Rule 1.7. Conflict of Interest: General Rule.
(a) Except as provided by 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:
(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.
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(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 same matter before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing.
Comment:
General Principles
[1] Loyalty and independent judgment are essential elements in the lawyer's
relationship to a client. Concurrent conflicts of interest can arise from the
lawyer's responsibilities to another client, a former client or a third person
or from the lawyer's own interests. For specific Rules regarding certain
concurrent conflicts of interest, see Rule 1.8. For former client conflicts of
interest, see Rule 1.9. For conflicts of interest involving prospective clients,
see Rule 1.18. For definitions of "informed consent" and "confirmed in writing,"
see Rule 1.0(e) and (b).
[2] Resolution of a conflict of interest problem under this Rule requires the
lawyer to: 1) clearly identify the client or clients; 2) determine whether a
conflict of interest exists; 3) decide whether the representation may be
undertaken despite the existence of a conflict, i.e., whether the conflict is
consentable; and 4) if so, consult with the clients affected under paragraph (a)
and obtain their informed consent, confirmed in writing. The clients affected
under paragraph (a) include both of the clients referred to in paragraph (a)(1)
and the one or more clients whose representation might be materially limited
under paragraph (a)(2).
[3] A conflict of interest may exist before representation is undertaken, in
which event the representation must be declined, unless the lawyer obtains the
informed consent of each client under the conditions of paragraph (b). To
determine whether a conflict of interest exists, a lawyer should adopt
reasonable procedures, appropriate for the size and type of firm and practice,
to determine in both litigation and non-litigation matters the persons and
issues involved. See also Comment to Rule 5.1. Ignorance caused by a failure to
institute such procedures will not excuse a lawyer's violation of this Rule. As
to whether a client-lawyer relationship exists or, having once been established,
is continuing, see Comment to Rule 1.3 and Scope.
[4] If a conflict arises after representation has been undertaken, the lawyer
ordinarily must withdraw from the representation, unless the lawyer has obtained
the informed consent of the client under the conditions of paragraph (b). See
Rule 1.16. Where more than one client is involved, whether the lawyer may
continue to represent any of the clients is determined both by the lawyer's
ability to comply with duties owed to the former client and by the lawyer's
ability to represent adequately the remaining client or clients, given the
lawyer's duties to the former client. See Rule 1.9. See also Comments [5] and
[29].
[5] Unforeseeable developments, such as changes in corporate and other
organizational affiliations or the addition or realignment of parties in
litigation, might create conflicts in the midst of a representation, as when a
company sued by the lawyer on behalf of one client is bought by another client
represented by the lawyer in an unrelated matter. Depending on the
circumstances, the lawyer may have the option to withdraw from one of the
representations in order to avoid the conflict. The lawyer must seek court
approval where necessary and take steps to minimize harm to the clients. See
Rule 1.16. The lawyer must continue to protect the confidences of the client
from whose representation the lawyer has withdrawn. See Rule 1.9(c).
Identifying Conflicts of Interest: Directly Adverse
[6] Loyalty to a current client prohibits undertaking representation
directly adverse to that client without that client's informed consent. Thus,
absent consent, a lawyer may not act as an advocate in one matter against a
person the lawyer represents in some other matter, even when the matters are
wholly unrelated. The client as to whom the representation is directly adverse
is likely to feel betrayed, and the resulting damage to the client-lawyer
relationship is likely to impair the lawyer's ability to represent the client
effectively. In addition, the client on whose behalf the adverse representation
is undertaken reasonably may fear that the lawyer will pursue that client's case
less effectively out of deference to the other client, i.e., that the
representation may be materially limited by the lawyer's interest in retaining
the current client. Similarly, a directly adverse conflict may arise when a
lawyer is required to cross-examine a client who appears as a witness in a
lawsuit involving another client, as when the testimony will be damaging to the
client who is represented in the lawsuit. On the other hand, simultaneous
representation in unrelated matters of clients whose interests are only
economically adverse, such as representation of competing economic enterprises
in unrelated litigation, does not ordinarily constitute a conflict of interest
and thus may not require consent of the respective clients.
[7] Directly adverse conflicts can also arise in transactional matters. For
example, if a lawyer is asked to represent the seller of a business in
negotiations with a buyer represented by the lawyer, not in the same transaction
but in another, unrelated matter, the lawyer could not undertake the
representation without the informed consent of each client.
