Conflicts of Interest Under the Revised Model Rules

• Publication year: 2021
• Citation: Vol. 81

81 Nebraska L. Rev. 1363. Conflicts of Interest Under the Revised Model Rules

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W. Bradley Wendel(fn*)

Conflicts of Interest Under the Revised Model Rules

TABLE OF CONTENTS

I. Introduction .......................................... 1363
II. How Conflicts Issues Can Be Presented ................. 1365
III. Concurrent Representation Conflicts ................... 1367
IV. Successive Representation Conflicts ................... 1372
A. Side-Switching Cases ............................... 1372
B. Migratory Lawyer Cases ............................. 1374
C. Dealing with Prospective Clients ................... 1377
V. Conclusion ............................................ 1378

I. INTRODUCTION

Critics of the rules of professional conduct promulgated under the authority of state supreme courts sometimes claim that these rules do not have much influence on the behavior of lawyers. Moral judgment, trained intuition, or a certain seat-of-the-pants bravado actually characterize lawyers' decisionmaking, rather than a careful study of the rules. As one professor and former lawyer writes:

I had cause to refer to the Model Rules of Professional Conduct exactly twice in eight years; I almost never heard any other lawyer refer to them. Lawyers make decisions every day about what conduct is ethical and about whether they will behave ethically, but often the formal rules have little to do with those decisions.(fn1)

Another scholar of the legal profession claims that "there is little evidence that anyone pays attention to ethical rules beyond the small proportion of lawyers who draft, discuss, and enact them."(fn2) There are some areas in which one's "moral compass" or experience is a pretty reliable guide. A lawyer does not need a disciplinary rule to point out that lying to the court is a bad idea, or that one should not communi

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cate with an opposing party who is represented by counsel. Where enforceable disciplinary rules overlap with one's moral judgment, it may not be terribly risky to fly by the seat of one's pants.

If there is any area in which intuition is not a reliable proxy for study of the rules, however, it is conflicts of interest. Conflicts doctrine is notoriously complex and subtle more like the hearsay rule in evidence or the rule against perpetuities than a clear, intuitively plausible prohibition like that against commingling personal and client funds. To be more precise, some conflicts rules are straightforward and easy to apply, particularly those involving a conflict between the client's interests and the lawyer's own "financial, business, property, or personal interests."(fn3) For example, lawyers should not enter into sexual relationships with their clients, because of the fiduciary nature of the lawyer-client relationship.(fn4) But when it comes to conflicts involving multiple client representation, where the interests of one client interfere with those of another, things get a bit murkier.

Accordingly, this Article sets out the existing Nebraska law of multiple client conflicts for the purpose of comparing it with the revised Model Rules of Professional Conduct, approved by the ABA House of Delegates in 2002.(fn5) The new version of the Model Rules is the result of several years of work by the so-called Ethics 2000 Commission, comprised of prominent lawyers, judges, and academics.(fn6) It preserves the structure and much of the language of the 1983 version of the Model Rules, which differed dramatically from the predecessor Model Code of Professional Responsibility. Because Nebraska has not adopted the Model Rules, it is one generation behind other jurisdictions considering the Ethics 2000 modifications. At least in the area of conflicts, however, the differences between existing Nebraska law and the Ethics 2000 version of the Model Rules are not that stark. In fact, the results of most of the reported Nebraska conflicts cases can be fitted comfortably within the analytical framework of the new Model Rules. There is nothing radical about the new rules in the area of conflicts.

