Previous
The concept of loyalty to the client pervades every set of rules governing lawyer behavior and is an essential element of the attorney/client relationship. To promote such loyalty, the Canons of Ethics focused on avoiding "conflicts of interest." That term was difficult to define, however, and the Code focused on the attorney's duty to exercise independent professional judgment on behalf of the client. The rules under the Code suggest that by avoiding situations in which the attorney's independent professional judgment is likely to be impaired, the obligation of loyalty to the client can be achieved. The Model Rules have returned to the concept of conflict of interest, but most of the essence of the rules has not changed.
Issues of conflict of interest and exercise of independent professional judgment arise in many contexts at all levels of practice. Conflicts can arise in the advising and counseling stage as well as in litigation; and in choosing clients, lawyers and law firms must keep a watchful eye towards current or future conflicts. Challenges to an attorney's acceptance or continuation of employment can arise in various forums as well. In addition to the potentiality of disciplinary proceedings, issues involving conflicts of interest and independent professional judgment arise in attorney disqualification motions, malpractice cases and in appeal of criminal convictions alleging ineffective assistance of counsel.
Should the setting in which the question arises affect the substantive standards used to address whether a conflict exists and whether it is permissible? Should the Code or Model Rules be used as the relevant "law" in disqualification or malpractice cases involving conflicts? Why or why not? Keep these questions in mind as you read the following materials.
What kind of interests can impair an attorney's independent professional judgment? What are the sources of conflict, both potential and real? These materials will consider the various conflicts that may affect a lawyer's independent judgment and the attempts that have been made to balance the various interests at stake.
The Model Rules address issues of the lawyer’s own interests in Rule 1.7(b) and 1.8. The Missouri Supreme Court has recognized the "inherent danger of becoming personally involved with the affairs of clients, self dealing with clients, and of 'taking a piece of the action."' In re Lowther, 611 S.W. 2d 1, 2 (Mo. banc 1981). The Court there stated: "The attorney, with his superior knowledge and education, can pursue this course only at his peril. It is an area wrought with pitfalls and traps and the Court is without choice other than to hold the attorney to the highest of standards under such circumstances." Id.
Model Rule 1.7(b) prohibits representation where the lawyer's interest may materially limit the lawyer's representation of a client. The proposed Restatement of the Law Governing Lawyers similarly prohibits undertaking or continuing representation if "there is a substantial risk that the lawyer's representation of the client would be materially and adversely affected by the lawyer’s financial or other personal interests. Restatement, § 206 (1996).
D.R. 5-101(A), the predecessor to Model Rule 1.7(b), was utilized to discipline attorneys for a variety of actions, including investing a client's money in property owned by the attorney's relative (Matter of Gamble 122 Ariz. 2, 592 P.2d 1268 [en banc 1979]); a loan of client's money to a corporation in which the attorney had an interest, (Matter of Reno, 609 P.2d 704 [Mont. 1980]), and preparing a will designating the attorney's sister as a beneficiary and the attorney as executrix with broad powers (State v. Gulbankian, 54 Wisc. 2d 599, 196 N.W.2d 730 [1972]).
When does a lawyer’s personal views give rise to conflicts under this section? When does a lawyer’s representation of a client limit what the lawyer can say or do outside of the contours of the attorney-client relationship? See Restatement, § 206, Comment e. Although a lawyer’s representation of a client is not an endorsement of the client or its views, M.R. 1.2(b), there may be a point at which a lawyer’s own views and the needs or demands of the client come into real conflict. At what point is consent required? At what point, if any, must or may the attorney withdraw? See M.R. 1.16(a)(1) and (b)(3).
What about sexual interest in a client? Can unwanted sexual advances create a conflict under Rule 1.7(b)? The Missouri Supreme Court said yes in In re Howard, 912 S.W.2d 61 (Mo. banc 1995), where the court stated:
The Rules are clear: "The lawyer’s own interests should not be permitted to have an adverse effect on representation of a client." Comment, Rule. 1.7. Howard’s unwanted sexual advances undermined the client’s faith in his service and interfered with his independent professional judgment. Both the complainants testified that rejecting Howard’s advances adversely affected his representation. In sum, Howard attempted to force clients to prostitute themselves to secure legal services, and thus violated Rules 1.7(b) and 2.1.
See also ABA/BNA Lawyer’s Manual, 51:408-410; ABA Formal Op. 92-364 (1992). Some jurisdictions have adopted, or are considering, special rules to address this issue.
