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Conflict Of Interest Outline

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This is an extract of our Conflict Of Interest document, which we sell as part of our Professional Responsibility Outlines collection written by the top tier of NYU School Of Law students.

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03. Conflict of Interest 163-185; 185-203; 214-226 226-237; 249-272
The Basic Architecture Of Lawyer-Client Conflicts

1. Lawyers have duties to clients of diligence, confidentiality, loyalty and related fiduciary duties (e.g., honesty).

2. The client is usually not able to monitor the behavior of a lawyer.

3. Conflict rules aim to reduce the risk that the lawyer will violate the duties in #1.

4. They do this by identifying situations where the lawyer's duties to another client, to a former client, or to a third person, or the lawyer's own interest will detract to an unacceptable degree from the lawyer's ability to satisfy the duties in #1.

5. Which can lead to (a) client suspicion and (b) misconduct.

Conflicts are -

• Fact specific (granular): You must get into the detail

• Literary: You will tell story that has the structure : "On the one hand…., but on the other hand…."

• Psychological:

• You will be assessing the lawyer's temptation, conscious or otherwise

• You will be assessing the client's objectively reasonable suspicion of counsel's loyalty
Actual misconduct - succumbing to a conflict is an

• independent violation of other rules
Goals of the conflict rules:

• Encourage client trust (allay suspicion)

• Reduce the likelihood of temptation -- lawyer disloyalty or abuse of confidential information, even unintentionally
How do you measure temptation?
How do you measure reasonable suspicion?
Countervailing considerations:

• Facilitate choice of counsel

• Facilitate specialization and career development

• Strategic abuse
Perez v. Kirk & Carrigan: Conflict between duty of confidentiality to Perez and interest of company in showing cooperation
"In A Box": Conflict between duty to inform Jennie Marsh that Endicott is facing possible indictment and duty to protect the confidential information of Font &Blue

What Are the Sanctions?

• Discipline (but usually not)

• Liability for malpractice or breach of fiduciary duty

• Fee disgorgement or forfeiture

• Disqualification from a matter

• Loss of a client

• Bad publicity
Concurrent Conflicts of Interest P.163-185
- Rule 1.7(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:
o (1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

1 ----

Rule 1.7(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
o (1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client; [a subjective/ objective test]
o (2) the representation is not prohibited by law;
o (3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.
[7] loyalty and independent judgment are essential elements in the lawyer's relationship to a client

Current client conflict exists if "significant risk that the representation of one or more client will be materially limited by the lawyer's responsibilities to other client, a former client or third person or by a personal interest of the lawyer

Lawyers wishing to avoid a conflict must make predictions
Restatement s.121 "a conflict of interest is involved if there is a substantial risk that the lawyer's representation of the client would be materially and adversely affected by the lawyer's own interests or by the lawyer's duties to another current client, a former client, or a third person"
o Risk to representation - need not be actual

Significant risk (and not only lawyers who actually betrayed a client/0
 It reduces the risk of misbehavior rather than try to discover and prove the misbehavior later
 encourage client trust and honesty
Concurrent conflict (conflicting interests a lawyer must avoid during the representation of a client)
o C.f. successive conflict (chapter 6)
Conflict of interest can result in discipline, disqualification from a representation, attendant embarrassment and cost; delay of client's cause, negative publicity, fee forfeiture, and civil liability (rarely, crime - US v Gellene perjury for failing to reveal firm's representation of clients with conflicting interest)
Most conflict rules have no mens rea requirement - absolute liability

Exception: imputed conflicts - conflict that arises only because the conflict of a colleague is imputed to other lawyers in a law office (i.e. lawyer A has a conflict only because her office colleague lawyer B
has a conflict)
Rule 1.10(a) While lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9…[with certain exceptions]
o forbids a lawyer knowingly to accept certain work that a conflicted colleague would have to decline

firm = an organisation, office - all seen as one lawyer

Introduction to Conflicts rules 1) Current client conflicts

Lawyer's loyalties divided between 2 or more current clients, e.g. lawyer for co-defendants in a civil/
criminal case may find that on wants blame the other

Personal interest - e.g. lawyer' spouse has large stock investment in the corporation that lawyer's client wants to sue for a big sum

1.7[1] uses the word 'loyalty'  lawyer's ability to be loyal and danger to client confidences

1.7(a) definition of concurrent lawyer-client conflict

Rule 1.8 specific concurrent conflict situations - see later. Routinely reoccur 2) Former client conflicts