This observation raises the obvious question why make the change? The Model Code has served Nebraska lawyers well, so perhaps it should be retained. The answer is that as they work through

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novel questions of law, Nebraska courts can benefit from the guidance of courts in the overwhelming majority of other jurisdictions, which have adopted state disciplinary rules patterned after the Model Rules. With recent changes by Virginia and Tennessee, only Iowa, Nebraska, Ohio, and Oregon retain rules based primarily on the Model Code.(fn7) Although the results of decisions under the Model Code often track those under the Model Rules, the analytical structure varies considerably. For example, Nebraska DR 5-105 uses the vague term "differing interests" to describe a conflict; the new version of Model Rule 1.7 clarifies the scope of the client interests that may differ from those of another client by using the terms "direct[] advers[ity]" and "material[] limit[ation]" on the lawyer's ability to represent the other client. Not only is the Model Rules terminology more precise, but if a court is interested in determining just what constitutes direct adversity of a material limitation, it has a vast amount of analogous authority to consult. Secondary sources such as the Hazard and Hodes treatise,(fn8) as well as the Reporter's Notes to the recently issued Restatement (Third) of the Law Governing Lawyers(fn9) already cite and discuss primarily Model Rules cases. Naturally as time goes on, the dominance of the Model Rules will only increase. Thus, lawyers faced with an uncertain conflicts situation will find it more difficult to find guidance in the law if Nebraska retains its Model Code-based disciplinary rules.

II. HOW CONFLICTS ISSUES CAN BE PRESENTED

It is all the more important that the law of conflicts of interest be clear and predictable in light of the serious consequences that can attach to a lawyer's violation of one of the rules. It is fairly unusual for a lawyer to be subjected to professional discipline solely for representing conflicting interests, although conflicts can sometimes be one of several grounds for discipline. On the other hand, motions to disqualify a lawyer, resulting from allegations of conflicts of interest, represent a serious risk. In Nebraska, non-clients generally do not have standing to assert conflicts,(fn10) but present and former clients may file a motion

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to disqualify a lawyer who is in violation of one of the conflicts rules. Courts are empowered to disqualify lawyers as an aspect of their inherent authority to regulate the practice of law of attorneys who appear before them.(fn11) They are not required to follow the disciplinary rules in deciding disqualification motions, but in practice most courts will be guided in large part by the rules, rather than trying to fashion a standard for disqualification in a vacuum.(fn12) Motions to disqualify are the procedure by which the conflicts issues were presented in most of the leading Nebraska cases,(fn13) and disqualification presents one of the most serious downside risks for lawyers working through multiple client representation.

The other serious risk is liability to a current or former client. Liability for malpractice is not limited to negligence, in the sense of failing to perform some task according to the standard of care. Lawyers may also be liable to a client or former client for breaching any of the fiduciary duties they owe,(fn14) including the duty to refrain from impermissibly representing conflicting interests.(fn15) In deciding whether a multiple representation is impermissible, courts often refer to the disciplinary rules for guidance, even though the preamble to the Model Rules expressly disavows any presumption that a violation of a rule would be an actionable civil wrong.(fn16) Thus, in cases where disqualification is appropriate, a lawyer also faces potential civil liability for breach of fiduciary duty. For similar reasons, conflicts of interest also create a potential defense to an action by the lawyer against the client to collect fees.(fn17) Disqualification orders entered by trial courts are sometimes accompanied by fee-forfeiture orders, but even if the court does not order forfeiture directly, it is likely that a client whose lawyer was disqualified from representation will resist paying fees for that work.

The remainder of this Article considers the two broad categories of multiple representation conflicts concurrent and successive representation. The discussion of successive representation conflicts is subdivided into three subcategories which each require a somewhat distinct analytical process side-switching, migratory lawyers, and prospective clients.

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III. CONCURRENT REPRESENTATION CONFLICTS

Sometimes called "current-client" conflicts, these cases involve a lawyer simultaneously representing two or more clients whose interests may be somehow at odds. Under the Nebraska Code, a lawyer is prohibited from beginning or continuing a professional relationship with a client where taking the new client would interfere with the lawyer's independent professional judgment or involve the lawyer in representing differing interests.(fn18) The key to the analysis here is the concept of independent professional judgment. Under agency law as well as the more specific law governing lawyers, a lawyer is required to be an effective, diligent, loyal representative of the client. The lawyer must be able to give advice about all of the client's options, without holding anything back for fear of interfering with another client's interests. When a lawyer takes on a new client, she must ask whether the duties she is assuming with respect to the new client compe-tence, diligence, confidentiality, loyalty, and...