Opinion ID: 835263
Heading Depth: 1
Heading Rank: 10

Heading: Current-client conflict

Text: DR 5-105(E) (1997) provided that a lawyer shall not represent multiple current clients when such representation would result in an actual or likely conflict. An `actual conflict of interest' exists when the lawyer has a duty to contend for something on behalf of one client that the lawyer has a duty to oppose on behalf of another client. DR 5-105(A)(1). A `likely conflict of interest' exists in all other situations in which the objective personal, business or property interests of the clients are adverse. DR 5-105(A)(2). If the current conflict was actual, then representation of both clients was prohibited, but if the current conflict was not actual, then representation was permitted if the clients consented after full disclosure. DR 5-105(F) (1997). The Bar argues that an actual conflict of interest existed when the accused represented both MLP, as debtor, and the investor partnerships, as creditors, in the Chapter 7 proceeding. The Bar advances that, in such circumstances, the debtor seeks to minimize its assets, while the creditor seeks to maximize them. However, when the accused initially agreed to represent MLP, he understood that the purpose of his representation would be to assist bankruptcy counsel in filing a motion to dismiss the bankruptcy proceeding altogether. The accused maintains that MLP and the investor partnerships had congruent interests in achieving dismissal because, if they were successful in doing so, they would preserve the herds from the claims of the Derbes creditors and the reach of the United States Trustee. We agree with the Bar that the test of whether there is an actual conflict of interest is objective, rather than subjective. See In re Cohen, 316 Or. 657, 662, 853 P.2d 286 (1993) (whether conflict exists depends on client's objective interests). We disagree, however, that the investor partnerships were necessarily creditors of MLP before the order for relief was entered. Until that time, the efforts of both parties were directed toward the goal of dismissing the bankruptcy. When the order for relief was entered, Hoyt instructed the accused to withdraw. However, the bankruptcy court requested that the accused continue in his role as local counsel to provide assistance to the court. The accused acceded to the court's request, explained the potential conflict that that presented in a letter to both sets of clients, and obtained their consent to his continued representation. [18] The Bar contends that the accused's disclosure of the potential conflict was insufficient. DR 10-101(B) (1997) defined full disclosure to mean an explanation sufficient to apprise the recipient of the potential adverse impact on the recipient of the matter to which the recipient is asked to consent, including a required recommendation that the recipient seek independent legal advice, confirmed contemporaneously in writing. The Bar argues that the accused failed to confirm in writing his recommendation that MLP seek independent legal advice. The Bar's argument is not well taken. The accused's July 1997 letter discussing the potential conflict issues was addressed to three of Hoyt's independent attorneys, as well as to Hoyt and Blackburn. That letter laid out the potential conflict and ended with the request, I would appreciate your advice and assistance in determining the appropriate role for me in these cases. We agree with the Bar that lawyers are required to abide by the black letter of DR 10-101(B) and that compliance with its spirit alone is insufficient. See In re Lawrence, 332 Or. 502, 512, 31 P.3d 1078 (2001) (accused's failure to confirm advice that client obtain independent legal advice in writing not obviated because accused arranged for client to consult with another lawyer). However, in our view, the accused in this case did meet the rule's requirement, as well as its purpose. The accused set forth the facts that created the potential conflict in a letter to his client and to independent counsel selected by his client and asked counsel to provide advice as to the potential conflict presented. 2. Former-client conflict When the accused learned, in late October 1997, that the interests of the investor partnerships and MLP had changed from interests that potentially could conflict to interests that did, by then, actually conflict, he renewed his motion to withdraw as attorney for MLP. After the bankruptcy court allowed the accused to withdraw, he continued to represent the investor partnerships in the Chapter 7 proceeding. DR 5-105(C) (1997) provided that a lawyer who has represented a client in one matter is prohibited from subsequently representing another client in the same matter when the interests of the current and former clients are in likely conflict, unless the lawyer obtains the client's consent after full disclosure from both the former client and the current client. According to the Bar, the accused's disclosure of the conflict that he concedes was likely was inadequate, because he did not reveal to the bankruptcy trustee, who represented the interests of MLP, that the investor partnerships had made payments to the accused and to Hoyt entities that instead should have been directed to MLP. The Bar's argument is not well taken. A lawyer who recognizes a likely conflict is required to advise the client of the potentially adverse consequences of the multiple representation, not of all facts known to him that could be helpful to the former client. DR 10-101(B); see In re Brandt/Griffin, 331 Or. 113, 135, 10 P.3d 906 (2000) (lawyer must provide disclosure sufficient to apprise client of adverse consequences and permit independent counsel to assess the conflict). In the affidavit that the accused filed in support of his motion to withdraw, the accused notified the trustee of the nature of the conflict, i.e., that the interests of MLP and the investor partnerships could diverge and that he could not advocate for both. The trustee gave his consent to the accused's continued representation, because the trustee determined that it was essential that he have one representative of the investors with whom he could communicate, given that 2,500 individual investors could be affected by the bankruptcy proceeding. The trustee may have benefitted had the accused also disclosed information about payments by investors or investor partnerships that would have assisted him in marshaling MLP assets, but that is not information that the accused was required to disclose to comply with conflict of interest rules. Finally, the Bar complains that the accused failed to comply with the requirement that he recommend that the trustee obtain independent legal advice and confirm that recommendation in writing as defined by DR 10-101(B)(2). The Bar is correct factually, and the Bar is also correct, as we have noted, that compliance with the letter of the rule is required. See In re Leuenberger, 337 Or. 183, 212, 93 P.3d 786 (2004) (lawyer did not advise client to seek independent counsel regarding his conflict of interest and did not confirm advice in writing); Lawrence, 332 Or. at 512, 31 P.3d 1078 (court rejected lawyer's argument that he complied with spirit rather than the letter of DR 10-101 in failing to advise client in writing of the potential conflict of interest); In re Barber, 322 Or. 194, 196, 904 P.2d 620 (1995) (lawyer sanctioned because he never disclosed in writing the nature and extent of a likely or actual conflict of interest, nor did he advise his clients to seek independent legal advice to determine whether consent to continued joint representation should be given); In re Altstatt, 321 Or. 324, 330-31, 897 P.2d 1164 (1995) (lawyer, who was both indebted to and representing estate, failed to make full disclosure in writing); Cohen, 316 Or. at 662, 853 P.2d 286 (lawyer represented both husband and wife in juvenile proceeding, in which authorities accused husband of mistreating wife's daughter, and failed to make full disclosure in writing); In re McKee, 316 Or. 114, 129-30 & n. 15, 849 P.2d 509 (1993) (lawyer filed slander-of-title action against former client without making full disclosure in writing). In each of those cases, the client the lawyer was required to advise of the potential conflict was a client of the lawyer with whom the lawyer had had a direct and continuing relationship. In each case, the rule required the lawyer to inform the client both orally and in writing that the client should seek independent legal advice, and the lawyer failed to do so. Here, the Bar contends that the accused failed to advise his former client, MLP, to seek independent legal advice. The bankruptcy court had put a trustee in control of MLP's affairs, and the trustee, who was an experienced government lawyer, also represented the bankruptcy estate. Only the trustee could decide, on behalf of the estate, whether to assent to the accused's continued representation of the investor partnerships. The trustee and the estate never had been clients of the accused and never had relied upon him to make decisions on their behalf. The circumstances of this case are unique in that the bankruptcy court specifically had appointed the trustee to provide the independent legal advice of which DR 10-101 speaks. Therefore, the accused was not required to advise the trustee to seek other advice on MLP's behalf. We find no violation of DR 5-105(C) or DR 10-101(B)(2).