Addressing a Conflict of Interest in a Joint Representation.
If you and your business partner still insist on the services of one lawyer, you would be relieved to know that the existence of a conflict of interest does not necessarily preclude a lawyer from representing more than one client in the same transaction. But it is something that needs to be addressed proactively in light of all the facts and circumstances.
First, the lawyer needs to determine whether a conflict of interest exists and, if so, whether it can be waived by the clients’ informed consent. There are some conflicts that are just non-consentable, either because the representation is prohibited by applicable law (e.g., representation of more than one defendant in a capital case)[1] or because it involves the assertion of a claim by one client against another in the same litigation or proceeding.[2] But common representation is permissible where the clients are generally aligned in interest, even though there is some difference in interest among them.[3] Organizing a business for two or more entrepreneurs or working out the financial reorganization of an entity in which two or more clients have an interest, for example, would likely fall within this category, depending on the facts and applicable law.[4]
Next, the lawyer needs to consult with the clients and obtain their informed consent, confirmed in writing.[5] The lawyer needs to talk with the clients to explain the risks and advantages, if any, of such representation, as well as reasonably available alternatives, and to afford the clients a reasonable opportunity to consider the risks and alternatives and to raise questions and concerns.[6] 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.[7] The information required depends on the nature of the conflict and the risks involved, but typically includes the implications of the common representation, including possible effects on loyalty, confidentiality, the attorney-client privilege, and the advantages and risks involved.[8] Importantly, a client who has given consent to a conflict may revoke the consent and, like any other client, terminate the lawyer’s representation at any time, if the client changes his or her mind.[9] In such case, though, the lawyer would be unable to continue work in the matter and the client would need to retain another lawyer, which means there will likely be duplicate work and costs. All the more reason to be aware of potential conflicts and plan ahead.
This post was a part of a multi-post blog series on joint representation, conflict of interest, and the need to obtain independent legal counsel. You can find the other posts by searching our blogs. If you have any questions about the content of this blog series or other issues not discussed here, please contact us.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
About the Author
Shawn McBride – R. Shawn McBride is the Managing Member of The R. Shawn McBride Law Office, P.L.L.C. which helps clients in legal issues related to starting companies, joint ventures, raising capital from and negotiating with investors and outside General Counsel functions. Shawn can be contacted at: 407-517-0064; [email protected], or www.mcbrideattorneys.com.
[1] Id. at cmt. 16.
[2] ABA, Model Rules of Professional Conduct, Rule 1.7(b), cmt. 28.
[3] Id. at cmt. 28.
[4] Id.
[5] ABA, Model Rules of Professional Conduct, Rule 1.7(b)(4).
[6] Id. at cmt. 20.
[7] Id. at cmt. 18.
[8] Id.
[9] Id. at cmt. 21.