Opinion ID: 2604253
Heading Depth: 1
Heading Rank: 4

Heading: petitioner's conduct

Text: DR 5-105 is the conflict of interest rule applicable to members of the Oregon State Bar. It describes a lawyer's duty of loyalty in situations where that loyalty could be divided by competing interests. Among other things, the rule addresses a lawyer's simultaneous representation of two clients whose interests are, or likely will be, adverse. Representing clients in actual conflict is barred by the rule; representing clients whose interests are likely to conflict is permitted, but only with the informed consent of both clients. DR 5-105. KAO alleged that petitioner had both actual and likely conflicts. The Court of Appeals decided that he had a likely conflict. [13] Kidney Association of Oregon v. Ferguson, supra, 97 Or.App. at 125, 775 P.2d 1383. As noted above, an analysis of petitioner's conduct under DR 5-105 is relevant to this case only because representation of multiple clients in violation of the disciplinary rules may be evidence of a breach of loyalty. Tracking the methodology used in discipline cases, and the conduct proscribed by DR 5-105, the first step in analyzing whether a lawyer, in the representation of clients with a potential conflict of interest, actually breached a fiduciary duty to a client, is to determine whether the lawyer simultaneously represented the clients with allegedly opposing interests. We conclude that petitioner represented the personal representative and the beneficiary (KAO) concurrently during the administration of the Ragan estate. The existence of a lawyer-client relationship primarily is determined by the reasonable expectation of the client that the lawyer will perform legal work in the client's behalf. In re Weidner, 310 Or. 757, 770, 801 P.2d 828 (1990). The existence of the relationship does not depend upon payment of fees and can be inferred by conduct of the parties. In re Mettler, 305 Or. 12, 18, 748 P.2d 1010 (1988). Throughout his term of service on the KAO board, petitioner regularly advised KAO on legal matters, including the probate of estates in which KAO was a beneficiary. One of his partners had a similar relationship with KAO when petitioner's term ended. Although KAO did not pay petitioner or his partner to be its lawyer, we infer that petitioner's firm had a lawyer-client relationship with KAO in respect of the Ragan estate through most of, if not all, the estate's administration. The existence of a lawyer-client relationship between petitioner and the personal representative is not disputed. The second step in analyzing the existence of a conflict of interest is to assess the adversity of the interests. We disagree with the Court of Appeals that there was a likely conflict between petitioner's two clients during the administration of the estate. Petitioner's clients were, respectively, the personal representative and the sole beneficiary of a single estate. By definition, a personal representative owes a duty of loyalty to the beneficiary's interests and shares the common goal of prompt and efficient distribution of estate assets. See ORS 114.265 (a personal representative has a statutory duty to preserve, settle and distribute the estate    as expeditiously and with as little sacrifice of value as is reasonable under the circumstances). It was conceivable at the outset that a conflict could develop, but a theoretical potential for conflict is not a likely conflict. [14] See In re Johnson, 300 Or. 52, 58-60, 707 P.2d 573 (1985) (distinguishing among actual, likely, and unlikely conflicts). A lawyer need not assume that a client is likely to breach a duty nor need a lawyer foresee all possible future conflicts among clients whose interests are common at the time of representation. In re Samuels/Weiner, 296 Or. 224, 674 P.2d 1166 (1983). Of course, a conflict of interest may develop at any time during a lawyer's representation of two clients. In re Johnson, supra, 300 Or. at 59-60, 707 P.2d 573. The Court of Appeals concluded that a likely conflict arose when [petitioner] became aware of the pending litigation [initiated against the estate by the former owners of the Laurelhurst Apartments] and potential diminishment in value of the major asset of the estate. Kidney Association of Oregon v. Ferguson, supra, 100 Or.App. at 527, 786 P.2d 754. The Court of Appeals reasoned that a likely conflict existed when petitioner knew that legal expenses incurred by the estate to settle the litigation could drain the estate of any assets that would inure to KAO. Id. Thus, under the analysis of the Court of Appeals, a personal representative's interest in paying an estate's bills conflicts with a beneficiary's interest in proper distribution of the estate. This cannot be correct. A personal representative is a fiduciary of an estate's beneficiaries. The representative's personal interest in the estate is limited to receipt of a statutorily-established fee based on the value of the estate. See ORS 116.173 (formula for compensation of personal representative). If a personal representative's negligent or intentional act or omission, or his unauthorized self-dealing, causes a loss to the estate, the personal representative is personally liable. ORS 116.063(3). No self-dealing, negligence, or wrongful conduct of the personal representative has been alleged in this case. The personal representative is not liable for declining asset values or escalating expenses for which the personal representative bears no fault. ORS 116.073(2). We conclude that, in this case, the estate's unexpectedly-increased expenses were caused by factors outside the control of the personal representative and were not attributable to the personal representative's conduct. Therefore, the personal representative's approval of the expenses related to the dispute over the Laurelhurst Apartments did not pit his interests against the interests of KAO. Petitioner's two clients shared a common interest in maximizing distribution to KAO. This did not change when the costs of estate administration increased. As the SPRB concluded, petitioner did not violate DR 5-105. Moreover, we conclude that petitioner did not breach a duty to the Ragan estate or to the personal representative during the administration of the estate. The probate court reduced petitioner's fees in this case after considering the factors listed in ORS 116.183. The probate court was not obliged to further reduce fees or deny them because of an alleged, but unsubstantiated, breach of loyalty. The probate court properly exercised its discretion in allowing petitioner's attorney fees.