Source: http://lalegalethics.org/?page_id=256
Timestamp: 2013-05-20 05:47:52
Document Index: 323333537

Matched Legal Cases: ['§ 121', '§ 125', '§ 22', '§ 134', '§ 129', '§ 131', '§ 122', '§ 122', '§ 8', '§ 132']

Rule 1.7. Conflict of Interest: Current Clients | Louisiana Legal Ethics
Rule 1.7. Conflict of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
The Louisiana Supreme Court adopted this rule on January 20, 2004. It became effective on March 1, 2004, and has not been amended since. This rule is identical to ABA Model Rule of Professional Conduct 1.7 (2002). The ABA made a number of notable revisions to Model Rule 1.7 in 2002.
Prior to 2002, the relationship between the two paragraphs of former Model Rule 1.7 was not well understood. Lawyers frequently struggled with identifying a direct-adversity conflict under former paragraph (a) when the representation was still problematic because it involved a clear conflict under the “material limitation” standard of former paragraph (b). See ABA Ethics 2000 Commission Revision Notes to Model Rule 1.7 (2002). To address this problem, the ABA defined “conflict of interest” to include both direct-adversity conflicts and material-limitation conflicts. See id.
Material-Limitation Conflicts
As to material-limitation conflicts, the 2002 revision to Model Rule 1.7 limited the scope of such conflicts to situations in which there is “a significant risk” that the representation will be impaired, rather than to situations in which it “may” be impaired, as was the case prior to the revision. See id.
The revised model rule makes clear that in certain situations a conflict may not be waived by the client. See Model Rules of Professional Conduct Rule 1.7(b). That is, the representation may not go forward even with the client’s consent. Unlike the former Rule, the revised Rule contains a single standard of consentability and informed consent, applicable both to direct-adversity and material-limitation conflicts. This standard is set forth in a separate paragraph, both to reflect the separate steps required in analyzing conflicts (first identify potentially impermissible conflicts, then determine if the representation is permissible with the client’s consent), and to highlight the fact that not all conflicts are consentable. See id.
Under the former model rule, consentability turned on a determination that the conflict would “not adversely affect the representation.” According to the ABA, the difficulty with this standard was that in order to determine that a conflict existed in the first place, the lawyer had to have already determined that the lawyer’s duties or interests were likely to “materially limit” the representation. The ABA believed that there is a subtle difference between “material limitation” and “adverse affect on” the representation. As a result, lawyers were understandably confused regarding the circumstances under which consent may be sought. See id.
In revised paragraph (b)(4), the ABA substituted “informed consent” of the client for “consent after consultation.” The ABA believed that “consultation” did not adequately convey the requirement that the client receive full disclosure of the nature and implications of a lawyer’s conflict of interest. The ABA chose the term “informed consent” because it already has a fairly well-accepted meaning in other contexts. That term, which is used throughout the Rules in place of “consent after consultation,” is defined in Rule 1.0(e).
Comments to ABA Model Rule 1.7
[1] Loyalty and independent judgment are essential elements in the lawyer’s relationship to a client. Concurrent conflicts of interest can arise from the lawyer’s responsibilities to another client, a former client or a third person or from the lawyer’s own interests. For specific Rules regarding certain concurrent conflicts of interest, see Rule 1.8. For former client conflicts of interest, see Rule 1.9. For conflicts of interest involving prospective clients, see Rule 1.18. For definitions of “informed consent” and “confirmed in writing,” see Rule 1.0(e) and (b).
[4] If a conflict arises after representation has been undertaken, the lawyer ordinarily must withdraw from the representation, unless the lawyer has obtained the informed consent of the client under the conditions of paragraph (b). See Rule 1.16. Where more than one client is involved, whether the lawyer may continue to represent any of the clients is determined both by the lawyer’s ability to comply with duties owed to the former client and by the lawyer’s ability to represent adequately the remaining client or clients, given the lawyer’s duties to the former client. See Rule 1.9. See also Comments [5] and [29].
[6] Loyalty to a current client prohibits undertaking representation directly adverse to that client without that client’s informed consent. Thus, absent consent, a lawyer may not act as an advocate in one matter against a person the lawyer represents in some other matter, even when the matters are wholly unrelated. The client as to whom the representation is directly adverse is likely to feel betrayed, and the resulting damage to the client-lawyer relationship is likely to impair the lawyer’s ability to represent the client effectively. In addition, the client on whose behalf the adverse representation is undertaken reasonably may fear that the lawyer will pursue that client’s case less effectively out of deference to the other client, i.e., that the representation may be materially limited by the lawyer’s interest in retaining the current client. Similarly, a directly adverse conflict may arise when a lawyer is required to cross-examine a client who appears as a witness in a lawsuit involving another client, as when the testimony will be damaging to the client who is represented in the lawsuit. On the other hand, simultaneous representation in unrelated matters of clients whose interests are only economically adverse, such as representation of competing economic enterprises in unrelated litigation, does not ordinarily constitute a conflict of interest and thus may not require consent of the respective clients.