Identifying Conflicts of Interest: Material Limitation
[8] Even where there is no direct adverseness, a conflict of interest exists
if there is a significant risk that a lawyer's ability to consider, recommend or
carry out an appropriate course of action for the client will be materially
limited as a result of the lawyer's other responsibilities or interests. For
example, a lawyer asked to represent several individuals seeking to form a joint
venture is likely to be materially limited in the lawyer's ability to recommend
or advocate all possible positions that each might take because of the lawyer's
duty of loyalty to the others. The conflict in effect forecloses alternatives
that would otherwise be available to the client. The mere possibility of
subsequent harm does not itself require disclosure and consent. The critical
questions are the likelihood that a difference in interests will eventuate and,
if it does, whether it will materially interfere with the lawyer's independent
professional judgment in considering alternatives or foreclose courses of action
that reasonably should be pursued on behalf of the client.
Lawyer's Responsibilities to Former Clients and Other Third Persons
[9] In addition to conflicts with other current clients, a lawyer's duties
of loyalty and independence may be materially limited by responsibilities to
former clients under Rule 1.9 or by the lawyer's responsibilities to other
persons, such as fiduciary duties arising from a lawyer's service as a trustee,
executor or corporate director.
Personal Interest Conflicts
[10] The lawyer's own interests should not be permitted to have an adverse
effect on representation of a client. For example, if the probity of a lawyer's
own conduct in a transaction is in serious question, it may be difficult or
impossible for the lawyer to give a client detached advice. Similarly, when a
lawyer has discussions concerning possible employment with an opponent of the
lawyer's client, or with a law firm representing the opponent, such discussions
could materially limit the lawyer's representation of the client. In addition, a
lawyer may not allow related business interests to affect representation, for
example, by referring clients to an enterprise in which the lawyer has an
undisclosed financial interest. See Rule 1.8 for specific Rules pertaining to a
number of personal interest conflicts, including business transactions with
clients. See also Rule 1.10 (personal interest conflicts under Rule 1.7
ordinarily are not imputed to other lawyers in a law firm).
[11] When lawyers representing different clients in the same matter or in
substantially related matters are closely related by blood or marriage, there
may be a significant risk that client confidences will be revealed and that the
lawyer's family relationship will interfere with both loyalty and independent
professional judgment. As a result, each client is entitled to know of the
existence and implications of the relationship between the lawyers before the
lawyer agrees to undertake the representation. Thus, a lawyer related to another
lawyer, e.g., as parent, child, sibling or spouse, ordinarily may not represent
a client in a matter where that lawyer is representing another party, unless
each client gives informed consent. The disqualification arising from a close
family relationship is personal and ordinarily is not imputed to members of
firms with whom the lawyers are associated. See Rule 1.10.
[12] A lawyer is prohibited from engaging in sexual relationships with a client
unless the sexual relationship predates the formation of the client-lawyer
relationship. See Rule 1.8(j).
Interest of Person Paying for a Lawyer's Service
[13] A lawyer may be paid from a source other than the client, including a
co-client, if the client is informed of that fact and consents and the
arrangement does not compromise the lawyer's duty of loyalty or independent
judgment to the client. See Rule 1.8(f). If acceptance of the payment from any
other source presents a significant risk that the lawyer's representation of the
client will be materially limited by the lawyer's own interest in accommodating
the person paying the lawyer's fee or by the lawyer's responsibilities to a
payer who is also a co-client, then the lawyer must comply with the requirements
of paragraph (b) before accepting the representation, including determining
whether the conflict is consentable and, if so, that the client has adequate
information about the material risks of the representation.
Prohibited Representations
[14] Ordinarily, clients may consent to representation notwithstanding a
conflict. However, as indicated in paragraph (b), some conflicts are
nonconsentable, meaning that the lawyer involved cannot properly ask for such
agreement or provide representation on the basis of the client's consent. When
the lawyer is representing more than one client, the question of consentability
must be resolved as to each client.
[15] Consentability is typically determined by considering whether the interests
of the clients will be adequately protected if the clients are permitted to give
their informed consent to representation burdened by a conflict of interest.
Thus, under paragraph (b)(1), representation is prohibited if in the
circumstances the lawyer cannot reasonably conclude that the lawyer will be able
to provide competent and diligent representation. See Rule 1.1 (competence) and
Rule 1.3 (diligence).
