Duty of Loyalty and Conflicts with Current Clients Flashcards
Direct adveristy
A lawyer must not represent a client if the client will be directly adverse to another client who is represented by the lawyer (whether in the same or separate matter)
Material limitation
A lawyer must not represent a client if there is a significant risk that the representation of the client will be materially limited by the lawyer’s own interest or by the lawyer’s responsibilities to another client, a former client, or a third party
A lawyer may still undertake representation when there is a current- client conflict if…
The lawyer may still undertake the representation if:
1. the lawyer reasonably believes that she can competently and diligently represent the client despite the conflict (objective standard)
2. representation is **not prohibited **by law
3. the representation does not involve asserting a claim by one client against another client represented by the lawyer in the same proceeding before a tribunal
4. each affected client gives informed consent, confirmed in writing
In CA: both the disclosure to the client and the consent from the client must be in writing
Examples of direct adveristy
- lawyer represents multiple clients in the same matter, and their interests are in actual conflict
- a lawyer accepts representation of a client who is an adverse party in a different matter the lawyer or firm is handling for an existing client
- as part of representing a client, a lawyer must conduct a harmful or embarrasing cross-examination of another existing client of the lawyer’s firm
Mere economic adversity does not amount to direct adversity for conflicts purposes
Cases involving insurance companies in CA
Under CA law, a lawyer who is retained by an insurance company to represent an insured also represents the insurance company for conflicts purposes and therefore may not file a direct action against that same insurer in an unrelated case without consent.
There is no duty of loyalty if the insurance company’s interest is only as an indemnity provider and not as a direct party to the lawsuit.
Examples of material limitation conflicts
- lawyer is representing multiple parties on the same side of the matter and the parties have potentially conflicting interests
- where a lawyer is dealing with a former client conflict that could affect their representation of the current client
- where the lawyer owes a duty to some third person and it could affect their handling of the matter
- where the lawyer has a personal or financial interest relating to the matter (i.e., close family relations with opposing counsel)
Which relationships require written disclosure to the client in California?
- where the lawyer (or another lawyer in the firm) has a legal, business, financial, professional, or personal relationship with or responsibility to, a party or witness in the client’s matter
- where the lawyer (or another lawyer in the firm) is an immediate family member of, or lives with, or is in an intimate personal relationship with, or is a client of the firm of, another party’s attorney in the client’s matter
Business transaction with clients
A lawyer must not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or money interest that is adverse to a client
See other card for exceptions
Exceptions to business transaction with clients
A lawyer must not enter into a business transaction with the client, unless:
1. the terms are fair to the client
2. the terms and lawyer’s role in the transcation are fully disclosed to the client in a writing that the client can reasonably understand
3. the client is advised in writing that they should get independent advice from an outside lawyer before entering into the arrangement; and
4. the client gives informed consent, in writing, signed by the client
Common examples of business transactions with clients
- accepting non-monetary property (such as stock) as payment for legal services
- borrowing money from a client, or purchasing property from a client
- selling property to a client
- taking an interest in the client’s property as a security for fees
Can a lawyer solicit a gift from a client or prepare an instrument on their behalf?
No, a lawyer must not solicit a substantial gift from or prepare an instrument for a client who is prepared to give a substantial gift to the lawyer
CA exception applies (see separate card)
However, these prohibition do not apply if the client is related to the recipient of the gift (i.e., the lawyer or the lawyer’s relative)
California exception to preparing instrument for client
A lawyer may prepare an instrument that creates a substantial gift for the lawyer or the lawyer’s relative–even if the client is not related to the recipient–if the client has been advised by an independent lawyer who has provided a certificate of independent review.
Financial assistance to client
A lawyer must not provide financial assistance to a client in connecting with pending or contemplacted litigation, with the following exceptions:
1. lawyer may advance court costs and litigation expenses, and repayment may be contingent on the outcome of the case
2. if the client is indigent, the lawyer may pay the court costs and litigation expenses outright
3. a lawyer representing an indigent client pro bono may provide modest gifts to the client for food, rent, transportation, medicine, and other basic living expenses. However, the lawyer must not: (i) promise or imply availability of such gifts; (ii) seek or accept reimbursement from the client; (iii) publicize or advertise a willingness to provide such gifts to prospective clients.
CA exception applicable (see other card)
Rules re: financial assistance to client in CA
The CA rule applies to financial assistance to a client in all contexts, not just litigation. Adds the following:
1. permits the same activities as the ABA rule regarding advances to clients and paying expenses; however, it is not limited to litigation expenses but allows for payment of any expenses incurred in promoting or protecting the client’s interests
2. it prohibits a lawyer from “buying” a potential client with a promise to pay the potential client’s debts
3. it does not contain the ABA provision for pro bono representations (lawyer can give client money for any purpose so long as the client gives the lawyer a written promise to repay the loan)
4. specifies that with the client’s consent, the lawyer may pay, or agree to pay, the client’s expenses to a third party from funds collected for the client as a result of representation.
Can a lawyer participate in aggregate settlement agreements?
No, unless:
1. the lawyer discloses to each client the eixstence and nature of all the claims or please involved and the participation of each person in the settlement; and
2. each client gives informed consent to the agreement in writing signed by the client
