Your cases may be filled with conflict, but make sure that they don’t include conflicts of interest. It’s most important to avoid conflicts of interest, but you also have to know what to do when they arise. And there’s a big stick involved with getting it wrong.
The key to conflict avoidance is having a system in place. A conflicts check system allows you to identify potential conflicts problems before accepting employment. The system should provide for checking names of current and former clients, corporate parents and affiliates of current and former clients, principal officers and directors, fictitious business names, persons who have consulted with your firm, current or former adversaries, nonclients who have a substantial economic relationship with your firm (e.g., CPAs), and companies or institutions for whom you or other attorneys in your firm have served or are serving as directors, officers, or trustees. Many attorneys also include opposing counsel in pending matters on the conflict list.
If you spot a conflict of interest, you need to consider your alternatives for resolving it. Conflicts problems can be resolved in various ways, depending on the stage of recognition and the manner in which they are handled, including:
- Declining to accept representation of a prospective client whose interests may be adverse to another client.
- Full disclosure to the client (or former client) and the client’s (or former client’s) written consent to the employment despite the conflict or potential conflict.
- The attorney’s voluntary withdrawal.
- The attorney’s forced withdrawal, i.e., disqualification, if the court finds a conflicts situation and grants the motion for disqualification.
When in doubt about the ethics of a potential conflict of interest, consider requesting information from the California State Bar’s Ethics Hotline or obtaining an opinion letter from private counsel specializing in legal ethics. An attorney’s documented effort to obtain such guidance coupled with the attorney’s subsequent compliance with that advice will create a record showing a good faith effort to comply with professional standards, thus minimizing the chances of being disciplined for “willful breach” of the rules. See Cal Rules of Prof Cond 1-100.
To underscore the seriousness of the conflict of interest rules, the effect of breaching them can be devastating, including:
- Disqualification. A finding of a conflict of interest may result in disqualification (i.e., forced withdrawal from further representation of the client in the particular matter) and may jeopardize the client’s interests.
- State Bar Discipline. Willful breach of any of the rules against conflicts of interest may subject the attorney to State Bar disciplinary sanctions. See Cal Rules of Prof Cond 1-100, 1-110. See also Bus & P C §§6077-6078; Cal Rules of Ct 9.19.
- Refunding Attorney Fees. The attorney or firm found to have breached conflict of interest rules can be required to return or forgo fees. A. I. Credit Corp. v Aguilar & Sebastinelli (2003) 113 CA4th 1072, 1079, 6 CR3d 813. Similarly, a retainer agreement may be voidable for public policy reasons if the attorney violates the rules proscribing representation adverse to a former client and disclosure of confidences.
- Tort Liability. An attorney who undertakes representation in violation of the conflict of interest rules may, in certain circumstances, be held liable in tort to pay the loss or additional expenses incurred as a proximate result of the improper conduct. See Lysick v Walcom (1968) 258 CA2d 136, 150, 65 CR 406 (attorney’s breach of ethical obligations toward client was breach of duty of care owed by attorney).
The bottom line is this: Know the conflict of interest rules and carefully follow them. For your reference, the rules in the California Rules of Professional Conduct are: Cal Rules of Prof Cond 3-300 (adverse pecuniary interest), 3-310(F) (accepting compensation from nonclient); Cal Rules of Prof Cond 3-310(E) (use of confidential information), 3-310(C) (conflicting concurrent representation); Cal Rules of Prof Cond 3-320 (relationship with other party’s lawyer); Cal Rules of Prof Cond 3-600 (organization as a client).
For excellent coverage of conflicts of interest and how to avoid them, turn to CEB’s California Civil Procedure Before Trial, chap 2. Also check out CEB’s program Conflicts of Interest Arising from Successive Matters, available On Demand and providing 1 hour of MCLE credit in legal ethics.
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