Ethics Opinion Clarifies When Client Interests are “Materially Adverse”

ABA Opinion 497

Even though the Rules of Professional Conduct prohibit lawyers from representing clients with adverse interests, it’s not always easy to determine when clients’ interests are so adverse that disqualification is necessary.

A new ethics opinion from the American Bar Association sheds light on the matter.

Formal Opinion 497, issued by the ABA Standing Committee on Ethics and Professional Responsibility in February 2021, takes a close look at Rules 1.9(a) and 1.18(c), which address conflicts involving representing a current client with interests that are “materially adverse” to a former or prospective client on the same or a substantially related matter.

“But neither Rule specifies when the interests of a current client are ‘materially adverse’ to those of a former client or prospective client,” the opinion states. “Some materially adverse situations are typically clear, such as, negotiating or litigating against a former or prospective client on the same or a substantially related matter, attacking the work done for a former client on behalf of a current client, or, in many but not all instances, cross-examining a former or prospective client. Where a former client is not a party to a current matter, such as proceedings where the lawyer is attacking her prior work for the former client, the adverseness must be assessed to determine if it is material. General economic or financial adverseness alone does not constitute material adverseness.”

Following are three scenarios where “material adverseness” occurs, according to the opinion:

1. Suing or negotiating against a former client
2. Attacking lawyer’s own prior work
3. Examining a former client

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ABA Formal Opinion 497

Here are some of the key provisions of the opinion:

• “[C]ourts, regulatory authorities, and ethics scholars … have generally concluded that material adverseness includes, but is not limited to, matters where the lawyer is directly adverse on the same or a substantially related matter. While material adverseness is present when a current client and former client are directly adverse, material adverseness also can be present where direct adverseness is not.”

• “In the absence of direct adverseness, generalized financial harm or a claimed detriment that is not accompanied by demonstrable harm to the former or prospective client’s interests does not constitute material adverseness.”

• “Material adverseness does not reach situations in which the representation of a current client is simply harmful to a former client’s economic or financial interests, without some specific tangible direct harm. In Gillette Co. v. Provost, the court concluded that ‘[w]ith respect to the material adverse prong of Rule 1.9, representation of one client is not adverse to the interests of another client, for the purposes of lawyers’ ethical obligations, merely because the two clients compete economically.’ Thus, a lawyer does not have a Rule 1.9 conflict solely because the lawyer previously represented a competitor of a current client whose economic interests are adverse to the current client.” 

• “Material adverseness … requires a conflict as to the legal right and duties of the clients, not merely conflicting or competing economic interests.”

• “If a reasonable lawyer reviewing the situation would conclude that the representation of a current client is materially adverse to a former client, the lawyer may still represent the current client, even if the current and prior matters are substantially related, provided the lawyer obtains the informed consent of the former client (or prospective client), to waive the potential conflict of interest and that consent is confirmed in writing.”

• “If a lawyer seeks to represent a current client in a matter that is materially adverse to a prior prospective client in the same or substantially related matter on which that prospective client consulted the lawyer, and the lawyer has received significantly harmful information from the prior prospective client, Rule 1.18(d)(1) permits representation of the current client if the current client and the prospective client give informed consent, confirmed in writing.”

Source: ABA Formal Opinion 497

Jay Reeves is author of The Most Powerful Attorney in the World. He practiced law in North Carolina and South Carolina. Now he writes and speaks at CLEs, keynotes and in-firm presentations on lawyer professionalism and well-being. He runs Your Law Life LLC, which offers confidential, one-on-one consultations to sharpen your firm’s mission and design an excellent Law Life. Contact jay@yourlawlife.com or 919-619-2441.