[16] Paragraph (b)(2) describes conflicts that are nonconsentable because the
representation is prohibited by applicable law. For example, in some states
substantive law provides that the same lawyer may not represent more than one
defendant in a capital case, even with the consent of the clients, and under
federal criminal statutes certain representations by a former government lawyer
are prohibited, despite the informed consent of the former client. In addition,
decisional law in some states limits the ability of a governmental client, such
as a municipality, to consent to a conflict of interest.
[17] Paragraph (b)(3) describes conflicts that are nonconsentable because of the
institutional interest in vigorous development of each client's position when
the clients are aligned directly against each other in the same litigation or
other proceeding before a tribunal. Whether clients are aligned directly against
each other within the meaning of this paragraph requires examination of the
context of the proceeding. Although this paragraph does not preclude a lawyer's
multiple representation of adverse parties to a mediation (because mediation is
not a proceeding before a "tribunal" under Rule 1.0(m)), such representation may
be precluded by paragraph (b)(1).
Informed Consent
[18] Informed consent requires that each affected client be aware of the
relevant circumstances and of the material and reasonably foreseeable ways that
the conflict could have adverse effects on the interests of that client. See
Rule 1.0(e) (informed consent). The information required depends on the nature
of the conflict and the nature of the risks involved. When representation of
multiple clients in a single matter is undertaken, the information must include
the implications of the common representation, including possible effects on
loyalty, confidentiality and the attorney-client privilege and the advantages
and risks involved. See Comments [30] and [31] (effect of common representation
on confidentiality).
[19] Under some circumstances it may be impossible to make the disclosure
necessary to obtain consent. For example, when the lawyer represents different
clients in related matters and one of the clients refuses to consent to the
disclosure necessary to permit the other client to make an informed decision,
the lawyer cannot properly ask the latter to consent. In some cases the
alternative to common representation can be that each party may have to obtain
separate representation with the possibility of incurring additional costs.
These costs, along with the benefits of securing separate representation, are
factors that may be considered by the affected client in determining whether
common representation is in the client's interests.
Consent Confirmed in Writing
[20] Paragraph (b) requires the lawyer to obtain the informed consent of the
client, confirmed in writing. Such a writing may consist of a document executed
by the client or one that the lawyer promptly records and transmits to the
client following an oral consent. See Rule 1.0(b). See also Rule 1.0(n) (writing
includes electronic transmission). If it is not feasible to obtain or transmit
the writing at the time the client gives informed consent, then the lawyer must
obtain or transmit it within a reasonable time thereafter. See Rule 1.0(b). The
requirement of a writing does not supplant the need in most cases for the lawyer
to talk with the client, to explain the risks and advantages, if any, of
representation burdened with a conflict of interest, as well as reasonably
available alternatives, and to afford the client a reasonable opportunity to
consider the risks and alternatives and to raise questions and concerns. Rather,
the writing is required in order to impress upon clients the seriousness of the
decision the client is being asked to make and to avoid disputes or ambiguities
that might later occur in the absence of a writing.
Revoking Consent
[21] A client who has given consent to a conflict may revoke the consent
and, like any other client, may terminate the lawyer's representation at any
time. Whether revoking consent to the client's own representation precludes the
lawyer from continuing to represent other clients depends on the circumstances,
including the nature of the conflict, whether the client revoked consent because
of a material change in circumstances, the reasonable expectations of the other
clients and whether material detriment to the other clients or the lawyer would
result.
Consent to Future Conflict
[22] Whether a lawyer may properly request a client to waive conflicts that
might arise in the future is subject to the test of paragraph (b). The
effectiveness of such waivers is generally determined by the extent to which the
client reasonably understands the material risks that the waiver entails. The
more comprehensive the explanation of the types of future representations that
might arise and the actual and reasonably foreseeable adverse consequences of
those representations, the greater the likelihood that the client will have the
requisite understanding. Thus, if the client agrees to consent to a particular
type of conflict with which the client is already familiar, then the consent
ordinarily will be effective with regard to that type of conflict. If the
consent is general and open-ended, then the consent ordinarily will be
ineffective, because it is not reasonably likely that the client will have
understood the material risks involved. On the other hand, if the client is an
experienced user of the legal services involved and is reasonably informed
regarding the risk that a conflict may arise, such consent is more likely to be
effective, particularly if, e.g., the client is independently represented by
other counsel in giving consent and the consent is limited to future conflicts
unrelated to the subject of the representation. In any case, advance consent
cannot be effective if the circumstances that materialize in the future are such
as would make the conflict nonconsentable under paragraph (b).
