Just because a name is identified in the conflict checking system does not mean a conflict exists. It does mean that the lawyer should fully evaluate the situation. There are a few common and key issues which should be addressed in any conflict of interest situation.
step one: the need for legal analysis
First and foremost, the lawyer must bring to the discussion with the client his or her own judgment about the propriety of acting in the face of the conflict. Clients cannot consent to certain conflicts of interest. Rule 2.04(2) of the Rules of Professional Conduct describes a non-consentable conflict: "A lawyer shall not act or continue to act in a matter when there is or is likely to be a conflicting interest." The rationale for the prohibition is that the matter is contentious and the interests are clearly adverse.
In some situations you may need to decline the representation, even though your client could consent to having you act for more than one interest, simply because you cannot exercise your judgment independently with respect to the client's interests. Even a perception that your judgment will be influenced is reason enough to decline the representation.
The conflicts test, simply stated, is as follows:
- You cannot proceed to seek a consent to waive from the client, former client or third party and then represent him/her unless you believe that the representation of one client will not adversely affect the interest of the other client.
- You cannot act for a client where your own interest is involved unless you believe that the presence of your interest will not adversely affect the interest of that client. If you are in doubt, consult with a colleague, your firm management or outside counsel, or make a confidential inquiry of the Law Society's Practice Advisory Service.
step two: the need for adequate disclosure
If you believe that it is appropriate to seek your client's consent to waive the conflict, the next step is adequate disclosure to all of the parties who are affected by the conflict.
Components of adequate disclosure include
- a review and discussion of the nature and circumstances of the conflict;
- an explanation of the potential competing interests;
- a review of the reasonably foreseeable negative implications, including what will happen vis-à-vis future representation of one or all of the clients if a conflict arises; and
- the possible need for independent counsel. You need to anticipate misunderstandings by your clients and address them proactively.
As part of this discussion, you should also review the positive aspects of proceeding with the representation despite the existence of a potential conflict. A commentary on Rule 2.04(3) of the Rules of Professional Conduct directs the lawyer to consider the availability of another lawyer at comparable expertise and experience, the extra cost, delay and inconvenience involved in engaging another lawyer, and the latter’s unfamiliarity with the client and the client’s affairs.
step three: the need for informed consent
Consent must be informed
Once adequate disclosure has been made, the affected parties or clients must decide if they are prepared to accept the lawyer's representation despite the burden of the conflict. This is also sometimes referred to as an informed waiver. The consent is informed only if it is given voluntarily and knowingly. Consent given by a client without these features is void and of no effect. If an informed consent is not forthcoming from the affected parties, then the representation is prohibited. Rule 2.04(3) of the Rules of Professional Conduct refers to the saving provisions of adequate disclosure and informed consent.
Consent must be put in writing
It is essential that the consent be in writing and executed by the clients. In fact, the disclosure made by the lawyer, and on which the consent is based, should also be put in writing.
Remember, all clients or parties affected by the existence of the conflict must have adequate disclosure. The paper documenting the clients waiver of conflict must be tailored to each representation. No single format will do.
Recommend ILA
A further precaution is to encourage the client/s to seek independent legal advice with respect to the consent/waiver which they are giving. This approach may not prevent claims by angry clients, but does reduce their validity to a non-starter.
Appendix 6 - Checklist for Eliciting Consent to Waive Conflict provides a checklist for eliciting the consent of the clients.
step four: the need for ongoing assessment
Lawyers need to be aware that conflicts can develop during the engagement, and that they need to assess situations for conflicts throughout the representation. Because these conflicts are outside the initial screening process, they often appear unexpected. Some, however, are foreseeable at the outset of the retainer.
Conflicts that arise subsequent to the retainer
UNEXPECTED CONFLICTS
Subsequent conflicts typically arise unexpectedly. Usual triggers are the addition of a new party to a transaction or lawsuit or the addition of a lateral hire who is personally disqualified from a matter in which the firm is engaged.
They can also arise in the case of a business transaction between lawyer and client who are business partners. Because of a pre-existing lawyer/client relationship (unknown to the lawyer), the client expects the lawyer to also act as a lawyer rather than solely as a business partner. These types of conflicts should be managed in the same way as suggested for initial conflicts.
PREVIOUSLY FORESEEABLE CONFLICTS
In some instances, subsequent conflicts were foreseeable. Typically, this type of conflict was identified prior to the engagement but did not involve a contentious matter; the conflict was managed with documented disclosure to the clients and their written waiver based on informed consent. Later, the conflict materializes and requires further management. The typical scenario is where previously aligned interests diverge, such as the individual interests of partners in a partnership.
Depending on just how contentious the matter has become, continued representation of some or all of the clients affected may or may not be possible.
Appendix 7 - Checklist for Managing a Subsequent Conflict reviews the steps to follow for management of the previously foreseeable conflict.
Occasionally a lawyer may miss all of the conflict signals and only come to appreciate the lurking harm when the situation is a veritable mess.
Appendix 8 - Action Plan to Contain a Conflicts Mess outlines a simple three-step action plan for managing this type of situation.
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Last update: Oct. 7, 2002