Duty of Loyalty

Question 1

Duty of Loyalty (Definition)

Answer 1

An attorney owes his client a duty of loyalty. A conflict of interest can be actual or potential. It arises where the interests of the attorney or a third party, including a current or former client, might limit or adversely affect the attorney’s decisions or ability in representing the client. Consider every possible type of conflict among all the parties.

Question 2

Conflict Strategy

Answer 2

On an essay exam, consider and fully discuss first any and all potential conflicts of interest that are presented by the facts as the fact pattern begins. Then, determine if any of these potential conflicts ripen into actual conflicts, and fully discuss the actual conflict.

Question 3

Continued Representation In the Event of a Conflict (ABA)

Answer 3

Permit continued representation if:

(1) the lawyer reasonably believes he can competently and diligently represent each client;
(2) the representation is not prohibited by law; and
(3) the clients’ claims do not involve the direct assertion of a claim by one client against another; and
(4) the lawyer obtains the clients’ informed, written consents.

Question 4

Continued Representation In the Event of a Conflict (CA)

Answer 4

Permit continued representation if:

(1) the lawyer reasonably believes he can competently and diligently represent each client;
(2) the representation is not prohibited by law; and
(3) the clients’ claims do not involve the direct assertion of a claim by one client against another.

Question 5

Potential Conflict (Rule)

Answer 5

Potential conflicts are those that may arise given the parties’ relationship in the context of the facts.

Question 6

Actual Conflicts (Examples)

Answer 6

concurrent conflicts between the client and either the attorney’s personal or business interests or those of another person; imputed conflicts due to a conflict with a person or another client in the firm; an ownership or financial interest adverse to a client—such as taking a security interest in a client’s property to secure payment of fees; improper use of confidential information or a client’s secrets; being designated as a beneficiary of a gift, estate, or trust; literary or media rights based on representing the client; financial assistance to the client; compensation from another person than the client; aggregate settlement in multiple representation; limiting liability for malpractice; insurance defense lawyer conflicts; and sexual relations.

Question 7

Concurrent Conflicts (Rule)

Answer 7

A concurrent conflict of interest exists when the representation of a client will be directly adverse to the interests of another client; or there is a significant risk that the representation of a client will be materially limited by the lawyer’s personal interests or by the interests of another client, former client, or third person.

CA requires prompt disclosure to the client of any facts giving rise to any legal malpractice claim against the lawyer.

Question 8

Imputed Conflicts (Rule)

Answer 8

Generally, if a lawyer faces a conflict of interest, no lawyer in that lawyer’s firm may represent the client; i e., the lawyer’s conflict is imputed to all the other lawyers in the firm.

Question 9

Imputed Conflicts Exceptions

Answer 9

This general rule of imputed conflicts does not apply to:

(1) Conflicts caused by former and current government lawyers;
(2) Conflicts caused by a purely personal interest of the conflicted lawyer that will not inhibit other lawyers in the firm from representing the client competently and diligently;
(3) Conflicts caused by the conflicted lawyer’s close family relationship with another lawyer who is representing a different client in the matter; and
(4) Conflicts caused by the conflicted lawyer’s sexual relationship with the client.

Question 10

Conflicts Involving Government Attorneys (Rule)

Answer 10

The ABA rules prohibit a lawyer from representing a client in connection with a matter in which the lawyer participated personally and substantially as a government officer or employee, unless the appropriate government agency gives informed, written consent. California does not have a counterpart, except that a lawyer who has participated on the prosecution side of a criminal case is prohibited from participating on the defense side.

Question 11

Screening (For Government Attorneys)

Answer 11

If the conditions of a screening procedure are met:

(a) the disqualified lawyer is screened from any participation in the matter;
(b) the disqualified lawyer does not share in any part of the fee earned (exclusive of a salary or partnership share established by prior independent agreement); and
(c) the government agency is notified of the screening arrangement.

The California rules, as set out in case law, are the same.

Question 12

Financial Conflicts (Rule)

Answer 12

Whenever a financial transaction is involved, the following is required for the transaction to avoid ethical issues:

(1) the transaction and terms must be fair and reasonable to the client and fully disclosed and transmitted in writing to the client in a manner that can be reasonably understood by the client; (
2) the client must be informed—in California, the client must be informed in writing—of the desirability of obtaining the advice of independent legal counsel to review the terms of the transaction; and
(3) the client understands the lawyer’s role in the transaction.

Question 13

Gifts to Attorney (Rule)

Answer 13

A lawyer must not solicit a substantial gift from a client or prepare an instrument giving the lawyer, or a person related to the lawyer, any substantial gift from a client (including a testamentary gift), except when the client is related to the donee. In CA, lawyer is prohibited from inducing the gift but not from preparing the instrument.

Question 14

Media Rights (ABA Rule)

Answer 14

Prior to the conclusion of representation of a client, a lawyer must not make or negotiate an agreement giving the lawyer literary or media rights to an account based, in substantial part, on information relating to the representation.

Question 15

Media Rights (CA Rule)

Answer 15

California case law recognizes that these agreements create a serious conflict of interest between the lawyer and the client; thus, the trial judge must ensure that the defendant fully understands the conflict. If the defendant does fully understand the conflict, he may waive it and continue to have the lawyer represent him.

Question 16

Sexual Relations with Clients (ABA)

Answer 16

A lawyer must not have a sexual relationship with a client. This rule does not apply if the lawyer and client had a consensual sexual relationship before they became lawyer and client. Even if there was a preexisting consensual sexual relationship, the lawyer should make sure that his ability to represent the client will not be affected by the relationship.

Question 17

Sexual Relations with Clients (CA)

Answer 17

The California rule prohibits a lawyer from: (i) demanding sexual relations with a client as a condition of professional representation, (ii) entering into sexual relations with a client by coercion or undue influence, or (iii) representing a client incompetently because of a sexual relationship with the client.

Question 18

Client Property and Records (Rule)

Answer 18

(1) A lawyer must hold property of clients or third persons separate from the lawyer’s own property, which means that client funds must be kept in a client trust account;
(2) must keep records of client funds and other property;
(3) must keep the client informed and deliver funds or other property to the client or a third person entitled to receive the funds or property;
(4) and if the lawyer is in possession of funds or other property to which the lawyer or a third person has a claim, and the client disputes the claim, the lawyer must keep the disputed portion of the funds or property separate.

Question 19

Trust Account Rules

Answer 19

First, when an attorney takes an advance on fees to be earned, those must go into the trust account until the fee is actually earned—when the work is done and billed for. At that point, unless the client objects, the attorney must pay themselves their fee out of the client trust account in a timely fashion. The failure to do so results in an improper commingling of the attorney’s funds with the client’s.

Question 20

Preservation of Records (CA)

Answer 20

In California, a lawyer must preserve records of client funds or other property for five years after the money or property is distributed.