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Conflict of Interest - Part 3

Posted 10/7/08  

Have you ever had your shield turned into a sword, and then used against you?

What does every lawyer think is the shield that protects the lawyer from discipline because of a conflict of interest? The client's consent to waive the conflict.

Let me start by observing that there are some conflicts of interest that cannot be waived by the client, no matter what. Like representing opposing parties in the same lawsuit or preparing an instrument giving the lawyer a substantial gift from a non-relative client. Most other conflicts of interest, however, can be waived by the client. A client's waiver would, for example, permit a lawyer to represent Client A in a substantially related matter in which Client A's interest is materially and directly adverse to the interest of Client B. As we discussed last month, a lawyer could even represent opposing parties in a non-litigation dispute, as an intermediary, pursuant to Rule 1.07, with the two clients' consent.

In each of these instances, it is the client's agreement that permits the lawyer to go forward without risk to her law license. So, how do you secure the client's consent?

First, the consent always, always, always, has to be in writing. The fact that the Rule requires conflict waivers to be in writing really only codifies what we already instinctively know: if the lawyer says the client orally consented and the client denies the oral consent, the client is probably telling the truth.

Having secured the client's signature on a letter that waives the conflict of interest, some lawyer's believe that they now have the impenetrable shield to protect them from allegations of improper, unethical behavior. How then, can this shield be turned into a sword against the lawyer? Here's how.

Virtually every time the Disciplinary Rules refer to client consent to waive a conflict of interest, you will find some form of the following words: "after full and complete disclosure to the client." As Hamlet said, "Ah, there's the rub." Failure to make full disclosure to the client invalidates the consent every time.

Typically, there is no requirement that the "full disclosure" be in writing, so you end up with the lawyer telling one story about what was disclosed and the client telling a completely different story. Guess who juries and grievance committees are going to believe? Smart lawyers include as a part of the conflict waiver the "full and complete disclosure," so that there is no dispute about what was disclosed. This is a wise practice but is still not without its perils.

My personal experience has been that every disclosure to a client concerning a conflict of interest is unavoidably incomplete and, therefore, fails to satisfy the requirement of full and complete disclosure. Trust me, a motivated adversary can always find something that you failed to disclose. And then the shield no longer protects you.

So, how then does the shield become a sword? When I have a waiver of a conflict of interest letter in a legal malpractice case, I usually mark it Plaintiff's Exhibit #1. Here's what the juries think when they see the waiver of the conflict letter, prepared by you, and signed by your client: "Well, would you looky here. That lawyer knew she was doing something wrong from the start and she talked her client into letting him do it anyway. That sneaky so-and-so!"

And there is your sword, turned against you.

Let me close by saying that there are obviously situations where a conflict can be waived and the client wants to waive the conflict. The best client consent to waive a conflict would have the following components:

• The consent is in writing;
• The letter sets out an honest attempt at full and complete disclosure, which includes the reason for the conflict rule and the consequences of both waiving and not waiving the conflict;
• The letter encourages the client to seek separate counsel to advise the client on whether to waive the conflict;
• The letter offers to pay for the separate counsel to advise the client on whether to waive the conflict, so that the client does not incur additional expense in order to accommodate the lawyer's conflict; and
• The client actually contacts independent counsel (not picked by the lawyer) and after such consultation, waives the conflict.

Now that, my friends, is a shield that can't be turned into a sword.

Randy Johnston, Johnston ♦ Toby, P.C.