Conflicts in Litigation
[23] Paragraph (b)(3) prohibits representation of opposing parties in the
same litigation, regardless of the clients' consent. On the other hand,
simultaneous representation of parties whose interests in litigation may
conflict, such as coplaintiffs or codefendants, is governed by paragraph (a)(2).
A conflict may exist by reason of substantial discrepancy in the parties'
testimony, incompatibility in positions in relation to an opposing party or the
fact that there are substantially different possibilities of settlement of the
claims or liabilities in question. Such conflicts can arise in criminal cases as
well as civil. The potential for conflict of interest in representing multiple
defendants in a criminal case is so grave that ordinarily a lawyer should
decline to represent more than one codefendant. On the other hand, common
representation of persons having similar interests in civil litigation is proper
if the requirements of paragraph (b) are met.
[24] Ordinarily a lawyer may take inconsistent legal positions in different
tribunals at different times on behalf of different clients. The mere fact that
advocating a legal position on behalf of one client might create precedent
adverse to the interests of a client represented by the lawyer in an unrelated
matter does not create a conflict of interest. A conflict of interest exists,
however, if there is a significant risk that a lawyer's action on behalf of one
client will materially limit the lawyer's effectiveness in representing another
client in a different case; for example, when a decision favoring one client
will create a precedent likely to seriously weaken the position taken on behalf
of the other client. Factors relevant in determining whether the clients need to
be advised of the risk include: where the cases are pending, whether the issue
is substantive or procedural, the temporal relationship between the matters, the
significance of the issue to the immediate and long-term interests of the
clients involved and the clients' reasonable expectations in retaining the
lawyer. If there is significant risk of material limitation, then absent
informed consent of the affected clients, the lawyer must refuse one of the
representations or withdraw from one or both matters.
[25] When a lawyer represents or seeks to represent a class of plaintiffs or
defendants in a class-action lawsuit, unnamed members of the class are
ordinarily not considered to be clients of the lawyer for purposes of applying
paragraph (a)(1) of this Rule. Thus, the lawyer does not typically need to get
the consent of such a person before representing a client suing the person in an
unrelated matter. Similarly, a lawyer seeking to represent an opponent in a
class action does not typically need the consent of an unnamed member of the
class whom the lawyer represents in an unrelated matter.
Nonlitigation Conflicts
[26] Conflicts of interest under paragraphs (a)(1) and (a)(2) arise in
contexts other than litigation. For a discussion of directly adverse conflicts
in transactional matters, see Comment [7]. Relevant factors in determining
whether there is significant potential for material limitation include the
duration and intimacy of the lawyer's relationship with the client or clients
involved, the functions being performed by the lawyer, the likelihood that
disagreements will arise and the likely prejudice to the client from the
conflict. The question is often one of proximity and degree. See Comment [8].
[27] For example, conflict questions may arise in estate planning and estate
administration. A lawyer may be called upon to prepare wills for several family
members, such as husband and wife, and, depending upon the circumstances, a
conflict of interest may be present. In estate administration the identity of
the client may be unclear under the law of a particular jurisdiction. Under one
view, the client is the fiduciary; under another view the client is the estate
or trust, including its beneficiaries. In order to comply with conflict of
interest rules, the lawyer should make clear the lawyer's relationship to the
parties involved.
[28] Whether a conflict is consentable depends on the circumstances. For
example, a lawyer may not represent multiple parties to a negotiation whose
interests are fundamentally antagonistic to each other, but common
representation is permissible where the clients are generally aligned in
interest even though there is some difference in interest among them. Thus, a
lawyer may seek to establish or adjust a relationship between clients on an
amicable and mutually advantageous basis; for example, in helping to organize a
business in which two or more clients are entrepreneurs, working out the
financial reorganization of an enterprise in which two or more clients have an
interest or arranging a property distribution in settlement of an estate. The
lawyer seeks to resolve potentially adverse interests by developing the parties'
mutual interests. Otherwise, each party might have to obtain separate
representation, with the possibility of incurring additional cost, complication
or even litigation. Given these and other relevant factors, the clients may
prefer that the lawyer act for all of them.