Lawyer’s Responsibilities to Former Clients and Other Third Persons
[9] In addition to conflicts with other current clients, a lawyer’s duties of loyalty and independence may be materially limited by responsibilities to former clients under Rule 1.9 or by the lawyer’s responsibilities to other persons, such as fiduciary duties arising from a lawyer’s service as a trustee, executor or corporate director.
[10] The lawyer’s own interests should not be permitted to have an adverse effect on representation of a client. For example, if the probity of a lawyer’s own conduct in a transaction is in serious question, it may be difficult or impossible for the lawyer to give a client detached advice. Similarly, when a lawyer has discussions concerning possible employment with an opponent of the lawyer’s client, or with a law firm representing the opponent, such discussions could materially limit the lawyer’s representation of the client. In addition, a lawyer may not allow related business interests to affect representation, for example, by referring clients to an enterprise in which the lawyer has an undisclosed financial interest. See Rule 1.8 for specific Rules pertaining to a number of personal interest conflicts, including business transactions with clients. See also Rule 1.10 (personal interest conflicts under Rule 1.7 ordinarily are not imputed to other lawyers in a law firm).
Interest of Person Paying for a Lawyer’s Service
[13] A lawyer may be paid from a source other than the client, including a co-client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer’s duty of loyalty or independent judgment to the client. See Rule 1.8(f). If 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 payer who is also a co-client, then the lawyer must comply with the requirements of paragraph (b) before accepting the representation, including determining whether the conflict is consentable and, if so, that the client has adequate information about the material risks of the representation.
[14] Ordinarily, clients may consent to representation notwithstanding a conflict. However, as indicated in paragraph (b), some conflicts are nonconsentable, meaning that the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent. When the lawyer is representing more than one client, the question of consentability must be resolved as to each client.
[17] Paragraph (b)(3) describes conflicts that are nonconsentable because of the institutional interest in vigorous development of each client’s position when the clients are aligned directly against each other in the same litigation or other proceeding before a tribunal. Whether clients are aligned directly against each other within the meaning of this paragraph requires examination of the context of the proceeding. Although this paragraph does not preclude a lawyer’s multiple representation of adverse parties to a mediation (because mediation is not a proceeding before a “tribunal” under Rule 1.0(m)), such representation may be precluded by paragraph (b)(1).
[21] A client who has given consent to a conflict may revoke the consent and, like any other client, may terminate the lawyer’s representation at any time. Whether revoking consent to the client’s own representation precludes the lawyer from continuing to represent other clients depends on the circumstances, including the nature of the conflict, whether the client revoked consent because of a material change in circumstances, the reasonable expectations of the other client and whether material detriment to the other clients or the lawyer would result.
[23] Paragraph (b)(3) prohibits representation of opposing parties in the same litigation, regardless of the clients’ consent. On the other hand, simultaneous representation of parties whose interests in litigation may conflict, such as coplaintiffs or codefendants, is governed by paragraph (a)(2). A conflict may exist by reason of substantial discrepancy in the parties’ testimony, incompatibility in positions in relation to an opposing party or the fact that there are substantially different possibilities of settlement of the claims or liabilities in question. Such conflicts can arise in criminal cases as well as civil. The potential for conflict of interest in representing multiple defendants in a criminal case is so grave that ordinarily a lawyer should decline to represent more than one codefendant. On the other hand, common representation of persons having similar interests in civil litigation is proper if the requirements of paragraph (b) are met.
[26] Conflicts of interest under paragraphs (a)(1) and (a)(2) arise in contexts other than litigation. For a discussion of directly adverse conflicts in transactional matters, see Comment [7]. Relevant factors in determining whether there is significant potential for material limitation include the duration and intimacy of the lawyer’s relationship with the client or clients involved, the functions being performed by the lawyer, the likelihood that disagreements will arise and the likely prejudice to the client from the conflict. The question is often one of proximity and degree. See Comment [8].
