go out on her own).

Question 4

Which response best fills in the blank?

Attorney called me with an inquiry. I listened. Then I said “okay, the matters aren’t the same or substantially related.  So you’re okay on section (a) of the rule.  But, don’t forgot about section (c).  Be wary of _____________ :”

  • A.   charging an unreasonable fee.
  • B.   cross-examining or deposing a former client
  • C.  removing funds from trust before you’ve earned them
  • D.  communicating with a represented party

Rule 1.9(a) prohibits an attorney from representing a client in a matter in which the client’s interests are materially adverse to the interests of a former client whom the attorney represented in the same or a substantially related matter.

If the two matters aren’t the same or substantially related (or if the current client’s interests aren’t materially adverse to the former client’s), then Rule 1.9(a) does not apply. Still, Rule 1.9(c) might apply.  Section c requires lawyers to protect information related to the representation of former clients.  So, while a conflict might not exist under section (a), the duties imposed by section (c) should give a lawyer pause if in a position to cross-examine or depose a former client.  The duty to protect that client’s information might create a concurrent conflict under Rule 1.7.  

For more, check out this oldie, but goodie, from the Massachusetts Board of Bar Overseers on “Conflicts in Cross-Examination.”

Question 5

This 2002 movie is based on a real-life story and is not about lawyers or practicing law.  It featured two megastars. One played Carl, the other Frank.

Frank spent much of the movie trying to avoid Carl.  However, by the end of the movie, Frank was working for Carl.  A scene in their office included this conversation:

  • Carl:   “How’d you do it Frank? How did you cheat on the bar exam in                                               Louisiana?”
  • Frank: “I didn’t cheat. I studied for two weeks and I passed.”

Name the movie.

Catch Me If You Can, starring Tom Hanks as Carl Hanratty and Leonardo DiCaprio as Frank Abagnale.

catch me if you can