Special Considerations in Common Representation
[29] In considering whether to represent multiple clients in the same
matter, a lawyer should be mindful that if the common representation fails
because the potentially adverse interests cannot be reconciled, the result can
be additional cost, embarrassment and recrimination. Ordinarily, the lawyer will
be forced to withdraw from representing all of the clients if the common
representation fails. In some situations, the risk of failure is so great that
multiple representation is plainly impossible. For example, a lawyer cannot
undertake common representation of clients where contentious litigation or
negotiations between them are imminent or contemplated. Moreover, because the
lawyer is required to be impartial between commonly represented clients,
representation of multiple clients is improper when it is unlikely that
impartiality can be maintained. Generally, if the relationship between the
parties has already assumed antagonism, the possibility that the clients'
interests can be adequately served by common representation is not very good.
Other relevant factors are whether the lawyer subsequently will represent both
parties on a continuing basis and whether the situation involves creating or
terminating a relationship between the parties.
[30] A particularly important factor in determining the appropriateness of
common representation is the effect on client-lawyer confidentiality and the
attorney-client privilege. With regard to the attorney-client privilege, the
prevailing rule is that, as between commonly represented clients, the privilege
does not attach. Hence, it must be assumed that if litigation eventuates between
the clients, the privilege will not protect any such communications, and the
clients should be so advised.
[31] As to the duty of confidentiality, continued common representation will
almost certainly be inadequate if one client asks the lawyer not to disclose to
the other client information relevant to the common representation. This is so
because the lawyer has an equal duty of loyalty to each client, and each client
has the right to be informed of anything bearing on the representation that
might affect that client's interests and the right to expect that the lawyer
will use that information to that client's benefit. See Rule 1.4. The lawyer
should, at the outset of the common representation and as part of the process of
obtaining each client's informed consent, advise each client that information
will be shared and that the lawyer will have to withdraw if one client decides
that some matter material to the representation should be kept from the other.
In limited circumstances, it may be appropriate for the lawyer to proceed with
the representation when the clients have agreed, after being properly informed,
that the lawyer will keep certain information confidential. For example, the
lawyer may reasonably conclude that failure to disclose one client's trade
secrets to another client will not adversely affect representation involving a
joint venture between the clients and agree to keep that information
confidential with the informed consent of both clients.
[32] When seeking to establish or adjust a relationship between clients, the
lawyer should make clear that the lawyer's role is not that of partisanship
normally expected in other circumstances and, thus, that the clients may be
required to assume greater responsibility for decisions than when each client is
separately represented. Any limitations on the scope of the representation made
necessary as a result of the common representation should be fully explained to
the clients at the outset of the representation. See Rule 1.2(c).
[33] Subject to the above limitations, each client in the common representation
has the right to loyal and diligent representation and the protection of Rule
1.9 concerning the obligations to a former client. The client also has the right
to discharge the lawyer as stated in Rule 1.16.
Organizational Clients
[34] A lawyer who represents a corporation or other organization does not, by
virtue of that representation, necessarily represent any constituent or
affiliated organization, such as a parent or subsidiary. See Rule 1.13(a). Thus,
the lawyer for an organization is not barred from accepting representation
adverse to an affiliate in an unrelated matter, unless the circumstances are
such that the affiliate should also be considered a client of the lawyer, there
is an understanding between the lawyer and the organizational client that the
lawyer will avoid representation adverse to the client's affiliates, or the
lawyer's obligations to either the organizational client or the new client are
likely to limit materially the lawyer's representation of the other client.
[35] A lawyer for a corporation or other organization who is also a member of
its board of directors should determine whether the responsibilities of the two
roles may conflict. The lawyer may be called on to advise the corporation in
matters involving actions of the directors. Consideration should be given to the
frequency with which such situations may arise, the potential intensity of the
conflict, the effect of the lawyer's resignation from the board and the
possibility of the corporation's obtaining legal advice from another lawyer in
such situations. If there is material risk that the dual role will compromise
the lawyer's independence of professional judgment, the lawyer should not serve
as a director or should cease to act as the corporation's lawyer when conflicts
of interest arise. The lawyer should advise the other members of the board that
in some circumstances matters discussed at board meetings while the lawyer is
present in the capacity of director might not be protected by the
attorney-client privilege and that conflict of interest considerations might
require the lawyer's recusal as a director or might require the lawyer and the
lawyer's firm to decline representation of the corporation in a matter.