[28] Whether a conflict is consentable depends on the circumstances. For example, a lawyer may not represent multiple parties to a negotiation whose interests are fundamentally antagonistic to each other, but common representation is permissible where the clients are generally aligned in interest even though there is some difference in interest among them. Thus, a lawyer may seek to establish or adjust a relationship between clients on an amicable and mutually advantageous basis; for example, in helping to organize a business in which two or more clients are entrepreneurs, working out the financial reorganization of an enterprise in which two or more clients have an interest or arranging a property distribution in settlement of an estate. The lawyer seeks to resolve potentially adverse interests by developing the parties’ mutual interests. Otherwise, each party might have to obtain separate representation, with the possibility of incurring additional cost, complication or even litigation. Given these and other relevant factors, the clients may prefer that the lawyer act for all of them.
[29] In considering whether to represent multiple clients in the same matter, a lawyer should be mindful that if the common representation fails because the potentially adverse interests cannot be reconciled, the result can be additional cost, embarrassment and recrimination. Ordinarily, the lawyer will be forced to withdraw from representing all of the clients if the common representation fails. In some situations, the risk of failure is so great that multiple representation is plainly impossible. For example, a lawyer cannot undertake common representation of clients where contentious litigation or negotiations between them are imminent or contemplated. Moreover, because the lawyer is required to be impartial between commonly represented clients, representation of multiple clients is improper when it is unlikely that impartiality can be maintained. Generally, if the relationship between the parties has already assumed antagonism, the possibility that the clients’ interests can be adequately served by common representation is not very good. Other relevant factors are whether the lawyer subsequently will represent both parties on a continuing basis and whether the situation involves creating or terminating a relationship between the parties.
[34] A lawyer who represents a corporation or other organization does not, by virtue of that representation, necessarily represent any constituent or affiliated organization, such as a parent or subsidiary. See Rule 1.13(a). Thus, the lawyer for an organization is not barred from accepting representation adverse to an affiliate in an unrelated matter, unless the circumstances are such that the affiliate should also be considered a client of the lawyer, there is an understanding between the lawyer and the organizational client that the lawyer will avoid representation adverse to the client’s affiliates, or the lawyer’s obligations to either the organizational client or the new client are likely to limit materially the lawyer’s representation of the other client.
This rule implements one of the fundamental duties attendant to the lawyer-client relationship–the duty of loyalty. As a loyal fiduciary who must faithfully champion his clients’ causes, a lawyer must avoid conflicts between the interests of his current clients and those of other persons, including the lawyer himself, his other current clients, past clients, and third parties. Unidentified or unresolved conflicts may lead to professional discipline, disqualification, fee forfeiture and malpractice liability. See Restatement (Third) of the Law Governing Lawyers § 121 cmt. f (2000).
Conflicts Involving a Lawyer’s Personal Interest
A lawyer may not represent a client if that representation is materially and adversely affected by the lawyer’s financial or other personal interests. See, e.g., Restatement (Third) of the Law Governing Lawyers § 125 (2000). Although there exists no per se prohibition against engaging in sexual relations with clients in Louisiana,[*1. Compare La. Rules of Professional Conduct Rule 1.8(j) (2004) ("Reserved") with Model Rules of Professional Conduct Rule 1.8(j).*] such relationships sometimes can present a conflict between the lawyer’s personal interest in the relationship and the client’s interests. See ABA Comm. on Ethics and Professional Responsibility, Formal Op. 92-364 (1992). The Louisiana Supreme Court has disciplined lawyers when personal relationships have interfered with their ability to exercise independent professional judgment and to render candid advice. See, e.g., In re DeFrancesch, 877 So. 2d 71 (La. 2004) (sanctioning lawyer for inappropriate sexual relations with client despite the existence of a preexisting relationship); In re Schambach, 726 So. 2d 892 (La. 1999); In re Ashy, 721 So. 2d 859 (La. 1998); In re Ryland, 985 So.2d 71 (La. 2008).
A lawyer typically may not represent a client in litigation if the lawyer will be called upon to cross-examine another (current or former) client as an adverse witness during the course of trial. See State v. Cisco, 861 So. 2d 118, 129-30 (La. 2003); see also ABA Comm. on Ethics and Professional Responsibility, Formal Op. 92-367 (1992).
Conflicts in Insurance Defense Practice
Liability insurance policies typically require the insurer to indemnify and to defend the insured for covered claims. Because Louisiana’s direct-action statute permits the assertion of claims against liability insurers, see, e.g., La. Rev. Stat. Ann. § 22:655, Louisiana lawyers often represent both the insured and the insurer in litigation. As a result, the conflicts issues that arise in Louisiana insurance defense practice are potentially more vexing than those in jurisdictions that do not permit direct actions. Joint representation of the insured and insurer typically does not present a conflict of interest. After all, both the insured and the insurer have a common interest–resolving the claim quickly and inexpensively. However, in at least three instances, the interests of the insured and the insurer may diverge.
