A Practical Approach to Conflicts of Interest

• Publication year: 1997
• Pages: 87

26 Colo.Law. 87 Colorado Lawyer 1997.

1997, September, Pg. 87. A Practical Approach to Conflicts of Interest

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87

Vol. 26, No. 9, Pg. 87

The Colorado Lawyer
September 1997
Vol. 26, No. 9 [Page 87]

Specialty Law Columns
The Ethics Column
A Practical Approach to Conflicts of Interest
by Scott Krob

One commentator has characterized conflicts analysis as "abstruse as explicating the Dead Sea Scrolls."1 Perhaps this explains why it is difficult to draft rules enabling lawyers to readily recognize conflict situations and properly address them. Conflicts arise from a full panoply of situations, ranging from the simple attempt to represent both sides in an uncontested divorce to the complex representation of various subsidiaries of multi-national corporations in intricate commercial transactions. The analysis of conflicts is often so factually driven that resolution of issues in one case provides little guidance for the next situation

The inability of the legal profession to provide clear guidelines dealing with conflicts is not, however, for lack of trying. Since 1280, lawyers have developed rules in this area.2 Lawyers in this country have made three major attempts to wrestle with these seemingly intractable problems. The 1908 Canons of Ethics addressed the issue through a single canon.3 In 1969, the Code of Professional Responsibility devoted far more verbiage to the issue, including lengthy Canon 5, comprised of twenty-four Ethical Considerations and seven Disciplinary Rules, each containing several subparts The result was far from satisfactory, creating much confusion and leaving large areas of conflict law unaddressed, such as conflicts with former clients. The most recent attempt to provide guidance is the Rules of Professional Conduct promulgated by the American Bar Association ("ABA") in 1983, amended and made effective by the Colorado Supreme Court on January 1, 1993 ("Rules").

Fundamental Underlying Policies

The two broad public policies underlying conflicts analysis, loyalty and confidentiality, should constantly be kept in mind. No specific Rule imposes a duty of loyalty, though it is mentioned in the Comment to Rule 1.7.4 Nonetheless, the concept of loyalty owed by an attorney to his or her client is well-established5 and is defined by the Colorado Supreme Court in terms of "undivided fealty" owed by a lawyer to a client.6 A lawyer must never be placed in a situation where the loyalty owed to his or her client may be diminished, fettered, or threatened in any manner by some other client or interest of the lawyer.7

Confidentiality is expressly provided for in Rule 1.6 and is fundamental to many aspects of being a lawyer.8 Confidentiality often takes center stage when conflicts arise.9 The existence of an attorney-client relationship creates an irrebuttable presumption that the client shared confidences with the lawyer.10 Clients need assurances that the confidences shared with their attorney will never be used against them.

The Conflict of Interest Flow Chart

Jane Doe walks into Joe Attorney's office and asks him to perform legal work. As Jane talks, Joe begins to wonder whether he has a conflict, either because of things he knows about Jane or because of the opposing parties or other interests that Joe has personally or other interests or duties he has in relation to some other third person. If Joe does have a conflict of interest, what can/must he do about it, if anything?

The flow chart in the Appendix to this article [see page 93] is offered as a practical tool that allows the practicing attorney to walk through a conflicts situation, identifying and answering key questions and highlighting how those issues have been addressed in Colorado. The flow chart and this article focus on Rules 1.7, 1.8, and 1.9, which cover most conflict situations.11

The Pigeonholes of Rule 1.8

Although it might be assumed that conflicts analysis should begin with Rule 1.7, which provides the general framework for such analysis, an easier approach is to begin with Rule 1.8. [See Box 1 on the flow chart.] Rule 1.8 has no particular rhyme or reason in terms of substantive law. It is merely a laundry list of specific conflicts problems that are encountered with such frequency or fraught with sufficient peril that the ABA felt the need to provide specific guidance.

If Joe Attorney's situation fits one of the Rule 1.8 pigeonholes, the Rule will tell him whether it is a conflict, whether the conflict can be waived, and if so, what steps must be taken in the course of such waiver. For example, if Jane Doe wants Joe to represent her and wants to pay him using the proceeds from the book Joe and she will write about her case, Rule 1.8(d) tells Joe that (1) it is a conflict to enter into an agreement over the media rights involved in a client's case before the representation is concluded, and (2) this conflict cannot be waived or consented to by Jane.

If Jane Doe wants Joe to prepare her will and include a substantial bequest to himself, Rule 1.8(c) tells Joe that (1) he is in a conflict situation, and (2) it cannot be waived or consented to by Jane, no matter how thoroughly he explains it or how insistent Jane may be.

The situations covered by the subparts of Rule 1.8 are:

a) Business transactions with client: The transaction must be fair to the client and fully disclosed in writing. The client must consent to the conflict in writing and must be given reasonable opportunity to consult with independent counsel.

b) Use of client information: Any information relating to a lawyer's representation of a client cannot be used by a lawyer to a client's disadvantage, unless the client consents.

c) Gifts from clients: Unless a lawyer is related to a client, the lawyer cannot receive a gift from the client using a document prepared by the lawyer, including the client's will. No consent is permitted.

d) Literary media rights: A lawyer cannot enter into an agreement with a client for the literary rights to a client's story until the representation is concluded. No consent is permitted.

e) Financial assistance from lawyer to client: A lawyer can advance court costs and expenses. The client must remain ultimately liable for such costs and must repay them unless the client is financially unable to do so.

f) Payment for services for a client by someone other than the client: If someone other than the client is paying the lawyer's bills (an insurance company, for example), such payment method must not interfere with the lawyer's exercise of his or her independent professional judgment, the client's confidences must be protected, and the client must consent to such arrangement.

g) Aggregate settlements or dispositions: When representing multiple clients in a single matter, each client must agree to any settlement or disposition.

h) Agreements limiting the lawyer's liability to the client: A client cannot prospectively agree to limit a lawyer's liability for malpractice unless the client is represented by independent counsel. A client cannot settle an existing malpractice claim against a lawyer unless the lawyer advises the client in writing to consult with independent counsel.

i) Family members acting as opposing counsel: Related lawyers (parent, child, sibling, or spouse) or cohabitating lawyers cannot represent directly adverse parties, unless all clients consent.

j) The lawyer's proprietary interest in a client's matter: The only interests lawyers can obtain in a client's case are a lien to secure payment of the lawyer, or a contingent fee.

"The analysis...