What about the lawyer who is seeking employment with a firm representing adverse to a current client? Do negotiations with that firm create a conflict of interest? The ABA Commission on Ethics and Professional Responsibility concluded that such negotiation could implicate Rule 1.7(b) where there is sufficient likelihood that a conflict will eventuate and could materially interfere with the lawyer’s independent professional judgment. Thus,
a lawyer who has an active and material role in representing a client in ligation must consult with and obtain the consent of that client, ordinarily before he participates in a substantive discussion of his experience, clients, or business potential or the terms of an association with an opposing firm.
ABA Formal Op. 94-400. See also Restatement, § 206, Comment d.
The Model Rules are more specific than the Code with regard to certain potential conflicts. For example, M.R. 1.8(c) prevents a lawyer from preparing an instrument giving the lawyer or a person closely related to the lawyer a substantial gift unless the client is related to the donee. See also Restatement, § 208. In addition, M.R. 1.8(i) specifically addresses representation of adverse interests by related lawyers (parent, child, sibling or spouse) and prohibits such representation absent consent after consultation.
Model Rule 1.8(a) prevents an attorney from entering into a business transaction with a client or acquiring a pecuniary interest adverse to a client unless the transaction is fair and reasonable, the terms are understandably disclosed in writing to the client, the client is given a reasonable opportunity to seek advice from independent counsel, and the client consents in writing. The Restatement prohibits such business or financial transactions except a standard commercial transaction in which the lawyer does not render legal services, unless (1) the client has adequate information about the terms of the transaction and the risks presented by the lawyer's involvement, (2) the terms and circumstances of the transaction are fair and reasonable to the client, and (3) the client consents after being encouraged to seek, and given a reasonable opportunity to obtain, independent legal advice. Proposed Final Draft #1, § 207 (1996).
In Missouri, D.R. 5-104(A), the predecessor to Rule 1.8(a), was utilized to discipline an attorney for making a sale of unwanted property to a client, In re Mills, 539 S.W.2d 447 (Mo. banc 1976) and for borrowing money from an incompetent client and selling property of the client to the attorney's wife. In re Miller, 568 S.W.2d 246 (Mo. banc 1978). In both instances, it was no defense that the transactions were consummated at fair market value and there was neither profit to the attorney nor loss to the client. Further, the court has indicated that dealings between lawyer and client are presumptively invalid, and the attorney bears the burden of demonstrating that the transaction was fair and full disclosure made. Miller, 568 S.W.2d at 205-208.
Rule 1.8(a) does not apply unless there is an actual attorney-client relationship between the lawyer and the client at the time the business transaction is entered into. Thus, where an attorney borrowed a substantial sum from a former client, and gave no indication he was giving legal advice to the former client regarding the current transaction, a finding of violation of Rule 1.8(a) was not proper. In re Disney, 922 S.W.2d 12, 14-15 (Mo. banc 1996).
M.R. 1.8(d) prohibits an attorney from acquiring publication rights in a client's case prior to the conclusion of the matter. Note that there is no consent provision relative to this prohibition. See also ABA Standards, The Defense Function, Standard 4-3.4. Why? What are the risks of such transactions? Are they sufficient to override the client’s desire for such representation? And why would a client agree to such conflicted representation in any event? Might a criminal defendant have a constitutional right to counsel of choice that overrides this provision? See Maxwell v. Superior Court, 639 P.2d 248 (Cal. 1982). See generally Annotated Rules, at 129-30.
Pursuant to M.R. 1.8(j), a lawyer may not acquire a proprietary interest in a client's cause of action. Exceptions to this rule allow an attorney to acquire a lien to collect a fee and to charge a contingent fee. Note that this rule applies only to litigation, and not to business transactions or other non-litigation matters.
M.R. 1.8(e) addresses financial assistance to clients. The Rule prohibits an attorney from advancing or guaranteeing financial assistance to a client unless the items involve costs of litigation. Such costs and expenses may be advanced with repayment contingent on the outcome of the case, and, if the client is indigent, the attorney may pay costs and litigation expenses for the client. Expenses beyond these, however, are still prohibited.
Should an attorney be allowed to advance living expenses to an impoverished client who is unable to work due to an accident? Why or why not? What if the client’s lack of funds would cause the client to accept a settlement the attorney considers grossly inadequate, and such advancement of funds would therefore prevent an injustice? What justifications for the rule outweigh these seemingly compelling considerations? For a discussion of the policies behind these rules, see Comment, Loans to Clients For Litigation Expenses, 55 Cal. L. Rev. 1419 (1967); see also Annotated Rules, at 130-132.
| Previous |
Next |