Successive conflicts

E.g. lawyer represented a former client in defending the legality of a patent, and later retained by new client to prove that the patent is invalid  duty of loyalty to client A prevents lawyer from seeking to destroy the patent rights he has won for it 1.9(a)
o Lawyer could have gained confidential info that could help the new client, if he reveals/ uses this info,
he may violate rule 1.9(c)

2 But if new client seeks to sue former client for irrelevant matter (nature of the representation is unrelated to the patent work)  lawyer may sue former client without disloyalty or danger to confidences
Imputed conflict within a law firm

Lawyer is prevented from representing a client because of a current/ former client conflict  impute client conflict within a law firm

1.0(c) Definition of firm/ law firm: a lawyer(s) in a law partnership, professional corporation, sole proprietorship or other association authorised to practice law; or lawyers employed in a legal service organisation or the legal department of a corporation or other organisation

If the lawyer changed firm (lateral lawyer), Model Rules provide that her conflict would travel with her to her new firm, unless the new firm screens the new lawyer
Government-lawyer conflicts

Lawyers who worked for government and moved to private sector (or vice versa)
o Rule 1.11: screening provision enable them to work in private sector without imputing their conflicts to their new colleagues
Lawyer-witness conflict - 'advocate-witness' - Rule 3.7

Lawyer for a litigation client will/ should be a witness (called by client or opposing side)
o Avoid conflict between the lawyer's interest in being an advocate and interest of the client

3.7(a) "a lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness unless 1) testimony relates to an uncontested issue, 2) relates to the nature and value of legal services rendered in the case; or 3) disqualification of the lawyer would work substantial hardship on the client."
Organisational lawyer conflicts - rule 1.13 and chapter 10

Conflict can develop if lawyer is deemed to represent both the company and its constituents (board members, officers, non-managerial employees)
o Even if the co. is the sole client, lawyer's employment status is within the discretion of these people,
who may have interests adverse to those of the co.
Conflicts in conflict rules

Conflict rules vary among American jurisdictions - federal court may apply conflict rules of the state they sit

Court look to norms in the Model Rules, Model Code, and local rules

When a dispute touches more than a jurisdiction and their conflict rules differ, a court may have to decide which rule to apply

Rule 8.5(a) lawyer subject to the disciplinary authority of the jurisdiction he is admitted to practice.
Conflict rules as default rules

If client give informed consent, lawyer and client may displace nearly all conflict rules

Definition of informed consent rule 1.0(e):
i. agreement by a person to a proposed course of conduct after the lawyer has communicated adequate info and explanation about the material risk of and reasonably available alternatives to the proposed course of conduct

Client may also demand more protection against its lawyer's conflict than the MA [lawyer would accept if it brings more money and business]
Competing interests P.167 o

3)

4)

5)

6)

7)

8)

9)

3 -1) Client-Lawyer Conflicts
A lawyer's business and financial interest - Lawyer. Realtor. Any Problem? (168)
o Can a lawyer with real-estate license do some brokering along with the lawyering
What rule(s) govern Melanie's wish to represent current clients as lawyer and broker on the sale of a home?
o Rule 1.7(a)(2) cover situation where she would be hired as a broker and then as a lawyer

Except as in b, a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
 Interferes lawyer's loyalty to client

1.7(b) a lawyer may represent notwithstanding conflict if

1. lawyer reasonably believes that the lawyer will be able to provide competent & diligent representation to each affected client;

2. representation is not prohibited by law;

3. representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

4. each affected client gives informed consent, confirmed in writing.
o Cmt [6] - Representation on unrelated matters with only economically adverse issues does not create a conflict
What rule(s) govern her wish to represent current non-clients on the purchase of a home and then also act as their lawyer if the make a deal?

