Conflicts of Interest

It’s easy to say, but put clients (past and present) ahead of revenue to stay out of trouble.

In 2011, the GA State Bar changed Rule 1.7 Conflict of Interest. The changes require full disclosure of conflicts, and “informed consent” in writing and signed by current and former affected clients. When I originally wrote about the changes in my blog, I wondered if the enhanced Rule 1.7 would curb lawyers’ attempts to enter into conflicting or potentially conflicting matters.

The temptation to ignore conflicts in pursuit of revenue can be great. If you’re not careful, you could find yourself in serious ethical and civil claim (breach of fiduciary duty) trouble.

You might have a conflict if…

In the past 6 months, we have received a number of questions from lawyers (and their current and former clients) about behavior perceived as potential or actual conflicts of interest. Some of the more common situations we continue to hear about include lawyers or law firms representing:

• All parties in a car accident.
• Both a husband and wife jointly in a divorce.
• An LLC, and then representing one LLC member in a legal matter against another member.
• Co-defendants in litigation.

The reasons why lawyers enter into these situations vary, but they are often linked back to some sort of financial gain. It’s easy to get distracted by the short-term dollar signs, and forget about the potential longer-term cost of time, reputation, disciplinary troubles, and even monetary damages.

You be the judge – a case study of conflict involving current and former clients

An attorney was representing Business A in a lawsuit against two other businesses (Business B and Business C) after a deal went south. The attorney was able to get the case to mediation, where Business A and Business B settled. The attorney felt that Business C had no money, and advised Business A to release its claims against Business C.

A year later, Business A learned that Business B was suing Business C in a similar matter, and Business A’s former attorney was reportedly now representing Business C. Of course, Business A didn’t want Business C benefiting from any previous knowledge, and contacted me to file a motion to have the attorney disqualified. The attorney initially claimed that consent was not required, and the representation would proceed over Business A’s objections. Fortunately, the attorney quickly realized the mistake (or consulted with counsel), re-evaluated the decision, and wisely walked away from the representation of Business C.

What would cause the attorney to even consider entering into a representation that might violate GA Bar Rule 1.9 Conflict of Interest: Former Client? In addition to a possible Bar grievance, the attorney could have been subjected to a breach of fiduciary duty claim (duty of loyalty). That claim could expose the attorney to punitive damages and attorneys’ fees, which may or may not be covered under the attorney’s professional liability insurance policy—assuming of course the attorney had a malpractice policy. Then there’s potential disbarment associated with violating the Bar Rules. Clearly, the long-term risks are much greater than any short-term reward.

Don’t let revenue cloud your legal judgment

Times are still tight for many attorneys, but don’t let a need for revenue interfere with the thorough evaluation of every new client matter. Here are a few ideas to help you make sound decisions:

• Perform a thorough conflict check on every matter, even previous clients who come to you with new cases.
• If a potential conflict exists, isolate and investigate the situation before proceeding.
• Seek advice from an experienced colleague if there is any doubt about whether the conflict can be waived by affected clients and former clients.
• Note all possible outcomes, including your withdrawal from representation, in your conflict disclosure/waiver letter.

If you choose to move forward, regularly re-evaluate the situation to determine if a potential conflict becomes an actual conflict as the matter progresses. If it does, understand your obligation to advise the client and possibly withdraw from representation. Then abide by that obligation.

Remember the Golden (Bar) Rule

Ask yourself this question before entering into a situation where there may be a hint of a conflict:

By taking on this matter, can I exercise my good faith independent
professional judgment, placing my client’s interests ahead of all others?

If the answer is yes, consider moving carefully forward with the necessary written disclosures and waivers. If you have to think for more than a few minutes about the right answer, the answer should be no. The only safe course of action in that situation is to decline the representation.

Douglas Chandler

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