Comparative Analysis of Attorney Ethical Rules

Introduction

All attorneys owe fiduciary duties to all clients[1] including undivided loyalty, independence of professional judgment, confidentiality, disclosure, and competency. In California, Rule 3-310 governs an attorney’s ethical obligation to avoid the representation of conflicting interests. The California Supreme Court is in the process of revising this Rule, which will be renumbered as Rule 1-7.

Current Rule 3-310

Rules of Professional Conduct, Rule 3-310(A) defines the terms “Disclosure”, “Informed written consent”, and “Written”.

Subsection (B) addresses disclosure and provides that a lawyer “shall not accept . . . representation of a client without providing written disclosure to the client where: . . . (3) The [lawyer] has or had a legal, business, financial, professional, or personal relationship with another person or entity the [lawyer] knows or reasonably should know would be affected substantially by resolution of the matter; . . .”

Subsection (C) addresses consent and provides that a lawyer “shall not, without the informed written consent of each client: (1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or . . . actually conflict; or (3) Represent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first matter is adverse to the client in the first matter.”

Subsection (F) addresses payment by a non-client and provides that a lawyer “shall not accept compensation for representing a client from one other than the client unless: (1) There is no interference with the [lawyer]’s independence of professional judgment or with the client-lawyer relationship; and (2) [Confidential i]nformation relating to representation of the client is protected . . . ; and (3) The [lawyer] obtains the client’s informed written consent. . . .”

The official comments provide that paragraph (F) “is not intended to abrogate existing relationships between insurers and insureds whereby the insurer has the contractual right to unilaterally select counsel for the insured, where there is no conflict of interest. (See San Diego Navy Federal Credit Union v. Cumis Insurance Society (1984) 162 Cal.App.3d 358.)”

Proposed Rule 1-7

Blanket Prohibition or Representing Conflicting Interests

A thorough revision of the Rules of Professional Conduct have been drafted. Rule 1.7(a) provides that “a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person. . . .”

Exceptions Upon Disclosure and Consent

Subsection (b) identifies exceptions to the foregoing general prohibition and provides that “a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and (4) each affected client gives informed written consent.”

Resolution of Conflicts of Interest

Official comment [2] requires a “lawyer to: (1) clearly identify the client or clients; (2) determine the scope of each relevant representation of a client or proposed representation of a client; (3) determine whether a conflict of interest exists; (4) decide whether the representation may be undertaken despite the existence of a conflict . . .; and (5) if so, consult with the clients affected . . . and obtain their informed written consent.”

Procedures to Determine Conflicts

Official comment [3] requires a lawyer to develop procedures “to determine whether a conflict of interest exists” and provides that “a lawyer should adopt reasonable procedures . . . to determine . . . the persons and issues involved. . . . Ignorance caused by a failure to institute such procedures will not excuse a lawyer’s violation of this Rule.”

Withdrawal Required Unless Conflicts Are Resolved

Official comment [4] provides that “the lawyer ordinarily must withdraw from the representation, unless the lawyer has obtained the informed written consent of the client. . . . [W]hether the lawyer may continue to represent any of the clients is determined both by the lawyer’s [duties to both clients].

Judgmental Conflict Qualifiers

Official comment [8] provides that even in the absence of direct adversity between dual clients “a conflict of interest exists if there is a significant risk that a lawyer’s ability to consider, recommend or carry out an appropriate course of action for the client will be materially limited as a result of the lawyer’s other responsibilities [including] a legal, business, financial, professional, or personal relationship with another person or entity and the lawyer knows or reasonably should know that either the relationship or the person or entity would be affected substantially by resolution of the matter. . . .”

Payment by Insurer Requires Analysis

Official comment [13] requires compliance with subsection (b) “[i]f acceptance of the payment from any other source presents a significant risk that the lawyer’s representation of the client will be materially limited by the lawyer’s own interest in accommodating the person paying the lawyer’s fee or by the lawyer’s responsibilities to a payor who is also a co-client.”

Written Disclosure Is Required

Official comment [18] “requires that the lawyer communicate in writing to each affected client the relevant circumstances and the actual and reasonably foreseeable adverse consequences of the conflict on the client’s interests and the lawyer’s representation and that the client thereafter gives his or her consent in writing [including] the nature of the conflict and the nature of the risks involved. When representation of multiple clients in a single matter is undertaken, the information must include the implications of the joint representation, including possible effects on loyalty, confidentiality and the lawyer-client privilege and the advantages and risks involved.”