First, the interests of the insured and the insurer conflict when the insurer contends that there is no coverage for the claim asserted against the insured. In such a circumstance, the insurer typically provides a defense to the insured, but does so under a “reservation of rights.” It is absolutely clear that a lawyer may not represent both the insured and insurer when the insurer denies coverage or reserves its right to deny coverage at a later date. See, e.g., Storm Drilling Co. v. Atlantic Richfield Corp., 386 F. Supp. 830, 832 (E.D. La. 1974); Belanger v. Gabriel Chem., Inc., 787 So. 2d 559, 565 (La. Ct. App. 1st Cir. 2001) (“If an insurer chooses to represent the insured but deny coverage, separate counsel must be employed.”).
Second, the interests of the insured and the insurer conflict when the claimant offers to settle a claim for an amount at or below policy limits, but the insurer prefers instead to press the matter to trial, potentially exposing the insured to a judgment in excess of policy limits. (As a practical matter, the increased risk to the insurance company of incurring liability for “bad faith” has reduced the occurrence of this conflict.) The lawyer in this situation must report the settlement offer to the insured and then determine whether continued representation of either the insured or the insurance company is appropriate.
Third, the interests of the insured and the insurer conflict when the insurer attempts to interfere with the lawyer’s professional judgment in the handling of a matter on behalf of the insured. See also La. Rules of Professional Conduct Rule 1.8(f) (2004) (prohibiting lawyers from accepting compensation from third party when doing so interferes with the lawyer’s professional judgment). For example, if the insurer directs the lawyer to limit the number of depositions taken in a matter and the lawyer believes that complying with that directive will result in incompetent representation of the insured, then the lawyer must consult with the insured and take appropriate action. See Restatement (Third) of the Law Governing Lawyers § 134(2)(a) (2000). Depending upon the circumstances, the lawyer facing such a conflict may make arrangements with the insured to pay for the necessary depositions, or withdraw from the representation.
Conflicts in Criminal Defense Practice
Conflicts that arise in criminal litigation present not only disciplinary issues but constitutional ones as well. Every accused individual has a Sixth Amendment right to conflict-free counsel. See, e.g., State v. Tensley, 955 So. 2d 227, 245 (La. App. 2d Cir. 2007); Wheat v. United States, 486 U.S. 153 (1988); Holloway v. Arkansas, 435 U.S. 475 (1978). Absent the informed consent of all affected clients, a lawyer in a criminal matter may not represent more than one accused person in the same matter. See Restatement (Third) of the Law Governing Lawyers § 129 (2000). In 2006, the Louisiana Supreme Court disciplined a criminal defense attorney for breaching his duty of loyalty to his client by giving legal advice to his client’s co-defendant. In re John, 924 So. 2d 990, 990 (La. 2006) (the lawyer also violated Rule 1.4(a)(1) for advising the co-defendant without his client’s informed consent).
Conflicts in Criminal Prosecution Practice
In many Louisiana jurisdictions, prosecutors are permitted to maintain private practices in addition to their prosecutorial function. The Louisiana Supreme Court has established a bright-line rule as to how such prosecutors must avoid potential conflicts of interest between their governmental clients and their private clients: “[I]n order to comply with the Rules of Professional Conduct, a district attorney must immediately withdraw from the civil representation of a client when there is substantial reason to believe that charges of criminal conduct have been or will be filed by or against the civil client.” In re Caillouet, 800 So. 2d 367, 370 (La. 2001) (quoting In re Toups, 773 So. 2d 709, 716 (La. 2000)) (internal quotation omitted). This rule applies “even if the criminal charges are unrelated to the civil representation.” Id. See also, In re Smith, 2010 WL 936225, 2009-2447 (La. 3/5/10) (suspending an Orleans Parish assistant district attorney for one year for representing criminal defendants in that same parish).
