Conflicts of interest are one of the leading causes of legal malpractice claims and lawyer disciplinary action.  Lawyers are held to a high standard when it comes to conflicts of interest. One of the bedrock principles of practicing law is the duty of loyalty. Clients depend on lawyers to have the utmost loyalty to them and to be able to exercise independent judgment on their behalf. Rule 1.7 of the North Carolina Rules of Professional sets strict standards for lawyers faced with conflicts. 

 Rule 1.7 addresses conflicts of interest involving current clients. When a lawyer faces a conflict of interest, they may still be able to represent a client if they obtain informed consent, confirmed in writing, from all affected parties. However, obtaining informed consent is a nuanced process that requires full disclosure and a clear understanding of the implications. 

Rule 1.7 and Conflicts of Interest

Rule 1.7 prohibits a lawyer from representing a client if there is a concurrent conflict of interest unless specific conditions are met. A concurrent conflict exists if:

1. The representation of one client will be directly adverse to another client; or
2. There is a significant risk that the lawyer’s responsibilities to another client, a former client, or a third party, or their own interests, will materially limit their ability to represent the client.

However, a lawyer may proceed with representation despite a conflict if:

1. The lawyer reasonably believes they can provide competent and diligent representation to each affected client;
2. The representation is not prohibited by law;
3. The representation does not involve one client asserting a claim against another client represented by the same lawyer in the same litigation or proceeding; and
4. Each affected client gives informed consent, confirmed in writing.

Elements of an Informed Consent Agreement

Informed consent is one of the most misunderstood concepts in the ethics rules. Getting informed consent is more than just telling a client/prospective client that there is a conflict and asking them to waive the conflict. When seeking informed consent to proceed despite a conflict, the lawyer must fully disclose the nature and implications of the conflict. An effective informed consent agreement should include the following:

1. Identification of the Conflict – A detailed description of the nature of the conflict, including how the lawyer’s representation of one client could potentially affect the other.
2. Potential Risks and Consequences – A clear explanation of how the conflict could impact the lawyer’s ability to provide independent legal judgment or create potential disadvantages for the client.
3. Benefits of Representation – Why the client might nonetheless choose to proceed with the representation despite the identified risks. For example, the client might benefit by sharing with fees with a joint client.
4. Alternative Representation Options – Information regarding the client’s right to seek independent legal advice regarding the conflict before consenting.
5. Voluntary Agreement – Assurance that the client is making an informed decision without coercion or undue influence.
6. Acknowledgment and Confirmation in Writing – A written confirmation that the client understands the conflict and agrees to proceed, typically signed by both the lawyer and the client.

When Informed Consent Is Insufficient

Not all conflicts are waivable in an informed consent agreement. Some conflicts are so serious that our State Bar has said that clients may not waive the conflict. In other words, it is nonconsentable. For example, in 2019 FEO 1, the Bar ruled that a lawyer may never represent both spouses in the preparation of a separation agreement. Another example of a conflict that is almost never consentable is found in 2013 FEO 14. In that opinion, the State Bar ruled that there are very few instances where common representation of the borrower and lender in a commercial real estate closing would be allowed, even with informed consent.

Any time that you are facing a conflict where your own interests or the interests of other clients or third parties might interfere with your duty of loyalty and independent judgment, you must ask yourself whether you can honestly be loyal to all parties involved. If the answer to that question is not a strong yes, then you should stop your inquiry there and decline the representation. If on the other hand you think that you can be a zealous advocate notwithstanding your own interests or others’ interests, then you must be sure to check the boxes above regarding a valid informed consent agreement. 

And remember, just because you can do it doesn’t mean you should.