Managing conflicts of interest is an integral part of law firm practice. Yet attorneys often dread the conflicts review process because they believe they might have to turn down new business rather than accept new clients, if any conflicts are revealed. However, this is not always the case. By understanding the conflict of interest rules and taking a few simple steps, lawyers and law firms can ensure compliance with ethical obligations while minimizing the need to turn away work.
Understand the types of conflicts under the rules
In many circumstances, a conflict can be resolved without an attorney or firm having to turn away a new client. Thus, it is important for attorneys to understand the rules governing conflicts.
There are two types of potential conflicts: successive representations and multiple representations.
Successive representations are conflicts arising out of the representation of former client and a prospective client. Under Rule 1.9 of the ABA Model Rules of Professional Conduct, a lawyer cannot represent a new client in a matter that is the same as or "substantially related" to the representation of the former client, where the new matter would be "materially adverse" to the former client without the former client's "informed consent." The essence of "substantial relationship" is whether the lawyer learned (or could have learned) confidential information from the old client that could be used to the disadvantage of that client in the representation for the new client.
There could be circumstances where an attorney is asked to take on work that is adverse to the interests of a former client, but where the attorney can do so because he or she could not have learned anything confidential about the former client that could be used by the firm in the new representation. If the attorney did not and could not have learned confidences and secrets that could now be used, the attorney can accept the new representation.
Multiple representation conflicts arise out of the concurrent representation of more than one client. This type of conflict can manifest itself in two ways:
- the new representation may involve more than one client; or
- a law firm may already be representing an existing client whose interests may be adverse to those of the new client.
When considering multiple representation conflicts, attorneys often assume they must decline a representation. This is not always true. Rather, under ABA Model Rule 1.7(a), the attorney should ask whether
- the representation of one client will be directly adverse to another client; and
- 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.
If the answer to either of these questions is "yes," then there is a potential conflict. Still, the representation may be permissible, if the attorney determines that he or she can comply with ABA Model Rule 1.7(b), including obtaining informed consent from the affected clients. If the answer is "no" (like representing tenants in common in a dispossessory action), then there is no conflict and the lawyer can accept the representation.
A computer-based system is only as good as the information put into it
In order to encourage compliance, the conflicts check system should be as painless as possible. Having a procedure that is both easy and fast will ensure that every attorney will "run conflicts" on every representation.
Computers and automated systems make conflicts-checking much easier. However, they do not obviate the need for human involvement. Indeed, a computer system has little value, if key information is never put into the system or if the information is incomplete or inaccurate.
That means attorneys need to participate in the process for every new representation—even if it does not involve a new client. Furthermore, conflicts-checking should be done each time a new party becomes involved as a plaintiff, defendant, lender, buyer or seller. Otherwise, critical conflicts could be missed that may have been addressed and resolved up front, instead of leading to problems down the line that could have been avoided.
Create a nimble conflict system
A conflicts check system must be nimble. That is, attorneys should be able to request "rush jobs" that can be completed quickly when necessary to make sure that needs are timely met. However, whether a conflict result is "timely" and "quick" depends on the circumstances. In a situation where a new client asks in July for a tax opinion to be provided by year-end, providing conflict results within a week is more than adequate. On the other hand, when a client has been sued and needs counsel to file an answer to the complaint less than a week later, a conflict result within two days might be too late.
For that reason, not every request is an emergency, and attorneys who make the conflict requests need to prioritize. A system that views every conflicts check as an emergency will likely put too much strain on conflicts-check personnel and be prone to shortcuts.
Use a common-sense approach to resolving conflicts
Assuming a conflict is discovered, there are still some circumstances in which an attorney can undertake the representation. Those include scenarios in which the representation can proceed with appropriate disclosure and consent (i.e., a conflict waiver).
Some conflicts of interest are clearly not waivable (e.g., a law firm cannot represent both a plaintiff and a defendant in the same lawsuit). On the other hand, in some circumstances, a potential conflict is identified, meaning some issue must be addressed before a lawyer can accept the representation.
Such conflicts can typically be resolved by consent or waiver from either the new client, another client or a former client. Rather than assuming that any "hit" in the conflict system requires the declination of new work, attorneys should take a common-sense approach to determining whether the matter can proceed.
For example, a client very well may agree to allow a firm to handle a very small matter adverse to the client where it involves a different business unit than the one for which the firm currently works. Thus, attorneys faced with a potential conflict should carefully consider whether to seek a waiver and how best to approach the client to make that request. While it might not be advantageous to request a waiver that would jeopardize a relationship with a client, many clients understand the occasional need for waivers, given the nature of the legal landscape today in which many large firms are asked to work that may bear little relationship to the conflicted matter.
Indeed, in some circumstances, the conflict that arises is not a legal conflict that would be prohibited by the rules, but rather a business one. Where no legal conflict exists, there is no ethical obligation to obtain consent. Nevertheless, depending on the totality of circumstances, attorneys may wish to notify the other client (subject to confidentiality obligations) of the new matter or take other voluntary steps to assure the client of the firm's commitment to the relationship and the client's interests.
Thus, the best systems are those that involve input and an open exchange of information between the conflicts-checking personnel and the attorneys who need the conflict information to ensure a collaborative and cooperative system. Implementing these simple systems can help ensure that running conflict checks doesn't have to impinge on the growth of the attorney's practice.
As published in the Daily Report