Duty of Loyalty and Conflicts of Interest (Current Clients) Flashcards
3 Types of Conflicts
1) Some are non-consentable. You can’t continue the representation.
2) Majority are resolvable with consent from the client or by meeting other conditions. Fixable.
3) Things that look like conflicts but aren’t. Red herrings.
Duty of Loyalty
This is a duty you owe to each client and because you owe duties to multiple people, it can create conflicts between them.
Consequence of Failing to Resolve Conflict
As atty, you could be disqualified, professionally disciplined, subject to civil malpractice liability, etc.
Sometimes used as tactical maneuver to kick you off case by enemy side in litigation.
Imputation of Conflicts
If lawyer is disqualified from taking on a client, that conflict is imputed to others at the firm and makes them also disqualified.
Exceptions to imputed disqualification:
1) Personal: When the conflict is uniquely personal and would not limit representation by colleagues
2) Screening: When conflict is based on situations involving prior work and you are screened and affected persons given notice
Imputed conflicts can be waived.
General Types of Conflicts with Current Clients
Lawyer must not rep client if:
1) Client will be DIRECTLY ADVERSE to another client who is represented by the lawyer, whether it’s in the same or separate matter
2) Taking on client creates significant RISK of MATERIAL LIMITATION by the lawyer’s own interest or former clients
Conditions for Resolving Current-Client Conflict
4 conditions:
1) Lawyer reasonably believes they can competently and diligently, objectively represent the client despite the conflict
2) Not prohibited by law
3) Lawyer not on both sides of same litigation (NEVER CONSENTABLE)
4) Affected clients give informed consent confirmed in writing (CA: both disclosure and informed consent must be in writing)
Direct Adversity Conflicts
Must not represent a client who is directly adverse to another concurrent client unless waived as described in the card on conditions for resolving.
NEVER ok to rep 2 clients on different sides of same litigation.
If you have to conduct an embarrassing cross X that would hurt your client, that’s DIRECT ADVERSITY
Mere ECONOMIC adversity is NOT direct adversity just because the 2 clients are economic competitors.
Having different positions on the law does not necessarily create direct adversity.
CA Insurance Direct Adversity Rules
In CA: a lawyer retained by an insurance company to represent an insured also represents the insurance company for conflicts purposes. Thus, the lawyer can’t file direct action against that insurance company. That’s the default rule.
BUT, by statute, there’s a carve out exception: the lawyer has no duty of loyalty to an insurer when the insurer’s interest in each matter is only an indemnity matter. In other words, the exception looks like this hypo:
Insco retains you to represent Driver 1 in tort case. May you now represent Driver 2 in a different case against Driver 3 and Insco, Driver 3’s insurer? YES. Normally looks like a direct adversity conflict, but the insurance company is only an indemnity provider in both of those cases and falls into the CA legislative exception.
Material Limitation Conflicts
“Significant risk of material limitation” relevant any time you might represent co-parties with potentially conflicting interests. Like spouses preparing a will or trust. Also co-defendants in criminal cases.
If a conflict emerges between the 2 clients, the remedy is to WITHDRAW FROM BOTH and advise them to get separate counsel. You must at least withdraw from the one that did not confide in you in such a way as to create the conflict. No partition here because the clients have material limitation.
Any time on a fact pattern a lawyer reps 2 clients, must bring up risks of multiple representation.
Fiduciary duties: if CEO is conflicting with company, and you are on the board, you can’t rep that CEO. Because you have fiduciary duties in personal capacity as a board member.
CA: always requires written disclosure of certain relationships and extend conflict to anyone with intimate personal relationship with lawyer, like living with them. If you have relationship with anyone who is a party or a witness that is also a conflict. CA requires written disclosure and written consent back.
Business Transaction with Client
Rule: must not enter into business transaction with client or knowingly acquire ownership or possessory interest adverse to client unless ALL of these 4 conditions are met:
1) Terms are fair to client
2) Terms and lawyer’s role fully disclosed in understandable way
3) Client advised in writing to get outside counsel’s advice
4) Client gives informed consent in signed writing
Mnemonic: First Discuss Over Coffee (Fairness, Disclosure, advice to get Outside counsel, Consent)
Misuse of Confidential Info
Lawyer can’t use confidential info to a client’s disadvantage (including prospective and former clients) without consent or confidentiality exception.
Substantial Gifts from Clients
Atty must not solicit or prepare instrument when gift recipient is self or relative. Can’t make the client’s will to give you stuff.
Exception: if the client is related to the recipient of the gift, then you can gift yourself stuff in your dad’s will.
Financial Assistance to Client - ABA Rule
No financial assistance in connection with litigation, except:
1) Advancing court costs and litigation expenses
2) Paying indigent client’s court costs and litigation expenses outright
3) When acting pro bono for indigent client, modest gifts for living expenses
Financial Assistance to Client - CA Rule
Can advance or pay any type of expense BUT
Can’t promise to help potential clients like paying their debts
Can lend money for any purpose if client gives written promise to repay
With client’s consent, can pay client’s expense to 3rd party from funds collected in case
Aggregate Settlement Agreements
Must disclose everything to each client and obtain informed consent in SIGNED writing