Conflicts in Representing Business Organizations
When a lawyer represents a corporation, a limited liability company or other business organization, the lawyer owes the duty of loyalty to the organization rather than to its constituents. See La. Rules of Professional Conduct Rule 1.13(a) (2004); see Desire Narcotics Rehab. Ctr., Inc. v. White, 732 So. 2d 144, 146-47 (La. Ct. App. 4th Cir. 1999). Because a lawyer representing an organization owes the organization a duty of loyalty, the lawyer generally must not represent another client if that representation would be adverse to the organization or would materially limit the lawyer’s representation of the organization. See, e.g., Restatement (Third) of the Law Governing Lawyers § 131 (2000). From time to time, a lawyer may be called upon to represent a constituent of an organization. For example, a lawyer may be asked to represent an individual director or officer of a corporation or a general partner in a limited partnership. Such a constituent may have interests that materially diverge from or conflict with the interests of the organization. A lawyer for the organization should not represent the interests of such a constituent against the organization unless (1) the lawyer reasonably believes that he or she can competently represent all interested persons, and (2) the lawyer obtains the informed consent, preferably in writing, from all interested persons. Moreover, the lawyer must obtain the organization’s informed consent from an appropriate official within the organization other than the constituent whom the lawyer seeks to represent. See La. Rules of Professional Conduct Rule 1.13 (g) (2004) (applying Rule 1.7 to potential conflicts involving representation of an organization’s constituents).
Curing Conflicts
Many, but not all, conflicts can be resolved through obtaining the consent of the affected client or clients. As to conflicts that can be resolved through client consent–consentable conflicts–the client’s consent must be informed to be effective. “Informed” consent requires that the lawyer consult with each affected client, and in so doing, communicate reasonably adequate information about the material risks of and reasonably available alternatives to the otherwise problematic representation. What information will be reasonably adequate in any given case will vary with the circumstances. However, the lawyer should typically discuss the following with the affected clients: the conflicting interests; the “contingent, optional, and tactical considerations and alternative courses of action that would be foreclosed or made less readily available by the conflict”; any “material reservations” that a disinterested lawyer representing the affected client might reasonably harbor; and, the possibility and consequences of a future withdrawal of consent by the affected clients. See Restatement (Third) of the Law Governing Lawyers § 122 cmt. c(i) (2000). Furthermore, the lawyer should discuss the effect of the proposed representation on confidential client information. Finally, the lawyer should make it clear that the affected client is free to decline to consent to the conflict.
Some conflicts of interest, however, cannot be resolved through the informed consent of the affected clients. A conflict is consentable only if a reasonable, disinterested lawyer would believe that the representation will not be adversely affected by potentially conflicting interests. If no reasonable lawyer would have such a belief, the conflict is considered to be “nonconsentable.” See Restatement (Third) of the Law Governing Lawyers § 122(2)(c) (2000). Furthermore, under paragraph (b)(3) of Louisiana Rule of Professional Conduct 1.7, a lawyer may never simultaneously represent opposing parties in litigation. Such conflicting-interest representations are now per se[*2. Prior to the 2004 revision of Rule 1.7, the Louisiana Rules of Professional Conduct classified no subset of direct-adversity conflicts as per se nonconsentable. Rather, the consentability of all direct-adversity conflicts was determined on a case-by-case basis using a rule of reason. See, e.g., Grant v. Grant, 734 So. 2d 68 (La. Ct. App. 2d Cir. 1999) ("Rule 1.7 allows a client to consent" to a direct adversity conflict "after consultation").*] nonconsentable. See La. Rules of Professional Conduct Rule 1.7(b)(3) (2004).
A lawyer sometimes may attempt to cure a potential conflict of interest by dropping a current client like a “hot potato” in order to undertake the representation of another, perhaps more lucrative, client in another matter. See Ronald D. Rotunda, Legal Ethics § 8-5 (2000). By doing so, the lawyer hopes to convert a “current” client into a “former” client whom he may then permissibly sue in an unrelated matter. See La. Rules of Professional Conduct Rule 1.9(a) (2004). However, when the lawyer’s primary motivation for dropping the current client is the desire to represent the prospective client, the discharge often will not cure the conflict. See Restatement (Third) of the Law Governing Lawyers § 132 cmt. c (2000).
Absent aggravating or mitigating circumstances, the following sanctions are generally appropriate in cases involving conflicts of interest: disbarment, when the lawyer without informed consent undertakes representation of a client when he knows that doing so presents a conflict of interest, the lawyer intends to benefit himself or another, and the lawyer causes serious or potentially serious injury to the client; suspension, when the lawyer knows of a conflict of interest, does not fully consult with the client about it, and the lawyer causes injury or potential injury to the client; reprimand, when the lawyer is negligent in determining whether a conflict exists, and the lawyer causes injury or potential injury to the client; and, admonition, when the lawyer engages in an isolated instance of negligence in determining whether the representation may present a conflict of interest, and the lawyer’s conduct causes little or no actual or potential injury to the client. See ABA Stds. for Imposing Lawyer Sanctions std. 4.3 (1992).