Informed Consent Requires Oral Explanation

Official comment [20] “requires the lawyer to obtain the informed consent of the client in writing. . . . The requirement of a written disclosure . . . does not supplant the need in most cases for the lawyer to talk with the client, to explain the risks and advantages, if any, of representation burdened with a conflict of interest, as well as reasonably available alternatives, and to afford the client a reasonable opportunity to consider the risks and alternatives and to raise questions and concerns. Rather, the writing is required in order to impress upon clients the seriousness of the decision the client is being asked to make and to avoid disputes or ambiguities that might later occur in the absence of a writing.”

Duration of Consent

Official comment [20A] provides that a “disclosure and an informed written consent are sufficient for purposes of this Rule only for so long as the relevant facts and circumstances remain unchanged. With any material change, the lawyer may not continue the representation without making a new written disclosure to each affected client and obtaining a new written consent.”

Revoking Consent

Official comment [21] provides that “[a] client who has given consent to a conflict may revoke the consent and, like any other client, may terminate the lawyer’s representation of that client at any time.”

Failed Joint Representation

Official comment [29 and 29A] provides that “[o]rdinarily, the lawyer will be forced to withdraw from representing all of the clients if the joint representation fails” including “the following situations: (1) the lawyer receives conflicting instructions from the clients and the lawyer cannot follow one client’s instructions without violating another client’s instruction; (2) the clients have inconsistent interests or objectives so that it becomes impossible for the lawyer to advance one client’s interests or objectives without detrimentally affecting another client’s interests or objectives; (3) the clients have antagonistic positions and the lawyer is obligated to advise each client about how to advance that client’s position relative to the other’s position; (4) the clients have inconsistent expectations of confidentiality because one client expects the lawyer to keep secret information that is material to the matter; (5) the lawyer has a preexisting relationship with one client that affects the lawyer’s independent professional judgment on behalf of the other client(s); (6) the clients make inconsistent demands for the original file.”

Unconflicted Insurance Defense

Official comment [37] provides that “[p]aragraph (a)(2) is not intended to modify the tripartite relationship among a lawyer, an insurer, and an insured that is created when the insurer appoints the lawyer to represent the insured under the contract between the insurer and the insured. Although the lawyer’s appointment by the insurer makes the insurer and the insured the lawyer’s joint clients in the matter, the appointment does not by itself create a significant risk that the representation of the insured, insurer, or both will be materially limited under paragraph (a)(2).”

Comparison of Current and Proposed Rules

Potential or Actual Conflicts

While current Rule 3-310 expressly requires ethical compliance for potential and actual conflicts, proposed Rule 1.7 eliminates this language. “[A] distinction between “potential” and “actual” conflicts of interest . . . is invalid and unworkable.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 371, fn. 7.) This change may impact the Dynamic Concepts line of cases.[2] “A mere possibility of an unspecified conflict does not require independent counsel. The conflict must be . . . actual, not merely potential.” (Dynamic Concepts, Inc. v. Truck Ins. Exchange (1998) 61 Cal.App.4th 999, 1007 (Dynamic Concepts).) Elimination of the actual/potential distinction may require the courts and counsel to revisit the rationale for this line of authority.

Judgmental Conflict Qualifiers

Proposed Rule 1.7 introduces elements not found in current Rule 3-310 barring representation one client is directly adverse to another client or there is a significant risk that representation will materially limit the lawyer’s responsibilities. Again, this change may impact the Dynamic Concepts line of cases. “The conflict must be significant, not merely theoretical.” (Dynamic Concepts, supra, 61 Cal.App.4th at 1007.) The express adoption of judgmental elements like “directly adverse,” “significant risk,” and “materially limit” may support the rationale for this line of authority.

Conflict Analysis, Procedures, and Disclosure

One significant clarification is proposed Rule 1.7’s requirement that dependent counsel analyze and orally disclose conflicts. Dependent counsel must develop procedures to determine the persons and issues involved when a reservation of rights could create conflicts or interest. Also, “in most cases . . . the lawyer [must] talk with the client, to explain the risks and advantages” of conflicted representation.


 

[1] Attorney Duties – MoL" href="http://dutytodefend.com/compendium-of-attorney-duties/">Compendium of Attorney Duties

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