Tricky Business: Representing Clients with Adverse Interests

470754185As a matter of professional responsibility, California attorneys must avoid conflicts of interest with current and former clients. Beyond these ethical obligations, there are also practical reasons to avoid a new client who is or may be adverse to a current or former client.

California Rules of Professional Conduct 3-300, 3-310 3-320, 3-600 require attorneys to avoid conflicts of interest with current and former clients, but allow for a conflicts waiver. There can be advantages to getting this waiver and representing clients with adverse interests: the old client knows that the new client’s lawyers won’t be unnecessarily litigious and the new client knows that you have a working relationship with the old client.

But there’s also the risk that the new and old clients will make assumptions that you’ll somehow handle the matter differently than you would if you were litigating or negotiating the matter against an unknown third party. For example, the new client may worry that you won’t pursue the matter as aggressively as you would if it weren’t adverse to the old client, and the old client may hope that this will be the case! This may be an issue even with a former client, because you may have an interest in getting more business from that client in the future.

If you decide to get a conflicts waiver, make sure to

  • assure the new client that your entire loyalty in this matter is with them, and
  • ensure that the old client doesn’t receive, and knows that he or she won’t receive, any information or consideration from you to which the old client wouldn’t otherwise be entitled as an opposing or otherwise adverse party.

Before problems can arise, consider whether it would be practical or effective to install an “ethical wall” between those in your firm working for the new client and those working for the old client. Typical structural elements of an ethical wall include

  • physical and departmental separation of attorneys,
  • prohibitions against and sanctions for discussions of confidential matters,
  • rules preventing access to inappropriate files,
  • compensation mechanisms that prevent counsel from participating in profits from walled-off matters, and
  • continuing ethical education.

If you find that your representation of adverse clients does become problem, first clarify the situation with both clients in writing and, if the situation doesn’t improve, consider withdrawing as counsel in the matter.

For more on getting client consent to representation after disclosing a conflict of interest, including sample conflict waiver forms, turn to CEB’s Fee Agreement Forms Manual, chapter 1 and California Client Communications Manual: Sample Letters and Forms, chapter 4. On dealing with conflicts of interest (including building an ethical wall), check out CEB’s California Civil Procedure Before Trial, chapter 2.

Related CEB blog posts:

© The Regents of the University of California, 2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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