1. Rule 1.8(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:

1. the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;

2. the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and

3. the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
o Adverse - inconsistency in interest, may only be a little

Lawyer would have great advantage over the client, Rule 1.8 matches the level of the parties to the same ground

In Re Neville p.169
- Facts: Bly is N's former client, a licensed estate broker and a knowledgeable and sophisticated real estate investor. N, Bly and a third party entered into a land swap contract drafted by N (N swapping his option in Bly's property for the third party's property. N to give Bly a promissory note). Bly created the substantive terms for the transfers, and N accepted these terms without negotiation. Was Bly client of N?
- Melanie wants to be the broker for her law clients who are buying or selling a home.
- If non-clients hire Melanie as a broker to buy or sell a home, she wants then to be the lawyer for the non-clients if they make a deal.
- Rule 1.8(a) applicable even if the lawyer is not formally in an AC relationship with the adverse party (and even if the client is told that the lawyer is not also undertaking to act as his attorney)
- Justifications:

1. Rule grounded in the fiduciary duty owed by an attorney to his client  such duty continues beyond completion of any particular matter which the attorney undertakes for the client (arise when AC
relationship is established and continues until it is abandoned)

4 2.

3. 4.-Policy: clients depend on the confidentiality and fairness arising from their relationship with their attorneys - client can be expected to assume 'their lawyer' will protect them (or at least not harm them)
[client would look to the lawyer as a protector rather than as an adversary]
Lawyers analytical training may permit expansion/ limitation of professional obligation, but clients are usually not trained to make so careful an analysis
So clients will obtain full disclosure on which to base their decision in all transactions

Rule 1.7(a)(2) inapplicable as the attorney is not representing the Bly on the land swap.
So how can Rule 1.8(a) apply to this transaction?

1. Agreement drawn by N contained terms that are disadvantageous to Bly  which should have been called to his attention, explained and removed from the agreement unless Bly agrees. The terms were those that "no respectable practitioner would have allowed a seller to accept"

2. N's fiduciary duty required that he take no advantage except with his client's consent after full disclosure
Bly was the sophisticated real estate investor and structured the deal. Neville says he just wrote down what Bly said. Neville was a real estate novice. So what protection did Bly need?

1. Although Bly may have outlined the transaction, he had no duty to foresee all the dangers inherent in the deal which he had outlined

2. Sophistication did not matter - the deal's nonfinancial terms were one-sided

3. Lawyer owe fiduciary duty and cannot take advantage of his superior knowledge and position

4. Client must be in all respect free from fraud (or client free from misconception)
What must Neville do today under Rule 1.8(a) to avoid the same result?

A Lawyer's Financial Interest
- Lawyer's own interest may create conflict with a client's interest, even if there is no deal subject to 1.8(a)
- In re Hager

Facts: lawyer sanctioned after negotiating a "fee" from the adverse party in a class action settlement without informing the client of the deal

Client consent required if, there is a potential conflict between the attorney's possible fee and the client's maximal satisfaction.
o Attorney's financial interest would reasonably have affected his professional judgment
Financial Assistance and Proprietary Interests (P.177)
- Rule 1.8(e) A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation, except that

(1) a lawyer may advance court costs and expenses of litigation, the repayment of which may be contingent on the outcome of the matter; and

(2) a lawyer representing an indigent client may pay court costs and expenses of litigation on behalf of the client.
[A lawyer shall not provide financial assistance to client in connection with litigation except (1)
advance court costs/expenses, or (2) cover costs/exp. of indigent (poor)]
o whether as a gift or as a loan o

o

Justification? Smolen:
 allowing lawyers to provide living expense will compromise their judgment, they might recommend an imprudent settlement to ensure repayment of money they advanced (but this would also prohibit advancing cost of litigation, which often will exceed lawyer's advance)
 ensure the client is not choosing a lawyer based on who will pay more toward living expenses, but on quality. (but clients do choose lawyer based on whose fees are lower)
Other states, e.g. Columbia allows attorney to financially assist their clients on a basis that it is strictly necessary to sustain the client during the matter, to avoid client being compelled to settle the claim on unfavorable terms

5 


Do these restrictions make it harder for poorer litigants to resist, for example, the ability of well-heeled defendants (e.g., insurance companies) to delay efforts to collect for injuries?
What's the justification? (Even modest financial help, it is said, will undermine the lawyer's independent judgment.
Why is there such reluctance to recognize a humanitarian exception?

