Avoiding Conflict of Interests

An attorney may not serve two masters. That, in a nutshell, is the rationale and logic behind the various ethical prohibitions against conflicts of interest.

A conflict of interest arises when there is a potential for influence on the attorney-client relationship that may affect the attorney’s (1) duty of loyalty to the client, (2) duty to render independent judgment to the client, or (3) duty to protect the client’s interests.

Claims arising out of client conflicts represent a growing area of malpractice. This is true for several reasons:

• The increasing complexity of business structures (with layers of managers, officers, shareholders, silent partners and governing boards) makes it sometimes difficult to identify exactly whose interest is being served.
• Competition for clients is increasing, which leads attorneys to accept cases that pose conflict issues rather than say no and lose the business.
• Clients are becoming more cost-conscious. They might want to save a few dollars by using the same lawyer – when in fact their interests are dissimilar.

A conflict might also exist as to the subject matter of the case. Example: a client comes to you with an injury claim against a hospital, where you also represent the hospital’s Board of Directors.

Know the Rules

Every attorney should be familiar with Rules 1.7, 1.8, 1.9 and 1.10 of the Revised Rules of Professional Conduct. If you are unsure whether a conflict exists, you should contact the State Bar and request their advice.

If a conflict of interest or matter exists before an attorney undertakes representation or develops after representation commences, the attorney must respectively decline or withdraw from representation.

Implement System Safeguards

It is imperative for every law office to maintain a good conflicts system and for all staff and members of the firm to utilize it.

Conflicts are most likely to result in a malpractice claim when the attorney (1) represents more than one person on the same matter; (2) has a personal interest, other than professional fees, in the matter being handling for the client; (3) represents one client against another client; or (4) represents one client against a former client.

To identify and avoid conflict situations, every law office should have a conflict checking system. It can be manual or computerized.

Under certain circumstances, the Rules permit an attorney to undertake a matter even though a conflict exists. However, the attorney is required to comply with certain safeguards, which include getting the consent of the parties involved and obtaining a formal written waiver. It is important to note that simply obtaining a client’s permission to proceed after disclosure of a conflict may not be sufficient to relieve the attorney of potential disciplinary action or civil liability.

“Consentability” is typically determined by considering whether the interests of the client will be adequately represented if the clients are permitted to give their informed consent to representation burdened by a conflict of interest. Thus, representation is prohibited if in the circumstances the lawyer cannot reasonably conclude that the lawyer will be able to provide competent and diligent representation. Comment [15] to Rule 1.7 of the Revised Rules of Professional Conduct.

In any case, obtaining the client’s consent to proceed in spite of a conflict does not always insulate the attorney from a malpractice claim. Although the client initially agrees to the representation, the client may nevertheless later accuse his attorney of unfair treatment. The client may feel that the lawyer is unable to render independent advice due to the perceived influence caused by the conflict of interest. Proceed with caution in such cases.

Other tips:

• It is advisable to avoid all conflicts, regardless of whether the client consents to the representation after full disclosure.
• Don’t take any case with even the slightest hint of a conflict of interest.
• Don’t become personally involved with a client. This can often lead to conflicts of interest.
• Never go into business with a client. This is almost always an automatic conflict of interest.