Confidentiality and conflicts of interest: a guide for South Dakota lawyers.

Author:Meierhenry, Judith K.
Position:Project Rural Practice Symposium
 
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Sparsely populated rural communities inherently create conflict of interest dilemmas for lawyers practicing in those communities. The purpose of the article is to give practical guidance to South Dakota lawyers on how to analyze and handle those conflicts. The article will discuss the applicable Rules of Professional Conduct and relevant South Dakota court and state bar opinions. It will identify when conflicts are allowed and when they are prohibited, and the disclosures, consents, or other actions that may be required.

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The South Dakota Supreme Court wields the authority to discipline lawyers. The Court has had this power since South Dakota became a state in 1889. (1) A variety of transgressions have brought lawyers before the Court to defend their licenses to practice law. The earlier disciplinary actions largely involved criminal activity or moral turpitude. (2) Over the years, lawyers have continued to get into trouble for such things as embezzlement, bribery, drugs, alcohol, theft, deception, and conflicts of interest. A criminal act is easy to detect, and one can understand why it prompts disciplinary sanctions. But detecting a conflict of interest appears to be more difficult. The "I know it when I see it" analysis doesn't always work. (3) Luckily, there is guidance on how to spot conflicts and what to do about them in the South Dakota Rules of Professional Conduct, case law, and state bar opinions. (4) Relying on the guidance these sources provide, this article will attempt to set forth some basic principles to help practitioners detect conflicts of interests and decide the appropriate course of action.

The rules governing conflicts of interest apply to all lawyers similarly, but the intimacy of a small community has prompted many of the questions to the South Dakota Ethics Committee of the South Dakota Bar Association. Admittedly, most of South Dakota is considered rural. (5) In rural communities, lawyers know a majority of the residents and vice versa. For the rural practice lawyer, these attorney-client and personal relationships increase the probability of encountering conflicts of interest. Thus, recognizing the conflicts and knowing how to handle them are imperative.

  1. DUTY OF LOYALTY AND CONFIDENTIALITY

    The conflict of interest prohibition springs from a lawyer's duties of loyalty and confidentiality. A lawyer's role is to "zealously assert[] the client's position under the rules of the adversary system." (6)

    [T]he relationship between attorney and client is highly fiduciary. It consists of a very delicate, exacting and confidential character. It requires the highest degree of fidelity and good faith. It is a purely personal relationship, involving the highest personal trust and confidence. (7) Conflicts arise when other interests compromise a lawyer's duties of loyalty and confidentiality.

    As early as 1918, the South Dakota Supreme Court highlighted the duties of loyalty and confidentiality in the case of Hosford v Eno. (8) The Court determined that public policy prevented an attorney from representing conflicting interests. (9) The Court held that a city attorney, who had the duty to enforce city ordinances, could not represent a defendant in circuit court against a charge based on the same incident that had violated the city ordinance. Trying to represent the defendant in circuit court put the city attorney "in the position of attempting to serve two masters at once whose interests were legally hostile to each other." (10) The lawyer's duty was to the city. The Court explained the rigidity and rationale of the conflict of interest rule as follows:

    The rule is rigid, and designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent. (11) The rationale for the rule is as valid today as it was in 1918. The rule serves as a shield for the honest lawyer and a sword against the dishonest lawyer.

    The nature of the legal practice requires lawyers to juggle various roles and responsibilities. They must "zealously" represent their clients, yet be officers of the court and good citizens of their communities. Normally, the roles work in tandem and their responsibilities are not compromised. But when they conflict, the lawyer must decide the proper action. (12) As the Preamble to the Rules observes, "Virtually all difficult ethical problems arise from conflict between a lawyer's responsibilities to clients, to the legal system and to the lawyer's own interest in remaining an ethical person while earning a satisfactory living." (13) In most cases, a lawyer's moral compass and professionalism prompt the ethically correct course of action. But at other times, the nuances of the situation call for more technical guidance. The consequences of ignoring a conflict can be dire for all concerned. For lawyers, it could mean malpractice lawsuits or disciplinary actions, including disbarment.