Fee-Payer Interest
- Inherent danger that arise when a criminal defendant is represented by a lawyer hired and paid by a third party,
esp. when the third party is the operator of the alleged criminal enterprise
- Risk 1: lawyer will prevent his client from obtaining leniency by preventing the client from offering testimony against his former employer; prevent client from taking other actions contrary to the employee's interest.
- Risk 2: where the paying party may have had a long-range interest in establishing a legal precedent + could do so only if the interests of the defendants themselves were sacrificed.
Related Lawyers, Significant others and Friends P.180
- Rule 1.10(a) imputes client conflict of 1 lawyer to other lawyer in the same office
- Rule 1.7 [11] when lawyers representing different clients in the same matter/ substantially related matter are closely related by blood or marriage  there may be a significant risk that client confidences will be revealed +
lawyer's family relationship will interfere with loyalty and independent professional judgment
-  client should be entitled to know of the existence + implications of the relationship before lawyers agree to represent (upon client giving informed consent)
- Disqualification arising from family relationship is personal  ordinarily wont be imputed to members of the firm Rule 1.10
Example: Can a lawyer's gender, religion or race create a conflict - Karen Horowitz's Dilemma P.180
 Facts: After the venue for the trial was moved to a rural southern county from a major city, Blair decided that
Karen should not be in the courtroom because of likely bias toward a woman Jewish lawyer. Karen had been working on the case for two years. She is not removed from the case, but from the courtroom.
 Does Karen have a 1.7 conflict by putting her wish to participate in the trial ahead of her client's interest in avoiding a biased jury?
 1.7(a) concurrent conflict of interest if (2) significant risk… by personal interest
 Personal interest for Karen - court experience, worked on the case for 2 years
 Can argue that she will do a good job on the case to overcome the prejudice of the local environment
 Should she be a good soldier and suck it up? Blair says her day will come in other matters, where her gender and religion may actually help her with a jury. Is that also objectionable?
 Even if not required, should lawyers subordinate their career interests to avoid the risk of juror, or judicial, bias? Should their law offices ask them to do so? What if the client raises the question?

6 2) Client-Client Conflicts
P.185-203; 214-226 1) Criminal
 6th amendment: right to counsel means right to un-conflicted counsel 1) Strickland - Ineffective assistance of counsel due to misconduct/prejudice
- Test: Was counsel's performance "reasonable considering all the circumstances?"
- If not, the "D must show that there was a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Page 192.
- Must establish lawyer error and prejudice to client

Error - Show errors so serious that counsel was not functioning as counsel guaranteed by the 6th Am.
o Prejudice - Lapses rendered trial so unfair as to undermine the outcome
- More demanding test than Cuyler v Sullivan 2) Cuyler v Sullivan - Ineffective assistance of counsel due to conflict

1. D who doesn't raise objection must establish

1. An actual conflict

2. Adversely affected performance (e.g. didn't call witness/ theoretical change in tactics)

3. If D demonstrates adverse effect, no proximate cause  doesn't matter if the outcome would be the same

4. If D does not raise objection, no Holloway/Cuyler reversal even if judge is aware of the conflict
(Mickens (2002))

2. When D does raise objection

1. Court must investigate or automatic reversal (Holloway (1978))

2. Otherwise court can assume no conflict

3. Prosecutor may object to D's representation for finality of judgment

1. If judge finds conflict, court's discretion to ignore waiver (Wheat)

2. Erroneous denial of counsel of choice is automatic reversal (Gonzalez-Lopez (2006))

4. Expediency alone can't justify ignoring meritorious disqualification unless it can be shown the motion was strategic (Fiandaca)
- Less demanding than Strickland

Cuyler v Sullivan is founded upon the difficulty of predicting how a case would have gone with an unconflicted lawyer  Once the conflict is shown to have actually affected the lawyer's performance,
court are not in a position to know whether the verdict would have been any different if the lawyer's performance had not actually been affected [only a chance of conflict]
o Strickland: must have made a different
Cuyler v. Sullivan (1980)
- Facts: 2 lawyers represented 3 Ds, including Sullivan. Other 2 co-D paid the lawyer's fee but S had no $. S was the first D to come to trial, evidence against him was entirely circumstantial, primarily on Mr. McGrath's testimony  D did not present evidence  jury found S guilty and sentenced to life imprisonment; while S' coDs were acquitted at separate trials
- Lawyers gave conflicting accounts of decision to rest S' defense:
o a lawyer said he had not wanted the defense to go on as he thought it would only be exposing the DW
for other 2 trials coming up.
o S going first would know the prosecution's case  to the co-Ds benefitTest for determining whether a D lawyer's conflict violated the 6th Am. assistance of counsel guarantee
The accused must show that "an actual conflict of interest adversely affected his lawyer's performance during the proceedings"
o [generous test for the accused, a chance of conflict would suffice, doesn't matter if it would have been the same, not a harm test]

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