    1. OVERVIEW OF CONFLICT OF INTEREST RULES

      The Rules of Professional Conduct serve as the ethics map for lawyers and should be a lawyer's primary authority when conflict questions arise. (14) South Dakota's current version of the Rules of Professional Conduct was adopted in 2003. Like most other states, South Dakota's Rules mirror the American Bar Association's Model Rules of Professional Conduct. Structurally, the Rules define the various prohibited conflicts, and the comments "accompanying each Rule explain[] and illustrate[] the meaning and purpose of the Rule[]" and, more specifically, its application. (15) The Rules "are rules of reason" and "should be interpreted with reference to the purposes of legal representation and of the law itself." (16)

      In South Dakota, the Ethics Committee of the South Dakota State Bar Association issues opinions that answer specific conflict queries. The South Dakota Ethics Committee is not a fact finding tribunal and will only issue opinions if the question involves undisputed facts. The opinions are published in the Bar Newsletter and can be found on the Bar Association's website. (17) Other states have similar publication processes. The widespread adoption of the Model Rules provides a wealth of authority for practitioners.

      Several rules address conflicts of interest. Rule 1.6 governs the duty of confidentiality. (18) Rule 1.7 addresses conflicts of interest affecting current clients. (19) Rule 1.8 outlines specific rules regarding current clients. (20) Rule 1.9 deals with conflicts arising from duties to former clients. (21) Rule 1.10 defines the imputation of conflicts to other lawyers in a law firm. (22) Rule 1.11 addresses the special conflicts covering "former and current government officers and employees." (23) Rule 1.18 covers conflicts involving prospective clients. (24) Definitions of terms are located in Rule 1.0. (25)

    2. IDENTIFYING THE CLIENT

      The first step in detecting and handling conflicts is to identify the client. Although it sounds simple, it may become a question of fact. By statute, a client is defined as "a person, public officer, or corporation, limited liability company, association, or other organization or entity, either public or private, who is rendered professional legal services by a lawyer, or who consults a lawyer with a view to obtaining professional legal services from [the lawyer.]" (26)

      Every law firm should have a system in place to track or detect if a person or entity is a current, former, or prospective client. (27) Even a solo practitioner or small firm needs a tracking mechanism. (28)

      Sometimes, the question is whether an attorney-client relationship was actually created. The following interactions will create an attorney-client relationship:

      1) a person seeks advice or assistance from an attorney;

      2) the advice or assistance sought pertains to matters within the attorney's professional competence; and

      3) the attorney expressly or impliedly agrees to give or indeed gives the advice or assistance. (29)

      The creation of an attorney-client relationship may depend on the communications and interactions between the attorney and the client. It may also depend on their respective perceptions of what transpired.

      Minimal contact with a person peripherally connected to a case or client usually will not create an attorney-client relationship. (30) The South Dakota Ethics Committee found no attorney-client relationship in a situation where the lawyers had minimal contact with an individual. (31) The lawyers represented a minor in a personal injury claim. (32) They needed a conservator for the child in order to settle the claim. (33) They communicated with the child's mother by phone to determine if she would agree to be appointed conservator. (34) They also mailed documents to her that she did not sign or return. (35) Based on these facts, the South Dakota Ethics Committee determined that the mother was not a "current, former, or even prospective client." (36) The child was the client, not the mother. The Committee applied the reasonable person standard noting that the mother could not have "reasonably believed" that an attorney-client relationship had been created. (37)

      Sometimes the lawyer and alleged client have different views on whether an attorney-client relationship existed. One situation forwarded to the South Dakota Ethics Committee involved a lawyer who had previously represented a father in a custody issue involving the father's child from a former relationship. (38) The father's wife was present during discussions with the lawyer, and the lawyer had some direct communication with the wife. (39) Sometime later, the father hired the lawyer to represent him in seeking a divorce from the wife. (40) The wife...

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